TMI Blog2007 (11) TMI 406X X X X Extracts X X X X X X X X Extracts X X X X ..... s such orders on the petition as he deems fit. - COMPANY APPEAL NO. 1 OF 1999 - - - Dated:- 14-11-2007 - DEEPAK GUPTA AND V.K. AHUJA, JJ. R. L. Sood and Vikas Rajput for the Appellant. M.S. Chandel, R.M. Bisht, Ankush Sood and Bimal Gupta for the Respondent . JUDGMENT Deepak Gupta, J. The following two interesting questions of law arise for decision in the aforementioned appeal : "1. Whether the company judge exercising powers under section 20(2) of the Sick Industrial Companies (Special Provisions) Act, 1985, is bound by the recommendations/opinion of the Board for Industrial and Financial Reconstruction ("the BIFR") under section 20(1) of the SICA recommending winding up of the company ? 2. What is the procedure to be followed by the company judge while proceeding with the winding up of the sick industrial company, under section 20(2) of the SICA ?" It is not necessary to give the detailed facts of the case. The appellant is a company duly incorporated under the Companies Act, 1956, having its head office at village Missarwala, post office Majra, tehsi! Paonta Sahib, district Sirmour. By the year 1990, the company had lost all its equity ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dents Nos. 1 and 2. Mr. Kuldip Singh, senior advocate, with Ms. Jyotika, counsel for respondent No. 7. Mr. Ankush Sood, vice Mr. B.C. Negj, for respondent No. 9. Company Petition No. 3 of 1999 : Heard. The Board for Industrial and Financial Reconstruction has vide its order dated April 1, 1999, found that the company M/s. Ashoka Alloy Steels P. Ltd., having its registered office at village Misserwala, post office Majra, tehsil Paonta Sahib, district Sirmour, is a sick industrial company and that it cannot be rehabilitated. It has further come to the opinion that the company should be wound up under section 20(1) of the Sick Industrial Companies (Special Provisions) Act, 1985, in the public interest. The period for filing an appeal against such an order has since elapsed. Under the circumstances, exercising the powers under sub-section (2) of section 20 of the abovesaid Act, it is ordered that the company M/s. Ashoka Alloy Steels P. Ltd., shall be wound up. The official liquidator is directed to take over the affairs of the company. Notice in this behalf shall be published in The Indian Express and Jansatta, Chandigarh edition, and it s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me while meeting all its financial obligations and that the company as a result thereof is not likely to become viable in future and 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. (2) The High Court shall, on the basis of the opinion of the Board, order winding up of the sick industrial company and may proceed and cause to proceed with the winding up of the sick industrial company in accordance with the provisions of the Companies Act, 1956 (1 of 1956). (3) For the purpose of winding up of the sick industrial company, the High Court may appoint any officer of the operating agency, if the operating agency gives its consent, as the liquidator of the sick industrial company and the officer so appointed shall for the purposes of the winding up of the sick industrial company be deemed to be, and have all the powers of, the official liquidator under the Companies Act, 1956 (1 of 1956). (4) Notwithstanding anything contained in sub-section (2) or subsection (3), the Board may cause to be sold the assets of the sick industrial company in such manner as it may deem fit and forward, the sale proceeds ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nding up of the sick industrial company in accordance with the provisions of the Companies Act. Therefore, it is clear that the opinion furnished by the Board will only form a basis for the proceedings to be continued against the sick industrial company for the purpose of winding up and the further proceedings are to be conducted in accordance with the provisions contained in the Companies Act for winding up of the company. Thus, what sub-sections (1) and (2) of section 20 dispense with is only the requirement of section 439 or 440, as the case may be, of the Companies Act for the purpose of initiating a proceeding for winding up of the company under Part VIII, Chapter II and also the enquiry into the question as to whether it is just and equitable to order winding up of a company. The rest of the proceeding for winding up shall have to be conducted in accordance with the provisions of the Companies Act. Sub-section (2) of section 20 of the Act is not happily worded. Though it opens with the words 'High Court shall, on the basis of the opinion of the Board, order winding up of the sick industrial company', but nevertheless, it further says that 'and may proceed and cause to proceed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny He must consider the recommendation of the Board, form his own opinion and thereafter proceed with the matter. A learned single judge of this court in Tata Iron and Steel Co. v. Him Ispat Ltd. [2002] 108 Comp Cas 537 , held as follows (page 547) : "So far as the opinion of the BIFR and the AAIFR under the SICA is concerned, it is relevant to be taken note of by the court. And it is thereafter that it has to form its own opinion, whether the company is to be wound up or not." A Division Bench of the Calcutta High Court in Eastern Paper Mills Ltd. v. BIFR [2002] 109 Comp. Cas. 1065 , held as follows (page 1072) : "As observed by the Madras High Court in its judgment in J.M. Malhotra's case [1997] 89 Comp Cas 600, when once a report is submitted by the BIFR/AAIFR, the same would become the basis for a proceeding to be continued against the sick industrial company for winding up in accordance with the provision of the Companies Act. Sub-section (2) of section 20 specifically states that the High Court shall, on the basis of the opinion of the Board, order winding up of a sick industrial company and may proceed or cause to proceed with the winding up of the sick i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Board dated April 25, 2001." In our opinion this authority does not lay down the correct law in view of the judgment of the apex court in V.R. Ramaraju's case [19971 89 Comp. Cas. 609. The Gujarat High Court in BIFR v. Unity Steels Ltd. [2002] 109 Comp. Cas. 236, dealt with this matter in detail. On the basis of the judgment of the Madras High Court and the apex court, the learned judge held as follows (page 246) : "Having heard the learned advocates at length, I am of the opinion that when section 20 of the SICA provides For tendering of Board opinion for winding up of a sick industrial company, it would necessarily mean that the High Court to whom such an opinion is tendered will be required to follow the procedure with regard to admission of a petition registered as a result of such an opinion tendered under section 20 of the SICA. Otherwise, the role of the High Court would be that of a rubber stamp upon the receipt of Board opinion as noted in the aforesaid Madras High Court decision as approved by the Supreme Court. The submissions of Mr. Singhi might sound attractive, but obviously run counter to the latest decision of the Supreme Court in V.R. Ramaraju v. U ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the court after admission of the petition for winding up to appoint a provisional liquidator upon the application of a creditor,, contributory company or of the company itself. Where the company is not the applicant, notice of the application should be given to the company unless the court for special reasons dispenses with the notice. Rule 112 provides for the directions to be given at the time of winding up and rule 113 provides for the advertisement of the order of winding up. From a perusal of the various rules, it is apparent that winding up is normally not ordered straightaway. When any petition for winding up is taken up by the judge, he may either order advertisement of the petition at the first stage or may even first decide to hear the company or any other person before even advertising the petition. Advertisement of a petition of winding up itself may sometimes cause irreparable harm to the company. The practice in this court has been that normally an order of advertisement is not passed without first hearing the company. However, in the case where the opinion is given by the Board there is a considered judicial opinion of a body of experts who have gone into all ec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the opinion of the Board as for as the parties which were represented before the Board are concerned, are governed by section 25 of the (SICA). If they choose not to exercise their right of appeal under section 25, they have no right to raise separate objections to the report of the Board. Further, in the present case as we have already noticed above, the company was served on September 30, 1999. The company was represented before the learned single judge on the date when the order was passed. No plea was raised that it wanted to object to the orders of the Board recommending winding up of the company. The impugned order has been quoted above and from a perusal of the order it appears that no objection was raised by the company when the order was being passed. The company had already been served. It was also represented before the Board which had forwarded the opinion to the court. The company should have been vigilant to protect its right and if it wanted to raise objections to the opinion of the Board, it should have filed an appeal and in case an appeal was not filed, it could have still filed its objections before the court when it received notice. It is not the duty of the c ..... X X X X Extracts X X X X X X X X Extracts X X X X
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