9911796707
TMI Blog2001 (3) TMI 917X X X X Extracts X X X X X X X X Extracts X X X X ..... second unit in September 1992. A lock-out was declared at the 1st unit in January 1993. Subsequently, in September 1995 lock-out was declared at the second unit. Lock-out declared at the second unit was lifted in April 1996. On 15-1-1996 the petitioner made a reference to the BIFR under section 15(1) of the Act. On 18-3-1996 BIFR declared the petitioner a sick company within the meaning of the Act and appointed Industrial Development Bank of India ( the IDBI ) as the Operating Agency ( O.A. ) to formulate a rehabilitation scheme. In the order, it was mentioned that, it would not be practical for the company on its own to make its net worth exceed its accumulated losses within a reasonable time. In view thereof, it was felt necessary in public interest to adopt the measures specified in sections 18 and 19 of the Act. As indicated above, the IDBI was appointed as the Operating Agency. Under section 17(3) of the Act to prepare rehabilitation report, keeping in view the guide-lines indicated. By order dated 21-5-1998, the BIFR observed that the company was no longer viable and was not likely to make its net worth exceed its accumulated losses within a reasonable time while meeting all ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd 18 and read as follows : "15. Reference to Board. (1) Where an industrial company has become a sick industrial company, the Board of Directors of the company, shall, within sixty days from the date of finalisation of the duty audited accounts of the company for the financial year as at the end of which the company has become a sick industrial company, make a reference to the Board for determination of the measures which shall be adopted with respect to the company: Provided that if the Board of Directors had sufficient reasons even before such finalisation to form the opinion that the company had become a sick industrial company, the Board of Directors shall, within sixty days after it has formed such opinion, make a reference to the Board for the determination of the measures which shall be adopted with respect to the company. ****** 16. Inquiry into working of sick industrial companies. (1) The Board may make such inquiry as it may deem fit for determining whether any industrial company has become a sick industrial company ( a )upon receipt of a reference with respect to such company under section 15; or ( b )upon information received with respect to such com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ne or more of the following measures, namely : ( a )the financial reconstruction of the sick industrial company; ( b )the proper management of the sick industrial company by change in, or take over of, management of the sick industrial company; ( c )the amalgamation of ( i )the sick industrial company with any other company; or ( ii )any other company with the sick industrial company; [hereafter in this section, in the case of sub-clause ( i ), the other company, and in the case of sub-clause ( ii ), the sick industrial company, referred to as transferee company ]; ( d )the sale or lease of a part or whole of any industrial undertaking of the sick industrial company; ( da )the rationalisation of managerial personnel, supervisory staff and workmen in accordance with law; ( e )such other preventive, ameliorative and remedial measures as may be appropriate; ( f )such incidental, consequential or supplemental measures as may be necessary or expedient in connection with or for the purposes of the measures specified in clauses ( a ) to ( e ) (2)** ** ** (3)( a ) The Scheme prepared by the operating agency shall be examined by the Board and a copy of the sc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ench. All the participants in the Joint Meeting held on 7-1-1998 unanimously concluded that no workable and acceptable scheme could be framed based on the proposal submitted by the Company. The participants also took strong objection to the absence of the Company/promoters at the meeting, despite advance notice being sent by the O.A. Even on an earlier occasion neither the promoter nor any of the Directors had participated in the Joint Meeting convened by the OA and the Bench had, therefore taken strong exception to such conduct of the promoter in the hearing held on 15-10-1997. The Bench had specifically directed that in the next joint meeting/hearing of the Bench, the promoter(s) or at least a Director of the Company must attend the proposed meeting. The lead Bank viz. PNB vide its communication dated 4-3-1998 informed the Bench that its dues are mounting and the bank has already indicated no confidence in the present Management of the Company. The Bank also informed that lack of seriousness on the part of the proposed co-promoters is evident from their conduct. The OA has already explored the possibilities of change of Management. However, no revival proposal was received ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... there was no rehabilitation proposal for consideration. The conclusion was that no workable scheme could be framed at present." 8. The BIFR also noted that there was a challenge to its order dated 21-5-1998 before the AAIFR but it was dismissed by order dated 27-1-1999 (in Appeal No. 178 of 1998). AAIFR in fact observed that, it was clear from the proceedings before BIFR that the company had been in the habit of putting up proposals and then raising questions about their own proposals, suggesting the need for further revision in their proposals. Nevertheless AAIFR had observed that, if a workable proposal acceptable to secured creditors was brought before BIFR by anyone in response to the show-cause for winding up, it could still be considered by the BIFR on merits. Though more than six months had elapsed since the order of the AAIFR, no comprehensive rehabilitation proposal with means of finance fully tied up was available for consideration. The BIFR accordingly came to the conclusion that, the promoters were neither serious in rehabilitating the company nor were they resourceful enough to mobilise the funds required for rehabilitation of the company. Accordingly, forwarding o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 10 per cent of simple interest, payable with a condition of 25 per cent down payment and balance in eight quarterly instalments commencing after six months from the date of down payment which was to be made within three months from the sanction of the scheme. It also envisaged permission from the State Government of Maharashtra, Bombay Municipal Corporation for sale of surplus land of the Bombay Unit as well as closure of this unit and retrenchment of the entire workforce of Bombay Unit apart from certain other reliefs and concessions in respect of sales tax, power supply etc. The proposal envisaged a sacrifice of nearly Rs. 14.87 crores from the financial institutions and PNB. There was no positive response to the advertisement inviting proposals for rehabilitation by change of management. Joint meeting convened by the O.A. was not attended by promoters. OTS proposal of the petitioner and/or the promoters was not acceptable to financial institutions and PNB. It was noticed that the petitioner had sold hypothecated goods and instead of crediting the sale proceeds with the PNB kept those in some other accounts with non-creditors banks and utilised them, thereby diluting PNB securi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee years. In the joint meeting it was concluded that no workable and acceptable rehabilitation scheme could be framed on the basis of proposal submitted by the petitioner. O.A. submitted minutes of the joint meeting to the BIFR by a letter dated 20-1-1998. The BIFR on consideration of the materials came to hold that it will not be possible to take any further measure for the revival of the petitioner because the existing promoters were not in a position to submit any rehabilitation proposal and the O.A. did not receive any credible revival proposal in response to the advertisement and it was not possible to form workers cooperative for revival of the petitioner. Accordingly, the BIFR formed the prima facie opinion that petitioner was no longer viable and was not likely to make its net worth exceed its accumulated losses within a reasonable time while meeting all its financial obligations and that it is just and equitable and also in larger public interest to wind it up. Thereafter notice regarding winding up was issued. The same was assailed as aforestated before the AAIFR. Considering the background highlighted above, AAIFR rejected the appeal. 9. In the appeal before the AA ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re was a reasonable ground for the BIFR to proceed under section 17 instead of outright winding up of the company under section 20. Once an order under section 17(3) was passed by the BIFR it was incumbent upon the Operating Agency to prepare a scheme with respect to the petitioner company in the light of section 18 of the Act. It is not disputed that the Operating Agency did not prepare the scheme. It also seems that it did not seriously consider the Techno Economic Feasibility Project Report submitted by the petitioner. The Operating Agency also failed to carry out the order of the Appellate Authority dated September 21, 1992 and as a consequence did not give its report as envisaged by the said order. Once an order under section 17(3) of the Act was passed the Operating Agency had no option but to frame a scheme. In case it was not feasible to frame a scheme the Operating Agency could have filed an application for review of the order passed by the BIFR under section 17(3) of the Act." 12. From the aforesaid conclusions of this Court, it cannot be inferred that in all cases an application for review has to be filed and without an application the BIFR cannot pass an order as re ..... X X X X Extracts X X X X X X X X Extracts X X X X
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