2003 (7) TMI 582 - HC - Companies Law

Issues Involved:
1. Validity of the orders passed by the Board for Industrial and Financial Reconstruction (BIFR) and the Appellate Authority for Industrial and Financial Reconstruction (AAIFR).
2. Compliance with the principles of natural justice.
3. Examination of the techno-economic viability study.
4. Role and consideration of financial institutions' views.
5. Merits of the rehabilitation proposal and its consideration by BIFR and AAIFR.
6. Jurisdiction and scope of the High Court's review under Article 226/227 of the Constitution of India.

Detailed Analysis:

1. Validity of the Orders Passed by BIFR and AAIFR:
The petitioners challenged the orders of BIFR and AAIFR, contending that these were not in accordance with law, arbitrary, and unreasonable. The petitioners argued that the BIFR failed to properly consider their rehabilitation proposal and acted in violation of the principles of natural justice by not providing a copy of the minutes of the joint meeting. They also claimed that the AAIFR did not adequately examine the grounds of appeal.

2. Compliance with the Principles of Natural Justice:
The petitioners argued that the BIFR's order violated the principles of natural justice as they were not supplied with the minutes of the joint meeting. They contended that the BIFR and AAIFR did not apply their minds before passing the orders and blindly accepted the report of the operating agency without proper scrutiny.

3. Examination of the Techno-Economic Viability Study:
The petitioners contended that the BIFR failed to ensure that the operating agency conducted a detailed techno-economic viability study. They argued that the operating agency's report was not based on such a study, which vitiated the BIFR's order. The petitioners highlighted that the BIFR did not conduct an enquiry as contemplated under Section 16 of the Sick Industrial Companies (Special Provisions) Act, 1985.

4. Role and Consideration of Financial Institutions' Views:
The respondents, including financial institutions, argued that the operating agency had considered the viability of rehabilitating the company within the parameters of RBI guidelines and found it not possible. They asserted that the financial institutions had lost faith in the petitioner-company due to its conduct and non-cooperation. The respondents emphasized that the financial institutions' views were crucial and should not be disregarded.

5. Merits of the Rehabilitation Proposal and Its Consideration by BIFR and AAIFR:
The petitioners claimed that their revised rehabilitation proposal, considering the changed policy of the government regarding the steel industry, was practical and viable. They argued that the BIFR and AAIFR failed to appreciate this proposal and instead viewed the matter from the perspective of financial institutions. The petitioners sought reconsideration of their proposal by the BIFR.

6. Jurisdiction and Scope of the High Court's Review:
The respondents contended that the High Court's jurisdiction under Article 226/227 of the Constitution of India is limited to examining jurisdictional irregularities and not the merits of the orders passed by the BIFR and AAIFR. They argued that the orders were in consonance with the provisions of the Act and did not suffer from any infirmities. The respondents also emphasized that the proceedings before the BIFR are not adversarial and the financial institutions' views are essential.

Conclusion:
The High Court, after considering the rival submissions, concluded that the BIFR and AAIFR had acted within their statutory parameters and guidelines. The court emphasized that the proceedings before the BIFR are not adversarial, but the views of financial institutions, as stakeholders, are crucial and should be considered. The court found that the BIFR had taken into account the relevant aspects, including the techno-economic viability study, and concluded that the company could not be revived within the RBI guidelines. The court also noted that the petitioners failed to participate in the joint meeting and did not inspire confidence in the financial institutions.

Given the passage of time and the changed scenario, the court held that there was no merit in interfering with the orders of the BIFR and AAIFR. The court dismissed the writ petition, vacated the interim order, and discharged the rule.

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