Date:21/02/2007 URL: http://www.thehindubusinessline.com/2007/02/21/stories/2007022101790200.htm

Back Creditors can take sick co to court to recover dues: HC

Our Legal Correspondent

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Chennai Feb. 20 If a company is referred to the Board for Industrial and Financial Reconstruction (BIFR), creditors cannot go to court to recover dues, right? Wrong, says Madras High Court.

Section 22 of Sick Industrial Companies (Special Provisions) Act, 1985, which bars a lender from going to court against a sick company for recovering dues, would cease to operate because of the amendment to Section 41 of the SARFAESI Act.

The First Bench, comprising Chief Justice Mr A.P. Shah and Mr Justice K. Chandru, said this while deciding on a writ petition of Golden Weaving Mills Pvt Ltd, Madurai. The company had challenged a notice of Tamilnadu Industrial Investment Corporation (TIIC) for recovery of dues of Rs 1.56 crore.

The argument of the petitioners that TIIC could not proceed under the SARFAESI Act was "clearly misconceived and could not be accepted", the Bench said.