2001 (8) TMI 1245 - HC - Companies Law

Summary

Issues:
1. Correctness of the order directing winding up of the appellant-company under the Companies Act.
2. Interpretation of sub-section (2) of section 20 of the Sick Industrial Companies (Special Provisions) Act, 1985.
3. The power of the Company Court to independently decide on winding up a company despite the opinion of the Board for Industrial and Financial Reconstruction (BIFR).
4. Settlement of dispute between the parties during the pendency of the appeal.

Analysis:

Issue 1:
The appellant challenged the order directing the winding up of the company under the Companies Act. The High Court stayed the impugned order, noting that the official liquidator had not taken possession of the company. The parties informed the Court of an amicable settlement, with the appellant paying a sum in full settlement of all claims, leading to a request to set aside the winding-up order.

Issue 2:
The Court discussed the interpretation of sub-section (2) of section 20 of the Sick Industrial Companies Act. It was argued that the word 'shall' in the provision did not bind the Company Court to automatically wind up a company based on the BIFR's opinion. The Court emphasized that the Company Court had the discretion to independently assess the situation and decide on winding up based on all relevant factors, including the BIFR's opinion.

Issue 3:
The Court highlighted that the BIFR's opinion was significant but not conclusive, and the Company Court was required to exercise its judicial discretion in deciding on winding up. Referring to previous judgments, the Court emphasized that the Company Court could review the BIFR's opinion and make an independent decision based on the circumstances of the case and the principles of winding up under the Companies Act.

Issue 4:
During the appeal, the parties settled their dispute, and the first respondent withdrew the winding-up petition. However, due to the BIFR's recommendation for winding up, the Court remitted the matter to the Company Judge for reconsideration in light of the settlement and the BIFR's opinion. The Court set aside the previous order and directed further consideration by the Company Judge.

In conclusion, the High Court set aside the order directing winding up of the appellant-company and remitted the matter for fresh consideration, considering the interpretation of the relevant legal provisions and the settlement between the parties.