2004 (12) TMI 387 - HC - Companies Law

Issues Involved:
1. Whether the petitioner industry had ceased to be an industrial undertaking.
2. Whether the second reference was barred by limitation.

Detailed Analysis:

1. Whether the petitioner industry had ceased to be an industrial undertaking:

The petitioner contended that the AAIFR's finding that the company is not an industrial company was based on conjectures and misreading of the law. The petitioner provided evidence, including a letter from the Joint Director of Madhya Pradesh Government dated 24th July, 2001, certifying that the factory was registered under the Factories Act, 1948, and had not declared permanent closure, despite not being in operation since December 1996. The petitioner also presented a letter from the Labour Commissioner, confirming the employment of certain laborers as permanent workers, and evidence of provident fund payments for these workers.

The respondent argued that since the company had not employed any workers since 1st April, 1997, it did not qualify as an industrial undertaking under the Sick Industrial Companies (Special Provisions) Act, 1985. They relied on the definition of "industrial company" and "industrial undertakings" under sections 3(1)(e) and 3(1)(f) of the Act and the definition of "factory" under section 3(c) of the Industries (Development and Regulation) Act, 1951, which requires the employment of 50 or more workers.

The court found that the AAIFR had misconstrued the definitions and ignored relevant documents. It emphasized that a factory could still be considered as such if it had ordinarily carried on manufacturing processes, even if not currently active. The court noted that the factory was under the control of a Court Receiver appointed by the Bombay High Court, which hindered its operation. The court held that the AAIFR's interpretation was erroneous and set aside its finding that the petitioner was not an industrial company.

2. Whether the second reference was barred by limitation:

The petitioner argued that the second reference was not time-barred. The first reference, filed based on accounts up to 30th September, 1996, had led to the BIFR declaring the company sick on 23rd June, 2000. This order was set aside by the AAIFR on 17th April, 2001. The petitioner filed a second reference on 8th May, 2001, after the AAIFR's decision.

The respondent contended that the second reference was time-barred. However, the court found that the petitioner could not have filed the second reference before the AAIFR's decision on 17th April, 2001. The court held that the second reference, filed on 8th May, 2001, was timely and in accordance with section 15(i) of the Sick Industrial Companies (Special Provisions) Act, 1985.

Conclusion:

The court set aside the AAIFR's order dated 31st December, 2001, and the BIFR's order dated 27th August, 2001. It remanded the case back to the BIFR to consider the second reference afresh, in light of the observations made. The writ petition was allowed, and the rule was made absolute, with parties bearing their own costs.

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