S.C. Agrawal, J. - (1.) These appeals filed by M/s.Shree Chamundi Mopeds Ltd. raise questions involving the interpretation of Section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985, hereinafter referred to as 'the Act'.
(2.) The appellant is a public limited company registered under the Companies Act, 1956. It was set up with the object of manufacturing mopeds in collaboration with Cycle Peugot of France. It has set up a factory at Hirahalli in Tumkur district of Karnataka State. The appellant company has taken on rent the premises belonging to the Church of South Indian Trust Association, respondent No. 1 in these appeals, in Bangalore on a monthly rent of Rs. 21, 159/-. The appellant company committed default in payment of rent and as on March 31, 1987 a sum of Rs. 2,45,534/- was payable as rent to the respondents. The respondents issued a legal notice dated 1 st April, 1987 calling upon the appellant company to pay the said amount. The appellant company while admitting the liability to pay the aforesaid sum stated that it was expecting certain sums of money towards developmental loan from the Government of Karnataka and as soon as the same was received it would clear the outstanding payable by it to the respondents. Since the amount was not paid the respondents issued a notice under Section 434 of the Companies Act and thereafter a petition was filed in the High Court of Karnataka under Section 433(e) of the Companies Act for winding up of the appellant company. While the said winding up petition was pending the appellant company, claiming that it has become a sick industrial company, filed a reference under Section 15(1) of the Act before the Board of Industrial and Financial Reconstruction, hereinafter referred to as 'the Board', on 12 December, 1988. After, hearing the concerned parties, the Board formed a prima facie opinion that it would be just and equitable as also in public interest that the appellant company, which has become a sick industrial company within the meaning of Section 3(1)(o) of the Act, should be wound up in view of the large accumulated losses, poor market prospects for the products of the appellant company and inability of the promoters to bring in the required additional interest free funds etc. After publication of the general notice in the newspapers and on intimation to the concerned parties the Board heard the objections/ suggestions, if any, of the concerned parties to the proposed winding up of the company and after considering the same the Board passed the order dated April 26, 1990, whereby it was found: "Upon consideration of the facts and material before us and the submissions made at today's hearing, we find that Shree Chamundi Mopeds Ltd. have become economically and commercially non-viable due to its huge accumulated losses and liabilities and should be wound up. However, in view of the submissions made by the company and in order to give a final opportunity to the promoters as requested by them, our advice to wind up the company to the respective High Court will be withheld for a period of one month. The promoters were directed to submit an acceptable rehabilitation proposal which is technically, economically and commercially viable for the revival of the company to ICICI urgently and ICICI was directed to appraise the proposal, if any, submitted by the promoters to them and submit their report to us within one month. If no acceptable rehabilitation scheme is received by the BIFR within one month, our opinion to wind up the company will be forwarded to the High Court of judicature in Karnataka for further necessary action under the law."
(3.) The appeal filed by the appellant company before the Appellate Authority for Industrial and Financial Reconstruction, hereinafter referred to as the "Appellate Authority", against the said order dated 26 April, 1990, was dismissed by the Appellate Authority by order dated January 7, 1991. The appellant company has filed Writ Petition (Civil) No. 594/91 in the High Court of Delhi wherein the said order passed by the Appellate Authority has been challenged. In the said writ petition, the High Court of Delhi, on February 21, 1991, passed an order for issuing notice returnable for May 10, 1991, to show-cause as to why rule nisi be not issued. On the stay petition filed with the said Writ Petition, notice was issued for May 10, 1991 and in the meanwhile, operation of the order of the Appellate Authority dated January 7, 1991 was stayed. We have been informed that the said Writ Petition is still pending in the Delhi High Court and the stay order passed by the said Court is also operative.;