The Hindu Business Line : HC ruling on sick company’s plea against liquidator’s appointment

Chennai, Dec. 12 A sick company facing winding up proceedings had no legal ground to question appointment of the provisional liquidator, the Madras High Court has held. The company should move first the said Court to set aside the appointment of the liquidator rather than try to revive scheme for rehabilitation of the unit.

Dismissing a writ petition by Manjhula Textile Processors (P) Ltd. challenging an order dated 6-7-2007 of Board for Industrial & Financial Reconstruction and praying for restoring proceedings for revival of Company, Mr Justice K. Chandru ruled that the Company Court could not proceed with an appeal against the order only if rehabilitation scheme was pending consideration under Section 16 of Sick Industrial Companies Act (SICA) or if the scheme was referred to under Section 17.

The pre-condition for such an overriding effect was not found in the present case, the Judge said.

Admittedly, there was no scheme pending. Petitioner, in his capacity as executive chairman, should move first the Company Court to set aside appointment of rather than trying to revive the scheme, which did not lie in the eye of law.

The petitioner, who claimed to be chairman of Company, had challenged the orders of BIFR which was issued by the board after notice to managing director of company, who was representing the company all along in reference to BIFR.

The petitioner contended that the managing director was acting against the interest of company.

Though Section 25 of SICA provided for appeal, there was no such appeal for de-registration, because the same was covered by Regulation 19 of BIFR Regulation 1987.

If de-registration was done by secretary, appeal would lie to chairman, and in the present case, since chairman himself had de-registered, there was no scope for appeal.

The petitioner said proceedings before the Company Court were invalid, if there was a scheme pending before BIFR, under Section 16.

The Judge ruled that there was no scheme pending. Hence, the writ petition stood dismissed.

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