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TMI Blog2000 (5) TMI 954X X X X Extracts X X X X X X X X Extracts X X X X ..... y way by any judicial order debarred from taking recourse to the provisions of the Act for the purposes of rehabilitation of the company. If there existed a power, its exercise cannot be termed to be mala fide only because it was initiated after availing the opportunity to make the payment of the amounts due and passing of the order of winding up of the company. - CIVIL APPEAL NO. 4709 OF 1998 - - - Dated:- 9-5-2000 - M.B. SHAH AND R.P. SETHI, JJ. Words and phrases - Deemed as appearing in section 441 of the Companies Act, 1956 JUDGMENT Sethi, J. - On being satisfied that the appellant-company was unable to meet the obligations of making the payment of the amounts due to the creditors, the learned Single Judge of the High Court vide its order dated 5-9-1997 directed its winding up. The Official Liquidator attached to the Court was appointed as Liquidator of the company with directions to take charge of the assets and other properties of the appellant-company. The notice of the winding up order was directed to be published in the Indian Express and Dainik Tribune. The operation of the order of the learned Single Judge was stayed by the Division Bench of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntended that having failed to get the security the appellant-company per force had defaulted the payment of balance amount towards interest, with the result that the respondent-bank moved an application before the Company Judge in Company Petition No. 111 of 1995 praying for revival of the winding up petition. The learned Single Judge admitted the petition for hearing and passed an order for issuance of publication vide its order dated 14-3-1997. Feeling aggrieved, the appellant herein preferred a special leave petition in this Court which was withdrawn on 28-8-1997 purportedly with a view to approach the learned Company Judge with fresh proposal of settlement. An application was moved before the learned Company Judge wherein the appellant proposed to pay alleged balance principal amount of Rs. 14,11,010 and the amount of Rs. 7,06,120 as interest thereon in monthly instalment of Rs. 2 lakhs each to be paid on or before 7th day of each English calendar month together with future interest at the rate of 12 per cent per annum thereon on a reducing balance basis till the liquidation of the entire amount. The aforesaid application was dismissed by the learned Company Judge on 5-9-1997 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ding up is the culmination of the petition presented to the court either under section 398 or section 433 or section 583. Therefore, the distinction is only at the stage at which the order is made by the court. . . ." (p. 443) The Act is shown to have been made, in public interest, with a view to securing the timely detection of sick and potentially sick companies owning industrial undertakings, the speedy determination by a Board of experts of the preventive, ameliorative, remedial and other measures which need to be taken with respect to such companies and the expeditious enforcement of the measures so determined and for matters connected therewith or incidental thereto. The object of the Act appears to be to afford maximum protection of employment, optimise the use of financial resources, salvaging the assets of production, realising the amounts due to the banks and to replace the existing time consuming and inadequate machinery by efficient machinery for expeditious determination by a body of experts to safeguard the economy of the country and protect viably sick units. Chapter III deals with the reference, enquiries and claims. Section 15 provides that when an industrial com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is also the legislative intention to see that no proceedings against the assets are taken before any such decision is given by the BIFR for in case the company s assets are sold, or the company wound up it may indeed become difficult later to restore the status quo ante . Therefore, in our view, the High Court of Allahabad in Industrial Finance Corpn. of India v. Maharashtra Steels Ltd. [1990] 67 Comp. Cas. 412, the High Court of Andhra Pradesh in Sponge Iron India Ltd. v. Neelima Steels Ltd. [1990] 68 Comp. Cas. 201, the High Court of Himachal Pradesh in Orissa Sponge Iron Ltd. v. Rishab Ispatt Ltd. [1993] 78 Comp. Cas. 264 are right in rejecting such a contention and in holding that the inquiry must be treated as having commenced as soon as the registration of the reference is completed after scrutiny and that from that time, action against the company s assets must remain stayed as stated in section 22 till final decisions are taken by BIFR." (p. 458) 4. The learned counsel appearing for the respondent has submitted that such an interpretation would defeat the ends of justice and make the petitions under the Companies Act, infructuous inasmuch as any unscrupulo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the said Act or other law, no proceedings for the winding up of the industrial company or for execution, distress or the like against any of the properties of the industrial company or for the appointment of a receiver in respect thereof and no suit for the recovery of money or for the enforcement of any security against the industrial company or of any guarantee in respect of any loans or advance granted to the industrial company shall lie or be proceeded with further, except with the consent of the Board, or as the case may be, the Appellate Authority. (2) Where the management of the sick industrial company is taken over or changed in pursuance of any scheme sanctioned under section 18, notwithstanding anything contained in the Companies Act, 1956 (1 of 1956), or any other law or in the memorandum and articles of association of such company or any instrument having effect under the said Act or other law ( a )it shall not be lawful for shareholders of such company or any other person to nominate or appoint any person to be a director of the company; ( b )no resolution passed at any meeting of the shareholders of such company shall be given effect to unless approved by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation for the enforcement of any right, privilege, obligation or liability, the period during which it or the remedy for the enforcement thereof remains suspended under the section shall be excluded." It is true that for invoking the applicability of section 22 it has to be established that an inquiry under section 16 is pending or any scheme referred to under section 17 is under preparation or sanctioned scheme is under implementation or an appeal under section 25 to an industrial company is pending. But it cannot be said that despite existence of any of the aforesaid exigencies the provision of section 22 would not be attracted after the order of winding up of the company is passed. The words no proceeding for winding up of the industrial company or for execution distress or the like against any of the properties of the industrial company or for the appointment of receiver in respect thereof shall lie or be proceeded with further, leave no doubt in our mind that the effect of the section would be applicable even after the winding up order is passed as no proceeding even thereafter can be proceeded with further under the Companies Act. The High Court appears to have not taken no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... presumed . 5. During the course of the proceedings it was pointed out that as the application filed by the appellant under section 15 has been dismissed by the Board on merits, the proceedings before the Company Judge cannot be stayed. However, the learned counsel appearing for the appellant placed on record the copy of the order passed by the Board which shows that the application has not been dismissed on merit but on the ground : "A perusal of the facts of the case and the various orders passed by the Punjab Haryana High Court as also the Supreme Court revealed the position that the Punjab Haryana High Court had passed an order of winding up the company on 5-9-1997, i.e., before the company s reference to the BIFR. Further, the Supreme Court had ordered that no further proceedings in winding up shall be taken before the High Court. The Bench observed that the winding up order had not been quashed which could have resulted in the restoration of the position as it stood on the date of passing of the order which had been quashed. The stay of the order meant that the orders which had been stayed would not be operative from the date of the passing of the stay order and i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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