Provisional liquidator and BIFR reference: directors may act for rehabilitation, and winding-up proceedings are stayed on registration.

Appointment of a provisional liquidator does not wholly divest the board of directors of authority; the board retains residuary power to take rehabilitation-related steps, including moving the Board for Industrial and Financial Reconstruction. Alleged suppression of facts before the Company Court does not by itself render the registered reference void or non est; the proper remedy lies in seeking recall or other appropriate relief. Once the reference is registered, the statutory bar under the sick-company legislation operates immediately, freezing winding-up proceedings and barring further acts such as steps by the Official Liquidator unless consent is obtained.

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Issues: (i) Whether the board of directors could move the Board for Industrial and Financial Reconstruction after appointment of a provisional liquidator; (ii) Whether suppression of facts rendered the reference before the Board for Industrial and Financial Reconstruction non est; (iii) Whether proceedings in the winding-up petition, including acts of the Official Liquidator, stood suspended upon registration of the reference before the Board for Industrial and Financial Reconstruction.

Issue (i): Whether the board of directors could move the Board for Industrial and Financial Reconstruction after appointment of a provisional liquidator

Analysis: Appointment of a provisional liquidator does not make the board wholly functus officio. The board retains residuary powers in matters that are not within the liquidator's function, especially where the statutory object is rehabilitation of a sick company. The powers to initiate steps under the special sick-company legislation are not powers assumed by the liquidator.

Conclusion: The board of directors could move the Board for Industrial and Financial Reconstruction notwithstanding appointment of a provisional liquidator.

Issue (ii): Whether suppression of facts rendered the reference before the Board for Industrial and Financial Reconstruction non est

Analysis: Alleged suppression before the Company Court did not affect the validity of the reference registered before the Board for Industrial and Financial Reconstruction. If any order was obtained by fraud, the remedy was to seek recall or appropriate relief, but the reference itself did not become void or a nullity merely for that reason.

Conclusion: The reference before the Board for Industrial and Financial Reconstruction was not non est and could not be ignored on that ground.

Issue (iii): Whether proceedings in the winding-up petition, including acts of the Official Liquidator, stood suspended upon registration of the reference before the Board for Industrial and Financial Reconstruction

Analysis: On registration of the reference, the prohibitions under the special sick-company legislation operate immediately. Proceedings for winding up and all further steps in such proceedings stand frozen unless consent of the Board or appellate authority is obtained. An attempted taking over of assets by the Official Liquidator is part of the winding-up process and cannot continue once the statutory bar comes into force.

Conclusion: All further proceedings in the winding-up matter stood stayed upon registration of the reference.

Final Conclusion: The application succeeded and the winding-up proceedings were stayed in view of the statutory protection available to the sick company under the special enactment.

Ratio Decidendi: Upon registration of a reference under the sick industrial company legislation, the statutory bar on further proceedings is immediately attracted, and the board retains residuary power to initiate rehabilitation-related steps despite appointment of a provisional liquidator.

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