JUDGMENT
N.V. Balasubramanian, J.
1. This writ petition is placed before me as per the orders of the Chief Justice, dated 5-2-2001.
2. This writ petition has been filed for the issue of a writ of declaration to declare that no proceedings for the recovery of money or non-repayment of trade or other dues and no order for payment or for enforcement of any security or guarantee against the petitioner’s company and its
directors and officers shall lie without the prior consent of the Board for Industrial and Financial Reconstruction (BIFR), New Delhi.
3. The case of the petitioner is that the petitioner-company was incorporated under the provisions of the Companies Act, 1956 (‘the Companies Act’) on 12-10-1990. The company’s authorised share capital is Rs. 15 crores divided into 1.5 crore equity shares of Rs. 10 each. There is no dispute that the company has received public deposits and has been paying interest thereon. It is fairly stated that the total outstanding deposit as on 31-10-2000 was Rs. 931.47 lakhs held by nearly 6,848 depositors, and out of the said sum, a sum of Rs. 911.99 lakhs held by 6,709 depositors had already matured for payment as on 31-10-2000, but the same was not paid to various depositors. It is further stated that the petitioner also approached the BIFR, and the BIFR has registered a case under Section 15(1) of the Sick Industrial Companies (Special Provisions) Act, 1985 (‘SICA’).
4. It is stated that when the matter stood like this, the depositors and other trade and financial creditors of the petitioner have been initiating distraint action notwithstanding the orders passed by the BIFR and the reference issued by the BIFR. Hence, the petitioner has filed this writ petition for a declaration to declare that no proceedings for the recovery of money or non-repayment of trade or other dues and no order for payment or for enforcement of any security or guarantee against the petitioner-company and its directors and officers shall lie without the prior consent of the BIFR.
5. I heard the submissions of Mr. M. Venkatachalapathy, the learned senior counsel, appearing for the petitioner. The learned counsel appearing for the respondent Nos. 1 to 3 have not chosen to file counter. The learned counsel appearing for the fourth respondent has filed a counter. I also heard the learned counsel appearing for the respondents.
6. The main submission of the learned senior counsel appearing for the petitioner is that under Section 22 of the SICA, no proceedings would lie against the company and its directors and officers. According to the learned senior counsel, the bar under Section c, would be available not only to the petitioner-company, but also to its directors and officers. The learned senior counsel submitted that the directors of the petitioner-company are guarantors of the company and when the principal, viz., the company is protected under Section 22, there is no reason for denying the protection under Section 22 to its directors and officers, and, according to the learned senior counsel, the directors and officers should also be protected under Section 22. The learned senior counsel relied upon the decision of the Supreme Court in Patheja Bros. Forgings & Stamping v. ICICI Ltd. [2000] 102 Comp. Cas. 21, 26 SCL 404, and submitted that considering the legislative intent of Section 22, the directors and officers should also be protected.
7. In my view, so far as the petitioner-company is concerned the provisions of Section 22, would apply only against the industrial company or any of its properties. There is no dispute that the petitioner-company has approached the BIFR and proceedings are pending before the BIFR. Further, the scope of Section 22 is limited and the provisions of Section 22 would apply to the properties of the industrial company, and the section does not preclude the authorities from investigating into the affairs of the company or from taking legal proceedings which would not in any way touch the properties of the industrial company. Therefore, the protection under Section 22 would only be available against the properties of the industrial company from distraint or otherwise and there is no bar for the authorities to investigate and conclude the proceedings against the company for the non-payment of deposit amounts to the depositors.
8. Insofar as directors and officers of the petitioner-company are concerned, I am unable to accept the submission of the learned senior counsel for the petitioner. Firstly, they are not the petitioners in the writ petition and the writ petition is filed by the company. Secondly, the directors of the petitioner-company, by no stretch of imagination, can be regarded as guarantors of the petitioner-company. The officers of the company are employees, and they cannot also be regarded as guarantors. The directors occupy a fiduciary position vis-a-vis the company and they cannot be regarded as guarantors of the company or its properties. I, therefore, hold that the protection available under Section 22, is not available to the directors and officers of the petitioner-company. I am of the view that the legislative intent is only to protect the properties of the company from any distraint proceedings, and the protection under Section 22 is not available to the directors and officers of the company.
9. As already observed, the directors of the company occupy a fiduciary position and they are not guarantors of the company or its properties. It is well settled that the company is a separate legal person distinct from its shareholders who have contributed share capital in the formation of the company. The directors may be the shareholders of the company, but the company is a separate legal person distinct from the directors. The submission of the learned senior counsel that the company is run by and under the supervision of the directors and, hence, the directors are also eligible to get protection under Section 22, is not acceptable as the company is a separate legal person, distinct from the directors and officers and if any violation takes place, it is open to the authorities to take
action against the directors and officers of the company in accordance with the law.
10. Insofar as the decision of the Supreme Court in Patheja Bros. Forgings & Stamping’s case (supra) is concerned, the decision is not applicable to the facts of the case. The Supreme Court was dealing with a case of a guarantor who happened to be the director of the company and in that factual situation, it was held that the guarantor would be entitled to the protection under Section 22. I am of the view that the decision in Patheja Bros. Forgings & Stamping’s case (supra) has no application. Here, the proceedings have been initiated against the directors of the petitioner-company in their capacity as directors and not in the capacity or in the character of guarantors of the petitioner-company. I hold that the embargo placed under Section 22 Act, should be construed in a strict manner and it should be limited to cases covered in Section 22 and it cannot be extended further. I, therefore, hold that it is not open to them to contend that there should not be any investigation or proceedings taken against them for the failure to repay the deposit money to the depositors.
11. I also reject the submission of Mr. M. Venkatachalapathy, the learned senior counsel, that the intent of the Legislature is to offer protection to the directors and officers of the company also. The intent of the Legislature, as observed by the Supreme Court in Patheja Bros. Forgings & Stamping’s case (supra), is to protect the interest of the company and its properties and also guarantors from the proceedings for execution, distress, etc. Further, the wording of Section 22 is clear and there is no ambiguity in the section, and the section is clear that no proceedings shall lie for winding up of the petitioner-company or execution or distress against any of the properties of the industrial company or its guarantors, and Section 22 does not extend its protective umbrella to its directors or its officers. I hold that the wording of Section 22 is clear that the protection under Section 22 is not available to the directors and officers of the company and the mere fact that the ultimate scheme that may be framed by the BIFR may provide for repayment to depositors is not a ground to hold that no proceedings should be taken as against the directors and officers of the petitioner-company and no investigation should be conducted and no criminal proceedings should be taken. I have already held that Section 22 does not even give protection to the investigation into the affairs of the company. In my view, Section 22 is limited in its scope and there is no bar for taking criminal proceedings against the directors or officers of the company or even against the company. In this view of the matter, I find no merit in the writ petition. Accordingly, the writ petition fails and it is dismissed. There will be no order as to costs. Consequently, W.M.P. Nos. 30326 and 30327 of 2000 are closed.