2003 (5) TMI 361 - HC - Companies Law

Summary

Issues Involved:
1. Maintainability of the winding-up petition under Section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985 (SICA).
2. Interpretation of Section 22(1) of SICA regarding the suspension of legal proceedings.
3. Scope and applicability of Section 22(1) in relation to various judicial precedents.

Issue-Wise Detailed Analysis:

1. Maintainability of the Winding-Up Petition:
The primary issue raised by the Respondent is whether the winding-up petition is maintainable under Section 22 of SICA. The court examined several decisions by the Apex Court which have created a dichotomy of opinion on this matter. Section 22(1) of SICA states that no proceedings for the winding-up of an industrial company shall lie or be proceeded with further, except with the consent of the Board or the Appellate Authority.

2. Interpretation of Section 22(1) of SICA:
The court referenced the decision in *Maharashtra Tubes Ltd. v. State Industrial & Investment Corpn. of Maharashtra Ltd.* [1993] 78 Comp. Cas. 803, where the Supreme Court emphasized the broad scope of Section 22(1), indicating that the purpose of this provision is to await the outcome of the reference made to the BIFR for the revival and rehabilitation of the sick industrial company. The court noted that the term "proceedings" in Section 22(1) should not be narrowly interpreted to mean only legal proceedings but should include any coercive measures against the company's properties.

3. Scope and Applicability of Section 22(1):
The court considered several precedents to clarify the scope of Section 22(1):
- In *Dy. CTO v. Corromandal Pharmaceuticals* [1997] 14 SCL 154, the Supreme Court held that the suspension of legal proceedings applies only to dues included in the sanctioned scheme.
- In *Tata Davy Ltd. v. State of Orissa* [1997] 14 SCL 81, the court favored a broader interpretation, requiring all creditors to obtain the consent of the Board to recover their dues from sick industrial companies.
- *Sirmor Sudburg Auto Ltd. v. Kuldip Singh Lamba* [1998] 91 Comp. Cas. 727, and subsequent decisions, supported the view that only claims included in the sanctioned scheme are subject to the suspension under Section 22(1).
- The court also referenced *Real Value Appliances Ltd. v. Canara Bank* [1998] 16 SCL 445, where the Supreme Court held that the inquiry under Section 16 of SICA commences as soon as the reference is completed, and from that time, action against the company's assets must remain stayed until the BIFR makes a final decision.

The court acknowledged the potential for misuse of Section 22 to delay or defeat creditors' legitimate claims but emphasized that the plain meaning of the statutory words must be adhered to. The court concluded that Section 22(1) requires the cessation of all proceedings, including winding-up petitions, to allow the BIFR to consider remedial measures for the sick industrial company.

Conclusion:
The court held that the winding-up petition is not maintainable without the consent of the BIFR, as required by Section 22(1) of SICA. The petition was dismissed with liberty granted to the petitioner to file a fresh petition if necessary. The court reiterated that the suspension of limitation under SICA ensures that creditors are not left without a remedy. All pending applications were also disposed of, with parties bearing their respective costs.