1997 (10) TMI 324 - HC - Companies Law

Summary

Issues:
1. Whether further proceedings should be stayed in view of the orders passed by BIFR for framing the scheme for rehabilitation of the respondent-company?

Analysis:
The petitioner filed a winding-up application against the respondent company under sections 433(e), 434(1)(a), and 439(1)(c) of the Companies Act, 1956, claiming an indebtedness of Rs. 5,45,677. The respondent denied the claim, stating it was under a BIFR rehabilitation scheme. The court admitted the petition, considering a prima facie case. The respondent argued that proceedings should be stayed based on previous BIFR proceedings and cited relevant case law.

The respondent contended that since a rehabilitation scheme was sanctioned by BIFR in a previous case, further proceedings should be stayed. The petitioner argued that it had supplied goods on credit after the BIFR scheme was framed, justifying the continuation of the proceedings. Case law was cited by both parties to support their arguments, emphasizing the interpretation of section 22 of the Companies Act, 1956, regarding the suspension of legal proceedings during rehabilitation schemes.

Referring to case law, it was established that if a sick company incurs debt after a BIFR rehabilitation scheme is framed, no permission is required from BIFR to take action against the debtor company, including filing for winding up. The court concluded that since the debts were incurred by the respondent after the BIFR scheme was framed for its rehabilitation, the winding-up proceedings should not be stayed. The judgment highlighted the importance of distinguishing debts incurred post-rehabilitation scheme from those covered by the scheme, emphasizing fair and reasonable interpretations of the law.

The judgment, delivered by Justice Krishna Saran Shrivastav, clarified the legal position regarding the continuation of winding-up proceedings against a company under a BIFR rehabilitation scheme. It emphasized the need to differentiate debts incurred pre and post-rehabilitation scheme, highlighting that permission from BIFR is not required for actions against debts incurred post-rehabilitation. The decision provided clarity on the interpretation of section 22 of the Companies Act, 1956, in the context of sick industrial companies undergoing rehabilitation, ensuring a fair balance between creditor rights and the rehabilitation process.