TaxTMI 
TaxTMI 
TaxTMI 
1999 (1) TMI 415
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....prayed that the official liquidator be restrained from taking further steps as per the order of this court dated November 13, 1998, without obtaining any prior permission from the BIFR. A few facts need be stated. A petition for winding up was filed in this court on May 18, 1998. According to the company, the accounts were made up on October 15, 1998. The company found that their net worth had been eroded by more than 50 per cent, and consequently at a board meeting held on November 3, 1998, they passed a resolution to move the BIFR under the provisions of the Sick Industrial Companies (Special Provisions) Act, 1985. It is the case of the company that thereafter they sent the papers to their counsel at Delhi for lodging the application. They received the papers from their counsel on November 11, 1998. The application was signed by the chairman and managing director on November 12, 1998. The papers were thereafter sent to the advocate at Delhi, on November 18, 1998, and the application was lodged with the BIFR on November 19, 1998. The said application was registered with the BIFR on December 1, 1998. A communication to that effect dated December 1, 1998, was sent to the company, ....
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.... stand suspended in spite of registration of the case on December 1, 1998 ? In so far as the first contention is concerned, reference needs to be made to section 450(3) of the Companies Act, which reads as under : "Where a provisional liquidator is appointed by the court, the court may limit and restrict his powers by the order appointing him or by a subsequent order but otherwise he shall have the same powers as a liquidator." From a reading of this sub-section, it is sought to be contended that unless the court has limited or restricted the powers of the liquidator he has all the powers of the liquidator and in these circumstances the board of directors cannot act on behalf of the company and to that extent has become defunct till the continuation of the appointment of the liquidator. It is, therefore, contended that the resolution passed by the board and/or for that matter the decision to refer the matter to the BIFR after the petition was admitted and the order appointing the provisional liquidator was passed is non est as it could not have been registered at the instance of a defunct board. The question is whether on the appointment of a provisional liquidator the board bec....
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....nd the purpose behind the Act is to enable a sick company to stand on its own legs. The official liquidator is appointed so as to protect the assets of a company so that in the event a company is wound up the assets are available to its creditors, secured and unsecured and others, who may be entitled to share. It is not the object of the official liquidator to start the process of rehabilitation of the company. Therefore, these will not be powers to be exercised by the official liquidator. If this be so, then if the test applied in Union Accident Insurance Co. Ltd., In re [1972] 1 All ER 1105 (Ch. D.) is applied to the facts of this case, it must be held that this is a residuary power in the board of directors and as such they will have powers to take steps with the aim and object of rehabilitating the company. The judgment in Union Accident Insurance Co. Ltd., In re [1972] 1 All ER 1105 (Ch. D.) has also been considered by a single judge of the Delhi High Court in Anil Kumar Sachdeva v. Four 'A' Asbestos (P.) Ltd. [1980] 50 Comp. Cas. 122. The learned single judge of the Delhi High Court relying on the observation of Plowman J. held that there are still residuary powers in the boa....
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....morandum and articles of association of the industrial company or any other instrument having effect under the said Act or other law, no proceedings for the winding up of the industrial company or for execution, distress or the like against any of the properties of the industrial company or for the appointment of a receiver in respect thereof and no suit shall lie or be proceeded with further, except with the consent of the board or, as the case may be, the Appellate Authority. The other provision which needs to be referred to is section 31. Section 31 is a section which saves certain proceedings which were pending when the Act came into force. Section 31 sets out that where a receiver or an official liquidator has been appointed in any proceedings pending immediately before the commencement of this Act, in any High Court for winding up of an industrial company, such proceedings shall not abate but continue in that High Court and no proceeding in respect of such industrial company shall lie or be proceeded with further before the Board. In other words, section 31 makes it clear that where before the Act came into force the receiver or official liquidator has been appointed in any p....
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....al of the industrial undertaking is finally determined. It is thus crystal clear that the main thrust of this special legislation is on revival or rehabilitation of the sick industrial undertaking and it is only when it is realised that the same is not feasible that the option of winding up of the unit can be resorted to." All these judgments came up for consideration before the apex court in Real Value Appliances Ltd. v. Canara Bank [1998] 93 Comp. Cas. 26 ; AIR 1998 SC 2064. Two more questions came up for consideration. The first question before the apex court was whether by suppression of material facts before the High Court the reference application to the BIFR could become bad. In answering the question in paragraph 15, the apex court has observed as under (page 33) : "We are at a loss to understand as to how any conduct of the appellant-company before the High Court of Bombay could make the registration of the reference before the BIFR bad. If any orders were obtained by the company from the High Court by way of fraud it was certainly open to the respondent to ask the High Court to recall such orders." The second question which arose was whether mere registration of refere....