TMI Blog2016 (7) TMI 345X X X X Extracts X X X X X X X X Extracts X X X X ..... itiated under Section 16 of the SICA. Consequently, the High Court was right in concluding that the provisions of Section 22 of the SICA would come into play and that the Company Court could not proceed further in the matter pending a final decision in the reference under the SICA. Quite apart from the above, we are also of opinion that in view of the subsequent developments and the fact that Madura Coats had participated before the BIFR and has taken its dues in terms of the rehabilitation scheme approved and sanctioned by the BIFR, nothing really survives for consideration in this appeal. Strictly speaking, we have merely undertaken an academic exercise pursuant to a reference made to a larger Bench. - CIVIL APPEAL NO. 1475 OF 2006 - - - Dated:- 29-6-2016 - Jagdish Singh Khehar, Madan B. Lokur and C. Nagappan, JJ. For The Appellant : Mr. Shivaji M. Jadhav, AOR For The Respondent : Mr. P. N. Gupta, AOR, Mr. Atishi Dipankar, AOR JUDGMENT Madan B. Lokur , J . 1. The appellant (Madura Coats) is aggrieved by the judgment and order dated 20th May, 2004 passed by the Division Bench of the Allahabad High Court in Special Appeal No. 420 of 2004. By the im ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng up order was passed by the Company Court, the reference was actually registered after the winding up order was passed by the Company Court. 7. On these broad facts, it was contended by Modi Rubber before the Division Bench that in view of the decision of this Court in Real Value Appliances Ltd. v. Canara Bank (1998) 5 SCC 554 on filing an application before the BIFR, all proceedings in respect of the company ought to have been stayed in terms of Section 22 of the SICA. Consequently, even the Division Bench of the High Court could not have decided the appeal filed by Modi Rubber. This contention was rejected by the High Court and it was held that the crucial date for a stay of proceedings under Section 22 of the SICA is the date on which the reference is registered with the BIFR and not the date on which an application for reference is filed. 8. However, the High Court took into consideration the subsequent events namely the fact of registration of the reference and relying upon Rishabh Agro Industries Ltd. v. P.N.B. Capital Service Ltd. (2000) 5 SCC 515 it was held that Modi Rubber was now entitled to the benefit of the provisions of Section 22 of the SICA. It was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ring of this appeal, further facts were placed before us. It was pointed out that the reference made by Modi Rubber to the BIFR was challenged by Madura Coats by filing Civil Misc. Writ Petition No. 17870 of 2004 in the Allahabad High Court. A view was taken by the High Court in its order dated 10th May, 2004 that the writ petition was premature and the maintainability of the reference could be raised by Madura Coats before the BIFR. Under the circumstances, the High Court did not consider it proper to entertain the writ petition which was accordingly dismissed. 12. Following upon the order passed by the High Court, Madura Coats moved an application before the BIFR on or about 12th January, 2006 in which it was prayed that Madura Coats be impleaded as a party in the proceedings and that its dues with interest thereon be included as a pressing creditor in the rehabilitation scheme. It is not clear whether any formal order was passed impleading Madura Coats in the proceedings before the BIFR, but in any event, it does appear from the record that Madura Coats participated in the proceedings before the BIFR. 13. We were told by learned counsel for Modi Rubber that before the BIFR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t 50 % of the principal outstanding as full and final payment. The payment shall be made in one go at the end of 3rd year from the sanction of the Scheme by the BIFR. We were told that Madura Coats did not challenge the rehabilitation scheme. 16. Under the circumstances, Modi Rubber addressed a letter to Madura Coats on 3rd September, 2008 informing the approval and sanction of the rehabilitation scheme by the BIFR and indicating the three options available to Madura Coats for clearing the outstanding dues. It seems that no reply was received by Modi Rubber to this communication. Accordingly, Modi Rubber sent another communication to Madura Coats on 12th August, 2011 reminding it to accept the settlement. In this communication, it was also mentioned that one raw material supplier had challenged the settlement terms by filing an appeal before the Appellate Authority for Industrial and Financial Reconstruction but that it had lost in the appeal. 17. Learned counsel for Modi Rubber brought to our notice a few orders passed by the Company Court after the approval and sanction of the rehabilitation scheme. These orders which have been placed on record suggest that Modi Rubber was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ust be treated to have commenced as soon as the registration of the reference is completed after scrutiny and that action against the company s assets must remain stayed in view of Section 22 of the SICA till a final decision is taken by the BIFR. This is what this Court said in paragraph 23 of the Report: It is argued that if the reference before the BIFR is only at the stage of registration under Section 15, then Section 22 is not attracted. This contention, in our opinion, has no merit. In our view, when Section 16(1) says that the BIFR can conduct the inquiry in such manner as it may deem fit , the said words are intended only to convey that a wide discretion is vested in the BIFR in regard to the procedure it may follow for conducting an inquiry under Section 16(1) and nothing more. In fact, once the reference is registered after scrutiny , it is, in our view, mandatory for the BIFR to conduct an inquiry. If one looks at the format of the reference as prescribed in the Regulations, it will be clear that it contains more than fifty columns regarding extensive financial details of the Company s assets, liabilities, etc. Indeed, it will be practically impossible for the BIF ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Companies Act. In that case a scheme of rehabilitation of the company was prepared and presented before the High Court under Section 391 of the Companies Act while proceedings were pending before the Appellate Authority for Industrial and Financial Reconstruction (AAIFR) under the SICA. The High Court approved the scheme of compromise and arrangement and in view of the order of the High Court the AAIFR also approved the scheme. This Court relied upon NGEF Ltd. v. Chandra Developers (P) Ltd. (2005) 8 SCC 219 to conclude that the Company Court and the BIFR do not exercise concurrent jurisdiction. Till the company remains a sick company having regard to the provisions of sub-section (4) of Section 20 [of the SICA], BIFR alone shall have jurisdiction as regards sale of its assets till an order of winding up is passed by a Company Court. Since the provisions of the SICA would prevail over the Companies Act, this Court held that the High Court could not have exercised jurisdiction and approved the scheme of compromise and arrangement prepared under Section 391 of the Companies Act. 23. Another situation is where a winding up order is passed by the Company Court but it is staye ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oceeded with further under the Companies Act. The High Court appears to have not taken note of the aforesaid words i.e. to be proceeded with further . As the impugned judgment is based upon wrong assumption of the provision of law and completely ignoring the vital words noticed hereinabove, the same cannot be sustained. 10. xxxxx 11. It may also be noticed that winding-up order passed under the Companies Act is not the culmination of the proceedings pending before the Company Judge but is in effect the commencement of the process. The ultimate order to be passed in such a petition is the dissolution of the Company in terms of Section 481 of the Companies Act. 26. In view of the above, this Court was of opinion that the interim order passed by the High Court after the reference was registered by the BIFR could not be sustained and deserved to be set aside. 27. From the above it is quite clear that different situations can arise in the process of winding up a company under the Companies Act but whatever be the situation, whenever a reference is made to the BIFR under Sections 15 and 16 of the SICA, the provisions of the SICA would come into play and they would prevail ..... X X X X Extracts X X X X X X X X Extracts X X X X
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