Rajasthan High Court - Jaipur
Maruti Udhyog Ltd. vs Instrumentation Ltd. on 17 December, 1993
Equivalent citations: [1995]82COMPCAS455(RAJ)
JUDGMENT G.S. Singhvi, J.
1. By this order, the application filed by the respondent-company on December 8, 1993, under Rule 9 of the Companies (Court) Rules, 1959, read with Section 151 of the Civil Procedure Code, and Section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985, is being disposed of.
2. An application filed by the respondent-company for dismissal of the company petition on the ground that an enquiry under Section 16 of, the Sick Industrial Companies (Special Provisions) Act, 1985 (for short "the Act"), was pending had been dismissed by the court on October 14, 1993, and a special appeal filed against that order is pending consideration before the Division Bench.
3. In this application filed on December 8, 1993, a prayer has been made for dismissal of the petition filed for liquidation on the ground that after October 14, 1993, a number of developments have taken place and they show that enquiry under Section 16 of the Act has been initiated and is pending.
4. Shri S. M. Mehta, senior advocate, appearing for the respondent-company, has invited the court's attention to the fact that the board of directors of the respondent-company had in their meeting held on July 29, 1993, resolved to make a reference under Section 15(1) of the Act to the Board for Industrial and Financial Reconstruction (for short "the BIFR"). The company made a reference to the BIFR in Form No. "AA". On October 5, 1993, a copy of the reference was delivered in the office of the Board. On October 28, 1993, the reference made by the board of directors of the company has been registered as Case No. 509 of 1993. After scrutiny of the reference had been made, the company was required to furnish certain informations. These informations have been submitted by the respondent-company, vide letter dated November 10, 1993. Thereafter, the case has been assigned to Bench No. 1 of the BIFR and the Board has decided to issue notice to 12 persons/institutes, whose names have been given out in the enclosure to the notice, which has been issued by the Registrar of the BIFR on November 30, 1993. Shri Mehta submitted that enquiry must be deemed to have been initiated immediately on the making of the reference application by the respondent-company and in any case the enquiry must be deemed to be pending as soon as the Board has taken cognizance of the reference application after the same was scrutinised by the Registrar of the BIFR. Shri Mehta argued that in view of the non-obstante clause contained in Section 22(1), the statutory bar against taking further proceedings under the Companies Act, 1956, operates and as such the petition filed by the petitioner under sections 433 and 439 of the Companies Act should be dismissed. Shri Mehta has also relied on a Bill which according to him has been introduced in Parliament for amendment of the Act. Shri Mehta invited the court's attention to some amendments introduced with reference to Section 16(3) of the Act and submitted that this Bill is also indicative of the intention of the Legislature that as soon as an application is submitted by the board of directors of the company under Section 15 of the Act, the enquiry must be deemed to have commenced and must be deemed to be pending for the purposes of Section 22(1). Shri Paras Kuhad, learned counsel for the petitioner, has strenuously argued that the application dated December 8, 1993, filed by the respondent-company is frivolous and vexatious and it has been filed with the sole object to delay the hearing of the petition on the merits. Shri Kuhad argued that having failed to persuade the Division Bench to stay the order dated October 14, 1993, passed by the company court, the respondent-company has moved this application even though there has been no material change in the fact situation. Shri Kuhad argued that the findings recorded by the court in its order dated October 14, 1993, must be treated as res judicata and, therefore, there is no need for fresh examination of the case. Shri Kuhad also argued that the notice annexure 3 filed with the application dated November 30, 1993, has been issued by the Registrar of the BIFR and there has been no application of mind by the Board itself. He submitted that till the matter is considered by the Board, enquiry cannot be treated as having been initiated. In regard to the Bill on which reliance has been placed by Shri Mehta, Shri Kuhad argued that till the Bill is passed by Parliament, it cannot be treated as a piece of legislation and no reliance can be placed on such Bill for the purposes of interpretation of the statutory provision contained in Section 16 and Section 22 of the Act.
5. I have given my thoughtful consideration to the rival submissions. While deciding the application filed by the respondent-company on an earlier occasion for dismissal of the company petition, 1 had analysed the provisions of Sections 15, 16, 17 as well as 22 of the Act and observed :
"Section 22(1) of the Act no doubt uses a non-obstante clause and in terms of that provision, no proceeding 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 shall lie or be proceeded with further except with the consent of the Board or of the appellate authority, as the case may be. However, before application of Section 22(1) is attracted, there must be an enquiry under Section 16 pending or any scheme referred to under Section 17 under preparation or consideration or a sanctioned scheme under implementation or an appeal under Section 25 relating to an industrial company pending. Thus, till any of the three eventualities are the provisions of Section 22(1) cannot be attracted. Logically, the proceedings pending against a company under the provisions of the Companies Act, 1956, or any other proceeding pending against the company or its properties under any other law of the land, cannot be stayed or frozen. The crucial words which call for interpretation in this case are 'an enquiry under Section 16 is pending'. As I have already noticed, Section 15 of the Act of 1985, deals with reference, Sections 16 and 17 deal with enquiry and Section 18 deals with scheme. It is, therefore, clear that the Legislature has deliberately made different provisions for making a reference by the board of directors of the company, determination of the question regarding sickness of the company by the board which may be done either on the basis of the reference or on the basis of any other information which the Board for Industrial and Financial Reconstruction may receive. When the Legislature has deliberately used different provisions, it is not possible to hold that the enquiry envisaged under Section 16 must be deemed to have commenced as soon as a reference under Section 15 is filed by the board of directors of the company. Clearly the Legislature had intended that it will be the Board for Industrial and Financial Reconstruction which shall apply its mind to the question as to whether and when enquiry should have commenced for determining whether the company has become a sick company or not. A stage prior to a decision by the Board to initiate an enquiry, cannot be equated with commencement of the enquiry envisaged under Section 16(1) and an enquiry can be treated as pending only after it has commenced and not prior to that."
6. If in the light of the above quoted observations the present day position of the reference made by the respondent-company to the BIFR is examined, it is clearly revealed that after October 14, 1993, the reference has been registered by the Registrar of the Board. Case number has been given to the respondent-company as 509 of 1993. Defects pointed out by the Registrar of the Board have been rectified by the company and then a notice dated November 30, 1993, has been issued by the Board. Anncxure 3 clearly shows that although the notice has been signed by the Registrar, he has done so under the instruction of the Board. The use of the expression "By order of the Board", is clearly indicative of the fact that notice has in fact been issued as per the order passed by the Board. It is, therefore, clear that the Board for Industrial and Financial Reconstruction has applied its mind and has taken a decision to call upon the affected parties to make their submissions before any decision is taken on the reference made by the respondent-company. The petitioner, Maruti Udhyog Ltd., is one of the parties to whom notices have been ordered to be issued by the Board. It is, therefore, clear that the Board for Industrial and Financial Reconstruction has taken cognizance of the reference made by the company and has initiated the proceedings. With the issue of notice dated November 30, 1993, it has to be considered that the enquiry, as envisaged under Section 22(1), is pending.
7. Once the enquiry under Section 16 is treated to be pending, the provisions of Section 22 of the Act are attracted and the company court cannot proceed further with the matter.
8. The argument of Shri Mehta that the company petition should be dismissed, cannot be accepted. I need not make an elaborate discussion on the subject in view of the order dated September 9, 1993, passed by me in Company Petition No. 6 of 1991--Union of India v. Krishna Mills Ltd. [1994] 81 Comp Cas 50. In that case, I have considered the entire matter at length and have not found merit in the submission made that the company petition is liable to be dismissed as soon as the provisions of Section 22 are attracted. It has been held in the said case that the proceedings under the Companies Act or such like statutes are to be frozen till the matter is finally decided by the Board or by the Appellate Authority, as the case may be.
9. In view of the above, the application filed by the respondent-company is allowed and it is ordered that the proceedings of Company Petition No. 8 of 1993, shall remain in abeyance till the Board for Industrial and Financial Reconstruction decides the reference made by the respondent-company under Section 15(1) of the Act.