IMPORTANT POINTS
1. The effect of Section 22 SICA would be applicable even after the winding up order is passed.
2. Order of winding up of Company and appointment of Official Liquidator does not bar Board of Directors to move BIFR under Section 15 of SICA to declare Company as a Sick Industrial Company.
3. From the date of submission of reference under Section 15 of SICA, an enquiry shall be deemed to have been commenced for the purposes of Section 22 of the Act.

Headnote:Sick Industrial Companies (Special Provisions) Act, 1985-Sections 22 and 25-Companies Act, 1956-Sections 433-Stay of suit etc.-Company ordered to be wound up-Order stayed pending appeal thereagainst-While so reference under Section 15 SICA filed which was rejected-Appeal thereagainst filed and pending-Company s petition before Company Court to stay winding up proceedings in view of Section 22 of SICA-From date of reference under Section 15 enquiry shall be deemed to have been commenced under Section 22-Effect of Section 22 would be applicable even after winding up order is passed-Winding up order does not bar Board of Directors of Company to move BIFR by passing resolution to declare Company as sick Company-Proceeding before Company Judge to remain in abeyance till disposal of application/appeal before BIFR/AAIFR.
       Section 15 provides that when an industrial company becomes a sick industrial company as defined under Section 2(o) of the Act, the Board of Directors of the Company, shall, within 60 days from the date of finalisation of the duly audited accounts of the company for the financial year make a reference to the Board for determination of the measures which shall be adopted with respect to the company. Section 16 obliges the Board to make such enquiry as it may deem fit for determining whether any industrial company had become a sick industrial company in accordance with the procedure prescribed therein. It follows from Explanation to Section 16(3) that from the date of submission of reference under Section 15 of SICA, an enquiry shall be deemed to have been commenced for the purposes of Section 22 of the Act. (Para 5)
       The argument that such an interpretation would defeat the ends of justice and make the petitions under the Companies Act, infructuous inasmuch as any unscrupulous litigant, after suffering an order of winding up, may approach the Board merely by filing a petition and consequently get the proceedings in the Company case stayed. Such a grievance may be justified and the submission having substance but in view of the language of Sections 15 and 16 of the Act particularly Explanation to Section 16 inserted by Act No.12 of 1994, this Court has no option but to adhere to its earlier decision taken in Real Value Appliances (supra). While interpreting, this Court only interprets the law and cannot legislate it. If a provision of law is misused and subjected to the abuse of process of law, it is for the Legislature to amend modify or repeal it by having recourse to appropriate procedure, if deemed necessary. (Para 6)
       It is true that for invoking the applicability of Section 22 it has to be established that an inquiry under Section 16 is pending or any scheme referred to under Section 17 is under preparation or sanctioned scheme is under implementation or an appeal under Section 25 to an industrial company is pending. But it cannot be said that despite existence of any of the aforesaid exigencies the provision of Section 22 would not be attracted after the order of winding up of the company is passed. The words "no proceeding for winding up of the industrial company or for execution distress or the like against any of the properties of the industrial company or for the appointment of receiver in respect thereof shall lie or be proceeded with further, leave no doubt in our mind that the effect of the section would be applicable even after the winding up order is passed as no proceeding even thereafter can be proceeded with further under the Companies Act. (Para 7)
       It is contended that after the order of the winding up and appointment of the liquidator, the Board of Directors had no jurisdiction to move the BIFR by passing a resolution. Such a submission cannot be accepted. In a winding up petition the liquidator is appointed to protect the assets of a company for the benefit of its creditors, secured and unsecured and others. It is not the function of the official liquidator to start the process of rehabilitation of the company as is aimed at under the Act. Despite appointment of the official liquidator, the Board of Directors continue to hold all residuary powers for the benefit of the company which includes the power to take steps for its rehabilitation. The Board of Directors in the instant case were not in any way by any judicial order debarred from taking recourse to the provisions of the Act for the purposes of rehabilitation of the company. If there existed a power, its exercise cannot be termed to be malafide only because it was initiated after availing the opportunity to make the payment of the amounts due and passing of the order of winding up of the company. 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. The words "shall be deemed to commence" in Section 441 of the Companies Act clearly show the intention of the legislature that although the winding up of a petition does not in fact commence at the time of presentation of the petition itself but it shall be presumed to commence from that stage. The word "deemed" used in the Section would thus mean, "supposed", "considered", "construed", "thought", "taken to be" or "presumed". (Paras 8 and 9)
       Held, consequently the proceedings pending before the Company Judge shall remain in abeyance till the disposal of the application/appeal before the authorities under the Act. (Para 12)

JUDGMENT

Sethi, J.-On being satisfied that the appellant-company was unable to meet the obligations of making the payment of the amounts due to the creditors, the learned Single Judge of the High Court vide his order dated 5th September, 1997 directed its winding up. Official Liquidator attached to the Court was appointed as liquidator of the company with directions to take charge of the assets and other properties of the appellant-company. The notice of the winding up order was directed to be published in the Indian Express and Dainik Tribune. The operation of the order of the learned Single Judge was stayed by the Division Bench of the High Court in Civil Appeal No. 26 of 1997 on 18.9.1997. The appellant thereafter filed Reference under Section 15(1) of the Sick Industrial Companies (Special Provisions) Act, 1985 (hereinafter referred to as the Act ) before the Board for Industrial and Financial Reconstruction (hereafter referred to as "the Board". The appellant then moved an application in the High Court under Section22 of the Act with a prayer for staying the proceedings arising out of the Company Petition No. 111 of 1985 which was the subject matter of Company Appeal No. 26 of 1997. The application was rejected by the Division Bench of the High Court vide the order impugned herein. After holding that as no proceedings under the Act of 1985 were pending on the date of passing of the winding up order, the application under Section 22 of the Act was misconceived. It was further found that no such proceedings were pending even on the date of passing of the said order by the Division Bench in Company Appeal No. 26 of 1997 and only on the basis of a Reference made to the Board the proceedings of winding up petition could not be ordered to be held in abeyance. Not satisfied with the order of the Division Bench of the High Court, the appellant-company has preferred this appeal.

2. Some of the facts relevant for the purpose of determining the controversy in this appeal are that the respondent-bank filed a Company Petition No.111/95 on 30.9.1995 under Section 433(e) & (f) and Section 434 of the Companies Act, 1956 for winding up of the appellant-company on the ground that the company had been unable to pay the loan of Rs. 50 lacs and the agreed rate of interest thereon. On 14.12.1995 a compromise was arrived at between the parties whereby the appellant company agreed to pay monthly instalments as per stipulations made in the compromised deed. In pursuance to the compromise arrived at between the parties, the appellant-company claimed to have paid the instalments and completed the full payment of principal amount of Rs. 50 lacs. Regarding interest, the company referred to further transactions between the bank and its other sister concerns. However, instead of agreeing with the request of the company to return the collateral security of 5 lacs shares of Rs.10/- each aggregating to Rs. 50 lacs, the respondent-bank is stated to have insisted for payment of instalment for the months of October and November, 1996 as per compromise. It is contended that having failed to get the security the appellant-company per force had defaulted the payment of balance amount towards interest with the result that the respondent-bank moved an application before the Company Judge in Company Petition No. 111/95 praying for revival of the winding up petition. The learned Single Judge admitted the petition for hearing and passed an order for issuance of publication vide its orders dated 14.3.1997. Feeling aggrieved, the appellant herein preferred a special leave petition in this Court which was withdrawn on 28th August, 1997 purportedly with a view to approach the learned Company Judge with fresh proposal of settlement. An application was moved before the learned Company Judge wherein the appellant proposed to pay alleged balance principal amount of Rs.14,11,010/- and the amount of Rs.7,06,120/- as interest thereon in monthly instalment of Rs. 2 lacs each to

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2000 Supreme(SC) 1015

Cases Referred (1)