Sick company proceedings do not abate a winding up petition, but the matter may be kept in abeyance pending BIFR outcome.

Commencement of proceedings under the Sick Industrial Companies (Special Provisions) Act, 1985 did not by itself abate a winding up petition under section 434 of the Companies Act, 1956. The Court treated the sick company process and the declaration under section 3(1)(o) as a reason to hold the winding up matter in abeyance, directing that it should not proceed further at that stage and that the record be consigned. The petitioner was left free to seek appropriate orders before the Board for Industrial and Financial Reconstruction and to seek revival of the winding up petition after completion of the sick company proceedings.

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Issues: Whether a winding up petition under section 434 of the Companies Act, 1956 abated upon commencement of proceedings under the Sick Industrial Companies (Special Provisions) Act, 1985 and declaration of the company as a sick industrial company.

Analysis: The Court noted that a similar question had already been examined in an earlier matter and that, on a detailed consideration of the scheme of the Sick Industrial Companies (Special Provisions) Act, 1985, commencement of proceedings under that Act did not by itself cause the winding up petition to abate. In view of the pending sick company proceedings and the declaration under section 3(1)(o), the Court directed that the present petition should not proceed further at that stage and that the record be consigned, while preserving the petitioner's liberty to seek appropriate orders before the Board for Industrial and Financial Reconstruction and to seek revival after conclusion of the sick company proceedings.

Conclusion: The winding up petition did not abate, but its proceedings were kept frozen pending the outcome of the proceedings under the Sick Industrial Companies (Special Provisions) Act, 1985.

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