Winding up stay requires a workable revival plan; Gujarat HC refused relief where creditors' dues and prior failures undermined the proposal.

The High Court considered whether a winding up order could be revoked or winding up proceedings stayed to enable revival of a company's manufacturing and mining operations. It examined the company's prolonged closure, earlier BIFR proceedings, a prior recommendation for winding up under section 20(1) of the Sick Industrial Companies (Special Provisions) Act, 1985, and the earlier failure of a revival scheme. The Court found the new proposal was substantially the same as the rejected one, the liabilities to secured and statutory creditors were substantial, and there was no concrete, workable arrangement showing that the promoters could clear dues and restart operations. Although section 466 of the Companies Act, 1956 permits a stay of winding up, the Court held that the facts did not justify such relief and rejected the application.

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Issues: Whether the winding up order could be revoked or the winding up proceedings stayed to permit revival and restarting of the company's manufacturing and mining activities.

Analysis: The application was examined in the light of the company's long closure, the earlier BIFR proceedings, the opinion recommending winding up under section 20(1) of the Sick Industrial Companies (Special Provisions) Act, 1985, and the previous failure to implement a revival scheme despite opportunities. The Court noted that the proposed revival plan was substantially the same as the earlier failed proposal, the liabilities to secured and statutory creditors were very large, and the record did not inspire confidence that the promoters could discharge the outstanding dues and successfully restart operations. The objections of major creditors and the absence of a concrete and workable arrangement were also considered. The existence of power under section 466 of the Companies Act, 1956 to stay winding up was not in dispute, but that power was held to be exercisable only where the facts justify such relief.

Conclusion: The Court held that this was not a fit case to revoke the winding up order or stay the winding up proceedings, and the application was rejected.

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