2003 (9) TMI 567 - HC - Companies Law

Issues Involved:
1. Non-relief to workmen despite AAIFR's order.
2. Legal proceedings initiated by an unrelated person.
3. Financial status and proposals for rehabilitation.
4. AAIFR's rejection of proposals.
5. Appellant's financial capacity.
6. Appellant's continued litigation.
7. AAIFR's authority to direct land sale.
8. Principles of natural justice.
9. Scope of appellate power under Section 25 of the Act.
10. Delay caused by appellant's writ petition.
11. Compensation to families of deceased workmen.

Issue-wise Detailed Analysis:

1. Non-relief to Workmen Despite AAIFR's Order:
The workmen, approximately 1,500 in number, employed by Dhanalakshmi Mills Ltd., have not received any relief despite the AAIFR's order on April 3, 1998, directing the sale of the company's valuable lands to pay wages, statutory dues, and secured creditors. The closure of the 'B' mill was permitted in 1994, with a direction to employ those workers in the 'A' mill.

2. Legal Proceedings Initiated by an Unrelated Person:
The delay in relief for the workmen is attributed to legal proceedings initiated by an individual who was neither a creditor, shareholder, nor connected with the company, but had made an offer in response to a BIFR advertisement for the rehabilitation of the sick industrial undertaking.

3. Financial Status and Proposals for Rehabilitation:
Dhanalakshmi Mill, incorporated in 1932, faced significant financial losses by 1993, leading to its application for closure of the 'B' mill. The BIFR declared the mill as a sick industrial undertaking in 1994 and appointed an operating agency to formulate a rehabilitation scheme. The appellant's offer was contested by the existing management, leading to a remand by the AAIFR for fresh consideration.

4. AAIFR's Rejection of Proposals:
The AAIFR, after an elaborate examination of the proposals, found both the appellant's and the existing management's proposals unviable. The AAIFR concluded that the appellant's proposal was not better than that of the existing promoters and lacked financial credibility.

5. Appellant's Financial Capacity:
The AAIFR found that the appellant did not have the requisite financial capacity to implement the proposed scheme. The appellant's claimed sources of funds were deemed unreliable, and there was no evidence of solvency or commitment from the appellant's group.

6. Appellant's Continued Litigation:
The appellant's continued litigation in this court delayed the rehabilitation process and the payment of arrears to workmen by over five years. The appellant's role in the rehabilitation process ended with the AAIFR's rejection of his proposal.

7. AAIFR's Authority to Direct Land Sale:
The appellant argued that the AAIFR did not have the power to direct the sale of land owned by the sick industry. However, the court held that the AAIFR's powers under Section 25(2) of the Act included the authority to modify or set aside the BIFR's order and give directions for the sale of assets to meet the company's obligations.

8. Principles of Natural Justice:
The appellant contended that the AAIFR's procedure violated the principles of natural justice by formulating issues without prior intimation. The court found this argument misconceived, as the issues were formulated based on the arguments already advanced and did not deny the appellant any opportunity to address them.

9. Scope of Appellate Power under Section 25 of the Act:
The court clarified that the appellate power under Section 25(2) of the Act is co-extensive with the power of the original authority. The AAIFR was within its rights to substitute the BIFR's order with its own directions for the sale of assets and rehabilitation of the sick industrial unit.

10. Delay Caused by Appellant's Writ Petition:
The delay in the rehabilitation process and payment of dues was primarily due to the appellant's writ petition, which remained pending for five years. The court emphasized the need for immediate implementation of the AAIFR's directions to avoid further delays.

11. Compensation to Families of Deceased Workmen:
The court directed the appellant to pay Rs. 5,000 each to the families of workmen who died after the AAIFR's order in 1998, as the delay in payment of arrears was caused by the appellant's litigation. The workers' union was instructed to submit a list of deceased workmen, and the appellant was ordered to deposit the compensation amount within eight weeks.

Conclusion:
The appeals were dismissed, and the court upheld the AAIFR's order, directing immediate implementation of the rehabilitation scheme and payment of dues to workmen and creditors. The appellant was also ordered to compensate the families of deceased workmen for the delay caused by his litigation.

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