Repeated sick-company references cannot automatically trigger Section 22 protection; courts may require direct Board scrutiny to prevent misuse.

Repeated references under the Sick Industrial Companies (Special Provisions) Act, 1985 can be scrutinised to prevent abuse of the statutory process, especially where earlier references were rejected on merits and the company had been found not genuinely sick. The Court recognised the scheme's balance between creditor recovery and rehabilitation, but held that repeated filings should not be mechanically entertained or automatically extend the protection of Section 22. It also stated that the Registrar cannot perform the Board's adjudicatory role, yet where prior references have failed, the matter may be required to be examined directly by the Board before statutory protection continues. The Board was directed to frame practice directions to curb such misuse.

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Issues: Whether, in the face of repeated rejected references under the Sick Industrial Companies (Special Provisions) Act, 1985, the Court should issue directions to prevent misuse of the statutory process and to ensure that fresh references are not mechanically entertained and do not automatically confer protection under Section 22.

Analysis: The petition was founded on a pattern of repeated references made after earlier references had been rejected on merits and on findings that the company had manipulated accounts and was not entitled to claim sickness. The Court held that the statutory scheme of the Sick Industrial Companies (Special Provisions) Act, 1985 creates a delicate balance between recovery by creditors and rehabilitation of a genuinely sick industrial company, but that the machinery can be abused if repeated references are used only to secure the suspension of proceedings under Section 22. While the Registrar cannot exercise the adjudicatory function of the Board, the Court held that where earlier references have already been rejected, the matter can be required to be examined directly by the Board before the benefit of the statutory protection is continued, and appropriate directions can be framed to prevent repeated misuse.

Conclusion: The writ petition was allowed in part and the Board was directed to formulate necessary practice directions within three months to address such repeated references and prevent misuse of the statutory process.

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