KAILASH NATH AGRAWAL AND ORS. versus PRADESHYA INDST. & INV. CORP. OF U.P. AND ANR.

KAILASH NATH AGRAWAL AND ORS. versus PRADESHYA INDST. & INV. CORP. OF U.P. AND ANR.

Section 22(1) of SICA does not prohibit recovery proceedings under the U.P. Public Money (Recovery of Dues) Act against guarantors; the embargo on recovery applies only to suits (adjudicatory judicial process) and only against the industrial company, not the guarantor. The distinction between 'suit' and 'proceeding' in SICA is deliberate and must be given effect. The contracts executed by guarantors do not alter their joint and several liability under Section 128 of Contract Act, and the creditor (PICUP) can enforce recovery under the U.P. Act without recourse to courts.

Parties
Appellants/guarantors: Kailash Nath Agrawal and others; Respondent No.1/creditor/government Company: Pradeshiya Industrial & Investment Corporation of U.P. Ltd. (PICUP); Respondent No.2/debtor Company: M/s Shefali Papers Ltd.
Jurisdiction
India
Judgment Date
14 February 2003
Procedural Posture
Civil Appeal / Final Judgment on Appeal Against High Court Dismissal of Writ Petition
Outcome
Appeals dismissed with costs.
Legal Topics
Interpretation of Section 22(1) SICA, Liability of Guarantors, Recovery Proceedings Under U.p. Public Money (recovery of Dues) Act, Joint and Several Liability Under Contract Act
Recovery of Public Dues Guarantees in Loan Transactions Industrial Company Rehabilitation Interpretation of Section 22(1) SICA Liability of Guarantors Recovery Proceedings Under U.p. Public Money (recovery of Dues) Act Joint and Several Liability Under Contract Act

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Parties

Kailash Nath Agrawal and others

Appellants/guarantors

Pradeshiya Industrial & Investment Corporation of U.P. Ltd. (PICUP)

Respondent No.1/creditor/government Company

M/s Shefali Papers Ltd.

Respondent No.2/debtor Company

Procedural Posture

Civil Appeal / Final Judgment on Appeal Against High Court Dismissal of Writ Petition

Legal Issues

  1. 1 Whether Section 22(1) of Sick Industrial Companies (Special Provisions) Act, 1985 provides protection to guarantors against recovery proceedings under U.P. Public Money (Recovery of Dues) Act
  2. 2 Difference between 'suit' and 'proceeding' in SICA in context of enforcement of guarantees
  3. 3 Whether recovery proceedings can be initiated against guarantors when debtor company is declared sick

Ratio Decidendi

Section 22(1) of SICA does not prohibit recovery proceedings under the U.P. Public Money (Recovery of Dues) Act against guarantors; the embargo on recovery applies only to suits (adjudicatory judicial process) and only against the industrial company, not the guarantor. The distinction between 'suit' and 'proceeding' in SICA is deliberate and must be given effect. The contracts executed by guarantors do not alter their joint and several liability under Section 128 of Contract Act, and the creditor (PICUP) can enforce recovery under the U.P. Act without recourse to courts.

Court Disposition

Appeals dismissed with costs.

Orders

  • Appeals dismissed with costs.
  • Recovery certificates issued against appellants stayed pending disposal of special leave petitions remain vacated.