Settlement of secured debts can justify recall of winding up and fresh rehabilitation review by the specialised forum.

Subsequent settlement of secured creditors' dues and other material post-order developments justified recall of the winding up order, because the company's financial position had materially changed after the original finding of non-viability. Once the secured debts were discharged, the question of revival required fresh consideration by the specialised rehabilitation forum rather than a final judicial closure. The reference was therefore rejected and the matter remitted for reconsideration of rehabilitation on the basis of a new proposal.

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Issues: (i) Whether the winding up order deserved to be recalled in view of the settlement of the secured creditors' dues and the subsequent financial developments. (ii) Whether, after recall of the winding up order, the reference before the Board for Industrial and Financial Reconstruction should be rejected and the matter remitted for fresh consideration of rehabilitation.

Issue (i): Whether the winding up order deserved to be recalled in view of the settlement of the secured creditors' dues and the subsequent financial developments.

Analysis: The winding up had been ordered on the footing that the company was not viable and its rehabilitation had not been tied up. After the order, the secured creditors' dues were shown to have been fully settled, and the materials placed before the Court indicated that the payments had been made by the ex-directors without creating any liability on the company. In these circumstances, the post-order developments materially altered the position that had existed when the winding up order was passed.

Conclusion: The winding up order was recalled.

Issue (ii): Whether, after recall of the winding up order, the reference before the Board for Industrial and Financial Reconstruction should be rejected and the matter remitted for fresh consideration of rehabilitation.

Analysis: Once the secured debts stood discharged, the question of the company's revival required a fresh examination by the specialised rehabilitation forum. The Court treated the changed financial position as requiring the Board to consider whether the company could survive on its own and whether a fresh rehabilitation proposal could be entertained, rather than closing the matter finally at the judicial level.

Conclusion: The reference was rejected and the matter was remitted to the Board for Industrial and Financial Reconstruction for fresh consideration of rehabilitation on the basis of a new proposal.

Final Conclusion: The company obtained relief from the winding up order, but the question of revival and rehabilitation was left to be reconsidered by the specialised Board on a fresh proposal, so the matter was not finally concluded before the Court.

Ratio Decidendi: Subsequent settlement of secured debts and other material post-order developments can justify recall of a winding up order and require the rehabilitation issue to be reconsidered by the competent specialised forum.

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