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TMI Blog1999 (8) TMI 863X X X X Extracts X X X X X X X X Extracts X X X X ..... ember 11, 1989, under section 10(1) of the Act came to the conclusion that the company has become a sick industrial company within the meaning of the provision of section 3(1)(o) of the Act. It was, therefore, deemed fit, by the BIFR to explore the possibility of reviving the company. In exercise of the power conferred on the BIFR under section 17(3) of the Act, the IRBI was appointed as the operating agency to examine the viability and prepare a scheme for revival/rehabilitation of the company in terms of section 18 of the Act. Ultimately by its order dated November 12, 1991, the BIFR recorded its opinion that it is just and necessary that the company should be wound up in terms of section 20 of the Act. Aggrieved by the said order the company preferred an appeal before the Appellate Authority for Industrial and Financial Reconstruction (AAIFR) which was disposed of by an order dated August 26, 1993, dismissing the appeal filed by the company as also Appeal No. 114 of 1991 filed by the Eastern Paper Mill Ltd. Workers' Union, Calcutta on the ground that there appears to be no possibility for rehabilitation of the company. The orders passed by the AAIFR in the two appeals being Ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of 1997 disposed of on February 10,1999). In that case the winding up order was made on a petition filed by a petitioning creditor on the ground that the company therein was unable to pay its just debts. The question was whether the company has a right to file any affidavit opposing the winding up even though it may not have disputed the debt on which the winding up petition was filed by a creditor. The Division Bench in that case considered the provisions contained in the Companies Act, the Companies (Court) Rules as also the practice developed in this court in dealing with petitions for winding up. As far as the provisions of the Act are concerned, they envisage an application for winding up being presented under section 433 on any of the grounds mentioned therein. Section 433 however, itself provides that the company may be wound up by the court if the several grounds are established. In other words even if the grounds are established, it is still open to the court to decide against winding up. The Companies (Court) Rules (referred to as the Rules) envisage (i ) the presentation of an application for winding up in the manner prescribed in rule 95 ; (ii) the admission of the w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e and all creditors and contributories or other persons may either oppose and/or support the winding up when the matter is taken up for hearing under section 443. Even at this stage the court is not bound to wind up the company. Section 443(1) provides : "S. 443.(1) On hearing a winding up petition, the court may- (a)dismiss it, with or without costs ; or (b)adjourn the hearing conditionally or unconditionally ; or (c)make any interim order that it thinks fit; or (d)make an order for winding up the company with or without costs, or any other order that it thinks fit;" The court may exercise any of these alternative powers. The observation of the Division Bench of this court in John Herbert and Co. P. Ltd. v. Pranay Kumar Dutta [1966] 36"Comp Cas 485; 70 CWN 516 (Cal) [DB], that the court forms a prima facie view at the time of the admission must mean a prima facie view as to whether the company should be wound up under section 443. It cannot be said, having regard to the practice of this court, that the court forms a prima facie view as to the ground on which the winding up petition is admitted. Thus if a petitioning creditor files a winding up petition on the ground that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ourt that the company was indebted under section 433(e) of the Act, a company would not be directed to be wound up, where for example a company is a running company, employing about 500 employees who are paid their wages regularly and which does business of crores of rupees every year ; it was emphasised that it is the duty of the court to seek the revival rather than the death of the company. We respectfully adopt this statement of the law. A Division Bench of the Gujarat High Court has also taken a similar view in New Swadeshi Mills of Ahmdabad, Ltd. v. Dye&hem Corporation [1986] 59 Comp Cas 183, at 186. The importance of the views of the creditors and contributories specially cannot be understated keeping in view the fact that under section 447 a winding up order enures to the benefit of all creditors and contributories under section 447 of the Act. In the instant case, as noticed above, though the company was heard in the matter presumably upon notice having been given, the winding up petition was not admitted nor direction for advertisement was issued. Instead an order of winding up has been passed, based solely upon the opinion of the BIFR/AAIFR. There has, thus, been brea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l cannot be sustained as there has been no determination of the question whether it was just and equitable to wind up the company. The learned judge construed the opinion of the BIFR/ AAIFR as conclusive. As observed by the Madras High Court in its judgment in J . M. Malhotra's case, when once a report is submitted by BIFR/AAIFR, the same would become the basis for a proceeding to be continued against the sick industrial company for winding up in accordance with the provision of the Companies Act. Sub-section (2) of section 20 specifically states that the High Court shall, on the basis of the opinion of the Board, order winding up of a sick industrial company and may proceed or cause to proceed with the winding up of the sick industrial company in accordance with the provisions of the Companies Act. Therefore, it is clear that the opinion furnished by the BIFR/AAIFR can only form a basis for the proceedings to be continued against the sick industrial company for the purpose of winding up and the further proceedings are to be conducted in accordance with the provisions contained in the Companies Act for winding up of the company. Upon receipt of the opinion of the BIFR/AAIFR the l ..... X X X X Extracts X X X X X X X X Extracts X X X X
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