1997 (4) TMI 389 - HC - Companies Law

Winding up - Suit stayed on winding up order, Suspension of legal proceedings, etc. and Winding up - Avoidance of certain attachments, executions, etc.

Issues Involved:
1. Validity of chamber summons under Section 22(1) of the Sick Industrial Companies (Special Provisions) Act, 1985 (SICA).
2. Execution of the order dated 13-3-1995 in light of Section 537 read with Section 441 of the Companies Act, 1956.
3. Continuation of the ad interim order dated 14-12-1994 and its modification on 13-3-1995.
4. Applicability of Section 446 of the Companies Act, 1956.

Detailed Analysis:

1. Validity of Chamber Summons Under Section 22(1) of SICA:

The plaintiffs took out a chamber summons on 31-10-1996 while an appeal under Section 25 of SICA was pending. The defendants argued that due to the embargo under Section 22(1) of SICA, the chamber summons was void ab initio. The court noted that although the chamber summons was filed during the pendency of the appeal, the appeal was disposed of on 25-1-1997, and no proceedings were pending under SICA at the time of the judgment. Therefore, the chamber summons could not be rejected on this ground. The court distinguished this case from C.J. Gelatine Products Ltd. v. Karam Chand Thaper & Bros. Ltd., where the inquiry under Section 16 of SICA was still pending, making the filing void ab initio. The court concluded that the first contention had no merit and rejected it.

2. Execution of the Order Dated 13-3-1995 in Light of Section 537 Read with Section 441 of the Companies Act, 1956:

The defendants contended that under Section 537 read with Section 441 of the Companies Act, 1956, the order dated 13-3-1995 could not be executed without the leave of the Delhi High Court, where the winding-up petition was pending. Section 537(1)(a) states that any attachment, distress, or execution put in force without the court's leave after the commencement of winding up shall be void. Section 441(2) fixes the commencement of winding up as the date of the presentation of the petition. The court agreed that the execution of the order dated 13-3-1995 was affected by the commencement of the winding-up proceedings and could not be executed without obtaining leave from the Delhi High Court. Consequently, the plaintiffs could not be granted any relief in the chamber summons, leading to its dismissal.

3. Continuation of the Ad Interim Order Dated 14-12-1994 and Its Modification on 13-3-1995:

The defendants argued that the ad interim order dated 14-12-1994, modified on 13-3-1995, was no longer in existence due to the disposal of the notice of motion. The court clarified that the notice of motion No. 2896 of 1994, which appointed the court receiver, had not been disposed of and was adjourned sine die on 23-1-1996. The order dated 13-3-1995 continued to hold the field. Therefore, the third contention raised by the defendants was rejected as misconceived.

4. Applicability of Section 446 of the Companies Act, 1956:

The defendants contended that under Section 446 of the Companies Act, 1956, the proceedings should be stayed due to the winding-up order passed by BIFR. The court explained that Section 446 applies when a winding-up order has been made or an official liquidator has been appointed by the court hearing the winding-up petition. The expression "winding-up order has been made" refers to the order passed by the court hearing the winding-up petition, not the recommendation by BIFR. Since no winding-up order had been made by the court, Section 446 was not applicable. Therefore, the last contention invoking Section 446 was negatived.

Conclusion:

The chamber summons was dismissed with no order as to costs, as the execution of the order dated 13-3-1995 could not proceed without the leave of the Delhi High Court, where the winding-up petition was pending.

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