9911796707
TMI Blog2002 (12) TMI 507X X X X Extracts X X X X X X X X Extracts X X X X ..... application made by the third respondent, the Government of Tamil Nadu has referred the matter in July 1992 to the Special Industrial Tribunal. The Special Industrial Tribunal has passed its award dated 28-11-1994 for closure of B mill with the condition that the workers of the said mill should be employed in A mill. The loss sustained by B Mill had an adverse impact on the A mill, hence the third respondent mill has made a Reference under section 15(1) of the Sick Industrial Companies (Special Provisions) Act, 1985, hereinafter referred to as Act which was registered by the second respondent in case number 105/93 on 22-2-1994. The second respondent has declared the third respondent mill as sick industrial company within the meaning of section 3(1)( o ) of the Act as its accumulated losses as on 30-1-1993 exceeded its net worth. The second respondent appointed the 5th respondent as operating agency under section 17(3) of the Act. The proposals of the third respondent was considered by the second respondent, but was unacceptable. The second respondent directed the operating agency to issue an advertisement inviting offers for rehabilitation of the third respondent mill by change in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gainst the order of the first respondent, the present writ petitions have been filed by the Cheran Group. 3. Learned Senior Counsel Mr. T.R. Rajagopalan appearing for the petitioner has advanced arguments as under : The first respondent has exceeded its jurisdiction in framing the issues viz., ( a ) Is Petitioner s proposal better than that of the third respondent as concluded by the second respondent? ( b ) Have the petitioner and the third respondent established their resourcefulness for implementing their respective proposals? ( c ) What is the most viable, workable alternative for the rehabilitation of the third respondent Mills? The petitioner had no occasion to challenge the same; that the first respondent has erred in framing those issues only at the time of passing final order; that the second issue raised by the first respondent was certainly not arising out of the impugned order of the second respondent and therefore, the first respondent had no jurisdiction to consider the same; that the second respondent itself has directed the operating agency to verify and ensure that the means of finance in the petitioner s proposal are tied up; that the operating agency has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rst respondent has erred in relying upon the market value as assessed by one Kandaswamy, Chartered Engineer when no material is placed before the Board to show that the price of land is Rs. 3,00,00,000 per acre; that the operating agency considered all aspects relating to rehabilitation of the sick industry and has recommended the petitioner s proposal as the best proposal for revival of the company and having regard to the fact that only other proposal given by the third respondent not being a feasible proposal, the first respondent ought to have approved the report of the operating agency and approved the scheme of the petitioner; that the first respondent has erred in observing that the interested parties were not heard and their views were not sought in regard to the latest proposals of the third respondent and the petitioner is incorrect; that in any event, the first respondent has erred in giving directions to the operation agency to prepare a revised scheme on the basis of sale of assets of B Mill. The learned Senior Counsel appearing for the petitioner relied on the following: ( i ) Rishabh Agro Industries Ltd. v. P.N.B. Capital Services Ltd. [2000] 25 SCL 461 (SC) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f proceedings under section 22(1) held that it is to await the outcome of the reference made to the BIFR for the revival and rehabilitation of the sick industrial company. The Hon ble Supreme Court has also given opportunity to the respondent company to seek the consent of the appellate authority under section 25 of the Act for taking action under section 29 of the State Financial Corporation Act, 1951. 4. Learned Senior Counsel Mr. A.L. Somayaji appearing for the third respondent advanced arguments as under: Pursuant to the order dated 28-1-1997 passed by this court in W.P. No. 12073 of 1995, the second respondent issued advertisement inviting proposals for rehabilitation of the third respondent Mills; the operating agency has received two proposals, one from the third respondent and another from the petitioner; that the proposal submitted by the third respondent envisaged the induction of Mr. Y. Jaganatham who has considerable experience of running two sick textile mills pursuant to rehabilitation scheme sanctioned by the second respondent viz., M/s. Bhavani Mills Limited and M/s. Thiruvepathy Mills Limited as a co-promoter; that the second respondent directed the partie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t approached the issues in the proper perspective and justified the allegation of the existing promoters and the fourth respondent; that when the proceedings are at large before the first respondent, it was always open to the first respondent to independently examine the proposals and come to a conclusion; that the allegation that issue "c" framed by the first respondent is completely beyond its jurisdiction and conflict with the order dated 28-1-1997 passed by this court in the writ petition is without any basis; that originally the petitioner has envisaged a contribution of Rs. 12.14 crores after seeing the third respondent s contribution of Rs. 14.14 crores and submitted a fresh proposal raising to Rs. 23.75 crores; that the first respondent has correct gone into the issue as to means or resourcefulness of the parties to generate the equity proposed to the brought in; that in a well reasoned order the proposal of the petitioner was rejected as a weak team to take over the valuable assets of Sri Hari Mills at a throw away price and found not worthy for consideration; that the allegation that the petitioner is capable of inducting the amount of Rs. 23.75 crores which was made only ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Gujarat Trade Union Manch s case ( supra ). In this case, a Division bench of Gujarat High Court has held that the decision of the Board is that of expert Body and ordinarily a decision of such a Body is not interfered unless it is palpably wrong or is such that no reasonable man of ordinary prudence would reach such a decision and ultimately dismissed the writ petition holding that it was not a fit case for interference. ( iii ) A.R.C. Cement Ltd. v. A.A.I.F.R. [1999] 97 Comp. Cas. 459 (Delhi). In this case, BIFR found that revival is not viable and recommended for winding up of the company. The court held that it will not interfere with the said finding. It was held that the statutory functionaries under the Act have to function within limitations and that within the framework of the law and equity in law is always a consideration even while interpreting any statute, but where equities are in contradiction of the law or force the authority to go beyond the law, no relief in such equity could be granted. Ultimately, the court held that the court will not sit in judgment nor scrutinise the figures just to find holes in the inferences drawn by the BIFR and AAIFR. ( iv ) B. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... operating agency for framing a scheme under section 18 of the Act. While doing so, BIFR directed the company not to bring about any change in the management. Inspite of the directions issued by the BIFR, the shareholders called for an Extraordinary General Body Meeting for the purpose of electing Managing Director and in fact election was held on 16-5-1995 and one person was elected as Managing Director. The BIFR passed order stating that those responsible for contravening its order would be liable for action which was challenged in the writ petition. The High Court held that BIFR, while determining whether a company is a sick company does not exercise any judicial or quasi-judicial powers, but it lays down the rules of conduct for the future and it does not purport to ascertain and enforce the existing rights. In other words, BIFR exercises only administrative function of ascertaining the sickness of the company and framing of a scheme for the purpose of its revival. Section 18 of the Act comes into existence only when a scheme is framed. Before a scheme is framed, the question of exercising incidental, consequential or supplemental powers under section 18(1)( f ) does not arise. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... udges, has held that an inferior Tribunal vested with the power to exercise judicial or quasi-judicial might have come to an erroneous conclusion, but, where the conclusion is in respect of a matter which lies entirely within the jurisdiction of the Tribunal and does not relate to anything collateral an erroneous decision upon which might affect his jurisdiction, and where records of the case do not disclose any error apparent on the fact of the proceeding or any irregularity in the procedure adopted by the Tribunal which goes contrary to the principles of natural justice, there are absolutely no grounds which would justify a superior court in issuing a writ of certiorari . 5. Learned counsel appearing for the 5th respondent submits that a direction may be issued to the rival parties to deposit at least 50% of the outstanding amount as one time settlement within a stipulated time. It is also submitted by the learned counsel that due to the prolonged litigation between the rival parties and pendency of the matter, the secured creditors are unable to recover their dues and in view of the delay, the value of the plant and machinery of the mill is reduced that even if the secured ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd. ( ii ) Universal Paper Mills Ltd. v. R.P.F. Commissioner [2001] 35 SCL 765 . In this case it has been held that the bar of proceedings against sick company is not applicable to statutory liabilities under E.P.F. Act. It seems that the third respondent company was liable to pay certain amount to the tenth respondent. The tenth respondent has been cited as the respondent in the writ petition. Though it was brought to the notice of this court that the third respondent was in arrears of amount, no relief is sought against the third respondent in these writ petitions. Moreover, the tenth respondent was not a party either before the second respondent or the first respondent. 9. Learned counsel Mr. O. Venkatachalam appearing for the 18th respondent submitted that the order of the first respondent rejecting the proposal of the third respondent as well as the petitioner is just, proper and valid, however, the sale of assets of B mill is not justified. The learned counsel submitted that if the vacant site adjacent to the B mill is sold, it would fetch several crores of rupees out of that sale proceeds, the dues of workers, the loan of secured and unsecured creditors could be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oard decides that it is not practicable for a sick industrial company to make its net worth exceed the accumulated loss within a reasonable time and that it is necessary and expedient in the public interest to adopt all or any of the measures specified in section 18. Section 18(1) contemplates that where an order is made under sub-section (3) of section 17 in relation to any sick industrial company, the operating agency specified in the order shall prepare as expeditiously as possible and ordinarily within a period of 90 days from the date of such order, a scheme providing for any one or more of the available measures viz., ( a ) the financial re-construction of the sick industrial company ( b ) change in or take over of the management ( c ) amalgamation of sick industrial company with any other company or any other company with the sick industrial company ( d ) sale or lease of a part or whole of any industrial undertakings of the sick industrial company. Section 20 contemplates that the Board can after enquiry opine that the sick industrial company is not likely to make its net worth exceed the accumulated loss within reasonable time, it is just and equitable that the compa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n lakhs) Purpose Existing promoters Group Co-promoters Aug 97/Sept 97 Cheran Sept 97 Aug 97 OTS 1196.00 1027.12 1170.00 Labour Dues 284.00 260.00 410.00 Capital Expenditure 184.00 150.00 425.00 Statutory dues 65.00 147.00 147.00 Electricity dues 39.00 38.50 38.00 Working Capital Margin 171.00 100.00 350.00 Reopening expenses 10.00 - Pressing creditors - 160.46 160.00 Unsecured loans - 93.00 1949.00 1976.06 2700.00 The Petitioner has enhanced the amount in respect of OTS, Labour dues, Capital expenditure and working capital margin in their revised pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of working capital margin, the third respondent has made provisions of Rs. 1.71 crores but the petitioner in its revised proposal envisaged Rs. 3.50 crores. Hence, the first respondent has found that the petitioner s proposal in this regard is better. 17. In respect of re-opening expenses, the third respondent offered Rs. 10 lakhs, but nothing has been offered by the petitioner. As the third respondent has already incurred the said expenses, it was found satisfactory to this Court also. 18. The first respondent has pointed out that the petitioner, after became aware of the third respondent s proposal gave a revised proposal with improved figures. Despite the said fact, the proposal with regard to OTS to secured creditors and payment of workers dues and statutory dues are concerned, the third respondent s proposal is rightly found by the first respondent as better. With regard to capital expenditure and working capital margin, the proposal is better than their own proposal submitted in August 1997 by the petitioner. On careful comparison of the figures and analysing the same in depth, the first respondent has concluded that the petitioner s proposal is not better than the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... res could be mobilised from the sale of office space to Lord Krishna Bank, RPG Cellular and New India Assurance Company, but the records produced shows that Lord Krishna Bank has dropped the idea, New India Assurance Company did not finalise it and RPG Cellulars also given up their proposal. The first respondent has also taken notice of their own order dated 23-7-1997 in Appeal No. 39 of 1997 filed by the petitioner in the case of Srihari Mills Ltd. wherein it is submitted that a rehabilitation proposal envisaging a total cost of Rs. 6.17 crores. In the said case, BIFR has directed all the interested parties to deposit Rs. 80 lakhs in a no-lien interest bearing account to show their financial capability. The petitioner herein has sought extension of time of making deposit on the ground that it had already blocked its funds to the extent of Rs. 5 crores in connection with the rehabilitation of other sick companies, however, failed to make deposit. The first respondent also concluded in the said order that the proposals of the petitioner in the nature of weak attempts to take over valuable assets of Srihari Mills Limited at a throwaway price and were therefore not worthy of conside ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such order a scheme suggesting for any one or more of the following measures. ( a ) The financial re-construction of the Sick Industrial Company( b ) For appropriate management by change in or take over of the management ( c ) Amalgamation of Sick Industry with any other company or any other company with Sick Industrial company etc., ( d ) The sale or lease of a part or whole of any industrial undertaking of the sick industrial company ( d )( a ) The rationalisation of managerial personnel, supervisory staff and workmen in accordance with law ( e ) Such other preventive, ameliorative and remedial measures as may be provided ( f ) Such incidental, consequential or supplement measures as may be necessary or expedient in connection with or for purposes of the measures specified in clauses ( a ) to ( e ). The first respondent has rightly ordered sale of B mill in terms of section 18(1)( d ) of the Act. 23. An argument was advanced by the counsel for the third respondent that the 2nd respondent ought to have made an order directing the Operating Agency to prepare a scheme and then call for proposals from outsiders, but straightaway called for proposal by advertisement contrary to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the BIFR or AAIFR to decide the lis between the parties who submitted the proposal. The Act has been enacted on the recommen- dation of the President under Article 117(1) read with 274(1) of the Constitution of India keeping in mind the ill-effects of sickness in Industrial companies such as loss of production, loss of employment, loss of revenue to the Central and State Governments and locking up of investible funds of banks and financial institutions are of serious concern to the Government and Society at large. This Act has been enacted with the object of affording maximum protection of employment, optimise the use of financial resources, salvaging the assets of production, realising the amounts due to the banks, financial institution to replace the existing time consuming and inadequate machinery by efficient machinery for expeditious determination by a body of experts. The order passed by the first respondent in setting aside the order of the 2nd respondent is well within its purview. The first respondent directed the Operating Agency to prepare a revival scheme on the basis of sale of assets and sale shall be organised by a committee to be set up by the 2nd respondent and ..... X X X X Extracts X X X X X X X X Extracts X X X X
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