1995 (7) TMI 317 - HC - Companies Law

Powers of person or body of persons appointed under section 15/15A to call for assistance in any investigation,

Issues Involved:
1. Validity of the BIFR's decision to appoint DAIL for the revival of ACL.
2. Determination of the "promoter" of ACL.
3. Compliance with procedural requirements under SICA, especially regarding tax concessions.
4. Legality of the transfer of shares under the sanctioned scheme.
5. Preferential rights of promoters in the revival scheme.
6. Validity and enforceability of directions given to the Central Government under the sanctioned scheme.

Detailed Analysis:

1. Validity of the BIFR's Decision to Appoint DAIL for the Revival of ACL:
The High Court upheld the decision of the Appellate Authority, which confirmed the BIFR's order sanctioning the scheme proposed by DAIL. The court noted that the BIFR had examined various schemes and found DAIL's proposal to be in accordance with the principles of the Act. The Appellate Authority also found that DAIL's scheme was feasible and that banks, financial institutions, and the Government of Andhra Pradesh had agreed to provide the necessary reliefs and concessions. The court emphasized that its jurisdiction was limited to judicial review and not to sit in appeal against the Appellate Authority's order.

2. Determination of the "Promoter" of ACL:
The court held that Bennett, Coleman and Co. Ltd. (BCCL) could not be considered the promoter of ACL, as it had not taken any steps preceding the incorporation of ACL. The court noted that the original promoters were Mr. D.L.N. Raju and Associates and the KCP group. BCCL, despite having substantial shareholding and controlling interest, was not the promoter. The court also rejected Dr. Jain's claim to be the promoter, as his agreement with BCCL was conditional and not approved by the financial institutions.

3. Compliance with Procedural Requirements under SICA, Especially Regarding Tax Concessions:
The court addressed the issue of whether the scheme was circulated to the Central Board of Direct Taxes (CBDT) as required under section 19 of SICA. The court referred to a letter from the Director of Income-tax (Recovery), which confirmed that the tax concessions granted by the BIFR were in order. The court rejected BCCL's contention that the scheme was invalid due to non-circulation to the CBDT, noting that the necessary approvals were obtained post-sanction.

4. Legality of the Transfer of Shares under the Sanctioned Scheme:
The court upheld the legality of the transfer of shares to DAIL, referencing the Supreme Court's decision in Kamani's case, which allowed for the transfer of shares in a sick industrial company under a sanctioned scheme. The court rejected BCCL's argument that the BIFR had no power to transfer ownership of the company, noting that the SICA provided for such measures under section 18.

5. Preferential Rights of Promoters in the Revival Scheme:
The court held that there is no principle of law that gives promoters a preferential right for the revival of a company after the stage under sub-section (2) of section 16 is crossed. The court noted that the BIFR may consider giving the promoter a right if their scheme is similar to others and if the promoter was not responsible for the company's sickness. However, in this case, both BCCL and Dr. Jain were found lacking in financial resources and managerial capability.

6. Validity and Enforceability of Directions Given to the Central Government under the Sanctioned Scheme:
The court held that the BIFR could not issue directions that the Central Government did not have the authority to comply with under any law. Specifically, the court found that the direction to extend the period of limitation for ACL for filing recovery suits against debtors by three years was beyond the BIFR's powers. The court noted that such directions must be within the framework of the Act and cannot nullify provisions of other laws like the Limitation Act.

Conclusion:
The High Court dismissed the petitions challenging the BIFR's and Appellate Authority's orders, upholding the scheme sanctioned in favor of DAIL. The court found no merit in the objections raised by BCCL and Dr. Jain, emphasizing the need for expeditious revival of the sick industrial company in the larger public interest. The court also directed that costs be paid to the Indian Council of Legal Aid and Advice.

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