1989 (7) TMI 306 - HC - Companies Law

Summary

Issues:
1. Interpretation of Section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985.
2. Distinction between "industrial company" and "industrial undertaking" under the Act.
3. Competence to make a reference to the Board under the Act after a winding-up order is made.
4. Difference between an order in winding up and an order of winding up.

Analysis:

1. The judgment deals with the interpretation of Section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985. The court was tasked with determining whether Section 22 applies to a case where a winding-up order has already been passed. Section 22 provides for the suspension of legal proceedings in certain circumstances related to the rehabilitation of industrial companies.

2. The court emphasized the distinction between an "industrial company" and an "industrial undertaking" under the Act. An industrial company must own one or more industrial undertakings, which are defined as activities in scheduled industries carried out by a company. If an industrial undertaking ceases manufacturing or is not involved in scheduled industries, it may not qualify as an industrial undertaking under the Act.

3. The judgment addresses the competence to make a reference to the Board under the Act after a winding-up order has been issued. It highlights that for a reference to be valid, there must be a functioning board of directors of the sick industrial company. Once a winding-up order is passed, the board of directors ceases to hold office, rendering any subsequent reference by them incompetent.

4. The court clarifies the difference between an order in winding up and an order of winding up. An order in winding up encompasses various interim orders made during the winding-up process, while an order of winding up is the final culmination of the petition. The judgment emphasizes that once a winding-up order is made appointing an official liquidator or receiver, the proceedings must continue as per the Act, and Section 31 saves pending proceedings in such cases.

In conclusion, the court dismissed the application to stop further proceedings following the winding-up order, citing that Section 22 does not apply once a winding-up order is issued. The judgment underscores the importance of understanding the legal distinctions within the Act and the implications of different types of orders in winding up proceedings. It also encourages the submission of a rehabilitation scheme if it has the potential to revive the company, subject to legal considerations and notice to the official liquidator.