2005 (8) TMI 744 - HC - Companies Law

Court dismisses winding-up petition against Vegepro Foods due to outstanding dues, allows petitioner to seek BIFR approval.

The court dismissed the winding up petition filed by U.P. Stock Exchange Association Ltd. against Vegepro Foods and Feeds Ltd. for outstanding dues, with ... Bar on winding up proceedings during BIFR reference under Section 22(1) of the Sick Industrial Companies (Special Provisions) Act, 1985 - registration of reference before BIFR under Section 15(1) of the Act of 1985 - requirement of BIFR sanction to institute or proceed with winding up during pendency of reference - winding up petition deemed to commence on filing - suspension of limitation during pendency of proceedings under Section 22(5) of the Act of 1985Bar on winding up proceedings during BIFR reference under Section 22(1) of the Sick Industrial Companies (Special Provisions) Act, 1985 - registration of reference before BIFR under Section 15(1) of the Act of 1985 - requirement of BIFR sanction to institute or proceed with winding up during pendency of reference - winding up petition deemed to commence on filing - Effect of a registered reference before BIFR on the maintainability of a winding up petition and the consequence where no BIFR permission has been obtained. - HELD THAT: - The Court held that once a reference under Section 15(1) of the Act of 1985 is registered by BIFR, the bar in Section 22(1) comes into operation and, subject to the statutory exceptions, no company petition for winding up of that company shall lie or be proceeded with. The legislative purpose is to prevent proceedings against the company's assets or winding up while the BIFR examines the company's sickness so as to preserve the status quo and enable effective remedial measures. The Court applied this principle to the facts: the reference in respect of the respondent company had been registered and the petitioner had not obtained permission from BIFR to file or proceed with the winding up petition. Consequently the petition could not be entertained and must be dismissed at this stage, with liberty to seek BIFR's sanction or await conclusion of the proceedings under the Act of 1985. [Paras 5, 6, 7]Company petition dismissed for want of maintainability; petitioner granted liberty to apply to BIFR for permission or await conclusion of the BIFR proceedings.Suspension of limitation during pendency of proceedings under Section 22(5) of the Act of 1985 - Whether the period of limitation is affected during the pendency of proceedings before BIFR or the Appellate Authority. - HELD THAT: - The Court noted that under the statutory scheme the period of limitation is suspended during the pendency of proceedings before BIFR or the Appellate Authority. This follows from Section 22(5) of the Act of 1985 and was applied to reassure that limitation will remain suspended while the reference or any appeal therefrom is pending. [Paras 7]Period of limitation suspended during the pendency of proceedings before BIFR or the Appellate Authority.Final Conclusion: The winding up petition is dismissed for want of maintainability because a BIFR reference had been registered and no sanction to proceed was obtained; petitioner may apply to BIFR for permission or await the conclusion of BIFR proceedings, and the period of limitation remains suspended during such pendency. Issues:1. Winding up petition filed by U.P. Stock Exchange Association Ltd. against Vegepro Foods and Feeds Ltd. for outstanding dues.2. Contention regarding the applicability of Section 22(1) of the Sick Industrial Companies (Special Provisions) Act, 1985.3. Interpretation of the legal provisions concerning the timing of winding up proceedings in relation to the BIFR reference.4. Arguments regarding the necessity of seeking permission from BIFR before initiating winding up proceedings.5. Dismissal of the company petition with the option to apply for permission from BIFR or await the conclusion of proceedings under the Act of 1985.Analysis:1. The U.P. Stock Exchange Association Ltd. filed a winding up petition against Vegepro Foods and Feeds Ltd. for outstanding dues amounting to Rs. 2,40,750.00. The petition was based on Section 433(1)(e) of the Companies Act, 1956, following a statutory demand notice issued on 19.4.2003.2. The respondent company argued that since a reference was made to the Board for Industrial and Financial Reconstruction (BIFR) under Section 15(1) of the Act of 1985, the provisions of Section 22(1) of the Act would apply. This section prohibits winding up proceedings until the proceedings under the Act of 1985 are concluded.3. The interpretation of Section 22(1) was crucial in determining the timing of winding up proceedings vis-a-vis the BIFR reference. The respondent relied on legal precedents to support the contention that the bar created by the Act of 1985 would prevent the initiation of winding up proceedings until the BIFR's decision is obtained.4. The argument regarding seeking permission from BIFR before initiating winding up proceedings was raised by both parties. The petitioner had not applied for permission, leading to the conclusion that no exception could be taken in this case.5. Ultimately, the company petition was dismissed with the option given to the petitioner to either seek permission from BIFR to file a winding up petition or wait for the conclusion of proceedings under the Act of 1985. It was emphasized that the period of limitation would remain suspended during the pendency of proceedings before BIFR or AAIFR under the Act of 1985.