JUDGMENT
A. Gopal Reddy, J.
1. The first respondent/writ petitioner-Company filed an application under Section 15 of the Sick Industrial Companies (Special Provisions) Act, 1993 (for short “SICA”) for its rehabilitation before the Board constituted under the SICA, namely, Board for Industrial and Financial Reconstruction (BIFR) and the said application was registered as 93/93 dated 7-12-1993. On such registration, BIFR after due enquiry, appointed Industrial Finance Corporation of India (IFCI) as the operating agency on 7-3-1994 for preparation of the scheme for rehabilitation of the first respondent-Company. Due to the loss sustained by the appellant-company to a tune of Rs. 30,99,009 – 40 for not lifting 800 cotton bales in time by the first respondent under sale contract, it invoked the arbitration clause by appointing the second respondent as sole Arbitrator. Questioning the said appointment, the first respondent-company moved this Court by filing WP.No. 8925/1994 contending that once the company is declared as sick industrial unit under the provisions of SICA, and BIFR appointed IFCI as the operating agency for preparing a scheme for rehabilitation of the company, appointment of Arbitrator as per the sale contract is hit by the provisions of Section 22(1) of the SICA. Learned Single Judge allowed the writ petition of the first respondent with a liberty to the appellant-company to proceed against the first respondent for recovery of any amount due to it after obtaining permission from BIFR. This order is under challenge by the appellant in this appeal.
2. Learned Counsel for the appellant would contend that Section 22(1) do not prohibit the proceedings pending before the Arbitrator, therefore, proceedings need not be stayed. Per contra, learned Counsel for the first respondent submits that whenever an enquiry is pending under Section 16 or any scheme referred to in Section 17 under consideration, no proceedings for enforcement of the dues can be proceeded with except with the consent of BIFR.
3. To resolve the controversy, a reference to Section 22 appears useful, which reads 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, notwistanding 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.”
(2) x x x x x;
(3) Where an inquiry under Section 16 is pending or any scheme referred to in Section 17 is under preparation or during the period of consideration of any scheme under Section 18 or where any such scheme is sanctioned thereunder, for due implementation of the scheme, the Board may by order declare with respect of the sick industrial company concerned that the operation of all or any of the contracts, assurances of property, agreements, settlements, awards, standing orders or other instruments in force, to which such sick industrial company is a party or which may be applicable to sick industrial company immediately before the date of such order, shall remain suspended or that all or any of the rights, privileges, obligations and liabilities securing or arising thereunder before the said date, shall remain suspended or shall be enforceable with such adaptations and in such manner as may be specified by the Board:
Provided that such declaration shall not be made for a period exceeding two years which may be extended by one year at a time so, however that the total period shall not exceed seven years in the aggregate.
(4) Any declaration made under Sub-section (3) with respect to a sick industrial company shall have effect notwithstanding anything contained in the Companies Act, 1956 (1 to 1956), or any other law, the memorandum and articles of association of the company or any instrument having effect under the said Act or other law or any agreement or any decree or order of a Court, Tribunal, Officer or other authority or of any submission, settlement or standing order and accordingly-
(a) any remedy for the enforcement of any right, privilege, obligation and liability suspended or modified by such declaration, and all proceedings relating thereto pending before any Court, Tribunal, Officer or other authority shall remain stayed or be continued subject to such declaration; and
(b) on the declaration ceasing to have effect-
(i) any right, privilege, obligation, or liability so remaining suspended or modified, shall become revised and enforceable as if the declaration has never been made; and
(ii) any proceeding so remaining stayed shall be proceeded with subject to the provisions of any law which may then be in force, from the stage which had been reached when the proceedings became stayed.
(5) x x x x x”.
4. The Apex Court in Kailash Nath Agarwal v. Pradeshiya Industrial and Investment Corporation of UP., 2003 AIR SCW 1358, after considering the amendment effected to Section 22 of the SICA by Act 12/94 and distinguishing between expression “proceedings” and “suit” held that the word “suit” in Section 22(1) of the SICA does not mean anything other than some form of curial process. The deliberate choice of the word “suit” in the circumstances would indicate that Parliament intended to limit the ambit of the amendment introduced to particular modes for the recovery of money or enforcement of guarantees.
5. A Division Bench of Delhi High Court in Lloyd Insulations (India) Limited v. Cement Corporation of India Limited, (2001) 105 CC 729 (Delhi), had an occasion to consider the amendment effected to Section 22 including the proceedings initiated under the Arbitration Act and observed that expression “suit for recovery of money” would not include the proceedings pending before the Court under Sections 14 and 17 of the Arbitration Act. Sub-section (3) of Section 22 empowers the Board to declare with respect to the sick industrial company concerned that the operation of all or any of the contracts, assurances of property, agreements, settlements, awards, standing orders or other instruments in force, shall remain suspended etc. Thus, the word “awards” finds mention in Sub-section (3) of Section 22 of the SICA. If the Board is satisfied it may suspend the operation of the “awards”. The only difference between the provisions under Section 22(1) and 22(3) is that while in the former case the proceedings of the suit of the nature mentioned in Sub-section (1) shall not lie or be proceeded with except with the consent of the Board, in the latter case, Board has to declare the suspension of such contracts, settlements, awards etc. Since awards are mentioned in Sub-section (3) of Section 22 of the SICA that is another reason to infer that the Legislature did not intend such awards to be covered by the expression “suits for recovery of money”. Accordingly, it was held that the arbitration proceedings pending under Sections 14 and 17 of the Arbitration Act cannot be treated as “suits for recovery of money” and therefore, would not be covered by Sub-section (1) of Section 22 of the SICA.
6. In view of the ratio of the decisions in Kailash Nath Agarwal (supra) and Lloyd Insultations (supra), in the instant case, where the appellant invoked the arbitration clause by appointing sole Arbitrator cannot be scuttled in the absence of any bar to proceed with arbitration. Consequently, the impugned order is liable to be set aside and the writ petition is liable to be dismissed. However, we make it clear that in the event of Arbitrator passing an award, it is open for the writ petitioner to move BIFR for appropriate relief under Sub-section (3) of Section 22 of the SICA.
7. In view of the above, the writ appeal is allowed. The impugned order is set aside and the writ petition is dismissed. No costs.