2015 (12) TMI 524 - HC - Companies Law

Application to Stay Winding-Up Dismissed for Non-Disclosure & Lack of Authority

Kemrock Industries And Exports Limited (In Liqn.) Versus Official Liquidator Of Kemrock Industries And Exports Ltd. (In Liqn.)

The application seeking to stay winding-up proceedings and possession by the Official Liquidator was dismissed. The Court found non-disclosure of material ... Winding up proceedings - application for to in abeyance the winding up proceedings against the company including impugned action of taking physical possession of the running company by the Official Liquidator as informed vide letter dated 26.10.2015 till the reference case/appeal is finally disposed of by the authorities under the SICA - maintainability of application - Held that:- As per Section 445 of the Companies Act, 1956 when the order of winding up passed by this Court, all the officers of the company in liquidation shall be deemed to be discharged except when the business of the company continued. It is an admitted fact that the Chief Financial Officer, who has verified the present application has not produced the authority given by the Board of Directors for filing the present proceedings, when inquired it is stated that the Board of Directors had given the authority to Mr.Sanjeev Jain, Chief Financial Officer to file the proceedings before this Court and to file the affidavits in May, 2014. However, admittedly after the order of winding up is passed by this Court, applicant is having no authority from the concerned Board of Directors to initiate the proceedings before this Court, therefore, in absence of valid authority given to the Chief Financial Officer, this application is not maintainable and therefore also the same is required to be dismissed. Symbolic possession of the properties of the applicant – company in liquidation has been taken over by the provisional liquidator in August 2014, inventory has been prepared. Lead secured creditor of all consortium bank has already initiated proceedings under Section 13 of the SARFAESI Act and therefore also as per further proviso of Section 15(1) of SICA, the reference itself is abated. However, we may not decide that issue at this stage. But, primafacie, this contention is required to be kept in mind while considering this application. Further, all the preconditions of Section 15 of SICA are complied with or not is also not gone into by this Court in detail as it is not required in the present proceedings. In view of the aforesaid facts, as a Company Judge, this Court cannot modify the order passed by the Hon'ble Division Bench and therefore the applicant is required to approach before the Hon'ble Division Bench for the relief prayed for in the present proceedings, the impugned communication dated 26.10.2015 is nothing but an action taken by the Official Liquidator in pursuance to the direction given by this Court and therefore, it is not proper for this Court to entertain this application as the same is not maintainable. Issues Involved:1. Urgent circulation request for the application.2. Request to stay and keep in abeyance the winding-up proceedings.3. Pending inquiry under Section 16 of SICA.4. Authority of the Official Liquidator to take possession.5. Alleged suppression of material facts by the applicant.6. Authority of the Chief Financial Officer to file the application.7. Compliance with Section 15(1) of SICA.8. Symbolic possession already taken by the Official Liquidator.9. Applicability of the Hon'ble Supreme Court decisions cited by the applicant.10. Maintainability of the application.Detailed Analysis:Urgent Circulation Request for the ApplicationThe learned advocate Mr. S.S. Panesar requested urgent circulation of the application, which was granted by the Court for 2:30 PM. Consequently, the Registry placed the papers for hearing.Request to Stay and Keep in Abeyance the Winding-up ProceedingsThe applicant, Kemrock Industries and Exports Limited (in liquidation), sought to stay the winding-up proceedings, including the impugned action of taking physical possession by the Official Liquidator, until the reference case/appeal is disposed of by the authorities under the Sick Industrial Companies (Special Provisions) Act, 1986 (SICA).Pending Inquiry Under Section 16 of SICAThe applicant filed a reference under Section 15 of SICA before the Board for Industrial and Financial Reconstruction (BIFR), which was registered as BIFR Case No. 138 of 2015. The inquiry under Section 16 of SICA was pending. The applicant contended that under Section 22 of SICA, no proceedings for winding up or execution against the properties of the industrial company would lie or proceed further without the consent of the Board.Authority of the Official Liquidator to Take PossessionThe applicant argued that the Official Liquidator was not empowered to take possession of the company's property due to the pending inquiry under Section 16 of SICA. The applicant relied on Supreme Court decisions, including Rishabh Agro Industries Ltd. v. P.N.B. Capital Services Ltd. and KSL and Industries Limited v. Arihant Threads Limited, which emphasized the protection of sick industrial companies from such proceedings.Alleged Suppression of Material Facts by the ApplicantThe respondent, represented by learned advocate Mr. J.S. Yadav, argued that the application should be dismissed due to the suppression of material facts. The applicant did not disclose the orders passed by the Company Judge and the Hon'ble Division Bench, which directed the winding up of the company and the taking over of its assets by the Official Liquidator.Authority of the Chief Financial Officer to File the ApplicationThe respondent contended that the Chief Financial Officer (CFO) of the applicant company did not have the authority to file the application. The Court noted that the CFO was given authority by the Board of Directors in May 2014, but this authority was not valid after the winding-up order was passed.Compliance with Section 15(1) of SICAThe respondent argued that the conditions laid down in Section 15(1) of SICA were not satisfied, and therefore, the BIFR should not have registered the reference. Furthermore, the lead secured creditor had initiated proceedings under the SARFAESI Act, which, under the further proviso of Section 15(1) of SICA, would abate the reference.Symbolic Possession Already Taken by the Official LiquidatorThe Official Liquidator had already taken symbolic possession of the company's properties in August 2014 and prepared an inventory. The current action was merely implementing the directions of the Company Judge, confirmed by the Hon'ble Division Bench.Applicability of the Hon'ble Supreme Court Decisions Cited by the ApplicantThe Court found that the Supreme Court decisions cited by the applicant were not applicable to the present case. The facts differed significantly, particularly since the Hon'ble Division Bench had dismissed the applicant's appeal, and the order was not challenged before a higher forum.Maintainability of the ApplicationThe Court concluded that the application was not maintainable for several reasons:- The applicant did not disclose all relevant material facts and orders.- The CFO lacked valid authority to file the application after the winding-up order.- The applicant should have approached the Hon'ble Division Bench for relief, as the Company Judge could not modify the Division Bench's order.ConclusionThe application was dismissed on the grounds of non-disclosure of material facts, lack of authority by the CFO, and the necessity for the applicant to seek relief from the Hon'ble Division Bench. The Court emphasized that the Official Liquidator's actions were in compliance with the directions of the Company Judge and the Division Bench.