2001 (9) TMI 1049 - HC - Companies Law

Summary

Issues:
Challenge to orders passed by BIFR and AAIFR under Articles 226 and 227 of the Constitution of India, 1950.

Analysis:
The judgment involved a petition challenging orders passed by the Board for Industrial and Financial Reconstruction (BIFR) and the Appellate Authority for Industrial and Financial Reconstruction (AAIFR) under Articles 226 and 227 of the Constitution of India, 1950. The controversy began with an application for reference under section 15 of the Sick Industrial Companies (Special Provisions) Act, 1985. BIFR initially held the petitioner as a sick company deserving winding up, which was later challenged before AAIFR. AAIFR held the reference incompetent and premature. Subsequently, another reference was filed, but BIFR rejected it, stating that a reference can only be made by a sick company supported by a resolution of its board. The petitioner then filed an application under section 16(1)(b) of the Act, treated by BIFR as a motion for suo motu action. The matter was reviewed by BIFR members, who concluded against reopening the case. The appeal before AAIFR was rejected due to delayed presentation.

In the writ petition, the petitioner argued that BIFR erred in not acting on the petition dated 10-2-1997, claiming there was no prayer for suo motu action. The petitioner contended that the communication from BIFR did not constitute an order, thus the appeal before AAIFR should have been considered non est. The respondent argued that the petitioner's intent was to prolong the matter for protection under section 22 of the Act. The Court examined the modalities of BIFR's orders, emphasizing that mere communications may not constitute legal orders. The term "order" in legal proceedings indicates an expression of opinion to be enforced.

The Court analyzed section 16 of the Act, which deals with inquiries into sick industrial companies. It noted that BIFR proceeded under the misconception of a suo motu action, while in reality, a petition was filed requesting an inquiry. The Court emphasized the necessity of a legal order for directing or refusing an inquiry, which was lacking in BIFR's communication. Considering the prolonged consideration of the matter, the Court directed BIFR to assess the information provided in the petition dated 10-2-1997 within a month to decide on action under section 16(1)(b). The Court did not express any opinion on the case's merits and instructed the petitioner to present any further information by a specified date for BIFR's review, making the previous orders inoperative. The petition was disposed of accordingly.