The Supreme Court clarified the meaning of 'suit' and 'proceeding' under S.22(1) of SICA, affirming that the protection does not extend to guarantors for loans to a sick industrial company.

1Leave granted.

2 The scope of the protection afforded to guarantees under S.22(1) of the Sick Industrial Companies' (Special Provisions) Act, 1985 (referred to as SICA) is in issue in these appeals. The Pradeshiya Industrial and Investment Corporation of U.P. Ltd., respondent No.1 herein (referred to as 'PICUP' hereafter) had given loans to a company, M/s. Shefall Papers Ltd., the respondent No. 2 before us (hereinafter referred to as the company). By way of security the company mortgaged its immovable properties and hypothecated its assets to PICUP. In addition the appellants executed bonds of guarantee in consideration for the grant of loans to the company.

3 On 1st December, 1997 the Company was declared sick by the Board for Industrial and Financial Reconstruction (BIFR) in terms of S.3(1)(o) of the SICA. The BIFR appointed IFCI as the operating agency under S.17(3) of the Act "to examine the viability and submit its report for revival of the company". While the proceedings before the BIFR were pending, on 5th February, 2002 three separate notices or demand were served on the appellants as personal guarantors in respect of the loans granted to the company of PICUP. The total amount claimed was Rs. 8,90,84,259.06p. Each of the appellants was called upon to pay the demand within 30 days along with the interest at the rates specified in the notice falling which PICUP said that it would take legal measures to recover its outstanding dues from each guarantor. The appellants replied to the notice stating that because of the decisions of this Court on the scope of S.22(1) of the Act, PICUP could not enforce its demand against the appellants. PICUP rejected the stand of the appellants and called upon the appellants to liquidate its dues failing which recovery certificates would be issued against the appellants.

4 The appellants did not pay. Instead they filed a writ petition which was ultimately dismissed on 23rd May 2002. The decision of the High Court is the subject matter of the present appeals. Recovery certificates which have been issued against the appellant have been stayed by this Court pending disposal of the special leave petitions.

5 The submission of the appellants is that S.22(1) of SICA specifically prohibited the filing of a suit for the recovery of the money for the enforcement of any guarantee in respect of any loan or advance granted to an industrial company. Reliance has been placed on Maharashtra Tubes Ltd. v. S.I.I. Corpn. of Maharashtra 1993(2) SCC 144 , Kanhaiyalal Vishindas Gidwani v. Arun Dattatray Mehta 2001 (1) SCC 78 , LIC v. Escorts Ltd. 1986 (1) SCC 264, P.L. Kantha Rao v. State of A.P. 1995 (2) SCC 471, Ghantesher Ghosh v. Madan Mohan Ghose 1996 (11) SCC 446, Pandurang R. Mandlik v. Shantibair Ghatge 1989 Supp. (2) SCC 627, to submit that the word 'suit' in S.22(1) should be understood as including any proceeding including certificate proceedings for the enforcement of such a guarantee.

6 It is submitted that this Court in Patheja Bros. Forgings & Stampings v. ICICI Ltd. 2000 (6) SCC 545 had clearly held that the legislative intent was to protect the guarantors since the guarantee given in respect of an industrial company which was being revived under the Act is a fundamental part of its restructuring process. It is further submitted that no rational distinction should be made between a creditor who would have to file a suit to enforce a guarantee and creditors like PICUP which could recover its dues without approaching the Court by summary proceedings as an arrear of land revenue. It is claimed that it a proceeding for recovery through a court of law were prohibited under S.22(1), there was no reason why such protection should be refused when action was sought to be taken without recourse to Court.

7 Learned counsel appearing on behalf of PICUP has submitted that the word 'suit' in S.22(1) must be understood as judicial or at least an adjudicatory process. It is pointed out that PICUP was entitled to e