2004 (5) TMI 571 - HC - Indian Laws

Appeal allowed, winding-up order quashed. Stay on proceedings pending Sick Industrial Companies Act appeal.

Modi Rubber Limited A Company Versus Madura Coats Limited

The appeal by Modi Rubber Limited was allowed, and the impugned winding-up order dated 12.3.2004 was quashed. The Court directed the proceedings before ... - Issues Involved:1. Winding up of Modi Rubber Limited due to inability to pay debts.2. Impleadment application by Phillips Carbon Black Limited.3. Adjournments and delays by Modi Rubber Limited.4. Reference to the Board of Financial Reconstruction (BIFR) under the Sick Industrial Companies (Special Provisions) Act, 1985.5. Applicability of Section 22 of the Sick Industrial Companies Act.6. Maintainability of the appeal by Modi Rubber Limited.Issue-wise Detailed Analysis:1. Winding up of Modi Rubber Limited due to inability to pay debts:The case involved several creditors filing petitions for the winding up of Modi Rubber Limited on the grounds of its inability to pay debts. The Court's order on 13.3.2002 found the company unable to pay its debts and restricted it from dealing with its assets without prior permission. The Court noted an admitted liability of Rs. 3,22,91,636/- and reiterated the company's inability to pay its debts on 21.5.2002, leading to the admission of the petition and issuance of an advertisement under Rule 24 of the Rules.2. Impleadment application by Phillips Carbon Black Limited:An impleadment application by Phillips Carbon Black Limited was allowed, indicating their interest in the proceedings.3. Adjournments and delays by Modi Rubber Limited:The company repeatedly sought adjournments, citing ongoing negotiations with Apollo Tyres Limited and other entities. The Court observed these as dilatory tactics and frivolous excuses, noting the lack of substantial progress or complete proposals from Modi Rubber Limited.4. Reference to the Board of Financial Reconstruction (BIFR) under the Sick Industrial Companies (Special Provisions) Act, 1985:Modi Rubber Limited's Board of Directors passed a resolution on 6.12.2003 to file a reference to the BIFR, which was registered on 17.3.2004. The appellant argued that the inquiry under Section 16(1) of the Sick Industrial Companies Act commenced upon the receipt of the reference application by BIFR on 4.2.2004, thus invoking the stay under Section 22 of the Act.5. Applicability of Section 22 of the Sick Industrial Companies Act:The Court disagreed with the appellant's interpretation, stating that the inquiry under Section 16(1) begins only after the registration of the reference, which occurred on 17.3.2004. Therefore, the impugned order dated 12.3.2004 did not violate Section 22 as the registration was not completed at that time. The Court emphasized that an appeal is a continuation of the original proceedings, and the appellant would benefit from Section 22 due to the registration during the appeal's pendency.6. Maintainability of the appeal by Modi Rubber Limited:The Court addressed the issue of whether the Board of Directors could file an appeal post the winding up order. It referred to the Supreme Court's decision in Rishabh Agro Industries Ltd. v. P.N.B. Capital Services Ltd., which allowed the Board of Directors to move the BIFR and implied the right to file an appeal. The Court rejected the respondent's argument that only the Official Liquidator could file the appeal, noting the special provisions of the Sick Industrial Companies Act aimed at the revival of sick companies.Conclusion:The appeal was allowed, and the impugned order dated 12.3.2004 was quashed. The proceedings before the Company Judge were directed to remain in abeyance until the disposal of the proceedings/appeal before the authorities under the Sick Industrial Companies Act. The Court emphasized the need for a serious effort to revive the company under the special provisions of the Sick Industrial Companies Act, which prevails over the general provisions of the Companies Act.