2003 (10) TMI 403 - HC - Companies Law

Summary

Issues:
Challenge to orders passed by the Board for Industrial & Financial Reconstruction (BIFR) regarding the winding up of a sick industrial company.

Analysis:
The writ petition challenged the two orders passed by the BIFR, dated 14 May, 2003, and 21 August, 2003, regarding the winding up of the petitioner company. The BIFR confirmed its opinion that the company was not likely to make its net-worth exceed accumulated losses within a reasonable period, justifying winding up. The BIFR had earlier declared the company a sick industrial company under the Sick Industrial Companies (Special Provisions) Act, 1985, and had sanctioned a rehabilitation scheme in 2001. However, the overseas co-promoter failed to bring in the required funds, leading to the scheme's failure. The BIFR directed the company to deposit a sum in an interest-bearing account for revival proposals but found the company lacking in resources and seriousness for revival.

The main contention raised in the petition was that the BIFR abdicated its duty to rehabilitate the company by not granting an extension for settling dues and proceeding with the winding up order. The petitioner argued that substantial payments had been made to banks under the sanctioned scheme, with only a balance remaining. However, the BIFR found the company lacking in resources and will to revive, as evidenced by the failure to deposit the required amount within the specified timeframes. The BIFR's decision was based on the company's conduct and its failure to fulfill obligations under the sanctioned scheme.

The court upheld the BIFR's decision, stating that the company's failure to deposit the required amount and revive the scheme indicated a lack of seriousness and resources for revival. The court emphasized that a rehabilitation scheme under the Act is binding on all parties involved and failure to fulfill obligations can lead to the scheme's collapse. The court found no illegality or arbitrariness in the BIFR's decision and dismissed the writ petition, concluding that the company's aim to prolong the process was not in line with the Act's objectives. The court rejected the plea to wait for the Appellate Authority for Industrial & Financial Reconstruction (AAIFR) to become functional before winding up the company.