2003 (1) TMI 515 - HC - Companies Law

2018 (7) TMI 2073 - HC

Issues Involved:
1. Opinion of BIFR under section 20(1) of the Sick Industrial Companies (Special Provisions) Act, 1985.
2. Dismissal of the appeal by AAIFR.
3. Special Civil Applications challenging the orders of BIFR and AAIFR.
4. Proposals and payments by the petitioner-company.
5. Legal interpretation of section 20(1) of the Sick Industrial Companies (Special Provisions) Act, 1985.
6. Arguments regarding the just and equitable clause.
7. Role of the High Court in accepting BIFR's opinion.
8. Impact on workers and the public interest.
9. Arguments by secured creditors.
10. Final decision and conditions imposed by the High Court.

Detailed Analysis:

1. Opinion of BIFR under section 20(1) of the Sick Industrial Companies (Special Provisions) Act, 1985:
The Board for Industrial and Financial Reconstruction (BIFR) conducted an enquiry and opined that M/s. Hathising Manufacturing Company Ltd. should be wound up as it was just and equitable. The company had accumulated losses and no viable proposal for revival emerged despite several opportunities.

2. Dismissal of the appeal by AAIFR:
The Appellate Authority for Industrial and Financial Reconstruction (AAIFR) dismissed the appeal against BIFR's opinion, noting that the company had significant outstanding dues and no feasible proposal to meet its financial obligations. The company had been before BIFR for about 12 years without any successful rehabilitation.

3. Special Civil Applications challenging the orders of BIFR and AAIFR:
The petitioner-company and Textile Labour Association (TLA) filed Special Civil Applications challenging the orders of BIFR and AAIFR. The matters were placed for hearing before the High Court.

4. Proposals and payments by the petitioner-company:
Several orders were passed by the court on different proposals given by the petitioner-company. The company was directed to deposit certain amounts to test its bona fides, but it failed to adhere to these directions. The financial institutions rejected the settlement schemes proposed by the company.

5. Legal interpretation of section 20(1) of the Sick Industrial Companies (Special Provisions) Act, 1985:
Section 20(1) presupposes three conditions: (i) the company is not likely to make its net worth exceed accumulated losses within a reasonable time while meeting all its financial obligations; (ii) the company is not likely to become viable in the future; (iii) it is just and equitable to wind up the company. The petitioner argued that the BIFR and AAIFR did not consider the just and equitable clause adequately.

6. Arguments regarding the just and equitable clause:
The petitioner-company argued that the just and equitable clause should consider factors beyond financial viability, such as workers' interest and social obligations. The BIFR and AAIFR were accused of not applying their minds to this clause.

7. Role of the High Court in accepting BIFR's opinion:
The High Court has the discretion to accept or reject BIFR's opinion. It is not a mere rubber stamp and must independently evaluate the facts and correctness of BIFR's opinion.

8. Impact on workers and the public interest:
The petitioner argued that winding up the company would adversely affect 600 workers and their families, and the company was a running unit paying wages regularly. The court considered the broader impact on society and the economy.

9. Arguments by secured creditors:
The secured creditors supported BIFR's opinion, stating that the company had defaulted on repayments despite several opportunities and concessions. They argued that the company's performance remained dismal and no viable rehabilitation scheme was proposed.

10. Final decision and conditions imposed by the High Court:
The High Court dismissed the Special Civil Applications and admitted the Company Petition for winding up. However, it did not pass the winding-up order straightaway. The court directed the company to pay an equivalent amount to the secured creditors as it pays to the workers monthly. The company was required to place the monthly pay bills of the workers and proof of payment to the secured creditors before the court. Failure to comply with this arrangement would result in a winding-up order.

Further Order:
The court stayed the order regarding admission and advertisement until 31st January 2003 but did not stay the condition of payment to the secured creditors. The IDBI was directed not to issue any advertisement regarding the petition until the specified date.

← Previous Next →