Section 22 suspension of proceedings begins on registered reference and information call under amended regulation 19(5)

A reference under section 15 of the Sick Industrial Companies Act remained valid despite the appellant's suppression of facts before the High Court, because there was no suppression before the BIFR and any grievance about fraud had to be pursued before the High Court itself. Section 22 barred further coercive steps once a duly registered reference was followed by the simultaneous calling for information or documents under amended regulation 19(5), as that stage marked commencement of the section 16 inquiry. The High Court's orders appointing a receiver and confirming the provisional liquidator were therefore not sustainable.

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Issues: (i) Whether the appellant's suppression of facts before the High Court and its inconsistent stand before the High Court and the BIFR invalidated the reference under section 15 and the subsequent BIFR proceedings. (ii) Whether, after registration of the reference and the operation of the amended regulation 19(5), the High Court could continue or pass orders appointing a receiver or confirming the provisional liquidator in view of section 22.

Issue (i): Whether the appellant's suppression of facts before the High Court and its inconsistent stand before the High Court and the BIFR invalidated the reference under section 15 and the subsequent BIFR proceedings.

Analysis: The appellant's conduct before the High Court was found to be unfair because material facts about the BIFR reference were not disclosed while adjournments were sought, and contradictory stands were taken regarding viability. However, the BIFR itself was informed of the relevant proceedings, and there was no suppression before it. The misconduct before the High Court did not legally affect the validity of the reference filed before the BIFR or the registration of that reference. Any grievance as to orders allegedly obtained by fraud from the High Court had to be addressed before that Court.

Conclusion: The reference under section 15 and the subsequent BIFR proceedings were not rendered invalid; this issue was decided against the respondents.

Issue (ii): Whether, after registration of the reference and the operation of the amended regulation 19(5), the High Court could continue or pass orders appointing a receiver or confirming the provisional liquidator in view of section 22.

Analysis: Section 22 bars winding up proceedings, execution against assets, appointment of a receiver, and similar actions when an inquiry under section 16 is pending. The Court held that after the 24-3-1994 amendment to regulation 19(5), once a reference is found in order and registered, and information or documents are simultaneously called for from the informant, the inquiry under section 16(1) must be treated as having commenced for the purpose of section 22. The statutory prohibition therefore operates from that stage, and the High Court could not proceed with the impugned orders made after that point.

Conclusion: The High Court's orders appointing a receiver and confirming the provisional liquidator were in violation of section 22 and could not stand; this issue was decided in favour of the appellant.

Final Conclusion: The appeals succeeded because the High Court's impugned orders were barred by the statutory suspension of proceedings once the inquiry stage under the Act had commenced, while the BIFR reference itself remained valid notwithstanding the appellant's earlier nondisclosure before the High Court.

Ratio Decidendi: For the purpose of section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985, an inquiry under section 16 is deemed to commence when a duly registered reference is followed by the simultaneous calling for information or documents under the amended regulation 19(5), and from that stage proceedings against the company's assets cannot continue without the Board's consent.

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