1993 (1) TMI 233 - HC - Companies Law

Summary

Issues Involved:
1. Commercial insolvency and indebtedness of the appellant-company.
2. Defence raised by the appellant-company regarding the ascertained sum, payments made, and interest agreement.
3. Applicability of section 22(1) of the Sick Industrial Companies (Special Provisions) Act, 1985, in staying winding up proceedings.
4. Jurisdiction of BIFR in relation to a company already directed to be wound up by a court.

Detailed Analysis:

1. Commercial Insolvency and Indebtedness of the Appellant-Company:
The petitioning creditor, Nester Pharmaceuticals (P) Ltd., applied under sections 433 and 434 of the Companies Act, 1956, for winding up Smith Stanistreet Pharmaceuticals Ltd., asserting the company was commercially insolvent. The appellant-company was alleged to owe Rs. 10,37,358.17 after accounting for payments. The statutory notice served on the appellant-company went unanswered.

2. Defence Raised by the Appellant-Company:
The appellant-company raised three defences:
- Unascertained Sum Due: The appellant argued that the exact sum due was not determined until the accounts were reconciled.
- Subsequent Payments: The appellant contended that payments made after the issuance of the statutory notice implied a waiver of the right to initiate winding up proceedings.
- Interest Agreement: The appellant claimed there was no agreement on the payment of interest.

The trial judge rejected the first two defences outright and construed the statutory notice dated December 4, 1990, as notice under the Interest Act, thereby validating the claim for interest. The presumption of insolvency under section 434 of the Companies Act was not rebutted by the appellant. Consequently, the petition was admitted for the amount of Rs. 10,37,358.27 with interest at 18% per annum from December 8, 1990, till the petition filing date, along with costs.

3. Applicability of Section 22(1) of the Sick Industrial Companies (Special Provisions) Act, 1985:
The appellant submitted that an enquiry under section 16 of the Sick Industrial Companies (Special Provisions) Act, 1985, was initiated by BIFR, and under section 22(1), the court should stay the winding up proceedings. Section 22(1) mandates that no proceeding for winding up shall proceed without BIFR's consent when an enquiry or scheme under sections 16 or 17 is pending.

4. Jurisdiction of BIFR:
The petitioning creditor argued that BIFR lacks jurisdiction once a court orders the winding up of a company. The Karnataka High Court and Supreme Court precedents were cited to support that BIFR's jurisdiction pertains to existing companies, not those already ordered to be wound up by a court. The court concurred with this interpretation, stating that the proceedings for winding up conclude with the court's winding up order, and BIFR cannot entertain matters relating to a company already directed to be wound up.

Conclusion:
The court held that BIFR has no jurisdiction over a company once a winding up order is made. The appellant's application for stay was dismissed, and the appellant was directed to comply with the trial court's order, which included making payments by instalments. The appeal was dismissed for non-prosecution, affirming the trial court's judgment and order.