TaxTMI Login
Just a moment...
Press 'Enter' to add multiple search terms. Rules for Better Search
Use comma for multiple locations.
---------------- For section wise search only -----------------
Accuracy Level ~ 90%
of 
Press 'Enter' after typing page number.
of Press 'Enter' after typing page number.
No Folders have been created
Are you sure you want to delete "My most important" ?
NOTE:
of Press 'Enter' after typing page number.
of Press 'Enter' after typing page number.
All Case Laws
of Press 'Enter' after typing page number.
of Press 'Enter' after typing page number.
All Case Laws
Join Channel
Note
Bookmark
Share
Don't have an account? Register Here
of Press 'Enter' after typing page number.
Issues: (i) Whether the winding up proceedings had already been permanently stayed or a formal order of permanent stay was still required; (ii) what should be the cut-off date for determining claims of creditors and workers; (iii) whether the three-member Committee of Management could continue or required substitution.
Issue (i): Whether the winding up proceedings had already been permanently stayed or a formal order of permanent stay was still required.
Analysis: The winding up order had been kept in abeyance at different stages, and the company had continued as a going concern under a revival scheme and successive court-monitored arrangements. The Court held that there was no earlier final order granting permanent stay under Section 466 of the Companies Act, 1956, though the factual position showed that the company was effectively functioning as if such stay existed. The statutory requirements for permanent stay, including satisfaction on proof that all winding up proceedings ought to be stayed, were not yet formally completed by the Company Court.
Conclusion: No formal permanent stay had yet been passed, but the circumstances justified a formal order of permanent stay after the directed audit and claim verification exercise.
Issue (ii): What should be the cut-off date for determining claims of creditors and workers.
Analysis: The Court rejected the view that the cut-off date should be the date of reference to BIFR. It held that claims had to be assessed with reference to the winding up order, because the statutory and procedural framework for winding up fixes the relevant position as on that date. The Court also noted that the scheme, the deposited funds, and the revival arrangements did not justify shifting the cut-off date away from the winding up order date.
Conclusion: The cut-off date was held to be 28 October 1987, the date of the winding up order.
Issue (iii): Whether the three-member Committee of Management could continue or required substitution.
Analysis: The three-member committee had itself expressed unwillingness to continue, and the Court found that the existing arrangement was no longer workable for the limited purpose of audit, inventory, and claim ascertainment. To secure a neutral and effective process, a one-member committee headed by a retired Chief Justice was directed to conduct the exercise with the assistance of a chartered accountant and the Official Liquidator. The earlier direction constituting the three-member committee was therefore not sustained.
Conclusion: The three-member Committee of Management was set aside and replaced by a one-member committee for the limited purpose directed by the Court.
Final Conclusion: The impugned order was modified to the extent necessary to fix the correct cut-off date, restructure the supervisory mechanism, and move the matter toward a formal permanent stay of winding up after audit and claim verification. The appeal was disposed of with consequential directions.
Ratio Decidendi: A winding up order, though kept in abeyance or functionally treated as stayed in a continuing revival arrangement, does not become permanently stayed unless the statutory conditions for stay under Section 466 of the Companies Act, 1956 are formally satisfied, and claims in liquidation must ordinarily be assessed with reference to the date of the winding up order.
TaxTMI 
