2002 (1) TMI 1225 - HC - Companies Law

Summary

Issues Involved:
1. Jurisdiction of the Board of Industrial and Financial Reconstruction (BIFR) to register a reference.
2. Validity of the winding-up petition against the respondent-company.
3. Admissibility and impact of the respondent-company's default in payment of lease rent/hire charges.
4. Interpretation of the term "industrial company" under the Sick Industrial Companies (Special Provisions) Act, 1985 (SICA).

Issue-wise Detailed Analysis:

1. Jurisdiction of the BIFR to Register a Reference:
The respondent-company argued that once a reference is registered by BIFR under section 16 of SICA, all further proceedings in the winding-up petition must be stayed. The petitioner contended that the BIFR lacked jurisdiction to register the reference as the respondent-company did not meet the criteria of an "industrial company" under SICA. The court examined the jurisdictional facts necessary for BIFR's jurisdiction, including whether the company was an "industrial company" engaged in a scheduled industry for at least five years. The court found that the respondent-company did not own any industrial undertaking until 5-12-2000 and thus was not an "industrial company" when the reference was made. Consequently, the BIFR's registration of the reference was without jurisdiction and could be ignored by the court.

2. Validity of the Winding-Up Petition:
The petitioner filed the winding-up petition on the grounds that the respondent-company was unable to pay its debts. The respondent-company admitted to defaulting on more than three consecutive instalments as per the consent terms agreed upon earlier. The court noted that the winding-up petition stands admitted due to the respondent's default, and it was necessary to issue directions consequent to the admission of the petition.

3. Admissibility and Impact of the Respondent-Company's Default:
The respondent-company had entered into lease/hire purchase agreements with the petitioner and failed to pay the lease rent/hire charges on time. The court recognized that the respondent-company admitted to owing Rs. 44,77,211 as the principal amount and had defaulted on the agreed payments. This default led to the admission of the winding-up petition as per the terms agreed upon by both parties.

4. Interpretation of the Term "Industrial Company" under SICA:
The court analyzed the definition of "industrial company" under SICA and the IDR Act. It concluded that for a company to be considered an industrial company under SICA, it must be engaged in a scheduled industry for at least five years. The respondent-company's attempt to amend its Memorandum of Association and obtain an industrial license was seen as a mala fide effort to claim protection under SICA. The court emphasized that the five-year period must apply to the company as an industrial company, not merely as a registered company.

Conclusion:
The court held that the BIFR's registration of the reference was without jurisdiction, rendering it a nullity. Consequently, the winding-up petition against the respondent-company was valid and admitted due to the respondent's default in payment. The court directed the petition to be advertised and allowed the respondent-company two weeks to stay the order. The petitioner was also given the option to file a separate application for the appointment of an official liquidator as a provisional liquidator.