2003 (12) TMI 328 - HC - Companies Law

Summary

Issues Involved:
1. Condonation of delay in filing satisfaction of charge under section 141 of the Companies Act, 1956.
2. Jurisdiction of the Company Law Board (CLB) in considering the merits of the charge satisfaction.
3. Compliance with the rehabilitation scheme sanctioned by the Board for Industrial and Financial Reconstruction (BIFR).

Issue-wise Detailed Analysis:

1. Condonation of Delay in Filing Satisfaction of Charge:

The appellant, Mangalore Chemicals & Fertilizers Limited, sought condonation of delay under section 141 of the Companies Act, 1956, for filing satisfaction of charge with the Registrar of Companies (ROC). The delay was attributed to several factors, including pending recovery proceedings and the need for compliance with the BIFR-sanctioned rehabilitation scheme. The appellant argued that the delay was not due to any mala fide or willful intention but was beyond their control. The Syndicate Bank opposed this, claiming the delay was due to the appellant's default.

2. Jurisdiction of the CLB in Considering the Merits of the Charge Satisfaction:

The CLB rejected the appellant's request for condonation of delay, suggesting that granting such relief would amount to modifying the BIFR-sanctioned scheme. The High Court of Karnataka found that the CLB exceeded its jurisdiction by delving into the merits of the charge satisfaction, which is the domain of the ROC under section 138 of the Act. The CLB should have confined itself to determining whether the delay was due to inadvertence or sufficient cause, without assessing the merits of the charge satisfaction.

3. Compliance with the Rehabilitation Scheme Sanctioned by BIFR:

The appellant had complied with the BIFR-sanctioned scheme by paying Rs. 114 crores to the consortium banks, except for the Syndicate Bank, which withheld satisfaction of charge due to pending recovery proceedings. The CLB's view that condoning the delay would modify the BIFR scheme was deemed incorrect by the High Court. The High Court emphasized that the CLB's role was limited to considering the cause for the delay and not the substantive compliance with the BIFR scheme.

Conclusion:

The High Court of Karnataka allowed the appeal, setting aside the CLB's order and remanding the matter back to the CLB for fresh consideration. The CLB was directed to focus solely on whether the delay in filing satisfaction of charge was due to inadvertence or sufficient cause and to avoid assessing the merits of the charge satisfaction, which is the ROC's responsibility. The High Court also ensured that the ROC's decision would not be influenced by the CLB's previous observations.