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TMI Blog2007 (10) TMI 406X X X X Extracts X X X X X X X X Extracts X X X X ..... M. Anil Kumar for the Respondent. ORDER 1. The Registrar, Board for Industrial and Financial Reconstruction (for short BIFR ), vide proceedings dated 29-11-2001, informed this Court that, having conducted an enquiry under section 16 of the Sick Industrial Companies (Special Provisions) Act, 1985 ("SICA" in short), the Bench of the BIFR, in its proceedings dated 19-11-2001, had recorded an opinion under section 20(1) that it was just and equitable that M/s. Charminar Papers Limited (hereinafter referred to as M/s. C.P.L), be wound up and that its opinion be forwarded to the High Court for further action in accordance with law. 2. In its proceedings dated 19-11-2001, the BIFR noted that M/s. C.P.L. was declared a sick industrial company under section 3(1)( o ) of SICA, that State Bank of India was appointed as the Operating Agency under section 17(3), that the scheme for rehabilitation was sanctioned vide order dated 12-1-1994, that the progress of its implementation was last reviewed at the hearing held on 15-10-1999 when the operating agency had informed that M/s. C.P.L. could not be revived within RBI parameters and that the operating agency was asked to submi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red that its opinion be forwarded to the High Court along with copies of all the orders passed earlier. The company and its promoters were directed, in terms of section 22A( b ) of the Act, to ensure safety of the company s assets and take no action for disposal thereof until such time as either a selling agency was appointed by the BIFR or the receiver/Official Liquidator of the High Court took charge of the same. 4. This Court, by order dated 5-6-2006, appointed the Official Liquidator attached to the High Court as the Provisional Liquidator of the Company and directed him to take possession of the assets of the company after taking inventory and after issuing notices to the creditor-State Bank of India as well as the company. He was also directed to file a report along with a copy of the inventory. 5. C.A. No. 103 of 2007 was filed by the erstwhile Managing Director of M/s. C.P.L. seeking recall of the order dated 5-6-2006, for discharge of the Provisional Liquidator and for a consequential direction that the management of the company be handed over to the former Board of Directors of the Company represented by its Ex-Managing Director. In the affidavit, filed in support ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om 10 were trade creditors to whom Rs. 25 lakhs was due, that these claims were more than 9 years old and had already become time-barred, that four of these trade creditors, who were due Rs. 17,49,284, had given their individual affidavits of consent to the revival operations of the company, that one trade creditor, M/s. Wire Fabrics (SA) Limited, Bangalore, to whom Rs. 2,63,604 was due, had received Rs. 75,000 in full and final settlement of all dues, that another trade creditor, M/s. White Star Industries, Hyderabad had already written off the debt and had issued a letter to that effect, that M/s. Ivax Paper Chemicals Limited, Hyderabad had agreed in principle to write off the debt and had issued a letter to that effect, that two more trade creditors, M/s. Paper Machine Wire Industries, Nasik and M/s. Swill Limited, Kolkatta had agreed for settlement, that negotiations were in progress and that M/s. Daram Rosen Private Limited, Daman was no longer functioning. It is stated that among the other unsecured creditors included loans given by the erstwhile Managing Director, his family members, his other concerns and the remuneration due to him, that these dues aggregating to Rs. 29. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a company be wound up. Under section 439, an application to the Court for winding up of the company shall be by a petition presented either by company itself or its creditor or the contributory or the Registrar of Companies. Under section 443 of the Companies Act the Court may, on the hearing of a winding up petition, dismiss it, adjourn the hearing, make an interim order, make an order for winding up of the company with or without costs, or any other order as it may think fit. 10. Part III of the Companies (Courts) Rules, 1959 relates to "Winding Up". Under Rule 95, a petition for winding up of a company shall be in Form Nos. 45, 46 and 47, as the case may be. Rule 96 relates to admission of the petition for winding up and directions as to advertisement and, thereunder, upon the filing of the petition, it shall be posted before the Judge in chambers for admission of the petition and fixing a date for the hearing thereof and for directions as to the advertisements to be published and the persons, if any, upon whom copies of the petition are to be served. Under Rule 96 the Judge may, if he thinks fit, direct notice to be given to the company before giving directions as to the ad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he making of an order on the said petition can send to the petitioner or his advocate notice of his intention signed by him, or his advocate, with his name and addresses so as to reach the petitioner not later than five days before the date fixed for hearing of the petition and to appear at the hearing for the purpose, in person or by his advocate. 12. On a conjoint reading of Rule 99 and Form No. 48, it is evident that creditors, contributories and others, desirous of supporting or opposing the making of an order for winding up of the company petition, are put on notice of a petition for winding up having been presented before the High Court. The purpose, which the advertisement seeks to serve, is to enable a creditor, contributory or any other person either to support or to oppose the making of an order of winding up. On being put on notice, contributories, creditors and others are entitled to file their affidavits in opposition to the petition for winding up. 13. Section 20 of the Sick Industrial Companies (Special Provisions) Act, 1985 ( SICA ) relates to winding up of a sick industrial company and reads as under : "(1)where the Board, after making inquiry under secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is, nonetheless, neither conclusive nor binding on the High Court. 16. The power conferred on the High Court under section 433 read with section 443 of the Companies Act, to order winding up of a company, is judicial in nature. The Company Court is required to apply its mind, consider the material on record and take an appropriate decision. While so doing, it is permissible for it to examine the correctness of the opinion of the BIFR and decide whether, in the light of the opinion furnished, the company should be wound up or not. From the language employed in sub-section (2) of section 20 of SICA, it is evident that the BIFR s opinion merely forms the basis for continuance of proceedings for winding up of the sick industrial company and that further proceedings, after receipt of the opinion of the BIFR, are to be conducted by the Company Court in accordance with the provisions of the Companies Act and the Rules made thereunder. ( J.M. Malhotra v. Union of India [1997] 89 Comp. Cas. 600 (Mad.), Loharu Steel Industries Ltd. v. D.C.M. Ltd. [2001] 107 Comp. Cas. 353 (Kar.). 17. The very fact that, under section 20(2) of SICA, the High Court is required to proceed with th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ispensed with by the special Act being the Sick Industrial Companies (Special Provisions) Act, 1985. ****** We have considered the matter at length. Special law always has an over-riding effect over the general law in the arena of conflict. Law is to be read that there is no necessity for the court to abdicate its own function of determining the question of winding up as to whether it is just and equitable by applying the requirements of section 439 or 440 as the case may be. In other words, applicability of such sections is dispensed with by appropriate provisions of the Special Act. Therefore, the rules under Companies (Court) Rules, 1959, as above specially rule 96 as applicable under such provisions of the Companies Act made for the purpose of admission of petition and directions as to advertisement etc. have no leg to stand... " [Emphasis supplied] (pp. 712-714) 19. However, in Eastern Paper Mills Ltd. v. Board for Industrial and Financial Reconstruction [2002] 109 Comp. Cas. 1065 , another Division Bench of the Calcutta High Court held: "In the instant case, as noticed above, though the company was heard in the matter presumably upon notice having been given, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ive, but obviously run counter to the latest decision of the Supreme Court in V.R. Ramaraju v. Union of India [1997] 89 Comp. Cas. 609, where the Supreme Court has said that section 20(2) of the SICA has to be construed to mean that the High Court in deciding the question of winding up of the company has to take into account the opinion of the Board forwarded under sub-section (1) and is not to abdicate its own function of determining the question of winding up. If that is so the mandate of the statute as appearing in the aforesaid rule 96 read with rule 99 read with rule 24 of the Companies (Court) Rules will stand violated and the very purpose behind the same will also stand defeated, in case winding up order is passed upon receipt of the Board opinion . In that view of the matter, the following order is required to be passed : Admit. To be advertised in the Indian Express , English edition and Jansatta Gujarati edition. The operating agency, namely IFCI. will see to the advertisements being published. Such advertisements shall be published on or before 12-8-1999, stating herein the date of final hearing to be 9-9-1999. Notice shall also be published in the Government Gaz ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... company petition justifies admission, would admission and an advertisement, as prescribed under the Company (Court) Rules, 1959, follow. While exercising its discretion, whether or not the winding up petition should be admitted, the Company Court can only examine the contents of the opinion and recommendations of the BIFR and nothing else. While the Court may well be hearing them on the validity of the opinion of the B.I.F.R, any other matter extraneous to the opinion and recommendation of the B.I.F.R including, as in the present case, the subsequent events, can only be examined after admission, on an advertisement being issued putting the creditors, contributories and others on notice of the B.I.F.R. having recommended winding up of the company on just and equitable grounds and they are informed that they are entitled either to support or oppose the petition for winding up. Neither the Companies Act, nor the Rules made thereunder, place any restriction on the grounds of opposition to an order of winding up. After an advertisement, as required under Rule 99 read with Rule 24 of the Company (Court) Rules, 1959, is issued it is always open to a creditor or a contributory to bring to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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