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2022 (8) TMI 374 - HC - Companies LawPermanent stay of winding up proceedings - Company failed to pay the debts - going concert - BIFR sanctioned the scheme of revival - HELD THAT:- A bare reading of the Section 466 of Companies Act, clarifies, that following two conditions are required to be satisfied for bringing an order of permanent stay of winding up in existence: (i) filing of an application either of the Official Liquidator or of any creditor or contributory for stay of winding up proceedings. (ii) proof to the satisfaction of the Court that all proceedings in relation to the winding up ought to be stayed. If the above two conditions are satisfied, the Company Judge has the discretion to stay the winding up proceedings, either altogether or for a limited time and impose appropriate terms and conditions. A copy of the order of the stay is required to be forwarded to the Registrar forthwith who is required to make a minute of the order in his books relating to the company - In the present case, applications for permanent stay of winding up proceedings being CA 191 of 2002 and CA 186 of 2001 are pending. Proof to the satisfaction of the Court as required by Section 466 is yet to be recorded by the Company Judge. It is worth noting that Section 466(1) does not use the phrase “permanent stay” but the expression “order staying the proceedings altogether” has the effect of permanent stay of proceedings. So far as the effect of order of permanent stay of winding up proceedings is concerned, in the case of SUDARSAN CHITS (I.) LTD. VERSUS O. SUKUMARAN PILLAI [1984 (8) TMI 242 - SUPREME COURT], Hon’ble Supreme Court has held in para 14 that when winding up order is kept in abeyance it is in the state of suspended animation meaning thereby it was effectively subsisting but inoperative for the time being. This court cannot lose sight of the settled legal position that winding up should be resorted to as the last resort after exhausting all remedies. In the facts of this case and especially considering the fact that the Company is operating as a going concern, it is not in the interest of justice to direct winding up of the company. It is worth noting that a large sum of Rs. 170 crores is lying in deposit with the Registrar of this Court and possibility of some of the contesting parties having an eye on it cannot be ruled out. Hence, every effort is required to be made to ensure the amount is utilized for rightful purposes. In the present case, for all practical purposes there is permanent stay of the winding up proceedings and only a formal order of permanent stay is required to be passed by Company Judge after obtaining audit report and recording a finding relating to satisfaction of settled conditions for such order. The appeal is disposed off with certain modifications.
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