1999 (10) TMI 639 - HC - Companies Law

Summary

Issues:
1. Winding up of the appellant company.
2. Setting aside the winding up order passed ex parte.
3. Discharge of debt due to the petitioning creditor.
4. Consideration of subsequent events and pending rehabilitation scheme.
5. Involvement of secured creditors in the decision-making process.
6. Proposals for rehabilitation pending with BIFR.
7. Revocation of the winding up order.

The judgment involved two appeals, one against the winding up order of the appellant company and the other against the refusal to set aside the winding up order passed ex parte. The respondent, an unsecured creditor, filed a petition seeking winding up due to the appellant's failure to discharge the debt. The new managing director, unaware of the petition, sought to set aside the order after the debt was cleared. The Single Judge, while acknowledging the debt discharge, held that once a winding up order is passed, it stands for all creditors and contributories. However, the court considered subsequent events and the pending rehabilitation scheme before ordering notice to secured creditors.

The court noted that the secured creditors, including major financial institutions, were not opposing the winding up due to pending rehabilitation proposals with BIFR. The new management's willingness to mobilize resources for industry revival influenced the creditors' stance. The court refrained from ordering winding up at that stage, considering the absence of objections from creditors and shareholders. It was decided to set aside the impugned orders and revoke the winding up order, emphasizing the possibility of future winding up if BIFR deems revival unfeasible. The judgment highlighted the importance of pending rehabilitation proposals and the creditors' interests in the decision-making process.

In conclusion, the court allowed the appeals, revoking the winding up order. It directed the payment of expenses to the official liquidator for watch and ward staff, to be borne by the appellant if not already paid as per the Single Judge's directions. No costs were awarded in the judgment.