2004 (8) TMI 391 - HC - Companies Law

Winding-up petitions upheld despite BIFR scheme; respondent to deposit dues; civil suits option granted

The High Court held that the winding-up petitions against the respondent company were maintainable despite the BIFR scheme, as the implementation period ... Suspension of remedy during implementation of a BIFR-sanctioned scheme - Exclusion of suspended period from computation of limitation - Bona fide defence in winding-up proceedings - Appropriate forum for adjudication of disputed monetary claims - civil suit versus winding up - Interim deposit as condition for withholding winding-up reliefSuspension of remedy during implementation of a BIFR-sanctioned scheme - Exclusion of suspended period from computation of limitation - Effect of the BIFR reference and implementation of its sanctioned scheme on the maintainability of proceedings and on the period of limitation for the petitioners' claims. - HELD THAT: - The court held that while a reference to BIFR was pending and the sanctioned scheme was under implementation, proceedings for winding up or recovery were suspended. The scheme here was under implementation up to 31-3-1999 and accordingly the period during which remedies were suspended must be excluded in computing limitation. The contention that the period of limitation began from the date BIFR closed its file (8-1-1996) was not prima facie consistent with the statutory provision suspending remedies until implementation ceased on 31-3-1999. [Paras 6, 14, 15, 16]The petitioners' claims were not barred by limitation because the period of suspension under the BIFR-sanctioned scheme up to 31-3-1999 must be excluded from computation of limitation.Bona fide defence in winding-up proceedings - Appropriate forum for adjudication of disputed monetary claims - civil suit versus winding up - Whether the disputed claims (including large interest components) could be finally adjudicated in winding-up petitions or required trial in a civil forum. - HELD THAT: - The court found substantial disputes as to liability, entitlement to interest, rate of interest, and factual matters (including possible receipt by the proprietor who sat on the Management Committee). These issues were neither manifestly frivolous nor plainly unsubstantial, and therefore amounted to bona fide defences which could not be finally resolved in winding-up proceedings. The court held that detailed scrutiny and evidence were necessary and that the proper course was for the petitioners to pursue their monetary claims in a civil suit rather than by immediate admission of the winding-up petitions. [Paras 10, 11, 12, 17, 18]Because contested factual and legal questions exist, the claims cannot be finally adjudicated in the winding-up petitions; petitioners are directed to seek relief in the Civil Court.Interim deposit as condition for withholding winding-up relief - Revival of winding-up petitions upon non-deposit - Interim measures to balance parties' interests pending litigation and consequences of non-compliance. - HELD THAT: - The court exercised its discretion to withhold winding-up relief and directed the respondent company to deposit specified sums into court within eight weeks as a condition for transferring the deposited funds to any civil suit the petitioners may institute. The court made clear that failure to deposit the directed sums would automatically revive the winding-up petitions for admission and advertisement, and allowed a three-month window for filing civil suits after intimation of deposit, failing which the respondent could withdraw the deposit. [Paras 18, 19, 20]Respondent company ordered to deposit stated sums within eight weeks; on deposit the petitioners may pursue civil suits (within three months) and, on failure to deposit, the winding-up petitions will be revived and admitted.Final Conclusion: Winding-up petitions are disposed of without admission: the period of suspension under the BIFR-sanctioned scheme (up to 31-3-1999) is excluded for limitation purposes, but substantial disputed questions of fact and law (including entitlement to interest) preclude final adjudication in winding-up proceedings; respondent directed to make interim deposits within eight weeks, failing which the petitions will be revived, and petitioners may sue in the Civil Court with the deposited sums to be transferred if suits are filed within three months. Issues Involved:1. Winding up of the respondent company under section 433(e) read with section 434 of the Companies Act, 1956.2. Liability of the respondent company to pay the claimed amounts with interest.3. Impact of the Board for Industrial and Financial Reconstruction (BIFR) scheme on the claims.4. Jurisdiction of the High Court to entertain the winding-up petitions.5. Applicability of the law of limitation.Issue-wise Detailed Analysis:1. Winding up of the respondent company under section 433(e) read with section 434 of the Companies Act, 1956:The petitions were filed for winding up of the respondent company, M/s. Shree Bansidhar Pvt. Ltd., under section 433(e) read with section 434 of the Companies Act, 1956. The court issued notice and restrained the respondent company from transferring any immovable properties or plant and machinery. The interim relief continued till the final hearing.2. Liability of the respondent company to pay the claimed amounts with interest:The petitioner in Company Petition No. 4 of 2002 claimed an amount of Rs. 2,48,858.94 along with interest at the rate of 18%, totaling Rs. 20,58,416.22 till 31-12-2001. Similarly, in Company Petition No. 5 of 2002, the petitioner claimed Rs. 3,81,959.39 with interest, amounting to Rs. 31,59,345.63 till 31-12-2001. The respondent company acknowledged the principal amounts in their balance sheets for the years 1988-89, 1989-90, and 1990-91. However, the respondent disputed the interest claims and argued that any right the petitioners had was modified by the BIFR scheme, which did not provide for interest payments.3. Impact of the BIFR scheme on the claims:The respondent company had made a reference to the BIFR in 1987-88, and a revival scheme was framed in 1990, which was under implementation till 31-3-1999. The respondent argued that the claims were suspended during this period under section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985 (SICA). The court agreed that the period during which the scheme was under implementation should be excluded from the limitation period. However, the court found that the claims, particularly the interest claims, required detailed scrutiny and evidence, which was not possible in the winding-up proceedings.4. Jurisdiction of the High Court to entertain the winding-up petitions:The respondent argued that the High Court had no jurisdiction to entertain the winding-up petitions as the BIFR scheme was binding on all parties, and any grievance should be addressed to the BIFR. The court, however, held that the petitioners had the right to take legal action after the implementation period of the scheme ended on 31-3-1999.5. Applicability of the law of limitation:The respondent contended that the claims were barred by limitation as the BIFR closed the case on 8-1-1996, and the petitions were filed in January 2002. The court held that the period during which the scheme was under implementation (till 31-3-1999) should be excluded from the limitation period, making the petitions within the permissible time frame.Conclusion:The court directed the respondent company to deposit Rs. 1 lakh and Rs. 1.5 lakhs towards the dues of the petitioners within eight weeks. The petitioners were allowed to file civil suits to prove their claims, and if the suits were not filed within three months, the respondent could withdraw the deposited amount. The court emphasized that any opinions expressed were prima facie and would not affect the merits of the case in the civil court. Both petitions were disposed of without any order as to costs.