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2020 (9) TMI 807 - HC - Companies LawWinding up of Company - Section 20(1) of the Sick Industrial Companies (Special Provisions) Act, 1985 - change of place of registered office of company - HELD THAT - Considering the lapse of 17 years since the reference dated 20.12.2002 was received from the BIFR in the year 2002/2003 and the Financial Position of the Company as disclosed in the affidavit of the Company as also the Official Liquidator, as, the total assets and the net worth of the Company exceeds the liabilities, as also in view of the three arbitration awards in its favour and the affidavit of Bank of India dated 29.04.2013 this Court is of the view that as the recommendation of the BIFR is not binding and conclusive upon this Court in view of the Division Bench judgment relied upon by the Company's counsel upon the case of J.M. MALHOTRA AND OTHERS VERSUS UNION OF INDIA AND OTHERS 1994 (9) TMI 365 - MADRAS HIGH COURT which has been upheld by the Supreme Court, this Court is of the view that the recommendations of the BIFR can not be accepted at this belated stage for the aforesaid reasons and the proceedings for winding up are liable to be dropped. Even after requisite notification and publication as per Rules no one else has come forward claiming any amount from the Company as a creditor. Moreover, as already stated, the financial position of the company has undergone a change, during pendency of these proceedings. It is worthwhile to mention that these proceedings are not on the grounds for winding up available under the Companies Act and the same have been initiated on the recommendation of the BIFR on the ground referred in Section 20 (1) of the Act, 1985 i.e. the net worth was less than the accumulated losses and the Company was not in a position to meet all its financial obligations within a reasonable time in future and as noticed hereinabove the financial position of the Company has changed in these 17 years, therefore, in view of the above, it can not be said that the Company can not revive itself. Petition disposed off.
Issues:
1. Winding up proceedings of M/s Sumac International Limited recommended by BIFR under Section 20(1) of Sick Industrial Companies (Special Provisions) Act, 1985. 2. Financial position of the company and liabilities exceeding assets. 3. Arbitration awards and creditor's affidavit indicating improved financial status. 4. Non-binding nature of BIFR recommendations on the Court. 5. Change in financial position of the company during the 17 years of pending proceedings. Analysis: 1. The judgment pertains to the winding up proceedings of M/s Sumac International Limited recommended by BIFR under Section 20(1) of the Sick Industrial Companies (Special Provisions) Act, 1985. The Court noted that the proceedings were initiated based on the BIFR's opinion that the company was not likely to recover its net worth to exceed accumulated losses within a reasonable time, making it non-viable. The case was before the Court since 2003, with no winding-up order issued despite the long duration. 2. The financial position of the company was a crucial aspect of the judgment. The Court considered the assets and liabilities of the company, noting that the assets exceeded liabilities. The Official Liquidator's report highlighted the company's assets at ?5,59,16,236/-, while liabilities were ?74,33,848/-. The company also had contingent liabilities related to tax and bank guarantees, with pending appeals before tax authorities. 3. The judgment discussed arbitration awards and a creditor's affidavit indicating an improved financial status. The company's assets were reported to outweigh liabilities, with the creditor, Bank of India, confirming in an affidavit that dues were satisfied till 2012. The company had won arbitration cases, with significant amounts awarded in its favor, reflecting a positive financial trajectory. 4. The Court emphasized the non-binding nature of BIFR recommendations on the Court. Referring to a Division Bench judgment of the Madras High Court upheld by the Supreme Court, the Court held that BIFR recommendations were not conclusive. Considering the financial improvements and arbitration awards, the Court deemed the BIFR's recommendations unacceptable at that stage, leading to the decision to drop the winding-up proceedings. 5. Lastly, the judgment highlighted the change in the company's financial position over the 17 years of pending proceedings. With no claims from creditors and a significant shift in financial circumstances, the Court concluded that the company had the potential to revive itself. Consequently, the Court dropped the winding-up proceedings initiated based on the BIFR's recommendation, citing the changed financial landscape and non-binding nature of the BIFR's opinion.
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