Sick industrial company reference barred after assignment of debt to a securitisation company; winding up proceedings sustained.

A later reference under the Sick Industrial Companies regime is barred where, before the reference is made, a securitisation or reconstruction company has acquired the financial assets under the 2002 Act. The first proviso to section 15(1) operates independently of the second proviso, which concerns abatement of a pending reference after measures under section 13(4) are taken by secured creditors holding at least three-fourths in value. Because the debt had already been assigned, the reference was not maintainable and protection under section 22 could not be invoked. The winding up petition was also found properly admitted and advertised on the basis of an undisputed debt and non-compliance with the interim deposit direction.

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Issues: (i) Whether a reference under the Sick Industrial Companies (Special Provisions) Act, 1985 was maintainable, and whether the protections of that Act applied after acquisition of the debt by a securitisation company; (ii) Whether the order admitting and advertising the winding up petition called for interference.

Issue (i): Whether a reference under the Sick Industrial Companies (Special Provisions) Act, 1985 was maintainable, and whether the protections of that Act applied after acquisition of the debt by a securitisation company.

Analysis: The first proviso to Section 15(1) of the Sick Industrial Companies (Special Provisions) Act, 1985, inserted by the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, bars a fresh reference where financial assets have been acquired by a securitisation or reconstruction company under Section 5(1) of the 2002 Act. That proviso operates independently of the second proviso, which deals with abatement of a pending reference only when secured creditors representing not less than three-fourths in value have taken measures under Section 13(4). The statutory definition of financial asset includes secured as well as unsecured debts. Since the debt had been assigned to the respondent before the reference was made, the later reference was not maintainable, and Section 22 of the 1985 Act could not be invoked to resist the proceedings.

Conclusion: The reference before the Board for Industrial and Financial Reconstruction was not maintainable, and the appellant could not claim protection under Section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985.

Issue (ii): Whether the order admitting and advertising the winding up petition called for interference.

Analysis: The record showed that financial assistance had been availed of, the statutory demand remained unanswered, no effective reply was filed to the winding up petition, and the debt was not genuinely disputed. The limited deposit directed during the interim stay had also not been complied with in full. On these facts, there was no basis to disturb the company court's order admitting and advertising the petition.

Conclusion: The order admitting and advertising the winding up petition was upheld.

Final Conclusion: The appeal failed in its challenge both to the applicability of the sick industrial companies regime and to the company court's decision to proceed with winding up, leaving the impugned order undisturbed.

Ratio Decidendi: A later reference under the sick industrial companies legislation is barred where, before the reference, a securitisation or reconstruction company has acquired the financial assets under the 2002 Act; the two provisos to Section 15(1) of the 1985 Act operate in different fields and cannot be conflated.

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