2001 (1) TMI 851 - HC - Companies Law

Summary

Issues:
1. Writ petition seeking quashing of Certificate Case under the Bihar and Orissa Public Demand Recovery Act, 1914.
2. Company petition for winding up proceedings under the Companies Act, 1956.
3. Challenge of a certificate for realization of debt during winding up proceedings.

Analysis:
1. The petitioner, Bhawani Paper Mills (P.) Ltd., filed a writ petition (C.W.J.C. No. 9850 of 1995) seeking to quash Certificate Case No. 1/BICICO of 1994 under the Bihar and Orissa Public Demand Recovery Act, 1914. The court denied relief as the matter was pending in winding up proceedings before the Company Judge, Patna High Court, under the Companies Act, 1956. The court held that once winding up proceedings are initiated, creditors cannot directly realize debts without being registered as a creditor of the company under liquidation, as per section 446 of the 1956 Act.

2. Another writ petition (C.W.J.C. No. 10961 of 1998) was filed by the same petitioner, Bhawani Paper Mills (P.) Ltd., subsequent to the registration of Company Petition No. 8 of 1997. The company was under the purview of the Board for Industrial and Financial Reconstruction (BIFR) under the Sick Industrial Companies (Special Provisions) Act, 1985. After due inquiry, it was recommended to the Patna High Court for winding up. The court emphasized that in matters related to the company's financial status and winding up, proceedings must adhere to the regulations of the Companies Act, ensuring fair distribution of assets among creditors.

3. The court opined that the proceedings in the writ petition challenging the certificate for debt realization had become infructuous due to the ongoing winding up proceedings. It highlighted the importance of following legal procedures outlined in the Companies Act during such situations, emphasizing the role of the Official Liquidator in asset distribution among creditors. Consequently, the court dismissed the appeal, affirming the decision that the writ petition had lost its relevance in light of the winding up proceedings.

In conclusion, the judgment underscores the significance of adhering to legal procedures and regulations, especially in matters concerning debt realization during winding up proceedings under the Companies Act, 1956. It clarifies the restrictions on creditors in directly realizing debts from a company under liquidation and highlights the role of the court and Official Liquidator in ensuring fair distribution of assets among creditors.