BIFR reference restraint bars winding up proceedings, while creditor participation and revival rights may still be preserved.

A pending reference before BIFR triggered the statutory restraint under section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985, so the winding up petition could not proceed on merits at that stage. The court noted, however, that the BIFR inquiry under section 15 could continue and that protective directions could still be made to safeguard the creditor's position. It allowed the creditor to participate in the BIFR inquiry and reserved liberty to renew the winding up petition on the same cause of action if the reference was rejected, leaving any future merits determination open.

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Issues: (i) Whether a winding up petition could be proceeded with when a reference concerning the respondent company was pending before the BIFR under the Sick Industrial Companies (Special Provisions) Act, 1985. (ii) Whether the petitioner could be permitted to participate in the BIFR inquiry and be given liberty to renew the winding up petition if the reference was rejected.

Issue (i): Whether a winding up petition could be proceeded with when a reference concerning the respondent company was pending before the BIFR under the Sick Industrial Companies (Special Provisions) Act, 1985.

Analysis: The pending reference before the BIFR attracted the restraint embodied in section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985. In that situation, the Court held that it could not go ahead with the winding up petition on merits. At the same time, the Court noted that section 15 of the Act empowered the BIFR to hold an inquiry into the financial position of the company, and the pendency of that inquiry did not prevent the Court from making directions protecting the creditor's interest.

Conclusion: The winding up petition could not be pursued on merits at that stage because of the statutory restraint under section 22.

Issue (ii): Whether the petitioner could be permitted to participate in the BIFR inquiry and be given liberty to renew the winding up petition if the reference was rejected.

Analysis: The Court held that there was no legal impediment to permitting the creditor to participate in the BIFR inquiry so that its debt could be safeguarded. It further held that such participation would not offend the statutory scheme. The Court also expressly reserved the petitioner's right to file or renew the winding up petition on the same cause of action if the reference before the BIFR was rejected, leaving the merits of such future proceedings open.

Conclusion: The petitioner was allowed to participate in the BIFR proceedings and was granted liberty to renew the winding up petition if the reference failed.

Final Conclusion: The petition was not entertained on merits at that stage, but the creditor was protected by being permitted to participate in the BIFR inquiry and by being left free to revive the winding up remedy later if the statutory reference did not succeed.

Ratio Decidendi: Where a reference concerning a company is pending before the BIFR, the winding up court must respect the statutory restraint under section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985, yet it may pass protective directions enabling the creditor to participate in the BIFR inquiry and preserve the right to revive the winding up proceedings later.

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