The legal principle is that coercive recovery proceedings cannot be initiated against a sick company. Manmohan and Raj Kumar were guarantors to the loan obtained by a sick company. Recovery proceedings against them were

Supreme Court in the matter of 'KSL & Industries Ltd. v. Arkhangelsk Threads Ltd. & Others' (2015) held that provisions of section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985 (SICA) will prevail over section 34 of the Debts Due to Banks and Financial Institutions Act, 1993 and had reiterated the legal principle that coercive recovery proceedings could not be initiated against a sick company. The problem is based on the decision of Division Bench of Delhi High Court in the case of 'Om Prakash Parasrampuria & Others v. Union of India & Others' decided on 3.3.2016. The Delhi High Court had in the instant case held that the word 'suit' cannot be understood in its broad and generic sense to include any action before a legal forum involving an adjudicatory process. If that were so, the legislature would have made the necessary provisions in section 22 of the SICA. The term 'suit' would therefore apply to proceedings in a Civil Court and not actions for recovery proceedings filed by the banks and financial institutions before a Tribunal such as the Debt Recovery Tribunal (DRT). Therefore, the proceedings against Manmohan and Raj Kumar can continue. They will not succeed in getting protection under section 22A of SICA.