Chamber Summons No.60 of 2013

13th February, 2013

Petitioner Counsel: Dr. BIRENDRA SARAF, a/w. Ms. LEENA DESAI, Mr. ARVIND SINGH GAUTAMA
Respondent Counsel: Mr. DIPESH SIROYA

Cases Cited:
Paramjeet Singh Patheja Vs. ICDS Ltd., 2007 ALL SCR 24=JT 2006(10) SC 41 [Para 13,14,16,21,39]
M/s. Arihant Threads Ltd. Vs. Employee's State Insurance Corporation, CWP NO. 9521/2008, Dt.14.7.2009 [Para 16]
Director of Settlements A.P. & Ors. Vs. M.R. Apparao & Anr., AIR 2002 SC 1598 [Para 17,39]
Kailash Nath Agarwal & Ors. Vs. Pradeshiya Industrial & Investment Corporation of U.P. Ltd. & Anr., (2003) 4 SCC 305 [Para 22,30,32,34]
SICOM Vs. Marvel Industries, Misc. Petition No.2/2007, Dt.1.7.2008 [Para 24,32]
Ved Prakash Agarwal Vs. M/s. Rama Petrochemicals Ltd., 2004(3) ALL MR 5 [Para 25,33]
San-A Tradubg Co. Ltd. Vs. I.C. Textiles Ltd., Arbitration Petition No.8/2005 [Para 27,34]
Indrajeet Arya & Anr. Vs. ICICI Bank Ltd., W.P. (C) No.7253/2011, Dt.2.5.2012 [Para 28,36]
Kedia Distilleries Ltd. Vs. Appellate Authority for Industrial and Financial Reconstruction & Ors., 109 Company Cases 444 [Para 29,37]
M/s. Patheja Bros.Forgings & Stampings & Anr. Vs. ICICI Ltd., 2000(4) ALL MR 243 (S.C.)=(2000) 6 SCC 545 [Para 30,33,39]
Maharashtra Tubes Ltd. Vs. State Industrial & Investment Corporation of Maharashtra Ltd., (1993) 2 SCC 144 [Para 33,34]
Shree Chamundi Mopeds Ltd. Vs. Church of South India, AIR 1992 SC 1439 [Para 34]

JUDGMENT

JUDGMENT :- By this Chamber Summons filed by the respondents, respondents have applied for stay of the execution and implementation of the order dated 19th June, 2012 passed in Arbitration Petition No. 707 of 2012 by which this Court had disposed of the arbitration petition filed under section 9 of the Arbitration and Conciliation Act, 1996 in terms of the consent terms filed by the parties. Some of the relevant facts for the purpose of deciding this Chamber Summons are as under :-

2. On 3rd March, 2008, petitioner had sanctioned invoice discounting facility of an amount not exceeding Rs.20,00,00,000/- in favour of the 1st respondent on the terms and conditions setout in the sanction letter. On 27th August, 2009 at the request of the 1st respondent, the petitioner sanctioned the renewal of the credit facility of an amount not exceeding Rs.20 crores to the respondent no.1. On 23rd September, 2010, the petitioner sanctioned renewal of the credit facility for further period till 31st December, 2010 and not exceeding Rs. 20 crores towards working capital requirements. Respondent No.2 executed personal guarantee in favour of the petitioner on 23rd September, 2010 guaranteeing the due repayment of all amounts payable by the respondent no.1 to the petitioner. Respondent nos. 3, 4 and 5 executed corporate guarantee on 4th November, 2010 in favour of the petitioner and also executed simple mortgage of their respective immoveable properties in favour of the petitioner. It is the case of the petitioner that the respondents committed default in making repayment of the diverse amounts.

3. By letter dated 3rd April, 2012, the 1st respondent admitted its liabilities to pay entire outstanding amount but informed that it was in discussion with some strategic investor for investment in the 1st respondent company and requested the petitioner to extend co-operation and support in that regard. The petitioner thereafter vide its advocates notice dated 4th May, 2012 called upon the respondents to repay the loan amount with interest and not to proceed with any sale of the properties without written consent of the petitioner and without first paying all outstanding dues of the petitioner. The respondents did not give any response to the said notice nor repaid any amount. By letter dated 3rd April, 2012, the 1st respondent informed the petitioner that they had proposed to enter into transaction with some strategic investor for investment in the company and requested for co-operation in respect of repayment of the outstanding amounts.

4. The petitioner thereafter came across a circular issued by the 1st respondent for its shareholders thereby proposing to pass a resolution for approval of sale and transfer of the company's Wind Mill located in Dhule, Maharashtra and also some of its other assets. The petitioner accordingly filed petition (707 of 2012) under section 9 of the Arbitration and Conciliation Act, 1996 interalia praying for appointment of the Court Receiver and injunction and praying for deposit of Rs. 25,30,32,482.69/- in this court.

5. Arbitration Petition (707 of 2012) filed by the petitioner appeared on the board of S.J.Kathawala, J. on 19th June, 2012 when both parties filed consent minutes duly signed by their respective advocates. This court disposed of the said arbitration petition in terms of the said consent minutes. This court referred the disputes and difference to Mr.J.P.Sen, Advocate. By consent of both parties, this court appointed Mr.Abhijeet Deb, Advocate practicing in Kolkata as a private Receiver/Commissioner in respect of the properties described in Ex. "U" to the petition. Both parties agreed that the said private receiver shall sell the mortgaged properties by public auction or private treaty preferably, within a period of six months from the date of the said order or such extended time as the petitioner may agree. The respondents agreed and undertook that till such time, the mortgaged properties were sold, they shall not in any manner sell, transfer, encumber, alienate or create third party rights or part with possession of the mortgaged properties. The respondents undertook to render all co-operation and assistance to the private receiver/commissioner for expeditious sale of the mortgaged properties and as and when called upon shall execute and register all necessary documents in favour of the purchaser and shall handover physical possession to the purchaser. Both parties agreed that the sale consideration of the said properties shall be deposited by the private receiver in this court and shall be subject to further orders of the arbitrator. Both parties were granted liberty to apply for further order/direction before this court if necessary.

6. Pursuant to the said order passed by this court, various meeting were held in the chamber of the private receiver for the purpose of taking steps for sale of mortgaged properties as per the said consent order. Dr.S.N.Mitra was appointed as a valuer who submitted his valuation report suggesting fair price of the mortgaged properties as approximately Rs.5.84 crores. On 17th December, 2012 the private receiver fixed 4th January, 2013 as date of publication of sale notice in the newspapers 'Telegraph', Kolkata edition and 'Bartman', Kolkata edition. The private receiver has fixed the date of sale of mortgaged properties on 23rd February, 2013.

7. Without any prior notice to the petitioner, the 1st respondent filed a reference before the Board for Industrial and Financial Reconstruction (for short 'BIFR') under the provisions of Sick Industrial Companies (Special Provisions) Act, 1985 (for short 'SICA'), which was registered on 21st November, 2012. It is the case of the petitioner that though the said reference was registered on 21st November, 2012, the respondents deliberately did not disclose the said fact to the petitioner or the private receiver even during the meetings held on 22nd November, 2012 and 17th December, 2012.

8. On 29th December, 2012 the 1st respondent vide e-mail for the first time informed the private receiver that the 1st respondent has been registered under BIFR under provisions 15(1) of SICA and requested for keeping the proceeding in abeyance. Pursuant to the said e-mail, the private receiver by his e-mail to the parties conveyed that in view of the proceedings before BIFR filed by the 1st respondent, he proposed to keep the process of sale as directed by this court in abeyance till 16th January, 2013 to enable the parties to approach this court for seeking necessary orders.

9. The petitioner vide their e-mail of 4th January, 2013 informed the private receiver and copy marked to the respondents that the provisions of section 22 of SICA would apply only to the assets/properties of the Industrial Company and the Guarantee(s) in respect of the loans. However, such protection under the said section had no implication on the properties of the guarantors and/or third party which have been offered as security.

10. The respondents have filed this chamber summons interalia praying for stay of the execution and implications of the order dated 19th June, 2012 passed in Arbitration Petition (707 of 2012) during the pendency and hearing of Reference No. 67 of 2012 filed by the 1st respondent before BIFR.

11. The learned counsel appearing for the respondents in support of the chamber summons submits that pursuant to the consent order passed by this court, the petitioners have already filed its statement of claim before the learned arbitrator and the respondents have already filed their counter statement of facts cum counter claims.

12. On 6th November, 2012, the 1st respondent made reference under section 15 of SICA to the BIFR for the purpose of reviving the 1st respondent company. By letter dated 21st November, 2012, the Registrar of Board for Industrial and Financial Reconstruction informed the 1st Respondent that the reference made by the company on 6th November, 2012 had been registered by BIFR as Case No. 67 of 2012.

13. The learned counsel appearing for the respondents submit that in view of the reference filed by the 1st respondent under section 15 of the SICA having been registered and as the matter is under active consideration of BIFR, the 1st respondent would be entitled to receive the protection guaranteed under section 22 of SICA and no suit for recovery of money and no proceeding for execution, distress or the like, against any of the properties of the respondent no.1 can be proceeded with except with leave of the BIFR. It is submitted that no suit for enforcement of any guarantee in respect of any loans or advance granted to the respondent no.1 is maintainable in the facts and circumstances of this case. It is submitted that the receiver appointed by this court is also not entitled to proceed to sell the said properties belonging to the respondent nos. 3 to 5 which had been furnished as security for repayment of the outstanding dues of the 1st respondent under the agreement dated 4th November, 2010. Respondent nos. 3 to 5 have thus applied for modification of the order dated 19th June, 2012 and seeks clarification that the properties belonging to respondent nos. 3 to 5 should not be sold during the pendency of Reference (67 of 2012) pending before BIFR. It is submitted that in view of section 22(1) of SICA, as inquiry is pending before BIFR on reference filed by the 1st respondent company and since guarantees were given by respondent nos. 3 to 5, guaranting repayment of loan of the 1st respondent in favour of the petitioner, no steps can be given by the petitioner even in respect of the personal properties of the guarantors which were mortgaged. The learned counsel submits that section 22(1) of SICA has been dealt with by the Supreme Court in case of Paramjeet Singh Patheja vs. ICDS Ltd., JT 2006(10) SC 41 : [2007 ALL SCR 24]. The learned counsel placed reliance upon paragraph 60 (vii) of the said judgment in support of the plea that the expression 'suit' in section 22 be given its plain meaning viz. any proceedings adopted for realization of a right vested in a party by law which would include arbitration proceedings.

14. Paragraphs 10, 12, 58, 59, 60 and 61 of the judgment in case of Paramjeet Singh Patheja, [2007 ALL SCR 24] (supra) reads thus :-

10. The Division Bench answered the reference in the affirmative on 19.03.2003 and held that an award is a "decree" for the purpose of Section 9 of the Insolvency Act and that an insolvency notice may therefore be issued on the basis of an award passed by an arbitrator.

12. The substantial questions of law of paramount importance to be decided by this Court are:

i. Whether an arbitration award is a "decree" for the purpose of Section 9 of the Presidency Towns Insolvency Act, 1909?

ii. Whether an insolvency notice can be issued under Section 9(2) of the Presidency Towns Insolvency Act, 1909 on the basis of an arbitration award?

58. Issuance of a notice under the Insolvency Act is fraught with serious consequences: it is intended to bring about a drastic change in the status of the person against whom a notice is issued viz. to declare him an insolvent with all the attendant disabilities. Therefore, firstly, such a notice was intended to be issued only after a regularly constituted court, a component of judicial organ established for the dispensation of justice, has passed a decree or order for the payment of money. Secondly, a notice under the Insolvency Act is not a mode of enforcing a debt; enforcement is done by taking steps for execution available under the CPC for realizing moneys.

59. The words "as if" demonstrate that award and decree or order are two different things. The legal fiction created is for the limited purpose of enforcement as a decree. The fiction is not intended to make it a decree for all purposes under all statutes, whether State or Central.

60. For the foregoing discussions we hold:

i) that no insolvency notice can be issued under Section 9(2) of the Presidency Towns Insolvency Act, 1909 on the basis of an Arbitration Award;

ii) that execution proceedings in respect of the award cannot be proceeded with in view of the statutory stay under Section 22 of the SICA Act. As such, no insolvency notice is liable to be issued against the appellant.

iii) Insolvency Notice cannot be issued on an Arbitration Award.

iv) An arbitration award is neither a decree nor an Order for payment within the meaning of Section 9(2). The expression "decree" in the Court Fees Act, 1870 is liable to be construed with reference to its definition in the CPC and held that there are essential conditions for a "decree".

(a) that the adjudication must be given in a suit.

(b) That the suit must start with a plaint and culminate in a decree, and

(c) That the adjudication must be formal and final and must be given by a civil or revenue court.

An award does not satisfy any of the requirements of a decree. It is not rendered in a suit nor is an arbitral proceeding commenced by the institution of a plaint.

(v) A legal fiction ought not to be extended beyond its legitimate field. As such, an award rendered under the provisions of the Arbitration Act, 1996 cannot be construed to be a "decree" for the purpose of Section 9(2) of the Insolvency Act.

(vi) An insolvency notice should be in strict compliance with the requirements in Section 9(3) and the Rules made thereunder.

(vii) It is a well established rule that a provision must be construed in a manner which would give effect to its purpose and to cure the mischief in the light of which it was enacted. The object of Section 22, in protecting guarantors from legal proceedings pending a reference to BIFR of the principal debtor, is to ensure that a scheme for rehabilitation would not be defeated by isolated proceedings adopted against the guarantors of a sick company. To achieve that purpose, it is imperative that the expression "suit" in Section 22 be given its plain meaning, namely any proceedings adopted for realization of a right vested in a party by law. This would clearly include arbitration proceedings.

(viii) In any event, award which is incapable of execution and cannot form the basis of an insolvency notice.

61. In the light of the above discussion, we further hold that the Insolvency Notice issued under Section 9(2) of the P.T.I. Act 1909 cannot be sustained on the basis of arbitral award which has been passed under the Arbitration & Conciliation Act, 1996. We answer the two questions in favour of the appellant.

15. Relying upon the aforesaid judgment the learned counsel submits that the consent order was obtained in arbitration proceedings filed under section 9 of the Arbitration and Conciliation Act, 1996 and personal properties of respondent nos. 3 to 5 are proposed to be sold under order passed in the said proceedings which were filed against the 1st respondent company as well as against the guarantors. It is submitted that the proceedings filed under section 9 of the Arbitration Act, 1996 would be thus covered by expression 'suit' in section 22 and thus no coercive steps can be taken by the party against even guarantors.

16. The learned counsel for respondents also placed reliance upon the judgment of the Punjab and Haryana High Court in case of M/s.Arihant Threads Ltd. vs. Employee's State Insurance Corporation delivered on 14th July, 2009 in CWP NO. 9521 of 2008 in which Punjab and Haryana High Court has followed the Supreme Court judgment of Paramjeet Singh Patheja, [2007 ALL SCR 24] (supra). The learned counsel placed reliance on para (3) of the said judgment which reads thus :-

3. Morgan Securities and Credit Pvt. Ltd. Vs. Modi Rubber Ltd. JT 2007(1) SC 432 refers to a decision that examines the interplay of the provisions of SICA and the Arbitration and Conciliation Act, 1996. The Supreme Court ruled that the provisions of Section 22 of SICA will prevail over the provisions of Arbitration and Conciliation Act. It is not possible to derive any strength from this decision since this did not pertain any proceedings for recovery of money. The same proposition also obtains through the decision of the Hon'ble Supreme Court in M/s Pandey Co. Builders Pvt Ltd. Vs. State of Bihar and another JT 2006 10 SC 414. Tata Davy Ltd. Etc. Vs. State of Orissa and others JT 1997 (7)SC 216 dealt with the case of recovery of arrears of tax under the Orissa Sales Tax Act, 1947 and the effect of Section 22 (1) of SICA. The Supreme Court had held that coercive process of recovery of tax would not be permissible without consent of BIFR. The recovery was sought by resort to attachment of the property under Section 13-A of the said Act. There could be no doubt about the proceedings for recovery through attachment of property would also be covered within the expression" no proceeding for the winding up of the industrial company, or for execution, distress or the like against any of the properties of the Industrial Company" occurring in the Section. Maharashtra Tubes Ltd. Vs. State Industrial & Investment Corporation of Maharashtra Ltd. and another reported in JT 1993 SC 310 referred to the inter play of provisions of SICA and the State Financial Corporations Act and the continuation of proceedings under Section 29 and 31 of the said Act. It is common knowledge that the provisions of Section 29 and 31 refer to jurisdiction of the District Court to cause attachment and sale of properties which would also be covered by the expressions referred to above under Section 22 of SICA. M/s Patheja Bros. Forging & Stamping and another JT 2000(8) SC 252 dealt with the situation of recovery of money against the Company which was admittedly under reference to BIFR under SICA. The issue that fell for consideration before the Supreme Court was whether a claim of guarantee would also be covered in a case where the suit was filed against the Company and its assets. The operation of Section 22 as covering claims against a guarantor could be seen from the term of the Section itself which includes " a benefit that is available to a guarantor for the loan advanced to the Company" and therefore the operation of Section 22 of SICA is easily discernible. M/s Pandey & Co. Builders Pvt Ltd. Vs. State of Bihar and another JT 2006 (10) 414 and Real Value Appliances Ltd. Vs. Canara Bank and others dealt with the effect of proceedings for winding before the Company Court and when there was also a reference to BIFR under SICA. The application to proceedings for a Company under winding up is also specifically dealt with under Section 22 where it contains expression " no proceedings for the winding up of the industrial Company......." shall lie or be proceeded with........ M/s Rishabh Agro Industries Ltd. Vs. P.N.B. Capital Services Ltd. JT 2000 (6) SC 447 dealt with the overriding effect of SICA when the Hon'ble Supreme Court held even after a liquidator is appointed by a Company Court, The Board of Directors shall have power to apply for rehabilitation under SICA. Jay Engineering Works Ltd. Vs. Industry Facilitation Council and another JT 2006 (12) 171 is followed for the proposition that the provisions of SICA shall prevail over the provisions relating to interest and Delayed Payments in Small Scale and Ancillary Industrial Undertaking Act, 1993 and no proceedings for recovery which the 1993 Act contemplated by resort to attachment and sale of properties would avail when proceedings were pending before BIFR. Paramjeet Singh Patheja Vs. ICDS Ltd. JT 2006 (10) SC 41 resolved the controversy relating to the effect of award passed under the Arbitration Act and an insolvency notice issued under Presidency Towns Insolvency Act, 1909 for non-payment of the amount due under the award, when proceedings were also pending before BIFR under SICA. The action under Insolvency Act was sought against private individual as a guarantor for the Company and therefore the pointed reference to "enforcement of a guarantee in respect of loan or advance granted to the Industrial Company" was clearly applicable.

17. The learned counsel for the respondents placed reliance upon the judgment of the Supreme Court in case of Director of Settlements A.P. and others vs. M.R.Apparao and another, AIR 2002 SC 1598 and particularly paragraph 7 in support of his plea that the statements of the court on matters other than law like facts may have no binding force as the facts of two cases may not be similar. But what is binding is the ratio of the decision and not any finding of facts. Paragraph 7 of the said judgment of the Supreme Court reads thus :-

7. So far as the first question is concerned, Article 141 of the Constitution unequivocally indicates that the law declared by the Supreme Court shall be binding on all Courts within the territory of India. The aforesaid Article empowers the Supreme Court to declare the law. It is, therefore, an essential function of the Court to interpret a legislation. The statements of the Court on matters other than law like facta may have no binging force as the facts of two cases may not be similar. But what is binding is the ratio of the decision and not any finding of facts. It is the principle found out upon a reading f a judgment as a whole, in the light of the questions before the Court that forms the ratio and not nay particular word or sentence. To determine whether a decision has 'declared law' it cannot be said to be a law when a point is disposed of on concession and what is binding is the principle underlying a decision. A judgment of the Court has to be read in the context of questions which arose for consideration in the case in which the judgment was delivered. An 'obiter dictum' as distinguished from a ratio decidendi is an observation by Court on a legal question suggested in a case before it but not arising in such manner as to require a decision. Such an obiter may not have a binding precedent as the observation was unnecessary for the decision pronounced, but even though na obiter may not have a bind effect as a precedent, but it cannot be denied that it is of considerable weight. The law which will be binding under Article 141 would, therefore, extend to all observations of points raised and decided ny the Court in a given case. So far as constitutional matters are concerned, it is a practice of the Court not to make any pronouncement on points not directly raised for its decision. The decision in a judgment of the Supreme Court cannot be assailed on the round that certain aspects were not considered or the relevant provisions were not brought to the notice of the Court (see MANU/SC/0391/1970 : AIR 1970 SC 1002 : AIR 1970 SC 1002). When Supreme Court decides a principle it would be the duty of the High Court or a subordinate Court to follow the decision of the Supreme Court. A judgment of the High Court which refuses to follow the decision and direction of the Supreme Court or seeks to revive a decision of the High Court which had been set aside by the Supreme Court is a nullity. (See MANU/SC/0215/1983 : AIR 1984 SC 1359 : AIR 1984 SC 1359). We have to answer the first question bearing in mind the aforesaid guiding principles. We may refer to some of the decisions cited by Mr. Rao in elaborating his arguments contending that the judgment of this Court dated 6th February, 1986 cannot be held to be a law declared by the Court within the ambit of Article 141 of the Constitution. Mr. Rao relied upon the judgment of this Court in the case of Pandit M.S.M. Sharma v. MANU/SC/0021/1958 : Sri Krishna Sinha and Ors. - AIR 1959 SC 395 , wherein the power and privilege of the State Legislature na the fundamental right of freedom of speech and expression including the freedom of the press was the subject matter of consideration. In the aforesaid judgment it has been observed by the Court that the decision in Gunupati Keshavram Reddy v. MANU/SC/0100/1952:Nafisul Hasan - AIR 1954 SC 636 , relied upon by the counsel for the petitioner which entirely proceeded on a concession of the counsel cannot be regarded as a considered opinion on the subject. There is no dispute with the aforesaid proposition of law.

18. Dr. Saraf, the learned counsel appearing for the petitioner on the other hand submits that it is not in dispute that the respondent nos. 3 to 5 had given personal guarantees to secure repayment of loan given by the respondents to the petitioner. The respondents had admitted its liability to the petitioner in correspondence. The respondents had agreed not to sell the mortgaged properties. The respondents had proposed to sell the mortgaged properties so as to prejudice the security granted in favour of the petitioner. The petitioners were therefore compelled to file proceedings under section 9 of the Arbitration Act, 1996. The respondents at that stage voluntarily agreed to the appointment of the receiver in respect of personal properties of respondent nos. 3 to 5 with power of sale and in view of such consent minutes of order filed by both parties, this court did not grant larger relief as claimed by the petitioner and appointed the private receiver with a direction to sale the mortgaged properties and to deposit the sale proceeds in this court. The learned counsel submits that private receiver as well as both the parties have taken steps pursuant to such consent order passed by this court to sale the mortgaged properties of 3rd to 5th respondent. The respondents have participated in all meetings before the private receiver. Valuation report was submitted by the valuer appointed by the receiver. At no stage, the respondent informed the private receiver or to the petitioner about filing of the reference under provisions of SICA before BIFR. At the very late stage, the respondent has applied for stay of the further steps in implementation of the consent order. The learned counsel submits that conduct of the respondent is totally dishonest and blameworthy.

19. The learned counsel appearing for the petitioner then submits that under section 22 of the SICA there is no protection conferred on the guarantors who had given personal guarantees and if proceedings other than suits are filed for recovery of money or for the enforcement of any security against the industrial company or of any guarantee. The learned counsel submits that the expression 'suit' referred in 2nd paragraph of section 22 does not include arbitration proceedings. The learned counsel submits that private receiver was appointed by consent of both parties for sale of the mortgaged properties and thus consent of board was not required. The learned counsel submits that proceedings filed under section 9 are not in the nature of suit. The learned counsel submits that prior to 1st February, 1994, there was no protection at all given to the guarantors. Section 22 (i) was amended by Act 12 of 1994 w.e.f. 1st February, 1994.

20. It is submitted that the expression 'suit' in section 22 is within a narrow ambit. Coercive action can be prevented and not voluntary action. The learned counsel submits that suit does not include execution proceedings. The private receiver was appointed by consent of both parties for sale of the properties. The learned counsel submits that amendment introduced to section 22 does not use word execution, distress etc. The learned counsel submits that the provisions of section 9 of the Arbitration Act are akin to section 31 of the State Financial Corporation Act. This court has already interpreted proceedings under section 31 of the State Financial Corporation Act and has held that the said proceedings were not in the nature of the suit.

21. The learned counsel distinguished the judgment of the Supreme Court in case of Paramjeet Singh Patheja, [2007 ALL SCR 24] (supra) on the ground that the issue before the Supreme Court in the said judgment was totally different. The issue was whether the arbitration award is a decree for the purpose of section 9 of the Presidency Towns Insolvency Act, 1909. The learned counsel submits that in that context, the Supreme Court held that arbitration award is neither a decree nor an order within the meaning of section 9(2) of Presidency Towns Insolvency Act, 1909. The Supreme court held that no insolvency notice can be issued under section 9 on the basis of the arbitration award. In that context, the Supreme Court held that section 22 of SICA be given its plain meaning viz. any proceedings adopted for realization of a right vested in a party by law which would clearly include arbitration proceedings. The learned counsel submits that the facts before the Supreme Court are different than facts of this case.

22. Dr.Saraf, the learned counsel appearing for the petitioner placed reliance upon the judgment of the Supreme Court in case of Kailash Nath Agarwal and others vs. Pradeshiya Industrial & Investment Corporation of U.P. Ltd. & Anr., (2003) 4 SCC 305 Paragraphs 24 to 34 of the said judgment reads thus :-

24. According to these decisions, a suit is an action taken in a Court of law.

25. Having regard to the judicial interpretation of the word 'suit', it is difficult to accede to the submission of the appellants that the word 'suit' in Section 22(1) of the Act means anything other than some form of curial process.

26. Apart from the semantic difference between the words 'suit' and 'proceeding' there is the absence of expensive words 'or the like' which appear after the expression 'proceedings, after the word 'suit'. The exclusion of such 'omnibus expression' after the word 'suit' must be given some weight in interpreting the word. As held by this Court in LIC v. Escorts Ltd. (supra):

"The distinction made by Parliament .....in the service provisions of the same Act cannot be ignored or strained to be explained away by us. That is not the way to interpret statutes. The proper way is to give due weight to the use as well as the omission to use the qualifying words in different provisions of the Act. The significance of the use of the qualifying word in one provision and its non-use in another provision may not be disregarded".

27. Since the legislature has expressly chosen to make a distinction between the suits for recovery of the money and enforcement of guarantees and proceedings for the recovery of money, that must be given effect to.

28. Furthermore, the Parliament must be taken to be aware of the decision in Maharashtra Tubes and the fact that the word 'proceeding' used in Section 22(1) had been widely construed to include proceedings for recovery of dues by State Financial Corporation as arrears of land revenue. The deliberate choice of the word 'suit' in the circumstances would indicate that Parliament intended to limit the ambit of the amendment introduced to particular modes for the recovery of money or enforcement of guarantees.

29. One of the reasons for the word 'proceeding' in Section 22(1) being construed widely by this Court in Maharashtra Tubes was that the proceedings were against the company itself. Having regard to the object of the Act viz., if possible to revive the company, as also the operation of the various sections towards the end, the Court held that it would be unreasonable to give such meaning to the word 'proceeding' as would result in dealing a death blow to the Company so that the entire procedure envisaged under the SICA would be set at naught.

30. We have been unable to find a corresponding reason for widening the scope of the word 'suit' so as to cover proceedings against the guarantor of an industrial company. The object for enacting the SICA and for introducing the 1994 amendment was to facilitate the rehabilitation or the winding up of sick industrial companies. It is not the stated object of the Act to protect any other person or body. If the creditor enforce the guarantee in respect of the loan granted to the industrial company, we do not see how the provisions of the Act would be rendered nugatory or in any way affected. All that could happen would be that the guarantor would step into the shoes of the creditor vis-a-vis the company to the extent of the liability met.

31. It is true that this Court in Patheja Bros. Forgings & Stampings v. ICICI Ltd. (supra) construed the 1994 amendment to Section 22(1) to hold:

"For our purposes, therefore, the relevant words are: "no suit ....for the enforcement ... of any guarantee in respect of any loans or advance granted to the industrial company" shall lie without the consent of the Board or the appellate authority. The words are crystal clear. There is no ambiguity therein. It must, therefore, be held that no suit for the enforcement of a guarantee in respect of a loan or evidence granted to the industrial company concerned will lie or can be proceeded with, without the sanction of the Board or the appellate authority under the said Act."

32. This is in keeping with the well established principle of statutory interpretation that where the language of the provision is explicit the language of the statute must prevail.

33. The appellants have, however, sought to draw sustenance from the following passage in the judgment:

"The argument on behalf of the first respondent is that while this provision provides for the continuation of proceedings against the industrial company, there is no provision in the said Act which provides for the continuation of any held-up proceeding against the guarantor of a loan or advance to such company and that, therefore, Section 22 should be read as applying only to a suit against the Industrial company and not a guarantor. Apart from the fact that, as indicated above the language of Section 22 is explicit the scheme would provide for the repayment of the loan or advance, and therefore, would take within its (sic) the claim on the guarantee; the question of proceeding with the suit against the guarantor would not arise. On the other hand, if the industrial company cannot be revived by a scheme, the embargo under Section 22 would cease to operate." (Emphasis ours)

34. These observations do not mean that when the words used are unambiguous, other extrinsic interpretative aids such as the objects of the statute, or the difficulties that would be faced by creditors will be relevant in interpreting the expression. The Court in Patheja's case merely observed that the creditor could recover its sum from the principal debtor under the scheme and, therefore, the claim on the guarantee would not arise if the amount is so recovered under the scheme. We do not read the observations quoted as holding that protection of guarantors of loans to a sick company is an object of the 1994 amendment which object must colour our interpretation of the amendment. Till 1994 no protection was afforded to the guarantors under the Act at all. A limited protection has been given in 1994. The expression used being clear and unambiguous, it is not for us to question the wisdom of the legislature in giving the limited protection it did or why such protection was necessary at all.

23. Placing reliance upon the aforesaid judgments, the learned counsel would submit that plain reading of section 22(1) of SICA makes it clear that the intent of the legislature was to limit the ambit of the amendment to particular modes for the recovery of money or enforcement of guarantee. The learned counsel submits that by 1994 amendment to section 22(i) relates to the pre-decretal stage because recovery proceedings by way of execution are already covered under the first half of sub-section (1) of section 22. The learned counsel submits that execution of an order against guarantors cannot be construed as suit under section 22 and thus in view of this limited protection granted by virtue of 1994 amendment, present proceedings cannot be stayed.

24. Dr.Saraf, the learned counsel placed reliance upon the judgment of this court delivered on 1st July, 2008 in Misc. Petition No. 2 of 2007 in case of SICOM vs. Marvel Industries and more particularly paragraphs 10, 16, 20 and 23 in support of his proposition that proceedings initiated by the Financial Institution under sections 31 and 32 of the Financial Corporation Act which are in parimateria to the proceedings under section 9 of the Arbitration and Conciliation Act. This court has already taken a view that such proceedings under sections 31 and 32 of the said Financial Corporation Act were not in the nature of suit and thus should not be stayed under section 22 of the SICA. The said paragraphs read thus :-

Section 22 in The Sick Industrial Companies (Special Provisions) Act, 1985

22. Suspension of legal proceedings, contracts, etc.

(1) Where in respect of an industrial company, an inquiry under section 16 is pending or any scheme referred to under section 17 is under preparation or consideration or a sanctioned scheme is under implementation or where an appeal under section 25 relating to an industrial company is pending, then, notwithstanding anything contained in the Companies Act, 1956 (1 of 1956 ) or any other law or the memorandum and articles of association of the industrial company or any other instrument having effect under the said Act or other law, no proceedings for the winding up of the industrial company or for execution, distress or the like against any of the properties of the industrial company or for the appointment of a receiver in respect thereof and no suit for the recovery of money or for the enforcement of any security against the industrial company or of any guarantee in respect of any loans or advance granted to the industrial company] shall lie or be proceeded with further, except with the consent of the Board or, as the case may be, the Appellate Authority.

(2) Where the management of the sick industrial company is taken over or changed, 3[in pursuance of any scheme sanctioned under section 18], notwithstanding anything contained in the Companies Act, 1956 (1 of 1956 ) or any other law or in the memorandum and articles of association of such company or any instrument having effect under the said Act or other law-

(a) it shall not be lawful for the shareholders of such company or any other person to nominate or appoint any person to be a director of the company;

(b) no resolution passed at any meeting of the shareholders of such company shall be given effect to unless approved by the Board.

(3) 2[Where an inquiry under section 16 is pending or any scheme referred to in section 17 is under preparation or during the period] of consideration of any scheme under section 18 or where any such such scheme is sanctioned thereunder, for due implementation of the scheme, the Board may by order declare with respect to the sick industrial company concerned that the operation of all or any of the contracts, assurances of property, agreements, settlements, awards, standing orders or other instruments in force, to which such sick industrial company is a party or which may be applicable to such sick industrial company immediately before the date of such order, shall remain suspended or that all or any of the rights, privileges, obligations and liabilities accruing or arising thereunder before the said date, shall remain suspended or shall be enforceable with such adaptations and in such manner as may be specified by the Board:

Provided that such declaration shall not be made for a period exceeding two years which may be extended by one year at a time so, however, that the total period shall not exceed seven years in the aggregate.

(4) Any declaration made under sub- section (3) with respect to a sick industrial company shall have effect notwithstanding anything contained in the Companies Act, 1956 (1 of 1956 ) or any other law, the memorandum and articles of association of the company or any instrument having effect under the said Act or other law or any agreement or any decree or order of a court, tribunal, officer or other authority or of any submission, settlement or standing order and accordingly,-

(a) any remedy for the enforcement of any right, privilege, obligation and liability suspended or modified by such declaration, and all proceedings relating thereto pending before any court, tribunal, officer or other authority shall remain stayed or be continued subject to such declaration; and

(b) on the declaration ceasing to have effect-

(i) any right, privilege, obligation or liability so remaining suspended or modified, shall become revived and enforceable as if the declaration had never been made; and

(ii) any proceeding so remaining stayed shall be proceeded with, subject to the provisions of any law which may then be in force, from the stage which had been reached when the proceedings became stayed.

(5) In computing the period of limitation for the enforcement of any right, privilege, obligation or liability, the period during which it or the remedy for the enforcement thereof remains suspended under this section shall be excluded.

25. The learned counsel placed reliance upon the judgment of the Division Bench of this court in case of Ved Prakash Agarwal vs. M/s.Rama Petrochemicals Ltd., 2004(3) ALL MR 5 and more particularly para 12 which reads thus :-

12. The result of a survey of these four judgments is clear. As far as leasehold rights of a sick company in a leased premises are concerned, they are not a property protected under Section 22 of the SICA as decided in Shree Chamundi Mopeds Ltd. MANU/SC/0501/1992 : [1992]2SCR999. When it comes to the proceedings against the industrial company, the expression must be widely construed because the basic idea is to revive the sick industry as held in Maharashtra Tubes Ltd. MANU/SC/0427/1993 : [1993]1SCR340. If there is any loan or advance granted to an industrial company and it is guaranteed to be repaid by a guarantor, no suit for enforcement of such a guarantee will lie against the guarantor also. This was held in Patheja Bros. MANU/SC/0448/2000 : AIR2000SC2553 . And lastly, as held in PICUP MANU/SC/0114/2003 : [2003]1SCR1159 , the protection under the amended Section 22(1) is not available to the guarantors, when it comes to execution proceedings. The effect of the amendment is to stall suits of a particular type but not the recovery proceeding against the guarantor. The upshot of the above discussion is that firstly execution or recovery proceedings on the basis of existing decrees is not at all covered by the amendment of 1994. When it comes to guarantors, it is only the suits for enforcement of any guarantee which would be stayed as against them provided they are in respect of loans or advances granted to the industrial company. Thus it is not that merely because the industrial company has become sick that the suits against the guarantors thereof would automatically get halted. The guarantors will have to show that they are suits in respect of loans or advances granted to the industrial company to get the protection and not otherwise. Therefore, merely because the industrial company is protected, the guarantor does not get protected automatically. All that was submitted before the learned single judge was that the industrial company, to which equipment was given on lease by the guarantor, was before the BIFR and, therefore, the suit against the guarantor cannot be proceeded with. On the submission, as it was placed before him, the learned judge was right in answering that the suit cannot be stayed merely on that footing.

26. The learned counsel submits that effect of the amendment to section 22 (1) is to stall suit of a particular type but not the recovery proceedings against the guarantor.

27. The learned counsel appearing for the petitioner then placed reliance upon the judgment of the Supreme Court in case of San-A Tradubg Co. Ltd. vs. I.C.Textiles Ltd. in Arbitration Petition No. 8 of 2005. Supreme Court after adverting to its earlier judgment in case of Kailash Nath Agarwal and others held thus :-

It is, thus, apparent from the wording of Section 22(1) and the above decisions of this Court that the proceedings covered under Section 22 are the proceedings of coercive nature, be that legal or otherwise, which would come within the purview of expression 'proceedings' as mentioned in the Section but it would not cover all proceedings. Section 22 (1) incorporated certain types of proceedings which would fall within its ambit and which are the proceedings for winding up of the industrial company or the proceedings for execution and distress against any of the properties of the industrial company or the proceedings for the appointment of a Receiver in respect of the properties of the industrial company. From the nature of the proceedings referred to in this Section, it is clear that only the proceedings which have the shape and effect of coercive nature would come within the ambit of Section 22(1) and for taking up such proceedings the permission of BIFR is required. By Act 12 of 1994, Section 22(1) was amended by insertion whereby a suit for the recovery of money or for the enforcement of any security against the industrial company or of any guarantee in respect of any loans or advances granted to the industrial company would not be maintainable unless consent of BIFR is obtained. In Kailash Nath Agarwal and Others vs. Pradeshiya Industrial & Investment Corporation of U.P. Ltd. and Another, (2003) 4 SCC 305, the question arose as to the scope of the protection afforded to the guarantors under Section 22(1) of SICA. The company was declared sick by BIFR in terms of Section 3(1)(o) of SICA. An operating agency was appointed under Section 17(3). While the proceedings before BIFR were pending, three separate notices of demand were served on the appellants as personal guarantors in respect of the loans granted to the company by the respondent Pradeshiya Industrial & Investment Corporation of U.P. Ltd. and it was said in the notices that the Corporation would take legal measures to recover its outstanding dues from each guarantor. It was contended by the guarantors that in view of Section 22(1) of SICA, the Corporation could not enforce its demand against the appellants under the permission of BIFR is obtained. This Court has drawn a distinction between the proceedings taken up under the U.P. Public Moneys (Recovery of Dues) Act, 1972 and a suit contemplated under Section 22 of SICA. This Court has held in Kailash Nath Agarwal (supra) that having regard to the judicial interpretation of the word 'suit', it is difficult to accede to the submission of the appellants that the word 'suit' in Section 22(1) of SICA means anything other than some form of curial process and the Court found it difficult to widen the scope of the word 'suit' so as to cover proceedings against the guarantor of an industrial company. By virtue of amendment to Section 22 of SICA, no suit for the recovery of money or for the enforcement of any security against the industrial company or of any guarantee in respect of any loans or advances granted to the industrial company, shall lie and adjudication is prohibited of the liability of the industrial company or the guarantor. Section 22 further prohibits taking up of the proceedings of the nature which would be coercive for recovery of money against a sick undertaking. Proceeding in arbitration is neither a suit under sub-section (1) of Section 22 of SICA nor the proceedings thereunder and, therefore, there is no prohibition under Section 22 of SICA to take up the arbitration proceedings to adjudicate the liability of the parties to the arbitration proceedings. In my view, Section 22 of SICA does not debar the arbitration proceedings under the Arbitration and Conciliation Act, 1996. The objections to the arbitration proceedings raised by the respondent fail for the aforesaid reasons and are rejected.

28.The learned counsel for the petitioner placed reliance upon the Delhi High Court in case of Indrajeet Arya and anr. vs. ICICI Bank Ltd. in Writ Petition (C) No. 7253 of 2011 delivered on 2nd May, 2012 and more particularly paragraphs 16, 17.4, 17.5, 17.6 and 18.1 which reads thus :-

16. The other aspect of the matter as to whether the action filed in the DRT by the respondent in which the petitioners are also arrayed would fall within the ambit of the term, 'suit', requires us to examine the statement of objects and reasons and some relevant provisions of SICA, as also, the view expressed by various courts with respect to the very same term.

17. 4 A reading of section 22 would show that while, the reference is pending before the BIFR, at various stages, which commences with its registration, the legislature provides for suspension of certain kinds of actions. This protection extends to the appellate stage as well, that is, when an appeal under section 25 relating to the industrial company is pending before the AAIFR. A careful perusal of sub section (1) of Section 22 would show that, it suspends proceedings such as winding up of the industrial company, "execution", "distress" or "the like" against the "properties of the industrial company" or, even initiation of steps for appointment of a receiver qua the properties of the industrial company. The use of the expression "industrial company as against "sick industrial company is significant as there may arise a situation which requires protection to be accorded to an industrial company prior to it being formally declared as a Sick Industrial Company by the BIFR, which is really the period between registration of reference and a declaration of sickness by the BIFR. Therefore, this limb of sub section (1) of section 22 is restricted to actions of the like nature described above, against the industrial company or its properties.

17.5 The second limb of sub section (1) of section 22 which begins with "and no suit" concerns itself with actions for recovery of money or for enforcement of security once again against the industrial company. The WP(C) No. 7253/2011 Page 22 of 42 second sub part so to say of this limb which speaks of "or of any guarantee in respect of any loans or advances granted to the industrial company" creates the difficulty, presently faced in the writ petition.

17.6 It may be relevant to note that the term used in this sub part of sub section (1) of section 22 is "guarantee" and not "guarantor". One possible explanation could have been, taking into account the overall scheme of SICA, which is, to rehabilitate and resuscitate viable sick industrial companies, and if, necessary to liquidate assets of sick industrial companies where they become non viable, to read the term "guarantee to mean perhaps a guarantee extended by an entity in which the industrial company has an interest as it could impact directly affairs of the industrial company since the industrial company's interest in such an entity would ordinarily be shown as an asset in its balance sheet. But this debate can no longer be taken forward for the reason that the Supreme Court in the case of "Patheja Brothers Forgings and Stamping"(supra) has categorically interpreted the term "guarantee" as that which relates to a guarantor who has furnished a guarantee as a security in lieu of loans and advances granted to an industrial company. It is important to note that Patheja Brothers Forging and Stamping dealt with a case where the suit was filed in a civil court both against the sick industrial company in its capacity as a principal debtor and the individual guarantors. The Supreme Court, interpreting the provision of sub section (1) of section 22 came to the conclusion by process of strict interpretation, that protection was also available to guarantor(s) of loans advanced to a sick industrial company.

18.1 It is pertinent to note at this stage, that section 9(2) of the Insolvency Act provides that a debtor commits an act of insolvency if a creditor who has obtained a "decree'' or an "order" against him for payment of money, issues him a notice, in the prescribed form, to pay the amount and, the debtor, fails to do so, within the time specified in the notice. It is in this context that, the appellant/guarantor challenged the insolvency notice, by moving a notice of motion before the Bombay High Court. The Single Judge in the Bombay High Court differed with the view taken earlier (by another Single Judge of that court) that an award is neither a decree nor an order for the purposes of the provisions of the Insolvency Act. A reference was made by the learned Single Judge to the Division Bench. The Division Bench answered the reference in the affirmative by holding that an award was a decree for the purposes of section 9 of the Insolvency Act, and therefore, an insolvency notice could be issued on the basis of an award passed by an Arbitrator.

29. The learned counsel for the petitioner placed reliance upon the judgment of Madhya Pradesh High Court in case of Kedia Distilleries Ltd. vs. Appellate Authority for Industrial and Financial Reconstruction and others 109, Company Cases 444 which reads thus :-

There is no dispute that such a consent was required for taking out the execution of any Court decree against the assets of such company. But a consent decree stood on a somewhat different footing. It may be technically correct to contend that a consent decree was also adecree within the meaning of Section 2(2), CPC and was executable, as held by various High Courts. But the question is whether protection umbrella of Section 22(1) was available to defeat the consent decree based on the agreement of parties.

In our view Section 22 bars a coercive proceeding of the type envisaged by it against an industrial company whose reference for sickness is registered by BIFR and is pending determination before it or the Appellate Authority. It indeed places an embargo on such proceedings for winding up, for appointment of Receiver or for execution, distress or the like against such company. Similarly it bars a suit for recovery of money or for enforcement of any security against it. All this is aimed at stopping any coercive action to provide abreathing lime to the company to revive and to stand on its own again or else to wind up. The proceedings contemplated by the provision wherever launched survive in both the cases and these remain under suspension only till the revival/rehabilitation scheme for the company is seen through or the company is wound up.

Having regard to this, it would be too much to claim that execution of aconsent decree was also hit by provisions of Section 22(1). After all a consent decree is the product of an agreement between the parties. It may be a decree within the meaning of Section 2(2), CPC and may be executable also, as held by some High Courts but it cannot be said to fall within the boundaries of the provision because it does not partake of the nature of a coercive proceeding which is barred. Any contrary view would be tantamount to placing too loose and undeservingly liberal a construction/interpretation on this provision ignoring and overlooking its true intent and purpose. After all once a company consented to such a decree with its eyes open, it should be presumed to have been conscious of its state of affairs at that time. Sickness claimed by it post-decree should be regarded as induced sickness and a stratagem to resile from its own agreement by seeking shelter under the provisions of Section 22(1).

As already noticed the SICA was enacted to provide opportunity to sick industrial companies to revive and be rehabilitated or wind up. Its purpose was not to enable unscrupulous companies to feign and manipulate sickness and to make a buck out of it. Section 22(1) was only a tool to achieve this object. Its terms were, therefore, to be interpreted reasonably and in that spirit and perspective. Otherwise it would breed dishonesty, encourage unfair practices and shady dealings and defeat the very purpose for which the statute was enacted. There is no dearth of instances where unscrupulous companies had misused this provision by manipulating sickness to ward off legitimate claims of creditors. Therefore, it requires both caution and circumspection to extend protection of Section 22(1) to such companies. This concern was also expressed by Jeevan Reddy, J. in Deputy CTO v. Corromandal Pharmaceuticals, (supra), in the following words (page 12) :

"The object of the Act is undoubtedly laudatory but it must also provide for appropriate measures against persons responsible where it is found that sickness is caused by factors other than circumstances beyond the control of the management... The proceedings before the Board for Industrial and Financial Reconstruction take a long time to conclude and all the while the protective umbrella of Section 22 is held over the company which was reported sick... There have been cases where unfair advantage is sought to be taken of the provisions of Section 22 by certain industrial companies and the wide language employed in the section is providing them a cover. Definitely Section 22 was not meant to breed dishonesty nor can it be so operated as to encourage unfair practices. It is expected that the Government might be thinking of necessary modifications in the Act."

30. Supreme Court in case of Kailash Nath Agarwal and others after adverting to the judgment of the Supreme Court in case of M/s.Patheja Bros.Forgings & Stampings & Anr. vs. ICICI Ltd., (2000) 6 SCC 545 : [2000(4) ALL MR 243 (S.C.)] after considering 1994 amendment to section 22(1) of SICA held that till 1994, no protection was afforded to the guarantors under the SICA at all. Only the limited protection has been given in 1994. It is further held that amendment introduced by 1994 amendment referred to the the pre-decretal stage because recovery proceedings by way of execution are already covered under the first half of sub-section (1) of section 22.

31. In my view, Dr.Saraf is right in his submission that proceedings section 9 of the Arbitration Act, 1996 cannot be equated with a suit referred in section 22 of SICA. Consent terms were arrived at and order was passed by this court in terms of consent terms and a private receiver was appointed by this court who has taken steps in execution of the said consent order. In my view, 1994 amendment to section 22(1) of the SICA does not bar enforcement of the order passed by a court in terms of the consent terms. In my view only suit for recovery of money or for the enforcement of any security against the industrial company or of any guarantee in respect of any loan advanced to the industrial company would be barred under section 22(1) of SICA and not any proceedings for enforcement of the consent terms filed under section 9 of the Arbitration Act.

32. This court in case of SICOM (supra) in Misc. Petition No. 2 of 2007 has considered a petition filed by financial institution under section 31(1) (aa) of the State Financial Corporation Act, 1951 by which financial institution had sought permission of the court for protection of the securities. The question arose before this court whether under section 22(1) of SICA any such application filed by the financial institution under section 31(1) (aa) of the State Financial Corporation Act, 1951 would be barred invoking guarantees and for action under section 32(g) of the State Financial Corporation Act, 1951. Question arose for consideration of this court was whether such proceedings were "suit" as to protect the guarantors of the industrial company. This court after adverting to various judgments of the Supreme Court including in case of Kailash Nath Agarwal (supra) held that section 22 of the SICA makes a clear distinction between the word "suit" and "proceedings". This court held that it is not possible to hold that bar under section 22(1) is applicable to proceedings filed under section 31[1(aa)] of the State Financial Corporation Act. In my view, the proceedings under section 9 of the Arbitration Act, 1996 if granted would not result in any money decree or decree of outstanding loan or advance. The proceedings under section 9 are only for protection of the security in favour of the lender. On conjoint reading of section 31[1(aa)] and the language of section 22(1), it is not possible to hold that the bar under section 22(1) is applicable to proceedings under section 9 of the Arbitration Act, 1996. In my view, the steps taken by the private receiver was for implementation of consent order passed in the proceedings filed under section 9 of the Arbitration Act, 1996 which in my view is not affected by any bar under section 22(1) of SICA.

33. Division Bench of this Court in case of Ved Prakash Agarwal (supra) after adverting to judgment of the Supreme Court in case of Maharashtra Tubes Ltd. vs. State Industrial & Investment Corporation of Maharashtra Ltd., (1993) 2 SCC 144 and M/s.Patheja Bros. Forgings & Stampings & Anr., [2000(4) ALL MR 243 (S.C.)] (supra) and after construing section 22(1) of SICA held that protection under amended section 22 was not available to the guarantors when it comes to the execution proceedings.

34. Supreme Court in case of San-A Tradubg Co. Ltd. (supra) after adverting to Supreme court in case of Maharashtra Tubes Ltd (supra), Shree Chamundi Mopeds Ltd. vs. Church of South India, AIR 1992 SC 1439 and Kailash Nath Agarwal (supra) held that proceedings in arbitration is neither a suit under sub-section (1) of section 22 of SICA nor the proceedings thereunder, and, therefore, there is no prohibition under section 22 of SICA to take up the arbitration proceedings to adjudicate the liability of the parties to the arbitration proceedings. It is held that section 22 of SICA does not debar the arbitration proceedings under the Arbitration and Conciliation Act, 1996.

35. The consent terms filed by both parties in application filed under section 9 under Arbitration Act, 1996 indicates that both parties had agreed to refer the dispute to the arbitration and had appointed the sole arbitrator. During the pendency of the arbitration proceedings, by consent of both parties, private receiver was appointed with power of sale such arbitration proceedings and steps were taken by the private receiver by consent of parties to sale the properties during the pendency of arbitration proceedings. In my view coercive steps can be stayed and not execution of consent orders. In my view consent terms filed in court by parties was an agreement and steps taken under such agreement cannot be stayed. It is clear that there is apparent distinguishment between the expression 'proceedings' and 'suit' used in section 22(1) of SICA. In my view, steps taken to enforce the consent order passed under section 9 of the Arbitration and Conciliation Act, 1996 would not be barred by section 22(1) of the SICA.

36. Delhi High Court in case of Indrajeet Arya and anr. (supra) after adverting to various judgments of Supreme Court held that the term 'suit' referred in section 22 of SICA would apply only to the proceedings of civil court and not actions for recovery proceedings filed by banks and financial institutions before a Tribunal, such as the DRT. Delhi High Court has held that limited protection has been granted by the legislature to the guarantors.

37. Madhya Pradesh High Court in case of Kedia Distilleries Ltd. (supra) after adverting to various judgments of the Supreme Court held that execution of a consent decree would not be hit by the provisions of section 22(1) of SICA as the consent decree is the product of an agreement between the parties.

38. Perusal of section 22(1) and more particularly 1994 amendment to section 21(1) of SICA clearly indicates that in so far as sick industrial company is concerned, any proceedings for winding up, execution distress or the like against any of the properties of the industrial company or for the appointment of receiver in respect thereof is barred whereas the limited protection is granted in case of guarantors only in respect of suit for recovery of money or for enforcement of any security against the industrial company or of any guarantee in respect of any loan or advances granted to the industrial company.

39. As far as judgment of Supreme Court relied upon by the respondent in case of Paramjeet Singh Patheja, [2007 ALL SCR 24] (supra) is concerned, perusal of the said judgment makes it clear that the issue before the Supreme Court in that matter was whether an award made under the provisions of Arbitration Act would be a decree for the purpose of section 9 of Insolvency Act and insolvency notice can be issued on the basis of the award passed by an arbitrator. The question before the Supreme Court was whether arbitration award is a decree for the purpose of section 9. Perusal of the said judgment indicates that considering section 36 of the Arbitration and Conciliation Act, 1996 which provides that where the time for making application for setting aside the arbitral award under section 34 has expired or such application having been made, it has been refused, the award shall be enforced under the Code of Civil Procedure, 1908 in the same manner as if it were a decree of the Court. The Supreme Court held that arbitration award is neither a decree nor an order for payment within the meaning of section 9(2) of the Presidency Towns Insolvency Act, 1909. In that context, the Supreme Court held that the object of Section 22, in protecting guarantors from legal proceedings pending a reference to BIFR of the principal debtor, is to ensure that a scheme for rehabilitation would not be defeated by isolated proceedings adopted against the guarantors of a sick company. The Supreme Court in that context held that that would include arbitration proceedings. In this case it is not in dispute that the arbitration proceedings are pending and award has not been declared so far either against respondent No.1, company or against the guarantors. In my view, judgment in case of Paramjeet Singh Patheja, [2007 ALL SCR 24] (supra) relied upon by the respondent is of no assistance to the respondent. In my view even on facts, the judgment of the Supreme Court in case of M/s.Patheja Bros.Forgings & Stampings & Anr., [2000(4) ALL MR 243 (S.C.)] is clearly distinguishable with the facts of this case. Reliance therefore placed by the respondent on the judgment of the Supreme Court in case of Director of Settlements A.P. and others (supra) is also of no assistance to the respondents but it support the case of the petitioner.

40. In view of the aforesaid reasons, in my view, the Chamber Summons is devoid of merits and is therefore dismissed.

41. No order as to costs.

Chamber summons dismissed.