JUDGMENT
P.V. Kakade, J.
1. Respondent No. 2 has taken out this chamber summons praying for raising of attachment of the right, title and interest of respondent No. 2 in the premises known as Yuchit Bungalow, Juhu Tara Road, Juhu, Santacruz
(West), Mumbai, levied pursuant to the warrant of attachment dated 31-1-2000.
2. Heard the learned counsel for the parties. Perused the affidavits filed by the parties in support of their respective contentions. Perused the entire record relevant to the issue at hand.
3. The petitioner-creditors had filed a claim before the arbitrator in respect of the amount claimed to be due by the respondent No. 1-company under the lease agreement dated 27-7-1994, entered into between the petitioners and respondent No. 1-company. The repayment of the lease amount due from respondent No. 1-company under the lease agreement was guaranteed by respondent Nos. 2 and 3 by a guarantee deed dated 27-7-1994, executed in favour of the petitioner-company, guaranteeing payment of the lease rental amounts on behalf of respondent No. 1-company, and respondent Nos. 2 and 3 having been directors of respondent No. 1-company. Respondent No, 1-company pointed out to the arbitrator by a letter dated 4-8-1998, that respondent No. 1 -company had been declared a sick company within the meaning of the provisions of Section 15 of the Sick Industrial Companies (Special Provisions) Act, 1985 (‘SICA’) and it filed a reference before the BIFR which had been registered as Case No. 28 of 1999, on 20-2-1998, and respondent No. 1-company was declared sick as on 31-7-1998. The respondents pointed out to the arbitrator that in view of the provisions of the SICA, the arbitration proceedings could not proceed against the respondents.
However, the arbitrator passed an award dated 4-8-1998, awarding the impugned amount against all the respondents jointly and severally and directed that the award would not be enforced against respondent No. 1-company until it came out from the BIFR.
4. The petitioners-claimants applied to this Court for execution of the said award dated 4-8-1998, against respondent Nos. 2 and 3, who are guarantors, by attachment of immovable properties standing in their names and warrant of possession dated 31-1-2000, was issued by this Court under the said Execution Application No. 42 of 1999, made by the petitioners by which respondent No. 2’s right, title and interest in the property was directed to be attached.
Therefore, the small but subtle question for our consideration is whether the properties held by the guarantors also are protected or not under the provisions of Section 22. Now, the provisions of Section 22 stipulate as under:
“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,”
Therefore, it is to be noted that this provision, specially after the amendment of 1993, definitely covers not only the industrial company but also the guarantee provided to such industrial unit. It may be noted that in Madalsa International Ltd. v. Central Bank of India [2000] 99 Comp. Cas. 153 the Division Bench of the Bombay High Court had taken a different view. However, the Full Bench of the Supreme Court in Patheja Bros, Forgings and Stamping v. ICICI Ltd. [2000] 102 Comp. Cas. 21, analysed the provisions of Section 22 and observed that it was found that the words of Section 22 were clear and unambiguous and that they provided that no suit for the enforcement of a guarantee in respect of a loan or advance granted to the industrial company concerned will lie or can be proceeded with, without the consent of the Board or the appellate authority. When the words of a legislation arc clear, it was observed that the Court must give effect to them as they stand and cannot demur on the ground that the Legislature must have intended otherwise.
Therefore, in this proceeding it is not in dispute that respondent Nos. 2 and 3 arc guarantors of respondent No. 1 pursuant to the deed of guarantee dated 27-7-1994. It may be noted that this fact was brought to the notice of the sole arbitrator by the respondents. However, though the learned arbitrator, took cognizance of the said information received from the respondents, he observed that the very conduct of the respondents proved that the company was not interested in making payment to the claimants or settling the claim. It was further observed that respondent No. 1, pending arbitration, has approached the BIFR to frustrate the claim. After referring to the provisions of Section 22, the learned arbitrator was of the view that the arbitration can proceed further and the award can be made and published the award against all the respondents with the direction that the award would not be enforced against the respondent-company, till the company came out of the BIFR.
Therefore, in other words, the learned arbitrator recognised the provisions of Section 22, but by necessary implication held that it was applicable only to the industrial company, i.e., respondent No. 1 and not to respondent Nos. 2 and 3, who were the guarantors of the said company. As referred to earlier, the Supreme Court has clarified the position and, therefore, in my view though the award is declared, no execution proceeding can lie either against respondent No. 1 or against respondent Nos. 2 and 3, who are the guarantors also protected under Section 22 of the SICA.
5. It was further sought to be urged on behalf of the respondents that the arbitration was a nullity as there is no clause in that regard in the deed of guarantee, so far as respondent Nos. 2 and 3 are concerned. The learned counsel for the petitioners-claimants submitted that there was no specific prayer made by the respondents initially raising the issue of illegality of the award on the ground that it was a nullity and without jurisdiction though such a plea is raised only in the rejoinder of the respondents. The learned counsel for the petitioners also took me through various provisions of the Arbitration Act, 1996, to support his submission that the arbitration proceeding was legal and proper.
Be that as it may, at present this Court is concerned only with the issue whether the execution preceding consequent upon the award, and consequential attachment is maintainable or not, in view of the provisions of Section 22. In my considered view, respondent Nos. 2 and 3, being guarantors of the industrial unit also are protected by virtue of Section 22 and, therefore, no execution proceeding could be initiated pursuant to the award against any of the respondents.
6. In the result, the attachment levied in the said Execution Application No. 42 of 1999, against the property of respondent No. 2 is rendered illegal and requires to be raised. It is made clear, however that the issue regarding illegality of the award has to be kept open for proper adjudication.
7. In view of the aforesaid observations, the chamber summons is hereby allowed in terms of prayer Clause (a) by virtue of Section 22. All other contentions of both the sides are left open.
8. At this stage, the learned counsel for the petitioners prayed for stay of the order. Prayer stands rejected.