Mere Settlement of Creditors/Workers Insufficient for Staying Winding Up Proceedings u/s 466

Case Details: Bipin J. Bagadia vs. Grand View Estates (P.) Ltd. - [2025] 170 taxmann.com 850 (HC-Bombay)

Judiciary and Counsel Details

• M.S. Sonak & Jitendra Jain, JJ.
• Mohit Khanna & Vaibhav Jagdale, for the Appellant.
• Virag Tulzapurkar, Cyrus Ardeshir, Sr. Advs., S.A.K. Najam-essani, Ms Pooja Shah, Maneksha, Sethna, Advs., Ranjiv Carvalho, Smt. Aparna Thipsay, Amir Arsiwala, Rahul Gupta, Yash Jariwala & Neha Samji for the Respondent.

Facts of the Case

In the instant case, respondents were group companies of the Company ‘S’ and they collectively hold 52% shares of the said company. The BIFR declared the company ‘S’ as sick company and recommended winding up of company.

Consequently, by the composite order, the High Court ordered the company to be wound up and directed the provisional liquidator to act as official liquidator. When winding up under Court’s order was in progress, respondents entered into agreements with company’s ex-workmen concerning settlement of dues of company’s ex-workmen.

Based on the said agreements, respondents instituted Interim Application, seeking stay on winding-up proceedings. By the impugned order, the application was allowed. It was noted that aspects of public interest, commercial morality and intention to revive company all these matters had not been considered the in impugned order.

Further, the Impugned order contained no reasons why discretion was exercised for staying winding up proceedings and whether any case was made out by respondents based on which it could be said that stay ought to be granted.

High Court Held

The High Court observed that the impugned order did not refer to earlier orders made by the Company Court, Appeal Court and the Supreme Court wherein similar application under Section 466 of the Companies Act, 2013 was disposed of. Further, there was no drastic change in circumstances since dismissal of earlier applications.

The High Court held that the mere settlement of creditors or workers did not entitle any party to a stay of winding up proceedings under Section 466 of the Act. Further, since the impugned order did not advert to section 466 and the principles to be followed for deciding such an application, the same was to be set aside.

List of Cases Reviewed

• Order dated 09 October 2023 in Interim Application No. 3663 of 2022 (Para 95) reversed.

List of Cases Referred to

• Neelkantha Kolay v. The Official Liquidator AIR 1996 Calcutta 171 (para 41)
• Sudarsan Chits (I) Ltd v. G. Sukumaran Pillai & Ors AIR 1984 SC 1579 (para 60)
• M/s Meghal Homes Pvt. Ltd. v. Shree Niwas Girni K.K.Samiti & Ors AIR 2007 SC 3079 (para 65).