SICA reference barred after debt assignment to reconstruction companies, so section 22 protection against winding-up was unavailable.

Where a company's debts had already been assigned to asset reconstruction companies, a later reference before the BIFR was barred by the second proviso to section 15(1) of SICA and was non-est in law. The Court held that this proviso operates independently and does not require the 75% condition found in the third proviso, so the statutory bar applied on the admitted facts. Because the reference was incompetent, the company could not invoke section 22 to stay the winding-up proceedings. The winding-up petitions were therefore allowed to proceed, and the company was found commercially insolvent and ordered to be wound up.

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Issues: (i) Whether a reference filed before the Board for Industrial and Financial Reconstruction after assignment of the company's debts to asset reconstruction companies was barred under the second proviso to section 15(1) of the Sick Industrial Companies (Special Provisions) Act, 1985 and therefore non-est. (ii) Whether the company could claim protection under section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985 to prevent continuation of the winding-up petitions.

Issue (i): Whether a reference filed before the Board for Industrial and Financial Reconstruction after assignment of the company's debts to asset reconstruction companies was barred under the second proviso to section 15(1) of the Sick Industrial Companies (Special Provisions) Act, 1985 and therefore non-est.

Analysis: The second proviso to section 15(1) applies where, after commencement of the SARFAESI regime, financial assets have been acquired by a securitisation or reconstruction company under section 5(1). The Court held that this proviso operates independently of the third proviso and does not require the 75% threshold found there. On the admitted facts, the debts had already been assigned to asset reconstruction companies before the reference was filed and registered before the Board. In that situation, the filing itself was hit by the statutory embargo. The Court rejected an interpretation that would import the 75% condition into the second proviso, holding that the language of the provision was plain and could not be rewritten on considerations of hardship or legislative purpose.

Conclusion: The reference was barred and non-est in law; this issue was decided against the company and in favour of the petitioner.

Issue (ii): Whether the company could claim protection under section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985 to prevent continuation of the winding-up petitions.

Analysis: Section 22 protection depends upon a valid reference pending before the Board. Since the reference itself was held to be incompetent under the second proviso to section 15(1), the statutory suspension of proceedings could not be invoked. The Court therefore held that the winding-up petitions were not barred and could proceed on merits. On the admitted liability and absence of any defence on merits, the company was found commercially insolvent and unable to pay its debts.

Conclusion: Section 22 protection was unavailable; this issue was decided against the company and in favour of the petitioner.

Final Conclusion: The winding-up petition was allowed, the company was ordered to be wound up, and the connected company petitions were disposed of as no longer surviving.

Ratio Decidendi: Where debts are already acquired by asset reconstruction companies, a subsequent reference to the Board is barred by the second proviso to section 15(1) of SICA, and a reference so filed cannot attract the protective bar of section 22.

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