TaxTMI 
TaxTMI 
TaxTMI 
1999 (1) TMI 417
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....urther steps as per the order of this Court dated 13-11-1998 without obtaining any prior permission from BIFR. 3. A few facts need be stated. Petition for winding up was filed in this Court on 18-5-1998. According to the company, the accounts were made upon 15-10-1998. The company found that their net worth had eroded by more than 50 per cent and consequently at a Board meeting held on 3-11-1998 passed a Resolution to move the BIFR under the provisions of Sick Industrial Companies (Special Provisions) Act, 1985 (' the Act'). 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 11-11-1998. The Application was signed by the Chairman and Managing Director on 12-11-1998. The papers were thereafter sent to the Advocate at Delhi on 18-11 -1998, and the application was lodged with BIFR on 19-11-1998. The said application was registered with BIFR on 1-12-1998. A communication to that effect dated 1-12-1998, was sent to the company, a copy of which has been annexed to the affidavit dated 12-12-1998 of Shri Surendra Kumar Seth, Constituted Attorney and the Vice President of t....
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....trict 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 Liquida- tor. It is, therefore, contended that the Resolution passed by the Board and/or for that matter the decision to refer the matter to BIFR after the petition was admitted and the orders appointing provisional liquidator was passed is non est act 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 becomes defunct or incapable of carry- ing out any function and as such incapable also of moving the Board for the purpose of rehabilitation of the company. To my mind the very fact that in the petition where the provisional liquidator is appointed the company can still defend the proceedings and / or prefe....
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....ator to start the process of rehabi-litation 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 Union Accident Insurance Co. Ltd. 's case ( supra) 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 Union Accident Insurance Co. Ltd. ( supra) has also been considered by a Single Judge of the Delhi High Court in the case of Anil Kumar Sachdeva v. Four A' Asbestos (P.) Ltd. [1980] 50Comp.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 board of directors inspite of the ap-pointment of provisional liquidator. In the case of The New Era Mfg. Co. Ltd. [1965] 2 Comp. LJ 309 , a Single Judge of the Kerala High Court was considering the question whether inspite of the appointment of a provi-sional liquidator, the board of directors could call general meeting under section 166. The learned Single Judge held that a liquidator whether pro....
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....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 imme-diately 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 proceedings for winding up then insofar as those proceedings are concerned, no proceed-ing could lie or proceeded with further before the Board. In other words reading section 31 co-jointly with section 32, which section makes the provisions of this Act overrides the provision of any other Act, even in a case where a petition for winding up has been presented or for that matter a provisional liquidator is appointed. The board of director....
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....s came up for consideration. The first question before the Apex Court was whether suppression of material fact 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:- "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 reference by the BIFR would result in the automatic cessation of all the proceedings which are pending either in the Civil Court or in the Company Court. After examining the two differing views taken by the different High Courts. The Apex Court in para 29 held that for the purpose of section 22 the proceedings are deemed to have commenced and the prohibitions contained in section 22 shall immediately come into play. In other words, the moment proceedings are registered before BIFR, the provisions of section 22 spri....