1 App(L) No.25.11 Kambli IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION APPEAL (L) NO.25 OF 2011 IN COMPANY PETITION NO.18 OF 1998 ... M/s.Rushabh Precision Bearing Ltd. ...Appellant v/s. 1.Gill & Co. Ltd. 2.Official Liquidator of M/s.Rushabh Precision Bearing Ltd. ...Respondents ... Mr.Ganesh Gole with Ms.P.V.Budadare for the Appellant. Mr.Gaurav Joshi with Mr.Avinash Joshi i/b Mulla & Mulla & CBC & Co. for Respondent No.1. Mr.S.S.Kumbhar with Mr.S.A.Bhagwat for Respondent No.2. ... CORAM: D.K.Deshmukh & Anoop V. Mohta, JJ DATED: 2nd Mayl, 2011 P.C.: 1. This Appeal is not on board for final hearing. But is heard by consent of parties. 2. By this appeal, the Appellant challenges the order dated 30th March, 2010 passed by the learned single Judge in Company Petition No.18 of 1998. 2 App(L) No.25.11 3. The relevant facts are that, Company Petition was filed by Respondent No.1 seeking an order of winding up of the Appellant-company on the ground that it is not able to pay its debts. In that company petition, consent terms were filed. On the basis of those consent terms an order was passed on 8th September, 1998. It appears that the consent terms provided for payment of money that was due to the Respondent No.1 from the Appellant. The consent terms provided that in case there were two defaults in payment of installments, then the Company Petition will stand admitted. There were two defaults committed by the Appellant. Therefore, the company petition came before the learned single Judge of this court. The learned single Judge by his order dated 10-2-1999 noted that there are two defaults in payment of installments. Therefore, in terms of the consent terms the company petition stood admitted. The company petition was directed to be advertised. It appears that, thereafter, that petition came before the another learned single Judge of this court. 3 App(L) No.25.11 4. It appears that, the Appellant-company had filed a Reference before the BIFR. The BIFR, however, by an order dated 23rd December, 2003 held that the Reference was not maintainable. The learned single Judge, therefore, granted the petition in terms of prayer clauses (a) and (b) of the petition. It appears that, thereafter, Company Application No. 290 of 2008 was taken out by the Appellant-company for setting aside the order passed by the learned single Judge allowing the company petition. That application was disposed of by another learned single Judge of this court by order dated 13th March, 2008. The learned single Judge while disposing of that application by order dated 13th March, 2008 noted that it was not pointed out to the learned single Judge who allowed the company petition that on that date an appeal filed against the order of BIFR was pending before the AAIFR and therefore the learned single Judge allowed the company application. As a result, the order allowing the company petition was set aside and the company petition was restored to file. It appears that, thereafter, the appeal before the AAIFR came to be dismissed for non-prosecution. An 4 App(L) No.25.11 application was made by the Appellant-company for restoration of that appeal. While the restoration application was pending before the AAIFR, Company Petition No.18 of 1998 came before the learned single Judge of this court on 30-3-2010. The learned single Judge referred to facts on record and also the fact that the appeal before the AAIFR, which was pending, is no more pending. The learned single Judge allowed the company petition in terms of prayer clauses (a) & (b) by order dated 30-3-2010. The present appeal is directed against that order. 5. It appears that the application of the Appellant for restoration of the appeal before the AAIFR was disposed of by the AAIFR by order dated 7-4-2010 and that application was allowed and the appeal was restored to file by the AAIFR. That appeal is presently pending before the AAIFR. 6. The learned Counsel appearing for the Appellant submits that restoration of the appeal by the AAIFR by order dated 7-4-2010 will render the order of the learned single 5 App(L) No.25.11 Judge granting company petition illegal, because, according to the learned Counsel, restoration of the appeal will relate back to the date of filing of the appeal and therefore the order of the learned single Judge is infirm. The learned Counsel relies on the judgment of the Supreme Court in the case of Rishabh Agro Industries Ltd. v/s. P.N.B.Capital Services Ltd., (2000) 5 SCC 515, 7. The learned Counsel appearing for the Respondent No.1, on the other hand, submits that restoration of the appeal by the AAIFR would not render the order passed by the learned single Judge granting the company petition invalid. Because the date on which the learned single Judge passed the order, he had jurisdiction to make the order. The learned Counsel submitted that the remedy of the Appellant is to make an application before the learned single Judge under Section 466 of the Companies Act for stay of further proceedings pursuant to winding up order, because the appeal is pending before the AAIFR. 6 App(L) No.25.11 8. We have examined the record in the light of these rival submissions. Because of the provisions of Section 22 of the Sick Industrial Companies(Special Provisions) Act, 1985 a Company Court loses jurisdiction to proceed further to take company petition for winding up in relation to which the Reference is pending before the BIFR or an appeal is pending before the AAIFR. On 30-3-2010, when the learned single Judge passed the order, which is impugned in the appeal, neither there was any Reference pending before the BIFR or any appeal was pending before the AAIFR. All that was pending was an application filed by the Appellant for restoration of the appeal before the AAIFR. That application cannot be equated to a Reference filed before the BIFR and therefore, in our opinion, the learned single Judge on that date i.e. 30-3-2010 had jurisdiction to make any order in accordance with law in the company petition. Perusal of the judgment of the Supreme Court in Rishabh Agro’s case, specially paragraph 9 of that judgment makes the above position clear. Paragraph 9 of that judgment reads as under: 7 App(L) No.25.11 9. It is true that for invoking the applicability of Section 22 it has to be established that an inquiry under Section 16 is pending or any scheme referred to under Section 17 is under preparation or sanctioned scheme is under implementation or an appeal under Section 25 to an industrial company is pending. But it cannot be said that despite the existence of any of the aforesaid exigencies the provision of Section 22 would not be attracted after the order of winding up of the company is passed. The words, “no proceeding for 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 receiver in respect thereof shall lie or be proceeded with further”, leave no doubt in our mind that the effect of the section would be applicable even thereafter can be proceeded with further under the Companies Act. The High Court appears to have not taken note of the aforesaid words i.e. to be proceeded with further. As the impugned judgment is based upon wrong assumption of the provision of law and completely ignoring the vital words noticed hereinabove, the same cannot be sustained. 9. In our opinion, unless there is a Reference pending before the BIFR or an appeal is pending before the AAIFR, the company court will have the jurisdiction to entertain and dispose of the company petition and as on 30th March, 2010 admittedly there was no Reference pending 8 App(L) No.25.11 either before the BIFR or appeal pending before the AAIFR, the company court had the jurisdiction to make the order. The order of restoration of appeal would not relate back to render the order passed by the learned company Judge invalid. However, it is equally true that in case the appeal is restored by AAIFR, again Section 22 of the SICA will come into force and becomes applicable in relation to the proceedings and no further steps can be taken by the company court pursuant to winding up order. Section 466 of the Companies Act reads as under: 466. Power of Court to say winding up.- (1)The Court may at any time after making a winding up order, on the application either of the Official Liquidator or of any creditor or contributory, and on proof to the satisfaction of the Court that all proceedings in relation to the winding up ought to be stayed, make an order staying the proceedings, either altogether or for a limited time, on such terms and conditions as the Court thinks fit. (2) On any application under this section, the Court may, before making an order, require the Official Liquidator to furnish to the Court a report with respect to any facts or matters which are in his opinion relevant to the application. 9 App(L) No.25.11 (3) A copy of every order made under this section shall forthwith be forwarded by the company, or otherwise as may be prescribed, to the Registrar, who shall make a minute of the order in his books relating to the company. 10. Perusal of the above quoted provisions of Section 466 shows that it vests powers in the court to stay further proceedings in relation to winding up of the company, if the court is satisfied that such an order is to be made. Therefore, on finding that appeal before the AAIFR in relation to the company itself is pending, further proceedings pursuant to winding up order cannot be made. In any case, in our opinion, following of such procedure will fully protect the interest of the company. Because in view of the consent terms filed and in view of the admitted default in payment of the installments, the only defence available to the Appellant/company in the company petition is pendency of the Reference. Therefore, in our opinion, no useful purpose will be served by disturbing the order allowing the company petition. In our opinion, the appropriate remedy of the Appellant in this situation is to make an application under Section 466 before the learned single Judge for stay of further 10 App(L) No.25.11 proceedings in view of pendency of Appeal before the AAIFR. In our opinion, therefore, following order would meet the ends of justice. O R D E R (i) The appeal is disposed of with liberty to the Appellant to make an application under Section 466 for stay of further proceedings consequent upon the order of winding up and seek appropriate orders from the company court. (ii) For a period of eight weeks from today, the interim order which is passed in this appeal and which is presently operating shall continue to operate. (D.K.DESHMUKH, J.) (ANOOP V.MOHTA, J.)