RISHABH AGRO INDUSTRIES LTD. versus P.N.B. CAPITAL SERVICES LTD.

Citation: [2000] SUPP. 1 S.C.R. 38 · Decided: 09-05-2000 · Supreme Court of India · Bench: M.B. SHAH · Disposal: Appeal(s) allowed
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Judgment (excerpt)

A 
RISHABH AGRO INDUSTRIES LTD. 
v. 
P.N.B. CAPITAL SERVICES LTD. 
MAY 9, 2000 
B 
[M.B. SHAH AND R.P. SETHI, JJ.] 
Sick Industrial Companies (Special Provisions) Act, 1985: 
Sections 15, 16 and 16(3) Expkmation-Enquiry-Commencement of_,. 
C Deemed date-For purposes of S.22-Held: ls the date of submission of 
reference under S.15. 
Section 22-Applicability of--High Court ordered winding up of 
company on account of non-payment of amounts due to its creditors-After 
D making only a part-payment company filed reference under S.15(1) before 
BIFR-Thereafter, the company moved an application before Division Bench 
under S.22 for staying the proceedings-But application rejected-Correctness 
of-Held: S.22 is applicable even after winding up order is passed if conditions 
prescribed under it are satisfied-Mere apprehension that an unscrupulous 
litigant may talw an undue advantage of the provision does not justify a 
E contrary view-Reference to BlFR is not mala fide only because it was 
initiated after making only part-payment-Hence, High Court erred in 
rejecting the application. 
Section 15(1)-Board of Directors-Power to move BI FR-After winding 
up order of company and appointment of liquidator-Power of Board of 
F Directors-Held: Board of Directors has power to move BIFR even in such 
cases. 
Companies Act, 1956: Sections 441 and 481. 
Company Judge-Proceedings before-Commencement and end of-
G Winding up order of company-Held: Winding up order is not the culmination 
but commencement of the proceedings-Dissolution of the company is the 
ultimate order: 
Words and phrases: 
"Deemed"-Meaning of-Jn the context ofS.441 of the Companies Act, 
H 1956. 
38 
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RISHABHAGRO INDUS. LTD. v. P N.B. CAPITAL SERVICES LTD. 
39 
~· 
The appellant-company was directed to be wound up by a Single Judge A 
of the High Court as it was unable to pay the amounts due to the respondent. 
A Liquidator was appointed to take charge of the assets and other properties 
of the appellant-company. The notice of the winding up order was directed to 
be published in certain newspapers. However, the Division Bench stayed the 
operation of the order of the Single Judge. 
B 
Thereafter, the appellant-company filed Reference under Section 15(1) 
of the Sick Industrial Companies (Special Provisions) Act, 1985 before the 
Board for Industrial and Financial Reconstruction (BIFR). The appellant then 
moved an application in the High Court under Section 22 of the Act with a 
prayer for staying the proceedings arising out of the Company Petition which c 
was the subject matter of the Company Appeal before the Division Bench. This 
application was rejected on the ground that no such proceedings were pending 
even on the date of passing of the said order by the Division Bench in that 
appeal and only on the basis of a Reference made to the BIFR the proceedings 
of winding up petition could not be ordered to be held in abeyance. Hence this 
appeaL 
D 
On behalf of the respondent it was contended that as no enquiry under 
Section 16 of the act was pending at the time the order of the winding up of 
the company was passed, the proceedings for winding up of the company could 
not be stayed; that a contrary view would defeat the ends of justice and make E 
the petitions under the Companies Act, 1956 infructuous inasmuch as any 
unscrupulous litigant, after suffering an order of winding up, may approach 
BIFR merely by filing a petition and consequently get the proceedings in the 
Company Case stayed; that the action of the appellant was ma/a fide inasmuch 
as it sought time from the court to make the payment of the amount due and 
> 
after seeking indulgence malafidely made the reference to BIFR; and that F 
after the order of winding up and appointment of the liquidator, the Board of 
Directors had no jurisdiction to move BIFR by passing a resolution. 
Allowing the appeal, this Court 
HELD: 1.1. The object of the Sick Industrial Companies (Special G 
Provisions) Act, 1985 is to afford maximum protection of employment, optimise 
the use of financial resources, salvaging the assets of production, realising 
the amounts due to the Banks and to replace the existing time-consuming 
and inadequate machinery by efficient machinery for expeditious determination 
"' 
by a body of experts to safeguard the economy of the country and protect viable 
-· 
sick units. (44-Fl 
H 
40 
SUPREME COURT REPORTS [2000] SUPP. I S.C.R.. 
A 
1.2. Sections 15, 16 and Explanation to Section 16(3)
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