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of <h1>Jurisdiction of BIFR Over Winding-up Petitions Upheld, Emphasizing Transparency and Integrity</h1> <h3>M/s. Foremost Industries (India) Versus The A.A.I.F.R. & Others</h3> The court held that the Board for Industrial and Financial Reconstruction (BIFR) retains jurisdiction even when a winding-up petition is pending or an ... - Issues:1. Jurisdiction of BIFR when winding up petition is pending or order passed.2. Effect of appointment of official liquidator on BIFR's jurisdiction.3. Interpretation of winding up order under Companies Act.4. Clean hands doctrine and fraudulent disposal of assets.5. Discretion of BIFR in conducting inquiries under Section 16(1) of the Act.Analysis:1. The main issue in this case was whether the Board for Industrial and Financial Reconstruction (BIFR) can proceed when a winding-up petition is pending or an order of winding up has been passed under the Companies Act, 1956. The court examined the jurisdiction of BIFR in such situations, particularly in reference to a case where an official liquidator had been appointed. The court concluded that the BIFR should take up the reference in accordance with the law, as the appointment of an official liquidator does not automatically take away BIFR's jurisdiction.2. The court referred to a previous judgment by the Apex Court to support its conclusion. The Apex Court had clarified that even after the appointment of an official liquidator in a winding-up petition, the Board of Directors retains powers for the company's rehabilitation. The court emphasized that the winding-up order is not the end of proceedings but the beginning of a process, and the company's assets are protected for the benefit of creditors. Therefore, the BIFR's jurisdiction is not ousted by the appointment of an official liquidator.3. The court also addressed the issue of clean hands doctrine and fraudulent disposal of assets raised by some respondents. It noted the importance of transparency and integrity in legal proceedings, warning against siphoning funds through fraudulent disposal of assets. The court emphasized the need for parties to act in good faith and not engage in activities that defraud creditors.4. Regarding the discretion of BIFR in conducting inquiries under Section 16(1) of the Act, the court clarified that the BIFR has wide discretion in determining the procedure for inquiries. Once a reference is registered, it is mandatory for the BIFR to conduct an inquiry. The Act aims to revive and rehabilitate sick industries before winding them up under the Companies Act. The court highlighted the importance of hearing all parties involved and protecting assets from disposal that could harm creditors.5. In conclusion, the court set aside the orders passed by both BIFR and AAIFR, directing the parties to appear before BIFR for necessary orders. The court emphasized the need for fresh orders to be passed in accordance with the law. Additionally, the provisions of Section 22 of the Act would apply, and the petition was disposed of accordingly.
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