2011 (1) TMI 1202 - HC - Companies Law

Whether Ambit and coverage of the Sick Industrial Companies (Special Provisions) Act, 1985 (the SICA) extend to a foreign company carrying on business in India.

Issues Involved:
1. Applicability of the Sick Industrial Companies (Special Provisions) Act, 1985 (SICA) to foreign companies.
2. Jurisdiction of the Board for Industrial and Financial Reconstruction (BIFR) to entertain references regarding foreign companies.
3. Validity of the revival scheme (SS-09) sanctioned by BIFR for Baranagore Jute Company PLC (BJC).
4. Locus standi of the petitioners to challenge the BIFR proceedings and the sanctioned scheme.
5. Interpretation of the term 'company' under SICA and its application to foreign companies.

Detailed Analysis:

1. Applicability of SICA to Foreign Companies:
The primary issue was whether SICA's ambit and coverage extend to foreign companies operating in India. The petitioners and some respondents argued that SICA does not apply to foreign companies. They contended that the language of SICA is plain, clear, and unambiguous, and thus, no external aid is required for understanding its provisions. Conversely, other respondents argued for a broader interpretation, suggesting that SICA should cover foreign companies to protect Indian shareholders, creditors, and workers.

2. Jurisdiction of BIFR:
The BIFR's jurisdiction to entertain references regarding foreign companies was questioned. The court noted that an objection regarding the BIFR's jurisdiction had been raised but not properly considered. It was emphasized that jurisdictional facts must exist for a tribunal to assume jurisdiction. The court held that the BIFR usurped jurisdiction not conferred by law, as SICA does not apply to foreign companies.

3. Validity of the Revival Scheme (SS-09):
The revival scheme sanctioned by BIFR for BJC was challenged on the grounds of jurisdiction and applicability of SICA. The court noted that if SICA does not apply to foreign companies, all proceedings and orders, including SS-09, would be invalid. The court ultimately quashed the proceedings before the BIFR, including the sanctioned scheme SS-09.

4. Locus Standi of the Petitioners:
The court examined the locus standi of the petitioners, particularly the unsecured creditor who was relegated to a civil suit by the Company Court. The court held that the writ petitioner in W.P. No. 12412(W) of 2010 had no right to seek remedy before the Writ Court regarding BIFR proceedings, as they were not directly affected by the scheme. Thus, W.P. No. 12412(W) of 2010 was dismissed.

5. Interpretation of 'Company' under SICA:
The court extensively analyzed the definition of 'company' under SICA and the Companies Act. It was noted that SICA defines 'company' as per section 3 of the Companies Act, 1956, which does not include foreign companies. The court referred to various principles of statutory interpretation, emphasizing that the legislative intent should be gathered from the language used in the statute. The court concluded that the restrictive definition of 'company' in SICA does not extend to foreign companies, and thus, SICA does not apply to BJC, a foreign company.

Conclusion:
The court held that SICA does not apply to foreign companies, and consequently, the BIFR had no jurisdiction to entertain the reference regarding BJC. All proceedings before the BIFR, including the sanctioned scheme SS-09, were quashed. The writ petition W.P. No. 12412(W) of 2010 was dismissed due to lack of locus standi, while the other two writ petitions were allowed.

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