2002 (2) TMI 1234 - HC - Companies Law

Summary

Issues Involved:
1. Failure to disburse principal and additional term loans.
2. Effect of reports showing the viability of the company.
3. Relief sought by the petitioner.

Detailed Analysis:

1. Failure to disburse principal and additional term loans:
The petitioner-company alleged that financial institutions failed to disburse the sanctioned loans, leading to an inability to complete the plant and commence production. The respondents countered that the project delays and cost overrun were due to the company's mismanagement and inability to bring in necessary funds. The court found that the company's claims were barred by laches and that any breach of contract should be addressed through civil courts, not under Article 226. The court emphasized that the agreements were ordinary civil contracts without public law elements, and thus, a writ petition was not the appropriate remedy.

2. Effect of reports showing the viability of the company:
The petitioner-company cited reports by IDBI and Tata Economic Consultancy Services indicating the unit's viability. The respondents argued that the viability was conditional upon the company's compliance with certain obligations, which it failed to meet. The BIFR and AAIFR had given the promoters several opportunities to revive the company, but these attempts failed due to the promoters' inability to bring in funds. The court held that the company could not circumvent the statutory orders of BIFR and AAIFR by filing a writ petition and that any grievances should be addressed in the pending winding-up proceedings before the Company Court.

3. Relief sought by the petitioner:
The petitioner sought a writ of mandamus directing the financial institutions to provide financial assistance for the revival of the company. The court found that the doctrine of promissory estoppel was not applicable as the necessary conditions were not met. The court also held that the financial institutions' actions in recalling loans and stopping disbursements were not arbitrary or irrational. The court concluded that the learned Single Judge exceeded jurisdiction by directing the financial institutions to provide financial assistance without considering the techno-economic viability of the unit.

Conclusion:
The appeals were allowed, and the writ petition was dismissed. The court emphasized that the revival and rehabilitation of sick industries should be addressed under the provisions of the Sick Industrial Companies (Special Provisions) Act, 1985, and not through writ petitions under Article 226. The court also highlighted the limitations of judicial review in matters involving commercial transactions and the need for parties to seek remedies through appropriate civil courts.