2000 (8) TMI 1005 - HC - Companies Law

Summary

Issues:
1. Jurisdiction of BIFR when winding up petition is pending or order passed under Companies Act.
2. Impact of appointment of official liquidator on BIFR's jurisdiction.
3. Interpretation of winding up order under Companies Act.
4. Compliance with BIFR procedures and considerations for protection of assets.

Issue 1: Jurisdiction of BIFR
The High Court deliberated on whether BIFR can proceed when a winding-up petition is pending or an order has been passed under the Companies Act. The BIFR refused to entertain a reference due to an official liquidator's appointment, based on consent terms between parties. The AAIFR concurred, stating that the appointment implied a decision for winding up, thus negating BIFR's jurisdiction.

Issue 2: Impact of Official Liquidator
The High Court cited the Apex Court's ruling in Rishab Agro Industries Ltd. v. P.N.B. Capital Services Ltd., emphasizing that the official liquidator's role is asset protection, not rehabilitation. The winding-up order marks the start, not the end, of proceedings, allowing the Board of Directors to initiate rehabilitation efforts even after liquidator appointment. Both BIFR and AAIFR erred in deeming the reference non-maintainable, as clarified by the Apex Court.

Issue 3: Interpretation of Winding Up Order
The High Court clarified that a winding-up order under the Companies Act initiates a process, not its conclusion. The legislative intent signifies commencement at the petition stage, with dissolution as the ultimate outcome. The Court emphasized that the word "deemed" implies a presumed commencement, highlighting the ongoing nature of winding-up proceedings.

Issue 4: Compliance with BIFR Procedures
Referring to Real Value Appliances Ltd. v. Canara Bank, the High Court stressed BIFR's mandatory duty to conduct inquiries post-reference registration. The Act aims at industry revival before winding up, requiring fair hearings for companies. BIFR was directed to reevaluate the case, considering subsequent events and asset protection. Parties were advised to approach BIFR for asset safeguarding, with potential orders against fraudulent asset disposal.

The High Court set aside BIFR and AAIFR's orders, directing parties to appear before BIFR promptly for necessary actions. The stay on previous orders was confirmed, with fresh orders mandated. Section 22 of the Act would apply post the Court's decision, ensuring compliance. The petition was disposed of accordingly, emphasizing adherence to legal procedures and protection of assets.