2003 (7) TMI 495 - HC - Companies Law

Summary

Issues:
1. Company petition seeking winding up under section 433(e) of the Companies Act due to inability to pay admitted debt.
2. Shelter of section 22 of SICA taken by the respondent company.
3. Whether the petitioner can participate in the inquiry proceedings before BIFR under section 15 of SICA.

Analysis:
1. The petitioner filed a company petition seeking winding up of the respondent company based on the ground of inability to pay admitted debt. The debt amounting to Rs. 15,73,038 was not repaid despite the liability being virtually admitted by the respondent. The petitioner, engaged in leasing and hire purchase, provided loans to the respondent, and after serving a statutory notice under section 434 of the Act, sought winding up.

2. The respondent sought shelter under section 22 of SICA, citing a pending reference under section 15 of SICA before the BIFR. The respondent requested the proceedings to be stayed or deferred due to the ongoing reference case.

3. The Court held that allowing the petitioner, a creditor, to participate in the inquiry proceedings before BIFR under section 15 of SICA is not illegal. Every creditor has the right to safeguard their debt, and it is within the BIFR's jurisdiction to decide the extent of creditor participation in the inquiry. The Court emphasized that there is no legal impediment for the petitioner to participate in the inquiry to secure their debts.

4. The Court rejected the argument that the absence of a specific provision under SICA would prevent the company court from allowing the petitioner to participate in the inquiry. The Court asserted its authority to safeguard the interests of creditors when the matter relates to winding up of a company under section 15 of SICA.

5. The Court reserved the petitioner's right to file a winding up petition against the respondent company even if the BIFR reference under SICA is eventually dismissed. The Court granted liberty to the petitioner to renew their petition under section 433 of the Companies Act on the same cause of action in the future, depending on the outcome of the BIFR reference.

6. Section 22 of SICA was highlighted as prohibiting the Court from proceeding with the winding up petition but not restricting the Court's power to give directions or observations to be considered by BIFR. The Court emphasized that allowing the petitioner to participate in the inquiry proceedings before BIFR does not violate the mandate of section 22 of SICA.

7. The petition was disposed of with the petitioner granted liberty to participate in the inquiry proceedings before BIFR in support of their debts. The Court directed BIFR to expedite the disposal of the reference case related to the respondent company. No costs were awarded in this judgment.