Sanctioned rehabilitation scheme bars winding-up action while implementation continues; limitation is suspended and notice defects may not defeat the petition.

A sanctioned rehabilitation scheme under the sick industrial companies regime was treated as continuing to bar winding-up proceedings while implementation remained in progress, so the company petitions could not be admitted. The Court held that expiry of the payment period for one class of creditors did not by itself end the statutory protection where the scheme remained capable of modification and part of the rehabilitation process. It also read the limitation suspension under section 22(5) as operating during the period of statutory suspension, rejecting a narrow construction tied to consent applications. The notice objection under section 434 was not treated as fatal on the facts.

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Issues: (i) whether the company petitions were barred by section 22(1) of the Sick Industrial Companies (Special Provisions) Act, 1985 while the sanctioned rehabilitation scheme was under implementation; (ii) whether the respondent's liability was barred by limitation in the facts of the case; (iii) whether non-service of notice at the registered office under section 434 of the Companies Act, 1956 defeated maintainability of the petitions.

Issue (i): Whether the company petitions were barred by section 22(1) of the Sick Industrial Companies (Special Provisions) Act, 1985 while the sanctioned rehabilitation scheme was under implementation.

Analysis: Section 22(1) of the Sick Industrial Companies (Special Provisions) Act, 1985 suspends winding-up proceedings, recovery actions and similar coercive processes during inquiry, consideration or implementation of a sanctioned scheme, unless consent of the Board or Appellate Authority is obtained. The rehabilitation scheme here was sanctioned by the Board and remained under implementation when the petitions were filed. The Court treated implementation as a continuing process and held that the expiry of the period fixed for payment of one class of creditors did not by itself terminate the statutory protection, because the scheme could still be modified and remained part of the overall rehabilitation process.

Conclusion: The petitions were not maintainable at that stage and could not be admitted against the respondent.

Issue (ii): Whether the respondent's liability was barred by limitation in the facts of the case.

Analysis: Section 22(5) of the Sick Industrial Companies (Special Provisions) Act, 1985 was read as extending limitation during the period when remedies remain suspended under section 22(1). The Court rejected the contention that the benefit of suspension of limitation was confined only to persons who had applied for consent to proceed. Such a restricted construction was declined because it would introduce words not found in the provision and would undermine its constitutional validity. The limitation objection raised by the respondent was therefore not accepted.

Conclusion: The debt was not held to be barred by limitation on the ground urged by the respondent.

Issue (iii): Whether non-service of notice at the registered office under section 434 of the Companies Act, 1956 defeated maintainability of the petitions.

Analysis: The notice relied upon by the petitioners was shown to have been addressed to an office of the respondent company, and the Court also noted that a defect in service at the registered office would not necessarily non-suit the petitioners where a winding-up case could otherwise be made out under section 434(1)(c) of the Companies Act, 1956. On the facts, the objection was not accepted as a fatal defect.

Conclusion: The notice objection did not defeat the petitions.

Final Conclusion: The controlling ground was the statutory bar under the sick industrial companies regime, so the winding-up petitions could not proceed to admission and were dismissed.

Ratio Decidendi: Where a sanctioned rehabilitation scheme under the sick industrial companies legislation remains under implementation, section 22(1) bars winding-up proceedings and related coercive actions, and limitation is correspondingly suspended under section 22(5) during the period of statutory suspension.

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