Very Important Points
1. Inquiry under Section 16(1) of the Sick Industrial Companies (Special Provision) Act, 1985 for purposes of Section 22 of the said Act shall be deemed to have commenced when information/documents are mandatorily required to be called for from the informant simultaneously with the registration of the reference under Regulation 19(5) and, consequently Section 22 and the prohibitions contained in it shall immediately come into play.
2. The conduct of company in suppressing facts before the High Court and of taking mutually contrary pleas before the High Court and Board of Industrial & Financial Reconstruction could not make the reference under Section 15 of the Sick Industrial Companies (Special Provision) Act, 1985 and the registration thereof by the BIFR bad as there was no suppression of facts before BIFR.

Headnote:(i) Sick Industrial Companies (Special Provision) Act, 1985-Section 22 r/w. Regulation 19(5)-Prohibitions under-Applicability-Registration of reference by BIFR -Inquiry u/s. 16(1) of the Act for purposes of Section 22 - Deemed to have commenced when information/documents are required to be simultaneously called for under second part of Regulation 19(5)-Section 22 and prohibitions contained therein-Attracted immediately-Orders of High Court appointing Receiver and confirming the appointment of provisional liquidator after the proceedings before BIFR reached the stage of inquiry u/s. 16(1)-Illegal and in violation of prohibition contained in Section 22 of the Act.
       Held : Inasmuch as under the latter part of Regulation 19(5) it is necessary that simultaneously with the registration of the reference, information/documents are to be called for from the informant-the ‘inquiry’ must, in our opinion, be deemed to have commenced under Section 16 of the Act at that stage itself, namely, at stage of the second part of Regulation 19(5) and it is no longer permissible to say that such a stage is reached only when the BIFR issues notices and starts an inquiry under Regulation 20 calling for additional information ‘in relation to the inquiry’ or only when orders are passed by the BIFR under Regulation 21, read with Section 16(1). The result is that strictly speaking, after the amendment of Regulation 19(5) on 24.3.1994 the latter part of Regulation 19(5) falls into Chapters III and IV of the Regulations which are referable to ‘Inquiries’ under Section 16 of the Act, rather than into Chapter II which deals with ‘References’ under Section 15. The Chapter headings cannot, in our opinion, be treated as rigid compartments. (Para 28)
       There can, therefore, be no difficulty in holding that after the amendment to Regulation 19 w.e.f. 24.3.1994, once the reference is registered and when once it is mandatory simultaneously to call for information/documents from the informant and such a direction is given, then inquiry under Section 16(1) must-for the purposes of Section 22-be deemed to have commenced. Section 22 and the prohibitions contained in it shall immediately come into play. In that view of the matter, we need not go into the correctness of the view expressed by the Calcutta, Rajasthan and Bombay High Courts which relied upon the unamended Regulation 19. Point 2 is decided accordingly. (Para 30)
       On the facts of this case, the impugned orders dated 28.7.1997 and 8.8.1997 of the High Court have been passed after the BIFR proceedings reached the stage of the second part of Regulation 19(5) on 24.7.1997 that is to say, when proceedings as per the amended Regulation 19(5) reached the stage of inquiry under Section 16(1). It must, therefore, be deemed that the said orders are illegal and are in violation of the prohibition contained in Section 22 of the Act. (Para 31)
       (ii) Sick Industrial Companies (Special Provision) Act, 1985-Section 15-Registration of reference by BIFR-Company taking mutually contrary pleas before BIFR and High Court-Supression of facts by Company before High Court-However, BIFR informed about the proceedings taken against the Company in the High Court both on company side and on original side-No suppression of facts before BIFR-Conduct of Company before High Court-Deprecated-But, such conduct to Company before High Court does not make registration of reference before BIFR bad.
       Held : It is clear from the application filed before the BIFR that the BIFR was informed about the proceedings taken against the Company in the High Court both on the company side and on the original side. So far as the BIFR was concerned, there was no suppression of facts before it. We are at a loss to understand as to how any conduct of the appellant Company before the High Court of Bombay could make the registration of the reference before the BIFR bad. If any orders were obtained by the Company from the High Court by way of fraud it was certainly open to the respondent to ask the High Court to recall such orders. No such thing was done. We, therefore, cannot accept the contention of the respondents that the reference under Section 15 of the Act and the registration thereof by the BIFR became bad because of any conduct of the Company before the High Court. It follows that equally the subsequent orders passed by the BIFR on the reference cannot, on that account, be said to be invalid. (Para 15)

Judgment

M. Jagannadha Rao, J.-Special leave granted in all the Special leave petitions.

2. Civil Appeal arising out of SLP (C) No. 14327/1997 is filed by ‘Real Value Appliances Ltd.’ against the order of the High Court of Bombay dated 28.7.1997 passed by a Division Bench in an interlocutory appeal, appointing a Receiver to take formal possession of the mortgaged properties which are subject matter of suit No. 82 of 1997 pending before a learned Single Judge of the said High Court on the Original Side. The respondent Canara Bank, which is the plaintiff in the suit is claiming in consortium with Union Bank of India a sum of Rs. 23.67 crores (approximately) as due to it as on 24.12.1996. Earlier the Single Judge of the Bombay High Court in his order dated 10.1.1997 had disallowed the application for appointment of Receiver in view of the stay of appointment of provisional Liquidator granted by a Division Bench of the Bombay High Court in winding up proceedings on 20.12.1996.

3. Civil Appeal (arising out of SLP (C) No. 14750 of 1997) is filed by the appellant Company against the order passed by another Division Bench of the Bombay High Court dated 8.8.1997 in Appeal No. 1193 of 1996 by which the order of the learned Single Judge on Company Side appointing a provisional Liquidator on 18.10.1996 was affirmed. Thereby an earlier order of stay dated 20.12.96 (granted by the Division Bench in respect of the Company Judge’s order dated 18.10.96) stood vacated. The respondents are Vardhman Spinning & General Mills Ltd., the creditors, who filed the winding up petition 415/1996 on 6.8.1996 against the appellant in the High Court of Bombay.

4. Civil Appeal (arising out of SLP (C) No. 15736/1997) is filed by the workmen (Engineering Kamgar Sangh) against the order dated 8.8.1997 passed by the Division Bench in winding up proceedings confirming the order of the Single Judge appointing provisional Liquidator. They are supporting the appellant company.

5. That is how these three appeals have arisen and have come before us. The appellant company had, after taking some adjournments before the Division Bench in the Company Appeal-which was filed against the order of the learned Single Judge appointing provisional liquidator-submitted a reference before the Board for Industrial and Financial Reconstruction (hereinafter called the ‘BIFR’) on 17.7.1997 under the Sick Industrial Companies (Special Provision) Act, 1985 (hereinafter called the ‘Act’). The said reference was registered on 24.7.1997 as Case No. 97 of 1997. The point raised in these appeals is that once the reference was registered by the BIFR on 24.7.1997, the Division Bench of the High Court ought not to have passed orders on 8.8.1997 vacating the interim stay granted by it on 24.12.1996 and ought not to have confirmed the order of the learned Company Judge dated 18.10.1996 appointing provisional liquidator, in view of the mandate of Section 22 of the Act. Likewise, it is argued that the order of another Division Bench dated 28.7.1997 appointing a Receiver in the interlocutory appeal arising out of the Civil Suit is also bad in view of Section 22 of the Act.

6. We may state that the order of the High Court-in proceedings arising out of suit-appointing Receiver on 28.7.1997 was stayed by this Court on 5.8.1997 in SLP 14327/1997. Similarly the order of the High Court, in proceedings arising out of winding up proceedings, dated 8.8.1997 vacating the stay and confirming the Company Judges order appointing provisional Liquidator was stayed on 12.8.1997 in SLP 14750/1997 and it was further ordered that the provisional Liquidator shall not take any further steps.

7. One other important fact to be noted is that on 10.11.1997 in SLP 14327/1997, this Court passed an order,-after hearing both sides, adjourning the SLPs “to enable the BIFR to come to a decision’. This Court, however, directed the appellant-Company not to dispose of or alienate or create any third party interests in any of the ass

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