TaxTMI 
TaxTMI 
1990 (9) TMI 360
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....ial Reconstruction Regulations, 1987 (hereinafter referred to as "the Regulations"), on June 25, 1990. These facts were brought on record by way of a supplementary affidavit filed by the company. 2. The only question to be determined is whether, under these circumstances, the winding up proceedings against the company must be stayed under the provisions of Section 22(1) of the Act. No other point has been put forward in support of the stay application on behalf of the company. 3. It is contended by Mr. H. K. Mitra, appearing for the company, that the winding up proceedings must be stayed. In support of this contention, the following submissions have been made : (i) Immediately upon the registration of the reference, an enquiry under Section 16 must be said to be pending within the meaning of Section 22(1) of the Act. According to Mr. Mitra, after the registration of a reference under Section 15, the Board has no option but to hold an enquiry under Section 16 of the Act. It is argued by way of analogy that a suit is said to be pending when it is filed and not only when the court takes up the suit for hearing. Similarly, according to him, an enquiry is pending when the....
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....hold an enquiry under Section 16 and chooses not to do so, an appeal could be preferred under the Act by any aggrieved person to the appellate authority from such refusal. In such case, even though the Board has not commenced the enquiry under Section 16(1), the provisions of Section 22(1) would in terms be immediately applicable. 4. Mr. S. Sarkar, appearing on behalf of the respondent, submitted : (i) The phrase "enquiry under Section 16 is pending" in Section 22(1) of the Act means that the Board should have applied its mind to the question whether it would enquire into the matter or cause an enquiry to be made under Section 16(2). It was argued on behalf of the respondent that the registration of the reference by the secretary under regulation 19 is a mere ministerial act. According to Mr. Sarkar, the secretary does not form part of the Board and has distinct functions allotted to him under Section 8 of the Act. (ii) Mr. Sarkar further contended that the language of Section 16 would make it clear that there is a discretion which is vested in the Board either to make or not to make an enquiry. It is contended that mere registration does not make an enquiry im....
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....o hold an enquiry. The word "may" in Section 16(1) would indicate that the Board can refuse to hold an enquiry. This power must, in any event, be taken to be a necessary corollary to the power to hold an enquiry. It is possible that if the Board finds a reference to be frivolous, it may exercise its option of not holding an enquiry at all. We are fortified in our finding by the three unreported decisions relied upon by Mr. Sarkar. Although this issue was not specifically raised before the Supreme Court in the Gram Panchayat's case, , we cannot lose sight of the observations of the Supreme Court in paragraph 10 of the decision, viz. (at page 173 of 71 Comp Cas) : "As soon as the enquiry under Section 16 is ordered by the Board, the various proceedings set out under Sub-section (1) of Section 22 would be deemed to have been suspended." 7. However, in our view, it is immaterial whether the Board has an option to hold or not to hold an enquiry under Section 16 of the Act in view of our interpretation of Section 22(1). 8. Section 22(1) in so far as it is material provides as follows : "22(1) Where, in respect of an industrial company, an inquiry under Section....
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.... principles contained in Articles 39(b) and (c) relate to subserving the common good as opposed to concentration of wealth. 14. It would appear from the Statement of Objects and Reasons of the Act that one of the objects of the Act is to salvage the productive assets and realise the amount due to the banks and other financial institutions to the extent possible from the non-viable industrial companies through liquidation of those companies. 15. In other words, the benefit of the legislation is not aimed merely at reviving a sick industry but also to put an end to a non-viable sick industry with a view to protecting investment of public funds. 16. At the time of the registration of a reference, the secretary is expected only to see whether the documentation is in order. The secretary is not required to come to any decision regarding the merits of the reference. There is necessarily some hiatus between the registration of the reference and the commencement of the enquiry. As stated above, one of the objects of the Act is to protect public investment made through financial institutions. If we accept the construction of Section 22(1) put forward by Mr. Mitra, it would defeat t....