Sick industrial company rehabilitation under SICA excludes parallel company court proceedings for compromise or arrangement during pending reference.

A sick industrial company that has made a reference under section 15 of the Sick Industrial Companies (Special Provisions) Act, 1985 cannot maintain a petition under sections 391 to 394 of the Companies Act, 1956 for a scheme of arrangement or compromise while the reference remains pending. The special Act creates an exhaustive rehabilitation framework under the control of the Board for Industrial and Financial Reconstruction, and parallel company court proceedings would produce conflicting control over assets and competing schemes. The Act also prevails over the Companies Act to the extent of inconsistency because it is a later, special, overriding code for revival and rehabilitation of sick industrial companies. The company petition was therefore held not maintainable.

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Issues: (i) Whether a company that has made a reference under section 15 of the Sick Industrial Companies (Special Provisions) Act, 1985 can maintain a petition under sections 391 to 394 of the Companies Act, 1956 for sanction of a scheme of arrangement or compromise during pendency of that reference. (ii) Whether the Sick Industrial Companies (Special Provisions) Act, 1985 overrides the Companies Act, 1956 in relation to schemes for revival, rehabilitation, compromise, or arrangement of a sick industrial company.

Issue (i): Whether a company that has made a reference under section 15 of the Sick Industrial Companies (Special Provisions) Act, 1985 can maintain a petition under sections 391 to 394 of the Companies Act, 1956 for sanction of a scheme of arrangement or compromise during pendency of that reference.

Analysis: The statutory scheme of the special enactment places a sick industrial company under the control of the Board for Industrial and Financial Reconstruction from the stage of reference, enquiry, and preparation or sanction of a revival scheme. The provisions dealing with rehabilitation, financial reconstruction, and implementation of schemes form an exhaustive mechanism for sick industrial companies. Allowing parallel proceedings under the Companies Act for sanction of an arrangement or compromise would create inconsistent forums, conflicting control over assets, and competing schemes. The reference to the Board therefore excludes the company court's jurisdiction in respect of such matters while the reference remains pending.

Conclusion: The company court has no jurisdiction to entertain or sanction a scheme of arrangement or compromise under sections 391 to 394 of the Companies Act, 1956 during pendency of a reference under section 15 of the Sick Industrial Companies (Special Provisions) Act, 1985.

Issue (ii): Whether the Sick Industrial Companies (Special Provisions) Act, 1985 overrides the Companies Act, 1956 in relation to schemes for revival, rehabilitation, compromise, or arrangement of a sick industrial company.

Analysis: The special enactment is later in point of time and is a complete code for sick industrial companies. Its non obstante clause gives it overriding effect over inconsistent provisions of other laws. The Court held that the subject of revival and rehabilitation of a sick industrial company, including schemes affecting creditors and shareholders, is covered by the special Act to the exclusion of the Companies Act to the extent of inconsistency. The statutory control of the Board over the company's assets and rehabilitation process is incompatible with parallel company court proceedings under the general company law.

Conclusion: The Sick Industrial Companies (Special Provisions) Act, 1985 prevails over the Companies Act, 1956 to the extent of inconsistency in matters concerning sick industrial companies and their schemes.

Final Conclusion: The reference was answered against the maintainability of the company petition, the contrary earlier views were overruled, and the petitions were dismissed because the special statutory regime under SICA excluded the company court's parallel jurisdiction.

Ratio Decidendi: Where a special and later statute creates a complete code with an overriding clause for sick industrial companies, proceedings for compromise or arrangement under the general company law cannot be entertained during pendency of a statutory reference before the rehabilitation board.

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