TaxTMI 
TaxTMI 
2000 (5) TMI 954
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....led reference under section 15(1) of the Sick Industrial Companies (Special Provisions) Act, 1985 ('the Act') before the Board for Industrial and Financial Reconstruction ('the Board'). The appellant then moved an application in the High Court under section 22 of the Act with a prayer for staying the proceedings arising out of the Company Petition No. 111 of 1985 which was the subject matter of Company Appeal No. 26 of 1997. The application was rejected by the Division Bench of the High Court vide the order impugned herein. After holding that as no proceedings under the Act were pending on the date of passing of the winding up order, the application under section 22 was misconceived. It was further found that no such proceedings were pending even on the date of passing of the said order by the Division Bench in Company Appeal No. 26 of 1997 and only on the basis of a reference made to the Board the proceedings of the winding up petition could not be ordered to be held in abeyance. Not satisfied with the order of the Division Bench of the High Court, the appellant-company has preferred this appeal. Some of the facts relevant for the purpose of determining the controversy in this ap....
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....ppeal filed against the order of the learned Company Judge, a petition for reference under section 15(1) was preferred before the Board on 30-9-1997. 2. Shri Anurag Kumar Agarwal, the learned counsel appearing for the appellant has submitted that the Division Bench of the High Court committed a mistake of law in interpreting section 22 and by holding that the proceedings appearing in section 22(1) meant the proceeding upto the stage of passing of winding up order by the Court and not thereafter. It is contended that the High Court completely ignored the mandate of the section which provided that no proceedings for the winding up of the industrial company shall lie or be proceeded with further in respect of the industrial company when an enquiry under section 16 is shown to be pending or any claim referred to under section 17 or under preparation or consideration of sanctioned scheme or under the implementation or when an appeal under section 25 of the Act relating to an industrial company was pending. According to the learned counsel, after the filing of the application under section 15 an enquiry under section 16 is deemed to be pending warranting the stay of the proceedings in t....
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....e company, shall, within 60 days from the date of finalisation of the duly audited accounts of the company for the financial year make a reference to the Board for determination of the measures which shall be adopted with respect to the company. Section 16 obliges the Board to make such enquiry as it may deem fit for determining whether any industrial company had become a sick industrial company in accordance with the procedure prescribed therein. Explanation to sub-section (3) of section 16 was inserted by Act No. 12 of 1994 which provides : "Explanation.-For the purposes of this sub-section, an inquiry shall be deemed to have commenced upon the receipt by the Board of any reference or information or upon its own knowledge reduced to writing by the Board." It follows, therefore, that from the date of submission of reference under section 15, an enquiry shall be deemed to have been commenced for the purposes of section 22. This Court dealt with this aspect of the matter in Real Value Appliances Ltd. v. Canara Bank [1998] (5) SCC 554/ 16 SCL 445 and held as under : ". . . In our view, when section 16(1) says that the BIFR can conduct the inquiry 'in such manner as it may deem fi....
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.... in the company case stayed. Such a grievance may be justified and the submission having substance but in view of the language of sections 15 and 16 particularly Explanation to section 16 inserted by Act No. 12 of 1994, this Court has no option but to adhere to its earlier decision taken in Real Value Appliances Ltd.'s case (supra). While interpreting, this Court only interprets the law and cannot legislate it. If a provision of law is misused and subjected to the abuse of process of law, it is for the Legislature to amend modify or repeal it by having recourse to appropriate procedure, if deemed necessary. Hence, we find it difficult to agree with the findings of the High Court to the effect : "The expression 'proceeding' appearing in section 22, sub-section (1) of the Act means the proceeding upto the stage of passing of winding up order by the Court. In terms of section 22(1) the proceedings for winding up of the company cannot be proceeded with and all such proceedings shall remains stayed till the conclusion of the proceedings before the BIFR if an enquiry is pending under section 16 of 1985 Act or any scheme is framed under section 17 of the said Act. This provision is not ....
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.... any scheme under section 18 or where any such scheme is sanctioned thereunder for due implementation of the scheme, the Board may by order declare with respect to the sick industrial company concerned that the operation of all or any of the contracts, assurances of property, agreement, settlements, awards, standing orders or other instruments in force, to which such sick industrial company is a party or which may be applicable to such sick industrial company immediately before the date of such order, shall remain suspended or that all or any of the rights, privileges, obligations and liabilities accruing or arising thereunder before the said date, shall remain suspended or shall be enforceable with such adoptions and in such manner as may be specified by the Board: Provided that such declaration shall not be made for a period exceeding two years which may be extended by one year at a time so, however, that the total period shall not exceed seven years in the aggregate. (4) Any declaration made under sub-section (3) with respect to a sick industrial company shall have effect notwithstanding anything contained in the Companies Act, 1956 (1 of 1956), or any other law, the memorandu....
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....ords noticed hereinabove, the same cannot be sustained. It has been further suggested on behalf of the respondent-bank that the action of the appellant was mala fide inasmuch as it sought time from the Court to make the payment of the amount due and after seeking indulgence mala fidely made the reference to the BIFR on 30-9-1997. It is contended that after the order of the winding up and appointment of the liquidator, the board of directors had no jurisdiction to move the BIFR by passing a resolution. Such a submission cannot be accepted. In a winding up petition the liquidator is appointed to protect the assets of a company for the benefit of its creditors, secured and unsecured and others. It is not the function of the Official Liquidator to start the process of rehabilitation of the company as is aimed at under the Act. Despite appointment of the Official Liquidator, the board of directors continue to hold all residuary powers for the benefit of the company which includes the power to take steps for its rehabilitation. The board of directors in the instant case were not in any way by any judicial order debarred from taking recourse to the provisions of the Act for the purposes ....