2000 (12) TMI 850 - HC - Companies Law

Summary

Issues:
1. Challenge against the order of winding up a sick company under the Sick Industrial Companies (Special Provisions) Act, 1985 (SICA).

Analysis:
The judgment involves a challenge against an order directing the winding up of a sick company, Allied International Products Ltd. (AIPL), under section 20(1) of the SICA. The company, established in 1962 for manufacturing industrial fasteners, faced numerous litigations and financial challenges over the years. The company's operations ceased in 1985, leading to its referral to the Board for Industrial and Financial Reconstruction (BIFR) in 1988. Despite efforts by the Operating Agency (OA) and the BIFR to devise a viable rehabilitation scheme, the promoters failed to provide concrete proposals or financial commitments for the company's revival.

The BIFR issued a show-cause notice to AIPL before ordering its winding up, allowing the company an opportunity to propose a rehabilitation plan. However, the company failed to present specific objections or substantial proposals for revival. The appellate authority, AAIFR, upheld the decision to wind up AIPL, noting the promoters' lack of financial support and the unviability of the proposed foreign currency loan. The appellate authority found no feasibility in formulating a rehabilitation scheme due to the company's substantial debts and obsolete plant and machinery.

The High Court, after considering the decisions of BIFR and AAIFR, declined to interfere, emphasizing the company's insolvency, inability to service debts, and lack of viable revival prospects. The Court highlighted the deteriorated state of AIPL's assets and the absence of concrete proposals from the promoters. Consequently, the petition challenging the winding-up order was dismissed, affirming the decisions of the SICA authorities.

In conclusion, the judgment underscores the challenges faced by a sick company like AIPL and the legal processes involved in determining its winding-up under the SICA. The Court's decision reflects the company's dire financial situation, lack of feasible revival options, and the creditors' pursuit of debts, ultimately leading to the dismissal of the petition challenging the winding-up order.