2012 (9) TMI 1255 - HC - Companies Law

Issues Involved:

1. Legality and jurisdiction of the orders passed by BIFR and AAIFR.
2. The validity of share transfer refusal by the petitioner company.
3. The role and implications of proceedings before the Company Law Board (CLB) and BIFR.
4. The impact of the Sick Industrial Companies (Special Provisions) Act, 1985 (SICA) on the proceedings.

Issue-wise Analysis:

1. Legality and Jurisdiction of Orders by BIFR and AAIFR:

The petitioner challenged the orders dated 08.06.2010 by BIFR and 22.07.2010 by AAIFR, claiming they were beyond jurisdiction and authority. The court examined the scope of BIFR's order, which merely granted consent for implementing CLB's order dated 15.05.2008. The court clarified that BIFR's role was not to adjudicate the merits of the share transfer but to permit its execution under Section 22(1) of SICA. The court rejected the petitioner's contention that BIFR had overstepped its jurisdiction, affirming that the orders were within legal bounds and jurisdiction.

2. Validity of Share Transfer Refusal:

The petitioner company refused the transfer of 3,582,422 shares lodged by respondent no.3, citing various objections. The CLB, in its order dated 15.05.2008, found the petitioner's objections to be a "camouflage" with the intent to deprive respondent no.3 of its rightful entitlement to the shares. The CLB concluded that the shares were pledged as security for inter-corporate deposits, and respondent no.3 had rightfully appropriated them due to the petitioner's default. The court upheld CLB's findings, noting that the petitioner had not disputed the authenticity of the share transfer deeds.

3. Role and Implications of Proceedings Before CLB and BIFR:

The CLB's order dated 15.05.2008, which was not challenged further by the petitioner, had attained finality. It directed respondent no.3 to seek BIFR's consent for executing the share transfer due to the pendency of proceedings under SICA. BIFR's order dated 08.06.2010 granted this consent, allowing the transfer to proceed. The court emphasized that BIFR's order was a procedural step to facilitate the execution of CLB's final decision, not a re-evaluation of the merits.

4. Impact of SICA on the Proceedings:

Section 22 of SICA prohibits proceedings against a sick industrial company without BIFR's consent. The court noted that the enforcement of security by respondent no.3 occurred before the petitioner's reference to BIFR and the winding-up order. Therefore, the petitioner's argument that the share transfer was invalid due to SICA proceedings was unfounded. The court highlighted that BIFR's consent was a necessary procedural requirement under SICA, which was duly fulfilled.

Conclusion:

The court concluded that the orders by BIFR and AAIFR were legally sound and within their jurisdiction. The petitioner's refusal to transfer shares was unjustified, and the CLB's order, which had attained finality, was correctly implemented by BIFR. The petition was dismissed, affirming the legality of the share transfer in favor of respondent no.3.

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