1992 (4) TMI 207 - HC - Companies Law

Summary

Issues:
1. Maintainability of the petition under the Sick Industrial Companies (Special Provisions) Act.
2. Interpretation of section 22(1) of the Sick Industrial Companies (Special Provisions) Act.
3. Effect of company being declared a sick unit on winding up proceedings.
4. Precedent regarding winding up petitions filed before a company is declared a sick unit.
5. Estoppel in challenging the maintainability of the petition.

Analysis:

1. Maintainability of the petition under the Sick Industrial Companies (Special Provisions) Act:
The petitioners filed a winding-up petition against the company for non-payment of debts. The company argued that since it was declared a sick unit under the Sick Industrial Companies (Special Provisions) Act before the petition was filed, the consent of the Board for Industrial and Financial Reconstruction was required. The court noted that without such consent, no winding-up proceedings could be entertained. The court held that the petition was void ab initio as it was filed without the necessary consent, rendering it not maintainable.

2. Interpretation of section 22(1) of the Sick Industrial Companies (Special Provisions) Act:
Section 22(1) of the Act suspends legal proceedings against a company under inquiry or with a scheme under consideration. The court emphasized that the Act overrides other laws and mandates prior consent for winding-up proceedings. The court clarified that the suspension begins with the inquiry and ends with scheme implementation. Lack of consent renders such proceedings void from the outset.

3. Effect of company being declared a sick unit on winding up proceedings:
The court highlighted that the company's status as a sick unit under the Act necessitated compliance with its provisions. The court emphasized the importance of obtaining consent before initiating winding-up proceedings against a sick company to align with the Act's objectives.

4. Precedent regarding winding up petitions filed before a company is declared a sick unit:
The court cited a precedent where a winding-up petition was kept in abeyance until the completion of the inquiry or scheme preparation under the Act. However, the court distinguished this case from the present one, emphasizing the need for prior consent before initiating such proceedings against a sick company.

5. Estoppel in challenging the maintainability of the petition:
The court rejected the company's argument of estoppel, stating that lack of consent made the petition void from the beginning, precluding any estoppel argument. The court emphasized the primacy of compliance with the Act's provisions over procedural arguments.

In conclusion, the court dismissed the petition due to its lack of maintainability under the Sick Industrial Companies (Special Provisions) Act, emphasizing the need for prior consent before initiating winding-up proceedings against a sick company. The court clarified the legal requirements and precedence in such cases, underscoring the Act's overriding effect on other laws.