JUDGMENT
R.C. Chopra, J.
1. This order shall dispose of defendant’s application under Order 37 Rule 3 of the Code of Civil Procedure for leave to defend the suit filed by plaintiff under Order 37 of the Code.
2. The facts relevant for the disposal of this application, briefly stated are that the plaintiff a Public Sector Company was supplying goods to a company known as ”Montari Industries Ltd” on credit basis. To ensure due payment of the price of the goods a Bank Guarantee dated 9/12th September, 1994 for an amount not exceeding Rs.50 lakhs was furnished to the plaintiff by the defendant bank. This Bank Guarantee was irrevocable. Defendant undertook to pay the amount due without any demur on the demand of the plaintiff as and when M/s Montari Industries Ltd failed to pay the amount of invoices within 30 days. The said Bank Guarantee was extended from time to time and the last extension was up to 7th September, 2000.
3. When M/s Montari Industries failed to pay the amount of the invoices raised by the plaintiff within 30 days the plaintiff invoked the Bank Guarantee vide letter dated 29th May, 2000 and called upon the defendant Bank to make payment of Rs. 47,38,693.69 within two days. M/s Montari Industries Ltd also addressed a letter dated 31.5.2000 to the plaintiff in which it was admitted that there was a failure on their part to pay the dues of the plaintiff. The defendant vide its letter dated 8.6.2000 pleaded inability to honour the Bank Guarantee and pay the amount in view of Section 22 of the Sick Industrial Companies ( Special Provisions) Act 1985 ( SICA) on the ground that M/s Montari Industries Ltd was before BIFR. The plaintiff insisted for payment as the bank guarantee was an independent contract between the plaintiff and the defendant and as such the defendant was bound to abide by the terms and conditions thereof by making payment. On the failure of Defendant to make payment present suit under Order xxxvII of the Code of Civil Procedure was filed for the recovery of Rs. 40,83,759.82 along with costs and interest.
4. In its application for leave to defend the defendant Bank has raised two grounds for grant of unconditional leave to defend the suit. The first ground is that in view of Section 22 of SICA the defendant bank was unable to honour the claim of the plaintiff and the suit filed by the plaintiff is not maintainable. The second ground is that the plaintiff as well as defendant are Government undertakings and as such in view of the directions passed by the Supreme Court in Oil and Natural Gas Commission Vs. Collector of Central Excise, the plaintiff is required to obtain clearance from the Government of India or the Committee constituted under the directions of the Government of India before the filing of the suit.
5. I have heard learned Counsel for the defendant-applicant and learned counsel for the plaintiff.
6. Learned counsel for the defendant has referred to Section 22 of the SICA to contend that after its amendment in the year 1994 no suit for the recovery of money or a suit for the enforcement of any security or guarantee in respect of any loan or advance granted to sick company can be instituted and proceeded further except with the consent of the Board or the Authority, as the case may be. Learned counsel for the plaintiff, however, contends that the bar created by Section 22 of SICA gets attracted only when a guarantee is in respect of a loan or advance granted to the sick company. He argues that in the present case no loan or advance was granted by the plaintiff to M/s Montari Industries and only goods were supplied to it and as such the plaintiff was well within its right to invoke the Bank Guarantee and file the present suit . He also contends that a Bank Guarantee is an independent contract between the beneficiary and the bank and its performance is not dependant upon the adjudication of dispute, if any, between the beneficiary and the person at whose instance the Bank Guarantee was furnished.
7. Section 22(1) of the SICA reads as under :-
”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 Sections 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.”
8. Learned counsel for the defendant has relied upon a judgment of the Apex Court in M/s Patheja Bros. Forgings and Stamping and Anr. Vs. I.C.I.C.I Ltd and Ors. in which it was held that no suit for enforcement of guarantee in respect of any loan or advance granted to a sick Industrial Company would lie or be proceeded with without the consent of the Board or the Appellate Authority as the case may be. The view taken by the Bombay High Court that a suit/proceedings against the guarantors are maintainable was not accepted and the orders of the Bombay High Court were set aside. The main question to be considered by this Court in this case is as to whether Section 22 of SICA covers the guarantees in respect of ”loans and advance only granted to an Industrial Company or it applies to those guarantees also which are furnished to ensure payments in respect of the goods supplied to an Industrial Company.
9. After considering the submissions made by learned counsel for the parties, this Court is of the view that the guarantee referred to in Section 22 of SICA need not be a guarantee in respect of the ”loan or advance” granted to an industrial Company but may be a guarantee in respect of a payment also due to the beneficiary from the sick company. The reason is that Section 22 of SICA precludes the filing of a suit for the recovery of money also which means that in case there had been no Bank Guarantee furnished by the defendant the plaintiff could not have filed a suit even against the sick company. If a suit for recovery of money could not be filed by plaintiff it is not understandable as to how it can be permitted to file a suit for invoking the Bank Gurantee which was also for the recovery of money on account of the supply of goods by the plaintiff to the sick industrial company. The predominant object of Section 22 of SICA is to stall and keep in obeyance legal proceedings, contracts etc. which have the effect of impeding revival of the sick company or adding to its liabilities. Therefore, the clause introduced in Section 22 of SICA by way of amendment Act of 1994 has to be harmoniously construed to advance its object and it has to be held that even Bank Guarantee furnished by the defendant at the instance of the sick company cannot be invoked. The judgment of the Apex Court in the case of Patheja Bros. (supra ) also says that the bar against suits applies in respect of suits against gurantor also. A Bank Guarantee may be an independent contract between the Beneficiary and Bank but Section 22 of SICA takes it into its sweep. This controversy therefore is a friable issue and provides sufficient grounds to the defendant to claim unconditional leave to defend the suit filed by the plaintiff.
10. In the course of arguments learned counsel for the defendant has not pressed the second ground which was based on the guidelines issued by Apex Court in ”Oil and Natural Gas Commission Vs. Collector of Central Excise” as the defendant bank is not squarely covered within the definition of Government of India or a public undertaking.
11. In view of the foregoing reasons , this Court is of the considered view that the defendant has succeeded in raising a friable issue in regard to maintainability of the suit filed by the plaintiff in view of Section 22 of the SICA and as such is entitled to unconditional leave to defend. Leave is granted accordingly.
12. The application stands disposed of.