2002 (12) TMI 497 - HC - Companies Law

Summary

Issues Involved:
1. Maintainability of company petitions in view of Section 22(1) of the Sick Industrial Companies (Special Provisions) Act, 1985 (SICA).
2. Whether the debt of the respondent-company is barred by limitation.
3. Whether it is equitable to order winding up of the respondent-company.

Issue-wise Detailed Analysis:

1. Maintainability of Company Petitions in View of Section 22(1) of SICA:
The court examined whether the company petitions could be maintained given the protection afforded under Section 22(1) of SICA. The respondent argued that since a rehabilitation scheme sanctioned by the Board for Industrial and Financial Reconstruction (BIFR) was under implementation, no winding-up proceedings could be initiated without BIFR's consent. The court noted that the scheme approved by BIFR on 16-6-1994 required the respondent to settle dues of unsecured creditors within seven years, i.e., by 15-6-2001. Despite the expiry of this period, the court held that the scheme remains under implementation until the company's net worth becomes positive, as per the continuous process outlined in SICA. Consequently, the protection under Section 22(1) of SICA remained in place, and the company petitions could not be entertained without BIFR's consent.

2. Whether the Debt of the Respondent-Company is Barred by Limitation:
The respondent contended that the debt was barred by limitation, as the last payment was made on 7-2-1992, and the claim was extinguished by 6-2-1995. The court rejected this argument, emphasizing that the period of limitation is extended under Section 22(5) of SICA for the duration during which the remedy remains suspended due to the rehabilitation scheme. The court clarified that this extension applies to all creditors, not just those who sought BIFR's consent. Therefore, the debt was not barred by limitation.

3. Whether it is Equitable to Order Winding Up of the Respondent-Company:
The court decided not to delve into the question of equities at this stage, as it was not directly relevant to the decision on whether to order advertisement of the petitions. The court noted that the questions of limitation and equities would arise at a later stage when considering the actual winding-up order.

Conclusion:
The court concluded that the company petitions could not be admitted due to the protection under Section 22(1) of SICA, which remains effective as long as the rehabilitation scheme is under implementation. The court also found that the debt was not barred by limitation due to the extension provided by Section 22(5) of SICA. The petitions were dismissed, and the petitioners were advised to pursue their application with BIFR for permission to proceed.