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Dena Bank vs The Official Liquidator on 29 January, 2015 cites

Tata Motors Ltd vs Pharmaceutical Products Of India Ltd on 16 May, 2008

We fully agree with Tata Motors (supra) where Apex Court observed, SICA would have an overriding effect on Companies Act. However, the concept of overriding effect would only come when there would be a conflict in law. We should read these two statutes harmoniously to find out whether the present scenario would have application of such observation. Under the law of winding up the Company Court was the supreme authority to exercise its discretion as to whether the company would be wound up or not. Such exercise might be at the instance of the creditors or at the instance of shareholders or contributory. In a given situation it could also be at the instance of the Central Government. SICA would prevail upon a totally different field i.e. rehabilitation/revival. If we read the provisions, we would find, a complete procedure was laid down, commencing from Section 15 to Section 22 as well as Section 26 as to the consideration to be made by the BIFR or the AAIFR in a given situation examining the chance of revival of a company. Section 15 would require an industrial company to refer to the BIFR when it's worth becomes negative and would become sick Industrial Company being an Industrial Company registered for not less than five years whose net worth became negative at the end of the financial year. Once the reference is made under Section 15 the BIFR would start operation examining the scope of revival. Section 16 permits them to make an enquiry into the affairs of the company, preparation of the scheme by appointment of a director. Section 16 would empower the Board to make suitable order on the completion of inquiry. Section 18 would suggest preparation and sanction of the scheme and in case the Board would find no chance of revival it would recommend for winding up under Section 20. Section 19 would suggest financial assistance whereas Section 19A would provide for arrangement for continuing operation during inquiry. Once the reference is registered and an inquiry under Section 16 is pending or any scheme is under preparation under Section 17 enforcement of any contract before a civil Court would not lie. No proceeding against the Sick Company would lie before any civil Court. All agreements privileges, rights, obligations, liabilities would remain suspended and could only be enforced with such adoptions and in such manner as the Board may prescribe. In case BIFR would decline to register a reference or pass an order of inquiry or suggest or recommend for winding up or pass any order in connection with such reference, the aggrieved party would be entitled to prefer appeal before the appellate authority under Section 25. Section 26 would suggest, no order passed by the BIFR or AAIFR could be questioned before any civil Court by any other party, no injunction could be passed by any Court or authority against any proceedings before the BIFR or AAIFR. The moment the reference is made the rights under any contract would automatically remain suspended, even a proceeding enforcing such right pending at that time, would also be liable to be stayed so that BIFR could effectively deal with chance of revival and at the same time approve a scheme for revival that would include redressal of such grievance for which any civil Court has already been approached or is likely to be approached by the aggrieved party. A creditor whose debt is unpaid is ordinarily entitled to seek winding up upon compliance of the provisions of Section 434 of the Companies Act 1956 that would ultimately culminate into an order of winding up blocking the chance of revival. Hence, such winding up process would come within the mischief of Section 22 and following Tata Motors. SICA would have overriding effect and winding up petition would be liable to be stayed till BIFR or AAIFR is in seisin or a scheme framed by the said authorities is in operation. The aggrieved party is not remediless. They are free to appear before BIFR and/or AAIFR for protection of their interest ventilating their grievance which they could otherwise do before a civil Court or a company Court as the case may be. This is well-settled principle of law that would deserve no relook. The decisions cited at the bar consistently upheld such principle of law. The present case would however, stand on a complete different footing. In the instant case, admittedly the order of winding up was passed on a date when there was no reference pending. Pertinent to note, the order of winding up was passed on July 30, 2010 whereas the reference was registered on September 12, 2013. Once the order of winding up was passed the lis brought by the creditor stood disposed of and the company Court would become functus officio on such issue. However the process would start for beneficial winding up through the Official Liquidator and the Company Court would have a supervisory and/or administrative role in the process as the Official Liquidator would act as custodian of the company in liquidation subject to the supervision of the Court. In the process of execution of such order of winding up, there might arise be various problems that Official Liquidator may face.
Supreme Court of India Cites 50 - Cited by 63 - S B Sinha - Full Document
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