2009 (4) TMI 1049 - HC - Indian Laws

Summary

Issues Involved:
1. Legality of AAIFR's directions for submission of revised rehabilitation proposals.
2. Evaluation of competing rehabilitation schemes for the sick company.
3. Allegations of contempt against M/s R.R.Kabels Ltd. for violating AAIFR's status quo order.
4. Consideration of M/s Tata Iron & Steel Co. Ltd.'s late proposal for rehabilitation.
5. Locus standi of interveners and individual applicants in the rehabilitation process.

Issue-Wise Detailed Analysis:

1. Legality of AAIFR's Directions for Submission of Revised Rehabilitation Proposals:
The petitioner, M/s R.R.Kabels Ltd., challenged the AAIFR's order dated 22nd September 2006, which directed all four parties (SJIL, Pegasus, RRK, and LLL) to submit revised rehabilitation proposals. The petitioner argued that its scheme was superior and that the other parties, including Pegasus and SJIL, did not conform to BIFR's directions. The court noted that AAIFR's directions were aimed at ensuring a comprehensive evaluation of all proposals to revive the sick company.

2. Evaluation of Competing Rehabilitation Schemes:
The court acknowledged that the evaluation of the proposals was a specialized task for the Operating Agency (OA). M/s R.R.Kabels Ltd. had deposited Rs. 25 crores and arranged an additional Rs. 34 crores for the company's revival, showcasing its commitment. However, M/s Tata Iron & Steel Co. Ltd. also submitted a proposal, supported by several workers' unions, and argued that their scheme was more beneficial to the workers and the company. The court decided that both proposals should be evaluated by the OA to determine which was more suitable for the company's rehabilitation.

3. Allegations of Contempt Against M/s R.R.Kabels Ltd.:
M/s Pegasus Assets Reconstruction Pvt. Ltd. alleged that M/s R.R.Kabels Ltd. violated AAIFR's status quo order by purchasing 85% of the secured debt of the sick company. The court referred to Section 22A of The Sick Industrial Companies (Special Provisions) Act, 1985, which restricts the disposal of assets but does not classify non-performing assets as "assets" of the sick company. Thus, the court found no violation of the status quo order by M/s R.R.Kabels Ltd.

4. Consideration of M/s Tata Iron & Steel Co. Ltd.'s Late Proposal:
The court noted that M/s Tata Iron & Steel Co. Ltd. had not submitted any rehabilitation proposal for over seven years despite being a party to the proceedings. However, given the court's interim order allowing Tata to submit a proposal, the court decided that the OA should evaluate Tata's proposal alongside M/s R.R.Kabels Ltd.'s scheme. The court emphasized that the ultimate goal was to revive the sick company and protect the interests of the workers.

5. Locus Standi of Interveners and Individual Applicants:
The court addressed the objections raised by M/s R.R.Kabels Ltd. regarding the locus standi of interveners and individual applicants. The court held that these parties were not seeking independent relief but were voicing their concerns about the rehabilitation proposals. The court ruled that the interveners' submissions should be considered by the OA during the evaluation process.

Conclusion:
The court remanded the matter to the OA for fresh evaluation of the proposals submitted by M/s R.R.Kabels Ltd. and M/s Tata Iron & Steel Co. Ltd. The OA was directed to consider the following factors:
- The earlier submission and financial commitments of M/s R.R.Kabels Ltd.
- The protection of workers' interests, including payment of arrears, wage security, and retrenchment plans.
- The return of investments made by M/s R.R.Kabels Ltd. if their proposal was not accepted.

The court vacated the stay on proceedings before AAIFR and BIFR but maintained the status quo regarding the assets of the sick company until the BIFR approved a scheme or modified the interim order. The writ petition by M/s Pegasus Assets Reconstruction Pvt. Ltd. was dismissed, and the court clarified that the consideration of proposals would be limited to those submitted by M/s R.R.Kabels Ltd. and M/s Tata Iron & Steel Co. Ltd.