TMI Blog1991 (3) TMI 332X X X X Extracts X X X X X X X X Extracts X X X X ..... bank to show its earnestness as ordered on September 30, 1988, a on joint memo filed by the parties. Various orders passed in between December 23, 1987, and February 13, 1989, bear testimony to the fact that sufficient indulgence was shown to the appellant. The first respondent-bank filed the aforesaid Company Petition No. 34 of 1986 for the winding up of the appellant company. There were two other similar petitions, being Company Petitions Nos. 13 and 39 of 1986 filed by the two other creditors under section 433( e ) read with section 434 of the Companies Act which were also heard along with Company Petition No. 34 of 1986 and were decided by a common order. Even if the order of winding up is passed in one company petition it will enure to the benefit of the petitioners in the other similar petitions. In the appeal preferred by the aggrieved party, the petitioners in the other petitions ought to have been made parties to the appeal, as they have also filed petitions for winding up and those petitions have also been allowed along with Company Petition No. 34 of 1986. Thus, the petitioners in Company Petitions Nos. 13 and 39 of 1986 are necessary parties to the appeal. In this way ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pany judge after taking into consideration the assets of the company and also its liabilities has come to the conclusion that it is not possible for the company to discharge its liabilities even after disposing of its entire assets. During the course of hearing of the company petition, the workers of the company got themselves impleaded. They raised an objection that the industry was run by the company under the provisions of the Sick Industrial Companies (Special Provisions) Act, 1985, and, therefore, it was not open to the company court to direct the winding up of the company. Reliance was placed on the provisions contained in sections 4, 15(1), 16, 17, 20, 22 and 31 of the Sick Industrial Companies (Special Provisions) Act, 1985 (hereinafter referred to as "the Act"). The learned company judge has rejected the contention based upon the aforesaid provisions of the Act and has held that the provisions of the Act can be availed of by the company only when an enquiry under section 16 of the Act is pending or that any scheme referred to in section 17 of the Act is under preparation or consideration or that a sanctioned scheme is under implementation. As none of them is present in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase ; that the provisions of section 15(2) of the Act are not mandatory ; that there is no evidence adduced by the appellant company that the area in which the mill is located is a cotton growing area, that the mill in question was regularly purchasing the cotton from the surrounding area and utilising the said cotton for manufacturing textile commodities ; that in the absence of such evidence and proof of the same the contention does not hold water and, therefore, on this ground it will not be permissible to hold that it would not be just and equitable to order winding up. In the light of the contentions urged on both sides, the following points arise for consideration : "(1)Whether the provisions of the Act, i.e , the Sick Industrial Companies (Special Provisions), Act, 1985, are attracted to the industry in question ? (2)Whether the order passed by the learned company judge direct ing winding up of the appellant company is liable to be interfered with?" Point No. 1. There is no doubt that the appellant company is an industrial company as defined in the Act inasmuch as it was running a scheduled industry as per the provisions of the Act. (See clauses ( e ), ( f ) and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sixty days after it has formed such opinion, make a reference to the Board for the determination of the measures which shall be adopted with respect to the company". From the aforesaid provisions it is clear that the board of direc tors of the industrial company within 60 days from the date of finalisation of the duly audited accounts of the company for the financial year as at the end of which the company has become a sick industrial company shall make a reference to the Board for determination of the measures which shall be adopted with respect to the company. The proviso further provides that if the board of directors have sufficient reasons even before such finalisation of the duly audited accounts of the company to form the opinion that the company had become a sick industrial company, within sixty days after the formation of such opinion the board of directors are required to make a reference to the Board established under section 4 of the Act for the determination of the measures which shall be adopted with reference to the company. In the instant case, no such step was taken either before filing the company petition for winding up or during the pendency of the said petit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in such State; ( b )a public financial institution or a State level institution or a scheduled bank unless it has, by reason of any financial assistance or obligation rendered by it, or undertaken by it, with respect to such company, an interest in such company". When the provisions of section 15 are to be invoked for the very same purpose that is to make a reference to the Board for determination of the measures which shall be adopted with reference to the sick indus trial company by the Central Governemnt or the Reserve Bank or a State Government or a public financial institution or a State level institution or a scheduled bank, the statute uses the expression "may", thereby leaving it to the discretion of the Central Government, the Reserve Bank, the State Government and other institutions mentioned therein to seek a reference to the Board for the determination of the measures which shall be adopted with respect to a sick industrial company. Whereas in sub-section (1) of section 15 of the Act, the expression used is "shall". Thus, the board of directors of the company were required to make a reference. They did not make a reference. There is no reason or expla nation put fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... egislature. Therefore, we reject the contention. The other provisions relied upon, viz., sections 17, 20, 22 and 31, are not of much relevance in a case where section 15 itself is not invoked nor the Board has invoked its power under section 16(1)( b ) of the Act. Therefore, we do not consider it necessary to refer to those provisions. Accordingly, we answer point No. 1 as follows : "As the provisions of the Act are not invoked by taking recourse to section 15(1) of the Act, the provisions of the Act are not attracted to the industrial company in question and also to the proceedings in question". Point No. 2. When the company is neither able to discharge its debts nor is it in a position to generate funds, and it has not placed any scheme before the court for improvement of its industry, the only course open is to order winding up as otherwise it would not be possible to discharge its debts. Therefore, we do not consider it necessary to go into the matter whether the debts of the company exceeded the assets of the company. No purpose is served, in the absence of any viable scheme, to allow the company to exist which would only result in increasing its liabilities. Therefore ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... possible and ultimately left the matter to us for final disposal. Keeping in view the submissions and facts placed after exploring the possibilities of settlement, we direct disposal of all the aforesaid cases on terms indicated below". All that we can point out is that no foundation is laid in this case for applying the principles stated in para 5 of the aforesaid decision. It is neither pleaded nor is any evidence adduced in this case that the area surrounding the industrial company in question is a cotton growing area and the industrial company manufactured its textile products only by purchasing cotton grown from the surrounding area. In the absence of any such plea and evidence, it is not possible to apply the decision of E.I.D. Parry's case, AIR 1985 SC 753. Learned counsel also stressed on para 5 of the judgment in Navnit R. Kamani's case [1989] 66 Comp Cas 132 (SC). In that case, in the course of winding up, there was a scheme presented. Therefore, in the light of that scheme, the winding up was not allowed. Such a situation does not arise in this case and we have pointed out earlier that no scheme has been presented even though the petition was pending for a long tim ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
