1994 (9) TMI 365 - HC - Companies Law

Summary

Issues Involved:
1. Constitutionality of Section 20 of the Sick Industrial Companies (Special Provisions) Act, 1985.
2. Alleged restriction on the exercise of jurisdiction by the High Court.
3. Alleged arbitrariness and discriminatory nature of the Board's powers under Section 20.
4. Compliance with Article 14 of the Constitution.

Issue-wise Detailed Analysis:

1. Constitutionality of Section 20 of the Sick Industrial Companies (Special Provisions) Act, 1985:
The petitioners sought a declaration that Section 20 of the Act is ultra vires and unconstitutional, arguing that it violates Article 14 of the Constitution. The learned single judge rejected this contention, and the appeals were made against this decision.

2. Alleged Restriction on the Exercise of Jurisdiction by the High Court:
The appellants argued that Section 20 imposes restrictions on the High Court's jurisdiction, giving unbridled power to the Board, which can lead to arbitrary and discriminatory actions. The court noted that Section 20 allows the Board, after inquiry and consideration of all relevant facts and circumstances, to recommend the winding up of a sick industrial company to the High Court. The High Court, on receiving the Board's opinion, may order the winding up and proceed with it according to the Companies Act, 1956. The court clarified that the High Court is not precluded from examining the correctness of the Board's opinion and can decide whether to proceed with the winding up.

3. Alleged Arbitrariness and Discriminatory Nature of the Board's Powers under Section 20:
The court examined the procedural safeguards in place, noting that the Board acts as a judicial body consisting of experts, including a chairman qualified to be a High Court judge. The Board must record its opinion with reasons after considering all relevant facts and hearing all concerned parties. The court emphasized that the Board's opinion forms the basis for the High Court's decision but does not bind the High Court to order winding up without examining the opinion's correctness.

4. Compliance with Article 14 of the Constitution:
The court rejected the contention that Section 20 violates Article 14, stating that the Board's procedure ensures no arbitrariness or discrimination. The Board acts judicially, following a consistent procedure for all cases. The decision to recommend winding up depends on the specific facts and circumstances of each company, and there is no scope for arbitrary or discriminatory actions. The court concluded that Section 20 is not violative of Article 14.

Conclusion:
The court dismissed the writ appeals, upholding the constitutionality of Section 20 of the Sick Industrial Companies (Special Provisions) Act, 1985, and confirming that it does not violate Article 14 of the Constitution. The court found no merit in the contentions regarding the restriction on the High Court's jurisdiction or the alleged arbitrariness and discrimination in the Board's powers.