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TMI Blog2016 (7) TMI 345X X X X Extracts X X X X X X X X Extracts X X X X ..... the allegation that Modi Rubber was unable to pay its huge undisputed debts. Notice was issued in the Company Petition to Modi Rubber who entered appearance but took several adjournments in the matter on one pretext or the other including furnishing the schedule for repayment of the admitted dues to the creditors, an arrangement being worked out with Apollo Tyres Ltd. and various other reasons. 3. Eventually, after two years of adjournments, the Company Court declined to grant any further adjournment to Modi Rubber. Accordingly, on a consideration of the material on record and after hearing learned counsel for the parties, the Company Court passed an order on 12th March, 2004 holding that Modi Rubber was unable to pay its undisputed debts and that it was just and equitable that the company be wound up. An Official Liquidator was appointed to take charge of the assets of the company and to submit a report along with the inventory. 4. Feeling aggrieved by the winding up order, Modi Rubber preferred an appeal before the Division Bench of the High Court which was allowed by the impugned judgment and order. 5. Before the Division Bench it was brought out for the first time that on 6 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al of proceedings before the authorities under the SICA. 10. Leave to appeal against the judgment and order of the High Court was granted on 24th February, 2006 and the following order passed: "Leave granted. Whether the Board of Industrial and Financial Reconstruction should entertain a reference made by a sick company in terms of Section 15 of the Sick Industrial Companies (Special Provisions) Act, 1985, ('SICA') after the company had already been directed to be wound up by a Company Judge in a matter which was pending before the Court for 2 years, vis-à-vis Section 22 of the Act is in question in this appeal, which arises out of the judgment and order dated 20.05.2004 passed by the Division Bench of the High Court of Judicature at Allahabad in Special Appeal No. 420/2004. Our attention has been drawn to a Division Bench decision of this Court in Rishabh Agro Industries Ltd. v. P.N.B. Capital Services Ltd., (2000) 5 SCC 515, wherein this Court opined that the reference in terms of Section 15 of SICA can be made even after passing of the winding up order. The correctness of the ratio of the said decision has been questioned before us. We are inclined to think that there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and a few governments/government agencies. It was also noted that unsecured creditors have to fall in line with the provisions of the rehabilitation scheme in the interest of revival of Modi Rubber. 14. Paragraph 7.38.1 of the summary record of proceedings read as follows:- "7.38.1 Objections were raised by some employees, unsecured creditors and a few Governments/Government agencies. It is very important that the interest of the employees is safeguarded and employment is protected while reviving the company. The terms for settlement of the dues of the workers should not be inferior to the terms offered for settlement of the dues of the secured creditors. Unsecured creditors have to fall in line with the provisions of the rehabilitation scheme in the interest of revival of the company in respect of Government/Government agencies who objected to the DRS, the words "to consider" have to be stipulated in the DRS. DB and Arsec (I) Ltd., the two secured creditors who raised objections have agreed to settle the matter with the company." 15. The BIFR finally issued certain directions, one of which was sanctioning the rehabilitation scheme under Section 19(3) and 19(4) of SICA for impl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r that the cheque was encashed by Madura Coats on 19th December, 2011. 18. The correctness of the impugned judgment and order will need to be tested on these facts and the law placed before us in connection with the reference made to the larger Bench. On hearing learned counsel for the parties on these facts, we are of the opinion that different situations can arise in the interplay between the Companies Act and the SICA in the matter of winding up of a company and these situations have already been dealt with by this Court at one time or another. 19. One such situation is where winding up proceedings are pending and a reference is made to the BIFR. This situation occurred in Real Value where winding up proceedings were pending and the appointment of a provisional liquidator was under challenge. At that stage, steps were taken by Real Value for making a reference under Section 15 of the SICA to the BIFR. Under these circumstances, one of the questions agitated for consideration by this Court was whether on the registration of a reference, the Division Bench of the High Court could pass orders in an appeal against an interim order passed by the Company Court. 20. While referring ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... [the High Court of Allahabad, the High Court of Andhra Pradesh and the High Court of Himachal Pradesh] 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 the BIFR." 21. This Court also referred to the Regulations framed under the SICA and in connection therewith it was held that after the amendment of Regulation 19 with effect from 24th March, 1994 once a reference is registered and it becomes mandatory to simultaneously call for information or documents from the informant and such a direction is given, then an enquiry under Section 16(1) of the SICA must, for the purposes of Section 22 thereof, be deemed to have commenced. This is what this Court held in paragraph 30 of the Report: "There can, therefore, be no difficulty in holding that after the amendment to Regulation 19 w.e.f. 24-3-1994, once the reference is registered and when once it is mandatory simultaneously to call for information/documents from the infor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sused and subjected to abuse of the process of law, it is for the Legislature to take appropriate steps. 25. With regard to the merits of the controversy before it, this Court took the view that it could not be said that the provisions of Section 22 of the SICA would not be attracted after an order of winding up is passed. While referring to this Section it was held that there was no doubt that the provision would be applicable even after the winding up order is passed and no proceedings even thereafter could be taken under the Act. It was noted that a winding up order passed under the Act is not the culmination of the proceedings before the Company Court but is in effect the commencement of the process which ultimately would result in the dissolution of the company in terms of Section 481 of the Act. This is what this Court had to say in paragraphs 9 and 11 of the Report: "9. 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. Bu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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