The main legal point established in the judgment is that section 22 of the SICA Act does not bar arbitral proceedings and does not extend protection to guarantors in execution proceedings.

JUDGMENT - D.K. DESHMUKH, J.:---By this notice of motion, the applicant seeks an order setting aside the Insolvency Notice No. N/II/01.

2.The facts that are material and necessary for deciding this Notice of Motion are that an amount was due from M/s. Shaan Interwell (I) Ltd. to the respondent/judgment creditor. Therefore, proceedings were started before the Arbitrator against the company and the applicant. When the proceedings were started before the arbitrator, though the claim made by the respondent was not disputed, an objection was raised to the continuance of the arbitral proceedings on the ground that a reference was pending before the B.I.F.R. The submissions was that in view of section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985, the arbitral proceedings cannot continue. The learned arbitrator after considering this submissions in detail rejected the objection holding that provisions of section 22 will not operate to stay the proceedings before the arbitrator. The arbitrator made an award for payment of the amount against the applicant as also the company. They were held jointly and severally liable to pay the amount. Neither the company nor the applicant challenged the award by filing petition under section 34 of the Arbitration Act. Ultimately, on the basis of the award of the arbitrator, insolvency notice was taken out by the respondent/decree holder against the applicant, because the award holds the applicant jointly and severally liable for the amount with the company. The learned Counsel appearing for the applicant raised two contentions (1) that as in view of the provisions of section 22 of the SICA Act, the arbitrator could not have made an Award, and the Award made by the arbitrator is inexecutable and therefore, it cannot be made basis of an insolvency notice. (ii) Second submission of the learned Counsel is that in view of the provisions of section 22 of the SICA Act execution of a decree against the company as also its guarantors cannot be proceeded with. The learned Counsel in support of his submissions relies on a judgment of the Supreme Court in the case of (M/s. Patheja Bros. Forgings Stamping and another v. I.C.I.C.I. Ltd. and others)1, 2000(4) Bom.C.R. (S.C.)13 . The learned Counsel submits that the view taken in the judgment of the Division Bench of this Court in the case of (Madalsa International Ltd. others v. Central Bank of India another)2, 1998(4) Bom.C.R. 124 has not been approved by the Supreme Court in its judgment in Patheja Bros.'s case and therefore, protection available to the sick company stands extended to the guarantors of such company.

3.The learned Counsel appearing for the respondent/decree holder, on the other hand, submits that bar of section 22 of the SICA Act does not operate in relation to arbitral proceedings. In support of that submissions, the learned Counsel relies on a judgment of a Division Bench of the Delhi High Court in the case of (Cement Corporation of India Ltd. v. Cement Corporation of India Ltd.)3, 2001(105) Company Cases 729. The learned Counsel also relies on a judgment of the Division Bench of this Court in Madalsa's case referred to above and contends that protection provided by section 22 against execution proceedings to the sick company does not extend to the guarantors. In the submission of the learned Counsel, provisions of section 22 extend protection to the guarantors only in relation to the suit and in the submissions of the learned Counsel taking up proceedings under the Insolvency Act cannot be termed as a suit and there is no provision in any law which bars the respondent/decree holder taking out insolvency notice on the basis of award made by the arbitrator. The learned Counsel in support of his submissions relies on a judgment of the Division Bench of this Court in the case of Madalsa International Ltd. referred to above, as also the judgment of the Division Bench of this Court in the case of (Sharad R. Khanna v. Kari

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