Maintainability of sick company reference denied where plant and machinery were already sold before filing, defeating section 22 protection.

The protective regime under the Sick Industrial Companies (Special Provisions) Act, 1985 could be invoked only if the reference was maintainable on the date of filing. Because the petitioner had already sold and lost possession of its plant and machinery before that date, it no longer qualified as an industrial undertaking and the reference failed. The subsequent auction sale of the land and building was not treated as void on the petitioner's challenge, since the threshold condition for section 22(1) protection itself was absent and later events could not cure that defect. The writ petition therefore failed and the impugned orders were upheld.

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Issues: (i) Whether the reference under the Sick Industrial Companies (Special Provisions) Act, 1985 was maintainable when the petitioner had ceased to be an industrial undertaking after sale and possession of its plant and machinery before the date of reference. (ii) Whether the auction sale of the land and building during pendency of the reference was void for want of prior permission under section 22(1) of the Sick Industrial Companies (Special Provisions) Act, 1985.

Issue (i): Whether the reference under the Sick Industrial Companies (Special Provisions) Act, 1985 was maintainable when the petitioner had ceased to be an industrial undertaking after sale and possession of its plant and machinery before the date of reference.

Analysis: The relevant date for examining maintainability was the date of filing of the reference. By that date, the plant and machinery had already been sold and possession had passed to the auction purchaser. Once the petitioner was divested of its plant and machinery, it no longer answered the description of an industrial undertaking for the purposes of the statutory scheme. The later argument that a new plant could be set up did not assist the petitioner because the protective regime applies only where the reference is otherwise maintainable on the date of filing.

Conclusion: The reference was not maintainable and the finding was against the petitioner.

Issue (ii): Whether the auction sale of the land and building during pendency of the reference was void for want of prior permission under section 22(1) of the Sick Industrial Companies (Special Provisions) Act, 1985.

Analysis: Although the reference was pending when the land and building were auctioned, several subsequent events had occurred, including confirmation of sale and transfer of rights. More importantly, the petitioner's challenge was rendered academic because the reference itself was not maintainable. The statutory objection based on want of permission could not improve the petitioner's position where the threshold condition for invoking the protective bar had failed. The filing of an application by the creditor for permission did not alter that result.

Conclusion: The sale was not treated as void on the petitioner's challenge, and the contention failed.

Final Conclusion: The impugned orders were upheld, the writ petition failed, and the petitioner obtained no relief.

Ratio Decidendi: The protective and prohibitory provisions of the Sick Industrial Companies (Special Provisions) Act, 1985 can be invoked only by an industrial undertaking whose reference is maintainable on the date of filing; if the company had already ceased to be such an undertaking, objections to subsequent recovery or sale proceedings do not avail it.

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