1999 (7) TMI 587 - HC - Companies Law

Issues Involved:
1. Validity and applicability of the Board for Industrial and Financial Reconstruction (BIFR) opinion under section 20(1) of the Sick Industrial Companies (Special Provisions) Act, 1985 (SICA).
2. Necessity of following the procedure under the Companies (Court) Rules, 1959 for winding up petitions.
3. Discretion of the High Court in winding up proceedings based on BIFR's opinion.
4. Publication and advertisement requirements for winding up orders.

Detailed Analysis:

1. Validity and Applicability of BIFR Opinion under Section 20(1) of SICA:
The petition was registered as a winding-up petition based on the opinion of the BIFR, which declared that it was just and equitable to wind up the respondent company. This opinion was confirmed by the Appellate Authority for Industrial and Financial Reconstruction (AIFR). The court noted that the BIFR's opinion was subject to appeal and had been confirmed by the AIFR, indicating no interference with the BIFR's decision.

2. Necessity of Following the Procedure under the Companies (Court) Rules, 1959:
The petitioner argued that the winding-up petition should proceed without the formality of admitting the petition, citing a Madras High Court decision that section 20 of SICA dispenses with the requirements of sections 439 and 440 of the Companies Act for initiating winding-up proceedings. However, it was contended that the High Court must still follow the procedures outlined in the Companies (Court) Rules, specifically rules 96, 99, and 24, which mandate the admission of the petition, fixing a date for hearing, and issuing public advertisements.

3. Discretion of the High Court in Winding Up Proceedings Based on BIFR's Opinion:
The court emphasized that while the BIFR's opinion forms the basis for winding up, the High Court is not merely a rubber stamp. The High Court must exercise its discretion and determine the correctness of the BIFR's opinion, as affirmed by the Supreme Court in V.R. Ramaraju v. Union of India. The High Court must take into account the BIFR's opinion but is not bound to follow it without its own independent assessment.

4. Publication and Advertisement Requirements for Winding Up Orders:
The court discussed the necessity of public notice and advertisement as per rules 96, 99, and 24 of the Companies (Court) Rules. These rules ensure that any interested party has the opportunity to appear and be heard. The court ordered that the winding-up petition be admitted and advertised in specified newspapers and the Government Gazette, with the final hearing date set. The operating agency, IFCI, was tasked with ensuring the publication of these advertisements.

Conclusion:
The High Court concluded that the petition must follow the procedural requirements of the Companies (Court) Rules, 1959, including the admission of the petition and issuing public advertisements. The court emphasized its discretionary role in assessing the BIFR's opinion and ordered the necessary steps to ensure compliance with the procedural rules, thereby maintaining the principles of natural justice and transparency in the winding-up process.

← Previous Next →