Gujarat High Court
Vajra vs Alta on 24 February, 2010
Author: R.M.Doshit
Bench: R.M.Doshit
Gujarat High Court Case Information System
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OJA/11/2010 9/ 9 ORDER
IN
THE HIGH COURT OF GUJARAT AT AHMEDABAD
O.J.APPEAL
No. 11 of 2010
In
COMPANY
PETITION No. 36 of 2004
With
CIVIL
APPLICATION No. 72 of 2010
In
O.J.APPEAL No. 11 of 2010
=========================================================
VAJRA
BEARINGS LTD. - Appellant(s)
Versus
ALTA
LEASING & FINANCE LTD. & 2 - Opponent(s)
=========================================================
Appearance
:
MR
VISHWAS K SHAH
for
Appellant
None for Opponent(s) : 1,
MR KM PARIKH for
Opponent(s) : 2,
MR JS YADAV for OFFICIAL LIQUIDATOR - Opponent(s)
: 3,
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CORAM
:
HONOURABLE
MS. JUSTICE R.M.DOSHIT
and
HONOURABLE
MR.JUSTICE K.M.THAKER 24th February 2010
ORAL
ORDER (Per : HONOURABLE
MS. JUSTICE R.M.DOSHIT) This Appeal preferred under Section 483 of the Companies Act, 1956 arises from the judgment and order dated 29th January 2010 passed by the learned Company Judge in Company Petition No. 36 of 2004.
In Company Petition No. 36 of 2004, filed by one Alta Leasing & Finance Limited [hereinafter referred to as, the Alta Leasing ], the learned Company Judge has, under the impugned judgment, made order of winding up of the appellant-Vajra Bearings Limited [hereinafter referred to as, the Company ].
The Alta Leasing filed the above Company Petition No. 36 of 2004 to seek winding up of the Company under Section 433 read with Section 434 of the Companies Act, 1956. According to the Alta Leasing, it had advanced loan to the Company to the tune of Rs. 16,50,000/= which the Company was required to repay by monthly installment of Rs. 1,54,000/= each commencing from 31st December 1999. The Company failed in making payment of monthly installments. On the date of the petition, the Company owed a sum of Rs. 19,88,055/= to the Alta Leasing.
The petition was contested by the Company. According to the Company, it had moved the Board for Industrial & Financial Reconstruction [hereinafter referred to as, the Board ] as envisaged by Section 15 of the Sick Industrial Companies [Special Provisions] Act, 1985 [hereinafter referred to as, the Act of 1985 ]. Pending the reference before the Board, a petition for winding up of the Company was not maintainable. It was, however, pointed out by the respondent no. 2-Anyonya Cooperative Bank Limited [hereinafter referred to as, the Bank ] that it had already availed of the remedy under Section 13 [4] of the Securitization & Reconstruction of Financial Assets & Enforcement of Security Interest Act, 2002 [hereinafter referred to as, the Act of 2002 ]. The reference pending before the Board had abated, as envisaged by the third proviso to sub-section (1) of Section 15 of the Act of 1985. The winding up petition against the Company was, therefore, maintainable.
It was then objected to on the ground that reference made to the Board had already been decided. The application made under Section 15 (1) of the Act of 1985 was accepted by the Board. As early as on 28th August 2006, the Company was held to be the sick industrial company. Moment the Company was held to be a sick industrial company, the reference came to an end. On the date the Bank invoked the power under Section 13 [4] of the Act of 2002, no reference was pending. The question of abatement of reference did not arise.
The learned Single Judge has followed the decision of this Court [Coram : Anant S. Dave, J.] in the matter of Paschim Petrochem Limited v. Authorized Officer, Kotak Mahindra Bank Limited [Special Civil Application No. 8015 of 2009 :: Decided on 11.01.2010] following the decision of the Delhi High Court in the matter of Madras Petrochemicals Limited & Anr. vs. BIFR & Ors. [(2009) 149 Comp. Cases 402 (Delhi)]. The learned Company Judge ordered winding up of the Company. Therefore, the present petition.
Learned advocate Mr. Vishwas K. Shah has appeared for the appellant. Mr. Shah has admitted that the Bank is the secured creditor of the appellant. He has, however, submitted that the appellant has not admitted its dues to the Bank. The Bank has filed a suit in the Court of Nominees for recovery of its dues. The suit is contested by the appellant. Unless the suit is decreed, the Bank has no right to recover its dues from the assets of the Company.
He has next contended that the Alta Leasing had requested the Company Court for permission to withdraw the company petition. The Company Court, however, did not allow the Alta Leasing to withdraw the company petition. Instead, conducted the company petition on behalf of the Bank without transposing the Bank as the petitioner. He has next contended that before the Bank took over possession of the assets of the Company in exercise of the power vested by Section 13 [4] of the Act of 2002, the appellant had already approached the Board under Section 15 of the Act of 1985. By order dated 20th August 2006 made by the Board, the appellant was declared to be a sick industrial company . The power under Section 13 of the Act of 2002 was exercised by the Bank latter and the possession as envisaged by Section 13 [4] of the Act of 2002 of the assets of the appellant was taken over on 15th March 2008. On declaration of the appellant as a sick industrial unit on 20th August 2006, the reference made under Section 15 of the Act came to an end, though the proceeding for rehabilitation did continue. The question of abatement of the reference as envisaged by the third proviso to sub-section {1} of Section 15 of the Act of 1985 did not arise. In support of his arguments, Mr. Shah has relied upon the judgment of the Orissa High Court in the matter of Noble Aqua Private Limited & Ors. vs. State Bank of India & Ors. [AIR 2008 Orissa 103]. Mr. Shah has submitted that the view taken by the Orissa High Court is the correct view. Nevertheless, the learned Company Judge has relied upon the judgment of this Court which has followed the decision of the Delhi High Court in the matter of Madras Petrochemicals Limited & Anr. vs. BIFR & Ors. [(2009) 149 Comp. Cases 402 (Delhi)]. He has submitted that the view taken by the Delhi High Court that even after a company is declared to be a sick industrial company, in the reference made under Section 15 [1] of the Act of 1985, the reference proceedings continue while the procedure under the succeeding Sections 16, 17, 18, 19, etc., of the Act of 1985 is underway.
We have perused both the above referred judgments of the Orissa High Court & of the Delhi High Court. We are unable to agree with Mr. Shah. Section 15 of the Act of 1985 provides for reference to the Board and for determination of the measures which shall be adopted with respect to the company ; Section 16 provides for inquiry into the working of the sick industrial company by the Board; Section 17 empowers the Board to make suitable order in respect of such inquiry. Section 18 of the Act provides for preparation and sanction of scheme for rehabilitation of the sick industrial company. Section 19 provides for financial assistance in furtherance of such scheme. Section 19A of the Act empowers the Board to make order as it may deem fit in respect of any financial assistance intended to be provided by the Central Government or the State Government or Reserve Bank of India or a public financial institution or a State level institution or a scheduled bank or any other institution. Section 20 of the Act empowers the Board, after making inquiry under Section 16 of the Act, to form an opinion that the sick industrial company is not likely to make its networth exceed the accumulated losses within a reasonable time or is not likely to meet its financial obligations and is not likely to become viable in future and that it is just and equitable that the company should be wound up; and to forward such opinion to the concerned High Court.
In our opinion, to say that Section 15 of the Act empowers the Board to hold that an industrial company has become 'a sick industrial company' and nothing further would lead to miscarriage of justice. In fact, Section 15 of the Act enjoins the Board of Directors of a company which has become a sick industrial company to make reference to the Board for determination of the measures which shall be adopted with respect to the company. These words leave no room of doubt that on receipt of the reference, as aforesaid, it is the duty of the Board to carry the matter to its logical end ie., either to frame a scheme for rehabilitation of the sick industrial company or to suggest to the concerned High Court to order winding up of such company as envisaged by Section 20 of the Act. The above referred provisions contained in Sections 15 to 20 of the Act are a complete scheme, right from the date a sick industrial company makes a reference to the Board to either the rehabilitation of the sick industrial company or to its winding up. It is a continuous proceeding. It cannot be said that once the company is declared to be a sick industrial company, the reference comes to an end.
We, therefore, hold that moment the Bank invoked its power under Section 13 [4] of the Act of 2002, the reference pending before the Board stood abated as envisaged by the third proviso to Section 15 (1) of the Act of 1985.
The contention that the appellant did not admit its dues to the Bank, requires to be rejected outright. Though the company petition was pending before the learned Company Judge for around six years, the appellant did not file reply disputing its dues or its incapacity to meet with its financial obligations. Pendency of the suit before the Court of Nominees or the defense raised in such suit are of no consequence. The Act of 2002 clearly empowers the Bank to recover its dues in exercise of powers conferred by the said Act, irrespective of the pendency of the suit for recovery before the competent forum.
For the aforesaid reasons, we hold that the present Appeal is devoid of any merit. The Appeal is dismissed in limine. Civil Application stands disposed of.
Learned advocate Mr. Shah requests that this order be stayed. The request is misconceived. Hence, rejected.
{Ms. R.M Doshit, J.} {K.M Thaker, J.} Prakash* Top