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Issues: (i) Whether the pendency of a writ petition and an interim stay against the BIFR/AAIFR orders barred the Company Court from proceeding with the winding-up petition under the Sick Industrial Companies (Special Provisions) Act, 1985. (ii) Whether the company had ceased business and lost its substratum so as to justify a winding-up order.
Issue (i): Whether the pendency of a writ petition and an interim stay against the BIFR/AAIFR orders barred the Company Court from proceeding with the winding-up petition under the Sick Industrial Companies (Special Provisions) Act, 1985.
Analysis: The governing principle was taken from the Supreme Court decision in Shree Chamundi Mopeds Ltd., where it was held that a mere stay of the operation of the BIFR/AAIFR order does not keep the proceedings under the Act pending in a manner that ousts the Company Court's jurisdiction. The Court treated sections 22 and 25 of the Act as not preventing the Company Court from entertaining and deciding the winding-up petition despite the pending writ proceedings.
Conclusion: The pendency of the writ petition and the interim stay did not bar the Company Court from proceeding with the winding-up petition; jurisdiction existed in favour of the petitioner.
Issue (ii): Whether the company had ceased business and lost its substratum so as to justify a winding-up order.
Analysis: The company's business had remained discontinued for years, its movable assets had been sold, and its immovable assets were under sale proceedings. The factual matrix showed that the company no longer had assets available for carrying on its business in accordance with its memorandum and articles. In these circumstances, the Court held that discretion should not be exercised against winding up and that the company had no defence to the petition.
Conclusion: The company's substratum had disappeared and a winding-up order was warranted in favour of the petitioner.
Final Conclusion: The winding-up petition was allowed and the company was ordered to be wound up.
Ratio Decidendi: A pending writ petition or interim stay against BIFR/AAIFR orders does not, by itself, divest the Company Court of jurisdiction to entertain a winding-up petition, and where the company has ceased business and its substratum has disappeared, winding up may be ordered.
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