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Issues Involved:
1. Whether the winding-up proceedings against the company must be stayed under Section 22(1) of the Sick Industrial Companies (Special Provisions) Act. 2. Interpretation and application of Sections 15, 16, and 22 of the Act. Detailed Analysis: Issue 1: Whether the winding-up proceedings against the company must be stayed under Section 22(1) of the Sick Industrial Companies (Special Provisions) Act. The company filed an application for stay of the winding-up order dated March 6, 1990, after making a reference to the Board for Industrial and Financial Reconstruction under Section 15 of the Act. The primary question was whether the winding-up proceedings must be stayed under Section 22(1) of the Act. The company contended that the registration of the reference should automatically stay the winding-up proceedings. The court, however, held that the mere registration of a reference does not equate to an enquiry pending under Section 16 of the Act. The court emphasized that the Board must apply its mind and decide to hold an enquiry for Section 22(1) to be applicable. Therefore, the application for stay was dismissed, and all interim orders were vacated. Issue 2: Interpretation and application of Sections 15, 16, and 22 of the Act. Contentions by the Company: (i) Pending Enquiry: The company argued that an enquiry under Section 16 must be considered pending immediately upon the registration of a reference under Section 15. They drew an analogy with the filing of a suit, which is considered pending from the moment it is filed. (ii) Purpose of the Act: The company contended that the Act aims to rehabilitate sick companies, and allowing winding-up proceedings to continue would frustrate this objective. They cited Maxwell on the Interpretation of Statutes to support a broader interpretation that achieves the legislation's purpose. (iii) Beneficial Construction: The company argued that any ambiguity in Sections 15, 16, and 22 should be resolved in favor of the company, as the Act is beneficial legislation. They quoted Maxwell on the Interpretation of Statutes to support this view. (iv) Appeal Option: The company contended that if the Board chooses not to hold an enquiry, an appeal could be preferred, making Section 22(1) applicable even if the enquiry has not commenced. Contentions by the Respondent: (i) Ministerial Act: The respondent argued that the registration of a reference by the secretary is a ministerial act and does not imply that an enquiry under Section 16 is pending. They emphasized that the Board must apply its mind to decide whether to hold an enquiry. (ii) Discretion of the Board: The respondent contended that the Board has the discretion to decide whether to hold an enquiry under Section 16. Mere registration of a reference does not mandate an enquiry. (iii) Avoidance of Payment: The respondent argued that allowing companies to stay proceedings by merely filing a reference could enable them to avoid paying creditors. (iv) Strict Construction: The respondent emphasized that the jurisdiction of courts cannot be excluded except by express provision of law. They argued that Sections 16 and 22 are clear and do not warrant beneficial construction. Court's Analysis and Decision: The court accepted the respondent's contentions and held that the Board has the discretion to decide whether to hold an enquiry under Section 16. The word "may" in Section 16(1) indicates that the Board can refuse to hold an enquiry. The court emphasized that the phrase "enquiry pending under Section 16" does not include a reference under Section 15. The court supported its view by the scheme of the Act, which distinguishes between a reference, enquiry, and scheme. The court noted that the registration of a reference is a ministerial act, and the enquiry under Section 16 commences only when the Board applies its mind. The court also highlighted that the purpose of the Act is not only to revive sick industries but also to liquidate non-viable ones to protect public investment. Allowing a stay of proceedings merely based on the registration of a reference could defeat this objective. The court dismissed the application for stay and vacated all interim orders. The appeal was also dismissed with no order as to costs.
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