Statutory embargo on winding up of sick companies applies to ordinary debt claims not covered by the rehabilitation scheme.

Section 22(1) of the Sick Industrial Companies (Special Provisions) Act, 1985 suspends winding up and other coercive proceedings against a sick industrial company during the statutory rehabilitation stage unless consent is granted. An ordinary money claim does not escape that embargo merely because it arose after sanction of the rehabilitation scheme and was omitted from the scheme. The Calcutta High Court distinguished the narrow revenue-tax context in which the Supreme Court had relaxed the bar, and held that the exception did not apply to a private debt claim. The winding up application was therefore barred and could not proceed for the time being.

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Issues: Whether the statutory embargo under section 22(1) of the Sick Industrial Companies (Special Provisions) Act, 1985 barred the winding up application against a sick industrial company where the creditor's claim arose after sanction of the rehabilitation scheme and was not included in that scheme.

Analysis: The relevant statutory language suspends winding up proceedings and other coercive actions against an industrial company when an inquiry is pending, a scheme is under preparation or implementation, or an appeal is pending, unless the Board or appellate authority consents. The decision distinguished the exceptional situation in which the Supreme Court read down the embargo in favour of the revenue for tax collected after sanction of the scheme, holding that the principle was confined to that context and did not extend to an ordinary money claim. The claim in the present case was a simple debt claim which, if permitted to proceed, would increase the financial burden of the sick company and undermine the rehabilitative object of the statute. The Court therefore held that the absence of inclusion of the claim in the sanctioned scheme did not take it outside the statutory bar.

Conclusion: The winding up application was hit by the embargo in section 22(1) and could not proceed.

Final Conclusion: The application was not maintainable in view of the statutory suspension of proceedings applicable to the sick industrial company, and the petitioning creditor's remedy was barred for the time being.

Ratio Decidendi: Section 22(1) of the Sick Industrial Companies (Special Provisions) Act, 1985 bars winding up and other coercive proceedings against a sick industrial company during the relevant statutory stage, and an ordinary money claim not falling within the narrow exceptional revenue-tax context does not escape that embargo merely because it is not included in the sanctioned scheme.

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