2003 (9) TMI 566 - HC - Companies Law

Issues Involved:
1. Exercise of discretionary powers by AAIFR and BIFR under the SIC Act.
2. Declaration of the petitioner company as a sick industrial company.
3. Refusal to sanction the revised draft rehabilitation scheme.
4. Sale of 1260 grounds of land at Perambur, Chennai.
5. Legal and procedural requirements under the SIC Act.
6. Settlement of dues to secured creditors and workers.
7. Implementation of the rehabilitation scheme.

Issue-wise Detailed Analysis:

1. Exercise of Discretionary Powers by AAIFR and BIFR:
The court examined whether AAIFR and BIFR exercised their discretionary powers under the SIC Act properly. The court emphasized that these authorities must act to achieve the objectives of the SIC Act, which includes the revival and rehabilitation of sick industries to prevent economic and social repercussions. The court noted that discretionary powers must be exercised with a commitment to the duties cast on the authorities.

2. Declaration of the Petitioner Company as a Sick Industrial Company:
The petitioner company, with divisions in textiles, engineering, and services, was declared a sick industrial company by BIFR on 15-10-1993. The BIFR appointed IDBI as the Operating Agency under section 17(3) of the SIC Act. The company continued to seek approval for a comprehensive techno-economic viable scheme for its survival, revival, and rehabilitation.

3. Refusal to Sanction the Revised Draft Rehabilitation Scheme:
The court scrutinized the refusal by BIFR and AAIFR to sanction the revised draft rehabilitation scheme submitted on 14-2-2003. The scheme included the sale of 1260 grounds of land at Perambur, Chennai, for Rs. 60 Crores. The court found that the refusal was based on the grounds that the scheme was not transparent and the sale price was lower than previously offered amounts. The court held that the authorities failed to consider the acceptance of the scheme by secured creditors and workers and the immediate settlement of dues.

4. Sale of 1260 Grounds of Land at Perambur, Chennai:
The court examined the procedural aspects of the sale of 1260 grounds of land. The BIFR had disbanded the Asset Sale Committee and later directed the company to bring in Rs. 20 Crores in a "No Lien Account" and allowed secured creditors to take a final view on the valuation and transfer price of the assets. The court noted that the sale proposal for Rs. 60 Crores was accepted by secured creditors and workers, and the sale price was to be paid within 15 days, meeting the immediate needs of the company.

5. Legal and Procedural Requirements under the SIC Act:
The court detailed the provisions of the SIC Act, including sections 15 to 22A, which outline the procedures for references, inquiries, and schemes for sick industrial companies. The court emphasized that the SIC Act aims to revive and rehabilitate sick industries before opting for winding up. The court found that the authorities failed to adhere to the procedural requirements and objectives of the SIC Act in their refusal to sanction the scheme.

6. Settlement of Dues to Secured Creditors and Workers:
The court considered the provisions made in the revised draft rehabilitation scheme for settling dues to secured creditors and workers. The scheme included contributions from promoters and co-promoters and the sale proceeds of the land. The court found that the scheme provided substantial sources of funds for discharging outstanding liabilities and reviving the company.

7. Implementation of the Rehabilitation Scheme:
The court directed the implementation of the revised draft rehabilitation scheme with specific timelines and conditions. The promoters and co-promoters were required to deposit their respective contributions, and the sale of the land was to be completed within specified periods. The court also directed the BIFR to oversee the implementation of the scheme and appoint the Operating Agency as the Monitoring Agency.

Conclusion:
The court allowed the writ petition, set aside the impugned orders of BIFR and AAIFR, and directed the implementation of the revised draft rehabilitation scheme with specific conditions and timelines to ensure the revival and rehabilitation of the petitioner company.

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