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IN THE HIGH COURT OF CALCUTTA
Ashim Kumar Banerjee, Samapti Chatterjee, JJ.
In re : Kamlapur Sugar and Industries Ltd. - Petitioner
Versus
Official Liquidator, High Court - Respondent
A.P.O. No. 450 of 2014 and C.P. No. 241 of 2009
Decided On : 29-01-2015
For the Appellant :Deepnath Roy Chowdhury and Shayantee Dutta, Advocates
For the Respondent:Abhrajit Mitra, Senior Advocate, Sarbapriya Mukherjee and Soumabha Ghosh, Advocates
For the PICUP :Indranil Nandi, Advocate
For the GPSK Comm. (P) Ltd. :R.L. Mitra and Priyanka Dhar, Advocates
For the Stressed Assets Stabilisation Fund IDB and IFCI Ltd. :Amiya Kumar Sur, Advocate
For the Official Liquidator :Ruma Sikder, Advocate
SICA would apply at the post-winding-up stage only when there is a conflict between the provisions of SICA and the Companies Act, and the company court does not have jurisdiction to entertain a reference under SICA after passing a winding-up order.
Headnote:
SICK INDUSTRIAL COMPANIES ACT - COMPANY COURT JURISDICTION - WINDING UP - POST WINDING UP STAGE - APPLICABILITY OF SICA - SUPPRESSION OF FACTS - COMPANY COURT'S ROLE - INTERPRETATION OF PROVISIONS - EFFECT OF WINDING UP ORDER - BIFR PROCEEDINGS - CONFLICT OF LAWS - OVERRIDING EFFECT OF SICA - STAY OF WINDING UP - COMPANY COURT'S SUPERVISORY ROLE - REVIVAL SCHEME - BIFR'S ROLE - DELIBERATE SUPPRESSION - DISHONESTY - APPEAL ALLOWED - STAY OF JUDGMENT AND ORDER - FOUR WEEKS.
Fact of the Case:
Kamlapur Sugar and Industries Limited (Kamlapur) faced financial difficulties and was unable to discharge its obligations to secured and unsecured creditors. Dena Bank, a secured creditor, issued a statutory notice of demand under Section 434 of the Companies Act, 1956, seeking payment of outstanding dues. Kamlapur failed to comply, leading Dena Bank to initiate proceedings before the Debt Recovery Tribunal (DRT), Lucknow, and obtain a certificate permitting recovery of approximately Rs. 17 crores. Kamlapur appealed before the appellate authority, which affirmed the DRT's decision. Dena Bank subsequently filed an application for winding up of Kamlapur in 2009, claiming that the company was in involved circumstances and unable to pay its debts. Kamlapur opposed the application, contending that as a secured creditor, Dena Bank was not entitled to pray for winding up and should instead seek execution of the decree. The company court negated this contention and passed an order of winding up in 2010. Kamlapur appealed, but the Division Bench upheld the winding-up order in 2012. During the winding-up process, Kamlapur attempted to initiate proceedings before the Board for Industrial and Financial Reconstruction (BIFR) under the Sick Industrial Companies Act, 1985 (SICA). However, the BIFR initially declined to entertain the reference but later registered it in 2013. Manoj Saha, claiming to represent the erstwhile management of Kamlapur, filed an application for stay of the winding-up proceedings and all connected matters, which was allowed by the company court. Dena Bank appealed against this order.
Finding of the Court:
The court held that the order of winding up, passed on July 30, 2010, was valid as there was no reference pending before the BIFR at that time. The reference was registered on September 12, 2013, after the winding-up order was passed. Once the winding-up order was passed, the lis brought by the creditor stood disposed of, and the company court became functus officio on the issue. The court further held that SICA would apply when the company existed and the reference could be made by persons having management and control. The Official Liquidator, being the custodian of the company during winding up, had no obligation to make a reference to the BIFR. The erstwhile management, having no control over the company, could only approach the company court with an appropriate scheme for revival, which they had unsuccessfully attempted in the past. The court also noted that the respondent's conduct and approach in suppressing the pendency of the BIFR proceeding before the court of appeal and their subsequent attempts to stall the sale amounted to a deliberate attempt to forestall the winding-up process.
Issues: 1. Whether SICA is applicable at the post-winding-up stage? 2. Whether the erstwhile management of Kamlapur committed fraud on the court by suppressing the BIFR proceedings? 3. Whether the company court has jurisdiction to entertain a reference under SICA after passing a winding-up order?
Ratio Decidendi: 1. SICA would apply at the post-winding-up stage only when there is a conflict between the provisions of SICA and the Companies Act. In the present case, there was no conflict as the winding-up order was passed before the reference to the BIFR was made. 2. The erstwhile management of Kamlapur deliberately suppressed the pendency of the BIFR proceeding before the court of appeal and made several attempts to stall the winding-up process, which amounted to fraud on the court. 3. The company court does not have jurisdiction to entertain a reference under SICA after passing a winding-up order, as the order of winding up disposes of the lis brought by the creditor and the company court becomes functus officio on the issue.
Final Decision: The appeal was allowed, and the judgment and order of the company court were set aside. The court granted a stay of its judgment and order for four weeks to allow the parties to challenge the order in a higher forum.
Ashim Kumar Banerjee, J.
Facts:
Kamlapur Sugar and Industries Limited (hereinafter referred to as "Kamlapur") obtained financial assistance from various finance institutions including Dena Bank, the appellant above named. The company became sick and was unable to discharge its obligation towards secured and unsecured creditors. Dena Bank issued a statutory notice of demand under Section 434 of the Companies Act on September 18, 2003 asking them to pay off the outstanding. The Kamalapur did not adhere to the request. Dena Bank initiated a proceeding before the debt recovery Tribunal Lucknow and obtained certificate dated February 14, 2008 permitting Dena Bank to recover Rs. 17 crores approximately. Kamalapur preferred an appeal before the appellate authority. The appellate authority affirmed the decisions vide judgment and order dated December 15, 2008. In this backdrop, Dena Bank filed an application for winding up in 2009 before this Court inter-alia claiming, the Company was in involved circumstances and was unable to pay its debts hence, it should be wound up. The company opposed the application. They contended, being a secured creditor, Bank was not entitled to pray for winding up. Their remedy would lie in execution of the decree. His Lordship negated the contention and ultimately passed the order of winding up vide order dated July 30, 2010 appearing at pages-34-45 of the paper book. Kamlapur filed an appeal. The Division Bench upheld the judgment and order of the learned Single Judge vide judgment and order dated July 23, 2012 appearing at pages 50-71. Pertinent to note, the Division Bench heard the matter for five days on and from June 25, 2012. The Division Bench dismissed the appeal on July 23, 2012. Kamlapur never informed the Court, they were trying to initiate proceedings before Board for Industrial and Financial Reconstruction (herein after referred to as "BIFR") established under the Sick Industrial Companies Act, 1985 (hereinafter referred to as SICA).
2. The Official Liquidator took charge of the assets and proceeded to sell the same by public auction. The learned Company Judge conducted the sale on September 20, 2013 and October 8, 2013. When the sale was being concluded, the erstwhile management of the company suddenly informed the learned Company Judge, they had already approached the BIFR. Pertinent to note, even after the order of winding up, Kamlapur tried to stall the winding up process, firstly on January 27, 2012 when an application for sanction of a scheme was dismissed by the learned Company Judge making serious comments about their conduct. The second attempt also failed on February 10, 2012 when the learned Single Judge again rejected the proposal for revival vide order dated February 10, 2012 appearing at pages 80-82. The third attempt failed on October 19, 2012 when the learned Judge while passing an order appearing at pages 75-76, rejected the prayer for adjournment on the plea of settling with the creditors. Similarly, attempt was made on September 21, 2012. Since all the avenues were closed and desperate attempt to forestall the sale was not successful the company approached the BIFR in June 2013. The BIFR initially declined to entertain the reference. Subsequently, by an order dated October 7, 2013 appearing at pages-10-11 BIFR registered the reference under Section 15(1) of SICA. On October 7, 2013 one Manoj Saha claiming to be the authorised representative of the erstwhile management filed an application for stay of the winding up and all connected matters as also for consequential order of restraint on the Official Liquidator from selling the assets. The learned Single Judge, vide judgment and order dated January 28, 2014, allowed the said application. His Lordship vide judgment and order of the said date appearing at pages 106-115, granted stay of the winding up proceeding subject to the order of the BIFR or the appellate authority. Being aggrieved, Dena Bank filed the instant app
