TMI Blog1993 (1) TMI 233X X X X Extracts X X X X X X X X Extracts X X X X ..... ditor, the appellant-company was indebted to the respondent petitioning creditor for a sum of Rs. 11,54,244.72 and after giving credit for payments, the balance sum was to the extent of Rs. 10,37,358.17 which sum the appellant-company failed to pay. Statutory notice was served on the appellant-company and there was no reply to such notice from the appellant-company. The appellant-company raised the defence before the trial court that ( i ) there was no ascertained sum due by the appellant-company to the petitioning creditor. Until the accounts were reconciled, it could not be said as to what was the exact sum payable by the appellant to the petitioning creditor, ( ii ) the appellant-company had made payments to the petitioning creditor subsequent to the issuance of the statutory notice under section 434 of the Companies Act and as such the petitioning creditor must be deemed to have waived its right to take proceedings for the purpose of winding up of the company, and ( iii ) there was no agreement as to the payment of interest. The learned trial judge rejected outright the first two contentions of the appellant-company and regarding the last contention as to interest the lear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... paid on or before September 25, 1992, and all subsequent instalments to be paid by 25th of each succeeding month. The order further provided that in default of the company making payment of any instalment or any portion thereof as directed by the said order, the stay would stand vacated and the official liquidator should take possession of the assets of the company forthwith. The appellant by this application is asking for stay of the operation of the said order. It appears that the appellant-company had paid September and October instalments. The November instalment was paid within the time extended by this court. The December instalment has not been paid although on a prayer of the appellant-company, the time for payment of December instalment was extended by this court. It is submitted on behalf of the appellant that the Board for Industrial and Financial Reconstruction (for short "BIFR") has already initiated an enquiry under section 16 of the Sick Industrial Companies (Special Provisions) Act, 1985 (hereinafter referred to as "the said Act"), and a scheme might be formulated under section 17 of the said Act. Learned counsel appearing on behalf of the appellant, therefore, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Karnataka High Court in Shanmugam (K.SP.V.) v. Maharashtra State Co-operative Cotton Growers Marketing Federation Ltd. [1991] 70 Comp. Cas. 440 . Counsel has also referred to an unreported judgment of a single judge of this court in New Tobacco Co. Ltd., In re (C. P. No. 621 of 1987) delivered on April 6, 1992. Learned counsel for the appellant has submitted that the said decision of the Karnataka High Court has no application to the present case as in that case there was no reference to the BIFR by the board of directors. In the present case there was a reference by the board of directors during the pendency of the winding up proceedings. But no initiation of enquiry under section 16 was made during the pendency of the winding up proceedings. It is also submitted by learned counsel for the appellant that in the present case the official liquidator has not yet taken possession of the assets of the company and as such the process of winding up is continuing and it is a proceeding for winding up of the company within the meaning of section 22(1) of the said Act. Learned counsel for the appellant submits that the expression "proceedings" in section 22(1) of the Act covers ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er of winding up the company is made. An order of winding up is the culmination of the petition presented to the court either under section 398 or section 433 or section 583. Therefore, the distinction is only at the stage at which the order is made by the court. Orders in winding up may be many and may relate to several matters which arise before the court, before making the final order allowing or dismissing the petition. If the petition is allowed, a winding up order must necessarily follow as provided under the Act and the consequences automatically follow if a winding up order is made. Therefore, what is contemplated under sub-section (1) of section 22 is the staying of the proceedings before the court in case a winding up order is not made and not where a winding up order is made. With this one exception, if an order in winding up is made appointing the official liquidator or a receiver, then also by virtue of section 31 of the Act, the proceedings of winding up will continue notwithstanding the Act as mandated under section 31 of the Act, which reads as follows : '31. Saving of pending proceedings. Where a receiver or an official liquidator has been appointed in any proc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In re (Company Petition No. 621 of 1987, dated April 6, 1992), the learned judge dealing with the case has observed that from the definition of a sick company in section 3(o), the reference' is to an existing company and under section 20 of the said Act, after considering all possible measures, if BIFR is of the opinion that it is just and equitable that the company should be wound up, it may record and forward its opinion to the concerned High Court. The High Court is then required on the basis of such opinion of the Board to order the winding up of the company. Therefore, as observed in the said judgment, the termination of proceedings before the BIFR is the winding up order and if the company has already been wound up then there would no question of BIFR being of the opinion that the company should be wound up or the court passing a second winding up order on the opinion of the BIFR. It is also observed that the stage of the proceedings relating to the company must be pre-winding up and not where the company has already been wound up. We entirely agree with this observation of the learned judge in the said matter of New Tobacco Co. Ltd., In re (C. P. No. 621 of 1987, dated Ap ..... X X X X Extracts X X X X X X X X Extracts X X X X
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