2003 (12) TMI 329 - HC - Companies Law

Issues Involved:
1. Legality and correctness of the Board for Industrial and Financial Reconstruction (BIFR) orders rejecting references on the ground of limitation.
2. Applicability of the Indian Limitation Act to references made under section 15 of the Sick Industrial Companies (Special Provisions) Act, 1985.
3. Interpretation of section 15(1) of the Sick Industrial Companies (Special Provisions) Act, 1985 regarding the 60-day period for making a reference.
4. Consequences of failing to make a reference within the stipulated 60-day period.
5. Rejection of references due to delay and laches.

Detailed Analysis:

1. Legality and Correctness of BIFR Orders:
The petitioner challenged the BIFR's rejection of references solely on the ground of limitation. The BIFR held that sections 4 to 24 of the Limitation Act are not applicable to references made under section 15 of the Act, as the Board is not a court. The BIFR also stated that future references would be non-maintainable due to the time-barred status of earlier references.

2. Applicability of the Indian Limitation Act:
The BIFR's position was that the Indian Limitation Act does not apply to references made under section 15 of the Act, as the Board is not a court. This interpretation led to the rejection of the references made by the petitioner.

3. Interpretation of Section 15(1) of the Act:
Section 15(1) mandates that the Board of Directors of a sick industrial company must make a reference to the BIFR within 60 days from the date of finalization of the duly audited accounts. The proviso to section 15(1) allows for a reference within 60 days after the Board of Directors forms an opinion about the company's sickness, even before finalization of accounts. The petitioner argued that the 60-day period is an obligation on the directors rather than a limitation period, and the BIFR's interpretation was a misreading of the law.

4. Consequences of Failing to Make a Reference Within 60 Days:
The court held that section 15(1) creates a mandatory obligation on the Board of Directors to approach the BIFR within the stipulated period. However, this does not constitute a limitation period that bars references beyond 60 days. Failure to comply with this obligation attracts penal provisions under section 33(1) of the Act, but does not deprive the BIFR of its jurisdiction to entertain the reference.

5. Rejection of References Due to Delay and Laches:
The court noted that the BIFR could reject references if the directors exhibited supine indifference, lack of bona fides, or if the reference was made solely to take shelter under the Act's protections. In this case, the delay was around 45 days, and the major creditor, IDBI, did not object to the reference. Therefore, the BIFR's rejection of the references was not justified.

Conclusion:
The court quashed the BIFR's orders dated 30th April 2002 and 28th July 2003, directing the BIFR to reconsider the reference made by the company in accordance with the Act. The court emphasized that the BIFR should consider the merits of the reference, including whether the company satisfies other norms under the Act.

Disposition:
Rule made absolute; petition disposed of in terms of the court's order.

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