2002 (3) TMI 827 - HC - Companies Law

Summary

Issues:
Challenge to order of Appellate Authority for Industrial and Financial Reconstruction (AAIFR) dismissing appeal against Board for Industrial and Financial Reconstruction (BIFR) order. Dispute over rehabilitation scheme reliefs from Government of India (Department of Revenue) under Sick Industrial Companies (Special Provisions) Act, 1985.

Analysis:
1. The petitioner challenged the AAIFR's order dated 16-5-2001, which dismissed their appeal against the BIFR's order dated 22-11-2000. The BIFR had directed the IDBI to issue an advertisement for change of management for a sick industrial company, Rajasthan Explosive & Chemicals Ltd. The petitioner, Government of India (Department of Revenue), had concerns regarding the reliefs envisaged in the Draft Rehabilitation Scheme (DRS) under the SICA, including tax exemptions, carry forward of losses, and deferment of tax dues.

2. The petitioner argued that the DRS lacked requisite details and information for them to examine the scheme on merits. The BIFR's order dated 8-5-2000 recorded the promoter's agreement to cover any shortfall due to inadequate reliefs and concessions. However, the sanctioned scheme circulated on 22-11-2000 deviated from the earlier order, mandating specific exemptions and reliefs from the petitioner. The petitioner contended that they were adversely affected by the sanctioned scheme, justifying their appeal against it.

3. The court noted that the DRS did not quantify tax concessions expected from the petitioner, hindering their ability to provide consent. The BIFR's failure to supply necessary details meant the limitation period for objections under section 19(2) had not commenced. The court emphasized the importance of providing complete information for a fair assessment.

4. The court found discrepancies between the order sanctioning the scheme and the subsequent circulation of the scheme, affecting the petitioner's interests. The petitioner's appeal was justified as they were significantly impacted by the circulated sanctioned scheme, which limited the petitioner's discretion in granting reliefs and concessions to the third respondent company.

5. Ultimately, the court allowed the writ petition, quashing the AAIFR's order and the BIFR's order to the extent it directed the Income-tax Department to grant reliefs to the third respondent. The BIFR was instructed to reevaluate the matter, considering whether reliefs and concessions were necessary for the company's revival, and involving the petitioner in the decision-making process.