TMI Blog2007 (11) TMI 402X X X X Extracts X X X X X X X X Extracts X X X X ..... he manufacture of galvanised pipes. The said amount was duly sanctioned and the said sum of Rs. 1,42,000 was advanced by the respondent to the appellant-company. An agreement was entered into for a term loan and the appellant-company also created a security for repayment of the amount by hypothecating its plant and machinery and creating an equitable mortgage of its factory premises situated in the abovementioned village. A loan agreement was executed on 30-3-1993 for repayment of the loan in various instalments. On the same day, the second appellant executed a personal guarantee for repayment of the loan amount in case of default by the appellant-company. 3. The appellant-company committed several defaults in repayment of the loan amount compelling the respondent to issue a notice on 16-10-1998 calling upon the appellant-company to pay the overdue amount within a stipulated period. Despite such notice, the appellant-company failed to make payment and accordingly, by a further notice dated 10-1-1999 the respondent called upon the appellant-company to repay the entire amount due and payable to the respondent by 3-2-1999 failing which the possession of the assets of the appellant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or was not required to exercise his right as a mortgagee before proceeding against the guarantor, the Division Bench dismissed the appeal with costs on 29-1-2007. It is the decision both of the learned Single Judge as also the Division Bench of the High Court which is the subject-matter of this appeal. 7. Appearing in support of the appeal, Mr. Shekhar Naphade, learned Senior Advocate, submitted that both the learned Single Judge and the Division Bench of the High Court had erred in giving a narrow meaning to the word suit as used in section 22 of SICA. He submitted that the context in which the expression suit had been used in section 22 of the aforesaid Act made such expression all pervasive to include other proceedings as well before a court or other authority empowered to recover debts and other dues against the company. It was urged that in the case of Maharashtra Tubes Ltd. v. State Industrial Investment Corpn. of Maharashtra Ltd. [1993] 2 SCC 144, it had been held that the expression "proceedings" in section 22(1) of SICA must be widely construed and could not be confined to legal proceedings understood in the narrow sense of proceeding in a Court of law or a l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cy Towns Insolvency Act, 1909 this Court, inter alia , held that 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. It was further observed that the object of section 22 of SICA in protecting guarantors from legal proceedings pending a reference to BIFR by the principal debtor was to ensure that a scheme for rehabilitation would not be defeated by isolated proceedings adopted against the guarantors of a sick company. In order to achieve such purpose, it was imperative that the expression "suit" in section 22 be given its plain meaning, namely, any proceedings adopted for realisation of a right vested in a party by law. 10. Mr. Naphade then submitted that the Bombay High Court had wrongly relied upon the decision of this Court in Kailash Nath Agrawal v. Pradeshiya Industrial Investment Corpn. of U.P. Ltd. [2003] 4 SCC 305 1 , wherein the decision rendered by this Court in the Maharashtra Tubes Ltd. s case ( supra ) as also in Patheja Bros. Forgings Stamping s case ( supra ) were distinguished and it was held that in both the cases while con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . According to Mr. Naphade, since the respondent had filed an application under section 31(1)( aa ) of the above Act making only a monetary claim against the appellant No. 2, on a true construction of the above provisions the said section permits enforcement only of the security given by the guarantor and since in the instant case the respondent had filed an application not for enforcement of any security but for claiming only the amount of guarantee the same could not be enforced against the appellant No. 2. According to Mr. Naphade the appellant No. 2 has not given any other security which could be proceeded against by the respondent. 13. Mr. Naphade submitted that the Bombay High Court had no jurisdiction to entertain the application made under section 31(1)( aa ) of the Act and the order passed there above was a nugity. 14. It was also submitted that I.A. No. 1 of 2007 was filed in the special leave petition for leave to place on record additional grounds as set out in the application and prayed that the same be allowed to be placed on record by way of additional grounds. Inasmuch as, such prayer was objected to on behalf of the respondent, Mr. Naphade referred to the d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rantor would be covered by the protection provided under section 22(1) of SICA, the question in Kailash Nath Agrawal s case ( supra ) this Court was concerned not with a "suit" but a "proceeding" for recovery of dues and in those circumstances this Court had examined the use of the expressions "proceeding" and "suit" used in different parts of section 22(1) of SICA. It was in that context that this Court distinguished the earlier decision in Patheja Bros. Forgings Stamping s case ( supra ) and upon holding that since the Legislature had expressly chosen to make a distinction between suits for recovery of money and enforcement of guarantees and proceedings for the recovery of money, such distinction had to be given effect to. It was held that even under the amended provisions only a limited protection had been afforded to guarantors with regard to the recovery of dues by way of suit, but not by way of proceedings, and, accordingly, a proceeding for recovery of money against a guarantor would stand outside the protection afforded under section 22(1) of the 1985 Act. 18. It was urged that in the instant case, a situation similar to that in Kailash Nath Agrawal s case ( sup ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st him personally and was independent of the sureties given in mortgage by the Principal Debtor. Mr. Savla submitted that the decision rendered in Kailash Nath Agrawal s case ( supra ) does not appear to have been brought to the notice of the Hon ble Judges deciding the Paramjit Singh Patheja s case ( supra ) and same was decided on other earlier decisions of this Court which dealt essentially with suits for recovery of dues. 23. It was submitted that since the Division Bench of the High Court took a view which finds support in Kailash Nath Agrawal s case ( supra ), no case had been made out for interference with the same. 24. In the decisions of this Court cited before us, two divergent views have been expressed in respect of the same issue involved in this appeal. In the other decisions, this Court had no occasion to go into the said issue which involved the interpretation of section 22(1) of the SICA in respect of either proceedings or suits respectively. In Kailash Nath Agrawal s case ( supra ), this Court has taken the view that the Legislature appears to have knowingly used two different expressions in section 22(1) of SICA, namely, proceeding in the fir ..... X X X X Extracts X X X X X X X X Extracts X X X X
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