2003 (8) TMI 410 - HC - Companies Law

Issues Involved:
1. Winding up of the respondent company based on the BIFR's recommendation.
2. Application for handing over possession of leased property.
3. Application for adjudication and payment of workmen's dues.
4. Legality of the BIFR and AAIFR's orders.
5. Validity of section 20(2) of the SICA.

Detailed Analysis:

1. Winding up of the Respondent Company
The BIFR recommended the winding up of the respondent company under section 20(1) of the Sick Industrial Companies (Special Provisions) Act, 1985 (SICA), as the promoters were not serious about rehabilitating the company. The BIFR's opinion was based on the company's inability to make its net worth exceed its accumulated losses within a reasonable time and its failure to meet financial obligations. The High Court, on receiving the BIFR's opinion, registered a company petition for winding up the respondent company.

The respondent company had made a reference to the BIFR under section 15(1) of the Act due to its financial difficulties. Despite the BIFR appointing IFCI as the operating agency and several attempts to formulate a viable rehabilitation scheme, the company and its promoters failed to comply with the conditions of the sanctioned scheme. The BIFR noted that the company had not shown any interest in implementing the scheme and had only sought protection under section 22(1) of the Act for nine years, while disposing of some assets to pay IFCI and ICICI.

The appellate authority (AAIFR) also found that the promoters failed to bring in the required funds and that the company had not made any positive developments for rehabilitation over ten years. The High Court noted that the BIFR and AAIFR, consisting of experts, had given ample opportunities to the company, but the promoters' actions indicated a lack of genuine effort to revive the company.

2. Application for Handing Over Possession of Leased Property
The applicants, owners of property No. 16, Friends Colony (West), New Delhi, filed an application (CA No. 1168/2002) seeking an order for handing over vacant possession of the ground floor premises leased to the respondent company. The lease deed dated 11-6-1965 was cited in support of their claim. The Court considered this application along with the main petition.

3. Application for Adjudication and Payment of Workmen's Dues
The workmen of the respondent company filed an application (CA No. 343/2003) seeking an order for adjudication and payment of their dues, as they had not been paid their salary since 11-11-1988. The Court considered this application along with the main petition.

4. Legality of the BIFR and AAIFR's Orders
The respondent company challenged the legality of the BIFR and AAIFR's orders through a writ petition (CWP No. 3499/2001), which was eventually withdrawn unconditionally. The High Court noted that the company had not sought liberty to re-agitate the issues raised in the writ petition before any other Court/Forum. Therefore, the orders of the BIFR and AAIFR had reached finality.

5. Validity of Section 20(2) of the SICA
The Court examined the provisions of section 20(2) of the SICA, which mandates that the High Court shall order the winding up of a sick industrial company based on the BIFR's opinion. Various judgments, including those from the Bombay High Court, Delhi High Court, and Madras High Court, were considered. The Madras High Court's decision in J.M. Malhotra v. Union of India, upheld by the Supreme Court, was particularly noted for stating that while the High Court must consider the BIFR's opinion, it should not abdicate its function of determining the question of winding up.

The High Court concluded that the BIFR's and AAIFR's extensive efforts and findings must be given due weightage, and the respondent company had not presented any viable scheme or means to justify keeping the company alive. Consequently, the Court accepted the BIFR's recommendation and ordered the winding up of the respondent company.

Conclusion
The High Court ordered the winding up of the respondent company based on the BIFR's recommendation, appointed the Official Liquidator to take over the company's assets and records, and directed the publication of the winding-up order. The applications for possession of the leased property and adjudication of workmen's dues were to be considered by the Liquidator, who was to submit an interim report within six weeks.

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