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Issues: (i) whether section 22(1) of the Sick Industrial Companies (Special Provisions) Act, 1985 applied to proceedings for sanction of a scheme of arrangement under sections 391 to 394 of the Companies Act, 1956 and could keep such proceedings in abeyance pending BIFR reference; (ii) whether a petition under section 391 of the Companies Act, 1956 could be treated as a winding up proceeding by reason of section 392(2) of the Companies Act, 1956.
Issue (i): whether section 22(1) of the Sick Industrial Companies (Special Provisions) Act, 1985 applied to proceedings for sanction of a scheme of arrangement under sections 391 to 394 of the Companies Act, 1956 and could keep such proceedings in abeyance pending BIFR reference.
Analysis: Section 22(1) suspends specified proceedings, namely winding up, execution, distress or like proceedings against the properties of a sick industrial company, and proceedings for appointment of a receiver. The expression "or the like" was construed in the light of the preceding words and was confined to coercive recovery-type proceedings against the company's property. Proceedings initiated by the company itself for sanction of a scheme of arrangement are of a different character and do not answer that description. The pending company petition was therefore not a proceeding that could be automatically stayed merely because a reference under section 15 of the 1985 Act had been made.
Conclusion: section 22(1) did not apply, and the company petition could not be kept in abeyance on that ground.
Issue (ii): whether a petition under section 391 of the Companies Act, 1956 could be treated as a winding up proceeding by reason of section 392(2) of the Companies Act, 1956.
Analysis: Section 392(2) enables winding up only after a compromise or arrangement sanctioned under section 391 is found incapable of satisfactory working. The winding up power arises at a later stage and is contingent upon failure of the sanctioned arrangement. A petition seeking sanction of a scheme under section 391 is therefore distinct from, and cannot be equated with, a winding up petition at the threshold.
Conclusion: the petition under section 391 was not a winding up proceeding, and section 392(2) did not support the stay order.
Final Conclusion: the appeal succeeded, the stay order was set aside, and the company petition was remitted for decision on merits before the learned single judge.
Ratio Decidendi: section 22(1) of the 1985 Act is confined to the proceedings expressly mentioned in it and comparable coercive proceedings against the property of the sick company, and a petition for sanction of a scheme of arrangement under section 391 of the Companies Act, 1956 is not a winding up proceeding.
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