2002 (12) TMI 507 - HC - Companies Law

Issues Involved:
1. Jurisdiction of the first respondent (AAIFR) in framing issues.
2. Comparison of rehabilitation proposals by the petitioner and the third respondent.
3. Resourcefulness of the petitioner and the third respondent in implementing their respective proposals.
4. Viable and workable alternative for the rehabilitation of the third respondent Mills.

Detailed Analysis:

1. Jurisdiction of the First Respondent (AAIFR) in Framing Issues:
The petitioner argued that the first respondent exceeded its jurisdiction by framing issues that were not arising out of the impugned order of the second respondent. The first respondent framed three issues: (i) Is Petitioner's proposal better than that of the third respondent as concluded by the second respondent? (ii) Have the petitioner and the third respondent established their resourcefulness for implementing their respective proposals? (iii) What is the most viable, workable alternative for the rehabilitation of the third respondent Mills? The court found that the first respondent had the jurisdiction to frame these issues based on the pleadings of the parties and the material evidence.

2. Comparison of Rehabilitation Proposals by the Petitioner and the Third Respondent:
The proposals were compared based on several parameters such as One-Time Settlement (OTS) dues, labor dues, capital expenditure, statutory dues, and working capital margin. The third respondent offered Rs. 11.96 crores for OTS, which was found slightly better than the petitioner's Rs. 11.70 crores. For labor dues, the third respondent offered Rs. 2.84 crores, while the petitioner offered Rs. 4.10 crores, which included Rs. 1.50 crores for Voluntary Retirement Scheme (VRS) that was not favored by the labor unions. The first respondent found the third respondent's proposal better in terms of labor dues. In terms of capital expenditure, the petitioner's proposal of Rs. 4.25 crores was found technically justifiable and better than the third respondent's Rs. 1.84 crores. For statutory dues, both proposals were found misleading. The petitioner's working capital margin of Rs. 3.50 crores was better than the third respondent's Rs. 1.71 crores. Overall, the first respondent concluded that the third respondent's proposal was better in several key areas.

3. Resourcefulness of the Petitioner and the Third Respondent in Implementing Their Respective Proposals:
The first respondent analyzed the capability of both parties to raise the required funds. The third respondent's proposal depended heavily on the co-promoter Jaganathan Associates, whose sources of funds were found unreliable. The petitioner's claimed sources of funds from the sale of office space to various entities were also found unsubstantiated. The first respondent concluded that both parties were incapable of raising the necessary resources for rehabilitation.

4. Viable and Workable Alternative for the Rehabilitation of the Third Respondent Mills:
Given the incapability of both parties to implement their proposals, the first respondent suggested raising adequate resources by disposing of the assets of B mill and, if necessary, part of the surplus land of A mill. This approach aimed to discharge all financial obligations and provide additional funds for modernizing the spinning operations of A mill, ensuring employment for the workers of B mill.

Conclusion:
The court upheld the order of the first respondent (AAIFR), finding it within its jurisdiction and based on material evidence. The court dismissed the writ petitions, directing the BIFR and the Operating Agency to implement the order within six months. The court emphasized the importance of the Sick Industrial Companies (Special Provisions) Act, 1985 in securing timely detection and rehabilitation of sick industrial companies to protect employment and optimize the use of financial resources.

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