2001 (1) TMI 910 - HC - Companies Law

Summary

Issues Involved:
1. Rejection of the rehabilitation scheme by BIFR.
2. Legal interpretation of the Sick Industrial Companies (Special Provisions) Act, 1985 (SICA).
3. Maintainability of the writ petition in the context of alternative remedies.
4. The jurisdiction of the BIFR and its decision-making process.

Issue-wise Detailed Analysis:

1. Rejection of the Rehabilitation Scheme by BIFR:
The petitioner company, Sarla Gems Ltd., was declared sick under SICA and referred to BIFR. The company proposed a rehabilitation scheme to establish a new project for producing PVC compounds at a different site. BIFR rejected the scheme on the grounds that it was not a rehabilitation proposal but the establishment of a new project. The court noted that the company's proposal involved shifting to a new site and changing its business entirely, which did not align with the objective of rehabilitating the existing sick unit.

2. Legal Interpretation of SICA:
The court emphasized that SICA aims to revive and rehabilitate sick industrial companies to secure employment, revenue, and the productive assets of the company. The act does not intend to facilitate the establishment of new ventures at the cost of existing assets and employees. The court highlighted that the rehabilitation should involve using the existing productive assets and not creating new liabilities by starting a completely new project.

3. Maintainability of the Writ Petition:
The Bank of Baroda (BoB) raised a preliminary objection regarding the maintainability of the writ petition, citing the availability of an alternative remedy through an appeal. The court acknowledged the settled principle that writ jurisdiction under Article 226 of the Constitution can be invoked despite the existence of an alternative remedy if there is a clear jurisdictional error or violation of natural justice. The court decided to entertain the writ petition due to the significant legal question regarding the scope of BIFR's jurisdiction and the interpretation of SICA.

4. Jurisdiction of BIFR and its Decision-Making Process:
The court examined whether BIFR's decision to reject the rehabilitation scheme was within its jurisdiction and based on valid grounds. It concluded that BIFR acted within its jurisdiction, as the proposed scheme did not align with the objectives of SICA. The court noted that the scheme involved selling the existing assets and starting a new project, which would not secure the employment of existing employees or utilize the current productive assets. The court found that BIFR's decision was reasonable and not based on extraneous considerations.

Conclusion:
The court dismissed the writ petition, upholding BIFR's decision to reject the rehabilitation scheme. It emphasized that the scheme proposed by the petitioner was incompatible with the provisions and objectives of SICA, which aim to rehabilitate existing sick industrial units rather than facilitate the establishment of new ventures. The court ruled that BIFR acted within its jurisdiction and based its decision on valid grounds, thereby rejecting the petitioner's claims.