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Issues Involved:
1. Applicability of the Sick Industrial Companies (Special Provisions) Act, 1985. 2. Validity of the order directing winding up of the appellant company. Issue-wise Detailed Analysis: Issue 1: Applicability of the Sick Industrial Companies (Special Provisions) Act, 1985 The appellant company argued that the industry was run under the Sick Industrial Companies (Special Provisions) Act, 1985, and thus the company court could not direct its winding up. The provisions of sections 4, 15(1), 16, 17, 20, 22, and 31 of the Act were cited to support this contention. However, the learned company judge rejected this argument, stating that the Act's provisions could only be invoked if an inquiry under section 16 was pending, a scheme under section 17 was under preparation or consideration, or a sanctioned scheme was under implementation. None of these conditions were met in this case. The court clarified that for the Act to apply, the company must be a "sick industrial company" as defined under section 3(o) of the Act, and a proceeding must be initiated before the Board under sections 15 and 16. The board of directors of the sick industrial company should have made a reference to the Board within sixty days from the finalization of the duly audited accounts, as per section 15(1). However, no such step was taken by the appellant company either before or during the pendency of the winding-up petition. Section 15(2) of the Act, which allows the Central Government, Reserve Bank, State Government, or a public financial institution to make a reference to the Board, was deemed discretionary and not mandatory. The court emphasized the difference between the mandatory "shall" in section 15(1) and the discretionary "may" in section 15(2). Additionally, section 16(1)(b) allows the Board to initiate an inquiry suo motu or upon receiving information about the financial condition of the company. However, this provision is also discretionary. Consequently, the court concluded that the provisions of the Act were not attracted to the appellant company since section 15(1) was not invoked, and there was no mandatory obligation for the bank to make a reference under section 15(2). Issue 2: Validity of the Order Directing Winding Up The appellant company was unable to discharge its debts or generate funds and did not present any viable scheme for improving its industry. The learned company judge concluded that the company had ceased operations for more than a year due to financial constraints and was unable to secure financing from other sources. Consequently, the only course of action was to order the winding up of the company. The court found no merit in the appellant's argument that the first respondent bank should have approached the Board under section 15(2) of the Act. The bank had provided several opportunities for the appellant company to generate funds and discharge its debt, but the company failed to do so. The court also noted that there was no evidence to support the appellant's claim that the surrounding area was a cotton-growing region dependent on the company's operations. The court referred to two Supreme Court decisions cited by the appellant. In E.I.D. Parry (India) Ltd. v. State of Tamil Nadu, the Supreme Court emphasized the importance of keeping a factory operational to support local employment and agriculture. However, the court found no foundation for applying this principle in the present case, as there was no evidence that the area surrounding the appellant company was a cotton-growing region. In Navnit R. Kamani v. R. R. Kamani, the Supreme Court considered a scheme presented during the winding-up proceedings. However, no such scheme was presented in the present case, despite the long pendency of the petition and appeal. Therefore, the court concluded that the learned company judge was justified in ordering the winding up of the appellant company, as there was no viable alternative to discharge its debts. Conclusion: The appeal was dismissed, and the order directing the winding up of the appellant company was upheld. The provisions of the Sick Industrial Companies (Special Provisions) Act, 1985, were not applicable as the necessary steps under section 15(1) were not taken, and section 15(2) was discretionary. The company was unable to discharge its debts or present a viable scheme for its revival, justifying the order for winding up.
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