2007 (7) TMI 681 - HC - Companies Law

Summary

Issues involved: Challenge to order passed by High Court for winding up a company u/s 20(1) of SICA based on BIFR opinion, application to recall the order, consideration of subsequent BIFR orders and change in company's financial position.

Issue 1: Challenge to winding up order u/s 20(1) of SICA

The applicant challenged the order passed by the High Court on 10-6-2004 for winding up M/s. Dr. Writer's Food Products Pvt. Ltd. based on the opinion of BIFR that the company was not likely to become viable in the future and should be wound up u/s 20(1) of SICA. The applicant sought to recall this order, arguing that it was passed ex parte without considering the possibility of appeal against the BIFR order. The subsequent BIFR order dated 29-5-2006 indicated a positive change in the company's financial position, leading to the conclusion that the company was no longer a sick industrial company as per Section 3(1) of the Act.

Issue 2: Applicability of Companies Act, 1956 and Company Court Rules

The applicant invoked the provisions of the Companies Act, 1956 and the Company Court Rules, specifically Rule Nos. 6 and 7, to challenge the winding up order. It was argued that the ex parte order to wind up the company without notice and without considering the appeal process under SICA was unjust, especially in light of the subsequent developments and findings by the BIFR. The Court considered the change in circumstances, including the company's increased net worth, and the applicability of the Code of Civil Procedure in such proceedings.

Issue 3: Judicial discretion and interest of justice

The Court exercised its inherent power and discretion to quash the order for winding up the company in the interest of justice and to avoid further complications. The change in the company's financial position, as evidenced by the subsequent BIFR orders, was a significant factor in the Court's decision to allow the applicant's challenge and set aside the previous order. The Court emphasized the need to consider the evolving circumstances and to prevent unnecessary prolongation of the legal proceedings.

This summary provides a detailed overview of the legal judgment, highlighting the key issues involved and the Court's reasoning in addressing the applicant's challenge to the winding up order.