IMPORTANT POINTS
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 over the provisions of the Companies Act and proceedings under the Companies Act must give way to proceedings under the SICA.
Real Value and Rishabh Agro do not require any reconsideration.

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 impugned judgment and order the Division Bench of the High Court allowed the Special Appeal of the respondent and stayed further proceedings before the Company Court consequent upon a winding up order passed against the respondent (Modi Rubber) till a final decision is taken on a reference made by Modi Rubber to the Board for Industrial and Financial Reconstruction.

2. Company Petition No.1 of 2002 was filed by Madura Coats in the Allahabad High Court for winding up Modi Rubber on the allegation that Modi Rubber was unable to pay its huge undisputed debts. Notice was issued in the Company Petition to Modi Rubber who entered appearance but took several adjournments in the matter on one pretext or the other including furnishing the schedule for repayment of the admitted dues to the creditors, an arrangement being worked out with Apollo Tyres Ltd. and various other reasons.

3. Eventually, after two years of adjournments, the Company Court declined to grant any further adjournment to Modi Rubber. Accordingly, on a consideration of the material on record and after hearing learned counsel for the parties, the Company Court passed an order on 12th March, 2004 holding that Modi Rubber was unable to pay its undisputed debts and that it was just and equitable that the company be wound up. An Official Liquidator was appointed to take charge of the assets of the company and to submit a report along with the inventory.

4. Feeling aggrieved by the winding up order, Modi Rubber preferred an appeal before the Division Bench of the High Court which was allowed by the impugned judgment and order.

5. Before the Division Bench it was brought out for the first time that on 6th December, 2003 the Board of Directors of Modi Rubber had passed a resolution to file a reference before the Board of Industrial and Financial Reconstruction (for short ‘the BIFR’) under the provisions of the Sick Industrial Companies (Special Provisions) Act, 1985 (for short ‘the SICA’).

6. Pursuant to the aforesaid resolution, an application was made by Modi Rubber to the BIFR on 3rd February, 2004 which was received by the BIFR on 4th February, 2004. Thereafter, the application was scrutinized and on 17th March, 2004 the reference made by Modi Rubber was registered as Case No. 153 of 2004. It will be seen that while the application for making a reference was sent to the BIFR before the winding 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 also held that a winding up order passed under the Companies Act, 1956 (for short ‘the Companies Act’) is not the culmination of the proceedings pending before the Company Court. The final order to be passe