1987 (11) TMI 395 - HC - Companies Law

Summary

Issues:
1. Application for sale of mortgaged property and appointment of Receiver under Industrial Finance Corporation Act, 1948.
2. Breach of loan agreements leading to the application.
3. Counter-affidavit raising objections under the Sick Industrial Companies (Special Provisions) Act, 1985.
4. Interpretation of Section 30(3) of the Industrial Finance Corporation Act, 1948.
5. Dispute regarding the pending enquiry under Section 16 of the Sick Industrial Companies Act.
6. Legal implications of Section 22 of the Sick Industrial Companies Act on the present proceedings.

Analysis:
1. The judgment pertains to an application by the Industrial Finance Corporation of India under Section 30 of the Industrial Finance Corporation Act, 1948, seeking the sale of mortgaged property and the appointment of a Receiver due to the respondent's breach of loan agreements. The loans were provided for a steel ingots project in U.P., with subsequent defaults leading to the application.

2. The respondent countered, citing the Sick Industrial Companies Act, 1985, and claiming a pending enquiry under Section 16, arguing against further proceedings. The petitioner contended that the breach of agreements and non-payment of loans necessitated relief under Section 30(3) of the Industrial Finance Corporation Act.

3. The court deliberated on the interpretation of Section 30(3) and the mandatory nature of relief in case of breaches. The respondent's objection based on the Sick Industrial Companies Act was analyzed, focusing on the pending enquiry and the discretion of the Board.

4. The court examined the language of Section 16 of the Sick Industrial Companies Act and the significance of the word "may" in the context of inquiries, ultimately emphasizing the mandatory nature of the enquiry once a reference is registered. The court highlighted the Act's objective of salvaging viable companies.

5. Noting Section 22 of the Sick Industrial Companies Act, the court underscored the requirement of Board consent for proceedings like winding up, appointment of a Receiver, or execution against company properties. The court concluded that the circumstances indicated a pending enquiry under Section 16, warranting a halt to the present proceedings.

6. Consequently, the court ruled against granting relief at the current stage, citing the pending enquiry and the need for Board consent as per Section 22. The judgment emphasized the importance of adhering to statutory provisions and the interests of all parties involved.