2001 (11) TMI 914 - HC - Companies Law

Summary

Issues Involved:
1. Validity of the winding-up order.
2. Applicability of Section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985.
3. Whether the winding-up order should be set aside due to the subsequent registration of the reference by the BIFR.

Detailed Analysis:

1. Validity of the Winding-Up Order:
The court initially ordered the winding up of Tan India Ltd. on 25-6-2001, concluding that the company was unable to pay its debts and was commercially insolvent. The petitioner had claimed that the respondent defaulted on hire purchase agreements and owed Rs. 1,02,52,136.96 as of 15-2-1997. Despite statutory notices and demands, the respondent failed to make payments and did not dispute its liability seriously. The respondent's attitude in other company petitions was similar, often seeking adjournments. The managing director's affidavit claimed the company was a sick industrial company and had made a reference to the BIFR, but no proof of receipt by the BIFR was provided. Consequently, the court held that the bar under Section 22 of the Sick Industrial Companies (Special Provisions) Act did not apply, as there was no evidence of the reference being received by the BIFR. Therefore, the court ordered the winding up of the company.

2. Applicability of Section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985:
The respondent argued that the winding-up order should be set aside because a reference under Section 15 of the Sick Industrial Companies (Special Provisions) Act was made on 30-5-2001 and received by the BIFR on 1-6-2001. However, the court noted that the winding-up order was passed on 25-6-2001, before the reference was registered as Case No. 311 of 2001 on 6-8-2001. The court referred to the Supreme Court's decision in Real Value Appliances Ltd. v. Canara Bank, which stated that mere registration of a reference does not result in the automatic cessation of all proceedings unless an inquiry is pending. The court concluded that on the date of the winding-up order, there was no legal impediment, and the order was validly passed.

3. Whether the Winding-Up Order Should Be Set Aside Due to Subsequent Registration of the Reference by the BIFR:
The respondent contended that the winding-up order should be set aside as proof of reference to the BIFR was subsequently received. However, the court emphasized that the winding-up order was validly passed on 25-6-2001, and the reference was registered only on 6-8-2001. The Supreme Court's decision in Rishabh Agro Industries Ltd. v. P.N.B. Capital Services Ltd. was cited, which held that Section 22 of the Sick Industrial Companies (Special Provisions) Act stays all further proceedings even after a winding-up order is passed. Therefore, while the winding-up order was not liable to be set aside, all further proceedings in the company petition were stayed pending the reference before the BIFR.

Conclusion:
The court upheld the validity of the winding-up order dated 25-6-2001, as there was no legal impediment at the time of its passing. However, it stayed all further proceedings in the company petition pending the reference before the BIFR. The vesting of the company's properties with the liquidator remained operative, subject to the proceedings before the BIFR. Liberty was given to either party to move the court upon the conclusion of the BIFR proceedings.