Industrial undertaking status survives temporary shutdown, and a second sickness reference may remain timely after appellate reversal.

A sick industrial unit may retain the character of an industrial undertaking even if manufacturing has temporarily stopped, because the relevant definition extends to premises where manufacturing is ordinarily carried on, not only where production is presently active. On that basis, the narrow view that the company had ceased to be an industrial undertaking was rejected. The document also notes that a second reference is not barred by limitation when it is filed after the earlier sickness declaration has been reversed on appeal, since the company remained shown as sick until that appellate decision. The appellate order and dismissal of the second reference were set aside and the matter was remitted for fresh consideration.

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Issues: (i) Whether the petitioner company had ceased to be an industrial undertaking so as to render the reference not maintainable under the Sick Industrial Companies (Special Provisions) Act, 1985; (ii) Whether the second reference was barred by limitation.

Issue (i): Whether the petitioner company had ceased to be an industrial undertaking so as to render the reference not maintainable under the Sick Industrial Companies (Special Provisions) Act, 1985.

Analysis: The definition of "industrial company" and "industrial undertaking" under the Sick Industrial Companies (Special Provisions) Act, 1985 is linked to the existence of a "factory" within the meaning of section 3(c) of the Industries (Development and Regulation) Act, 1951. That definition is not confined to a unit where manufacturing is actually and presently being carried on; it also covers premises where manufacturing is ordinarily carried on. The Court held that the Appellate Authority erred in reading the definition narrowly and in ignoring relevant materials showing continued licence renewal, employment of workers for maintenance, and the absence of permanent closure. A sick unit may temporarily stop production and yet retain the character of a factory and industrial undertaking.

Conclusion: The finding that the petitioner was not an industrial undertaking was set aside and the issue was answered in favour of the petitioner.

Issue (ii): Whether the second reference was barred by limitation.

Analysis: The second reference was filed after the earlier declaration of sickness had been set aside in appeal. Until that appellate decision, the petitioner continued to stand as a sick company on the record, and the second reference based on later accounts could not meaningfully be made earlier. The Court therefore held that the reference filed shortly after the appellate order was within time and consistent with section 15(1) of the Sick Industrial Companies (Special Provisions) Act, 1985.

Conclusion: The finding that the second reference was time-barred was set aside and the issue was answered in favour of the petitioner.

Final Conclusion: The impugned appellate order and the underlying dismissal of the second reference were set aside, and the matter was remitted for fresh consideration by the BIFR.

Ratio Decidendi: For the purposes of sickness proceedings, a factory is not confined to a unit currently engaged in manufacturing; premises where manufacturing is ordinarily carried on may still qualify, and a second reference is not barred when made after reversal of the earlier sickness declaration.

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