Sanctioned rehabilitation scheme cannot be invoked selectively to defeat winding up petitions while the company remains in breach of its obligations.

A sanctioned rehabilitation scheme under the Sick Industrial Companies (Special Provisions) Act, 1985 was binding, but it could not be used selectively to defeat pending winding up petitions while ignoring the company's own unpaid obligations under the same scheme. The scheme required payment to different classes of creditors and reflected an earlier High Court direction on funds to be reserved for one creditor. The Court stated that a party seeking relief must first demonstrate readiness to perform its own obligations, and the existence of objections before BIFR did not justify dismissal of the petitions in the company's favour. The request for dismissal was rejected.

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Issues: Whether the company could seek dismissal of the winding up petitions on the footing that the sanctioned rehabilitation scheme under the Sick Industrial Companies (Special Provisions) Act, 1985 caused all pending winding up proceedings to stand withdrawn.

Analysis: The sanctioned scheme was binding under section 18(8) of the Sick Industrial Companies (Special Provisions) Act, 1985, but the Court found that the scheme also imposed obligations on the company which had not been duly honoured. The scheme specifically contemplated payment obligations to different classes of creditors and also incorporated the High Court's earlier direction concerning the amount to be set apart for one creditor. The Court held that a party seeking relief must first show readiness to perform its own obligations, and a company in breach of the scheme could not invoke one clause of the scheme to defeat pending winding up petitions while ignoring other operative clauses. The pendency of objections before BIFR did not justify dismissal of the petitions in the company's favour.

Conclusion: The request for dismissal of the winding up petitions on the basis of the sanctioned scheme was rejected.

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