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Issues: (i) whether the winding up proceedings could be suspended on the basis of a mere reference to the Board for Industrial and Financial Reconstruction; and (ii) whether the respondent-company's admitted indebtedness, absence of bona fide repayment arrangements, and failure to produce a viable revival scheme justified winding up.
Issue (i): whether the winding up proceedings could be suspended on the basis of a mere reference to the Board for Industrial and Financial Reconstruction.
Analysis: The respondent-company sought suspension of the proceedings on the footing that it had sent a reference under section 15(1) of the Sick Industrial Companies (Special Provisions) Act, 1985. The Court held that mere dispatch of a reference and its receipt subject to verification did not amount to registration of the reference after scrutiny. Until the reference is duly registered and the statutory process actually commences, no automatic stay or suspension of other proceedings follows. The Court also found the plea lacking in bona fides and treated it as an attempt to delay the proceedings.
Conclusion: The plea for suspension was rejected.
Issue (ii): whether the respondent-company's admitted indebtedness, absence of bona fide repayment arrangements, and failure to produce a viable revival scheme justified winding up.
Analysis: The debt was not genuinely disputed and the company repeatedly acknowledged its liability. Despite repeated opportunities, it failed to make payment, failed to honour promised instalments, and failed to place any workable revival or rehabilitation plan before the Court. The expert committee and the secured creditors found the revival proposal financially unviable, the company's substratum had effectively disappeared, and continued business had become impracticable. The Court held that inability to pay admitted debts, coupled with lack of bona fide conduct and absence of a feasible revival scheme, warranted winding up on a just and equitable basis.
Conclusion: The company was liable to be wound up.
Final Conclusion: The petitions succeeded, the company was ordered to be wound up, and the provisional liquidator was directed to take over as Official Liquidator and proceed in accordance with law.
Ratio Decidendi: A mere reference to BIFR, without completed registration after scrutiny, does not by itself suspend winding up proceedings, and an admitted debt with no bona fide or viable revival plan justifies winding up of the company.
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