Hon'ble Attau Rahman Masoodi,J.
( Delivered by Hon'ble A. R. Masoodi, J. ) This company appeal filed under section 483 of the Companies Act, 1956, read with Chapter VIII Rule 5 of the Allahabad High Court Rules, essentially challenges the jurisdictional validity of the order dated 16.4.2014 passed by learned Single Judge appointing a new arbitrator [Hon'ble Mr. Justice Pradeep Kant (Retd.)]in respect of some claim arising out of a contract between the respondent company and the appellant. The appellant has further assailed the order dated 7.12.2015 passed by the learned Single Judge in the aforesaid company petition whereby the application for recall of the order dated 16.4.2014 is disposed of without modifying or altering the tenor of the order already passed on 16.4.2014.
Arbitral proceedings between the appellant and the respondent company relate as far back as to the year 1993 when regular suit no. 827 of 1993 came to be filed in the Court of II Additional District & Sessions Judge, Senior Division, Bulandshahr under the Arbitration Act, 1940 seeking some protection in accordance with Section 20 read with Section 41 (b) and the Second Schedule appended to Arbitration Act, 1940 as well as for appointment of Arbitrator. During pendency of the aforementioned arbitration proceedings, the company was declared as sick industrial unit in terms of Section 3 (1) (o) of Sick Industrial Companies (Special Provisions) Act, 1985 (hereinafter referred to as the 'SICA'). The arbitration proceedings went up to the Supreme Court on the question of interim protection during currency of the proceedings before the Board of Industrial and Financial Reconstruction (hereinafter referred to as the 'BIFR'). The proceedings before the BIFR failed, as a result whereof a reference came to be made before this Court under Section 20 (1) of SICA and this is how a company petition i.e. Company Petition No. 9 of 2014 came to be registered before the High Court at Allahabad. By an order dated 25.2.2003 passed by this Court at Allahabad, the matter came to be transferred to this Bench at Lucknow as the registered office of the respondent company was situated in Lucknow. The above order was passed for the limited purpose of initiating winding up proceedings of the company on the reference forwarded by the BIFR under Section 20 (1) of the SICA.
The respondent company, inter alia, filed Civil Misc. Application No. 889 of 2003 in the company petition mentioned above, wherein it was prayed that a new arbitrator be appointed in place of Hon'ble Mr. Justice B. L. Loomba (Retd.) who passed away leaving the arbitration proceedings between the respondent and the appellant as undecided. The record reveals that official liquidator attached to the High Court also filed an application praying that the recommendations made by the BIFR be accepted and winding up orders be passed so that official liquidator may step into the management of the affairs of the company.
The record also reveals that C.M. Application No. 1414 of 2007 for the same relief as prayed for in C.M. Application No. 889 of 2003, was filed by the respondent company. All the applications remained pending till the impugned orders dated 16.4.2014 came to be passed appointing Hon'ble Mr. Justice Pradeep Kant (Retd.) as the sole arbitrator for concluding the pending arbitral proceedings between the respondent and the appellant.
It is noticed that the subsequent application i.e. C.M. Application No. 1414 of 2006 was sought to be not pressed and a prayer to this effect is evident from the order passed on C.M. Application No. 61881 of 2012, which was also disposed of by the Court on the same day by passing a separate order. The appellant later on filed C.M. Application No. 71825 of 2014 for recall of the order dated 16.4.2014 on the premise that the learned Company Judge could not step into the jurisdiction of passing the impugned orders on the company petition unless an order for appointment of liquidator provisionally or an order for winding up the company was otherwise passed.
This company appeal raises a basic and vital question as to the exercise of jurisdiction by the learned Company Judge in relation to arbitration proceedings on 16.4.2014 when neither a provisional liquidator was appointed in terms of Section 450(2) of the Companies Act, 1956 read with Section 20(1) of SICA nor an order of winding up the company was passed by the Company Judge on the reference made by the BIFR before this Court under Section 20 (2) of SICA.
The question that crops up for our consideration is limited to the extent as to whether the learned Company Judge on the mere reference of BIFR under Section 20 (1) of the SICA could exercise any jurisdiction under the Companies Act in respect of proceedings under other laws or the proceedings under Section 446 (1) and (2) of the Companies Act are dependent upon and subject to an order passed by the Company Judge for winding up the company or appointment of official liquidator as provisional liquidator.
Learned counsel for the appellant as well as learned counsel for the respondent have placed reliance upon the judgement reported in (1984) 4 SCC 657. Learned counsel for the appellant has further placed reliance upon a judgement reported in (2000) 5 SCC 515.
The proceedings before the Company Judge have come to be initiated on the strength of a reference as made by the BIFR to this Court under Section 20 (1) of the SICA. Section 20 of the SICA for ready reference is reproduced below:
"Section 20 -WINDING-UP OF SICK INDUSTRIAL COMPANY.
(1) Where the Board, after making inquiry under section 16 and after consideration of all the relevant facts and circumstances and after giving an opportunity of being heard to all concerned parties, is of opinion that the sick industrial company is not likely to make its net worth exceed the accumulated losses within a reasonable time while meeting all its financial obligations and that the company as a result thereof is not likely to become viable in future and that it is just and equitable that the company should be wound up, it may record and forward its opinion to the concerned High Court.
(2) The High Court shall, on the basis of the opinion of the Board, order winding-up of the sick industrial company and may proceed and cause to proceed with the winding-up of the sick industrial company in accordance with the provisions of the Companies Act, 1956 (1 of 1956).
(3) For the purpose of winding-up of the sick industrial company, the High Court may appoint any officer of the operating agency, if the operating agency gives its consent, as the liquidator of the sick industrial company and the officer so appointed shall for the purpose of the winding-up of the sick industrial company be deemed to be, and have all the powers of, the official liquidator under the Companies Act, 1956 (1 of 1956).
(4) Notwithstanding anything contained in sub-section (2) or sub-section (3), the Board may cause to be sold the assets of the sick industrial company in such manner as it may deem fit and forward the sale proceeds to the High Court for orders for distribution in accordance with the provisions of section 529A, and other provisions of the Companies Act, 1956 (1 of 1956)."
Plain reading of Section 20 (1) and (2) of the SICA would make it amply clear that since the reference is made by the BIFR before this Court on the basis of its opinion, the provisions of Companies Act, 1956 become applicable and the jurisdiction of the Company Judge is set into motion as soon as the reference is registered. On receiving a reference under Section 20 (1), it is obligatory on the part of the company to subscribe to the proceeding of reference either for filing the representations or winding up and facilitate the company judge to record its satisfaction for proceeding in connection with all the matters to which the company is a party including the necessity of appointing provisional liquidator in terms of the Companies Act or otherwise so as to confirm the opinion of the BIFR either way.
In the instant case, upon registration of the reference by this Court in the form of company petition no. 9 of 2003, the representations are undisputedly said to have been filed by the respondent company. As to whether provisional liquidator is to be appointed or not, the impugned orders do not record any satisfaction. The learned Company Judge without having recorded a satisfaction either way, has nevertheless proceeded to dispose of the C.M. Application No. 889 of 2003 (wrongly mentioned as 1414 of 2006) seeking to appoint new arbitrator in respect of an arbitration proceeding pending before the civil court between the respondent and the appellant ever since 1993. The jurisdiction exercised by the learned Company Judge under the Companies Act is assailed on the ground of jurisdictional error by making a specific reference to Section 446(1) and (2) of the Companies Act. For the purpose of resolving the issue in dispute, we may reproduce the relevant provisions of Section 446 as well as Section 450 of the Companies Act, 1956, hereunder:
"446. Suits stayed on winding up order.
(1) When a winding up order has been made or the Official Liquidator has been appointed as provisional liquidator, no suit or other legal proceeding shall be commenced. or if pending at the date of the winding up order, shall be proceeded with, against the company, except by leave of the Court and subject to such terms as the Court may impose.
(2) The Court which is winding up the company shall, notwithstanding anything contained in any other law for the time being, in force, have jurisdiction to entertain, or dispose of-
(a) any suit or proceeding by or against the company;
(b) any claim made by or against the company (including claims by or against any of its branches in India);
(c) any application made under section 391 by or in respect of the company;
(d) any question of priorities or any other question whatsoever, whether of law or fact, which may relate to or arise in course of the winding up of the company;
whether such suit or proceeding has been instituted or is instituted, or such claim or question has arisen or arises or such application has been made or is made before or after the order for the winding up of the company, or before or after the commencement of the Companies (Amendment) Act, 1960 .] (65 of 1960 .) (3) Any suit or proceeding by or against the company which is pending in any Court other than that in which the winding up of the company is proceeding may, notwithstanding anything contained in any other law for the time being in force, be transferred to and disposed of by that Court.
(4) Nothing in sub- section (1) or sub- section (3) shall apply to any proceeding pending in appeal before the Supreme Court or a High Court."
"450. Appointment and powers of provisional liquidator.
(1) At any time after the presentation of a winding up petition and before the making of a winding up order, the Court may appoint the Official Liquidator to be liquidator provisionally.
(2) Before appointing a provisional liquidator, the Court shall give notice to the company and give a reasonable opportunity to it to make its representations, if any, unless, for special reasons to be recorded in writing, the Court thinks fit to dispense with such notice.
(3) Where a provisional liquidator is appointed by the Court, the Court may limit and restrict his powers by the order appointing him or by a subsequent order; but otherwise he shall have the same powers as a liquidator.
(4) The Official Liquidator shall cease to hold office as provisional liquidator, and shall become the liquidator, of the company, on a winding up order being made."
Learned counsel for the appellant inviting the attention of this Court to the aforesaid provisions, has argued that unless and until the learned Company Judge passes an order for appointment of provisional liquidator or an order for winding up of the company is passed, the Company Judge cannot be said to have any jurisdiction and until then no order in relation to proceedings mentioned under Section 446 (1) and (2) can be passed.
Per contra, learned counsel for the respondent has argued that once the reference is forwarded by BIFR to this Court under Section 20 (1) of SICA, the provisions of the Companies Act, ipso facto, become applicable and this Court has a jurisdiction to pass an order in relation to the matters mentioned under Section 446 notwithstanding any order to have been passed for winding up or appointment of provisional official liquidator.
We have perused the impugned orders as well as the record of proceedings and it is found that the learned Company Judge, before passing the impugned orders, has not recorded any satisfaction either way i.e. for winding up the company or for appointment of a provisional liquidator but on the contrary has proceeded to deal with the company claim against the appellant. It is worthwhile to mention that Section 441(2) clearly postulates the commencement of winding up proceedings from the date of presentation of the company petition and notice for filing representations is clearly envisaged under Section 450 (2) which is not an empty formality unless such an opportunity is dispensed with. Once the law envisages an opportunity, consideration of the representations open to be filed by the company for recording satisfaction as regards winding up becomes imperative. On discharge of this obligation, the Company Judge would either assume jurisdiction to deal with other matters as provided for under Section 446 of the Companies Act or may not enable itself to proceed under the Companies Act, 1956. In the event satisfaction is recorded to proceed with the winding up of the company or a provisional liquidator is appointed, it is open to the Company Judge to allow the competent courts to proceed in the matters filed by or against the Company under such terms as the Company Judge may provide for under Section 446 (1) or in the alternative, the jurisdiction of all such courts be assumed to dispose of the pending matters filed by or against the company by the Company Judge itself as per the mandate of Section 446 (2) of the Act. Once the satisfaction to wind up the company is recorded on the representations filed by the company, looking to the mandate of law under Section 450 (2), all other matters filed by or against the company become amenable to the jurisdiction of the Company Judge in a manner provided for under Section 446 (1) and (2) of the Companies Act. The order appointing a provisional liquidator would also signify the intention of winding up and the provisions of Section 446 (1) and (2) would become available to the Company Judge for the exercise of his respective jurisdictions in relation to the pending matters filed by or against the company notwithstanding the fact whether official liquidator is associated with or not. This, however, is not to suggest that the official liquidator may not be appointed as provisional liquidator but what is meant is that the discretion to appoint provisional liquidator lies with the Company Judge, who may also have regard to other provisions like Section 20 (3) of SICA etc. as the purpose of winding up is to consolidate all the proceedings.
From a careful reading of the judgement placed reliance upon, we are of the considered opinion that the learned Company Judge while exercising the jurisdiction in the matter ought to have recorded satisfaction on the aspect of winding up by considering the representations filed by the company. We are also conscious of the fact that arbitration proceedings stood delayed inordinately but to safeguard the interest of the company, such an exercise is mandatory.
Both the parties have agreed that it was incumbent on the part of the learned Company Judge to have recorded his satisfaction on winding up or appointment of provisional liquidator before having passed the impugned orders and on the strength of consensus expressed by the learned counsel for the parties, we hereby set aside the order dated 16.4.2014 passed by the learned Company Judge as well as the order dated 7.12.2015 and remit the matter back to the learned Company Judge for dealing with the matter in accordance with law. Both the parties have agreed to appear before the learned Company Judge on 03.02.2016. The registry may list the company petition accordingly and it shall be open to the respondent company to press urgency in the matter and the appellant also undertakes to co-operate with the proceedings.
Further proceedings under the Companies Act, 1956 shall depend upon the order that may be passed by the learned Company Judge on the representations filed by the respondent company with due participation of the appellant in the proceedings as has been observed hereinabove.
The appeal is disposed of accordingly.
Dated: Jan. 14, 2016 MFA Court No. - 4 Case :- SPECIAL APPEAL DEFECTIVE No. - 583 of 2015 Hon'ble Amreshwar Pratap Sahi,J.
Hon'ble Attau Rahman Masoodi,J.
The writ petition is disposed of vide our orders of date, on separate sheets.
Dated: Jan. 14, 2016 MFA