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TMI Blog2003 (12) TMI 329X X X X Extracts X X X X X X X X Extracts X X X X ..... ated 28th July, 2003 has also observed that any future reference also will not be maintainable since the earlier references are held to be time barred. 2. The facts which give rise to this petition lie within a narrow compass. The petitioner company was incorporated on 13th July, 1995 and commenced commercial production on 13th May, 2000. The petitioner is engaged in manufacture of Dimethyl Terephathalate (DMT), which is covered under section 19(2) of the First Schedule of Industrial Development Regulation Act, 1951. The company was reported to have paid up capital of Rs. 1713.90 lakhs with free reserve of Rs. 3580.90 lakhs and accumulated loss of Rs. 7321.96 lakhs as on 30th September, 2001. The Board of Directors of the petitioner company resolved in its meeting dated 27th December, 2001 that the petitioner company has accumulated losses, which are more than the net worth of the company and, therefore, the company has become a sick company within the definition contained in section 3(1)( o ) of the Act on compilation of the audited accounts for the year ended on 30th September, 2001. Under section 15(1) of the Act a reference has to be made within 60 days from the date of fin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y, its shareholders and the financial institutions who have lent money to the company. In case of a reference, which is competent at the behest of the other agency under the very section, the period of 60 days cannot be treated as limitation. Therefore to read the limitation in sub-section (1) as barring reference beyond that period would be misreading of the provisions of law. If the legislation intended to provide a specific rule of limitation and debarring reference beyond that period of limitation, the enactment would be couched in different language. In any event, Mr. Datar urged that the proviso to section 15(1) enables the Board of directors of the company to file a reference before finalization of accounts in annual general meeting. That enabling provision will not preclude the petitioner company under section 15(1) of the Act to file a reference after the annual general meeting. Therefore, the finding of the Board that the reference was not filed within 60 days is totally incorrect and it suffers from non-application of mind. 5. On the other hand, Mr. Gangapurwala submitted that the provisions of section 15(1) clearly lays down period of limitation of 60 days. He urged ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... us determination by a body or experts to safeguard the economy of the country and to protect viable sick units. Section 15 and section 3(1)( da ) deal with the time period. The relevant provisions i.e. section 15(1) and section 3(1)( da ) read as follows: "15. Reference to Board. (1) When an industrial company has become a sick industrial company, the Board of Directors of the company, shall, within sixty days form the date of finalization of the duly 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 finalization 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: 3. Definitions. (1) In this Act, unless the context otherwise requires,- ( a ) to ( d )****** ( da ) date of fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... duled banks, etc. The basic idea is to revive sick units, if necessary, by extending further financial assistance after a though examination of the units by experts and only when the unit is found to be no more capable of rehabilitation, that the option of winding up may be resorted to. The provisions of section 15(1) required to be interpreted in the light of this legislative objective behind enacting the Act. Section 15(1) fixes on the Board of Directors of industrial company a responsibility or obligation to make a reference to the BIFR, if the company has become sick. For the purpose of making a reference, the sickness has to be judged on the basis of the finalization of the audited accounts of a particular financial year. The proviso to section 15(1) shows that the reference to the BIFR has to be made earlier if the directors formed an opinion about the sickness even before the finalization of the accounts. Any contravention of the provisions clearly attract the general penalty provision contained in section 33(1). In our considered view section 15(1) does not lay down a period of limitation but it creates a mandatory obligation on the part of the Board of Directors to approac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere considered and were found to be inadequate ........" 25. There is another reason for coming to the same conclusion, namely that the object and purpose of the Act will be defeated in case the Board of Directors are allowed to make a reference at their will. In such a case, the reference may be used as a tool against the recoveries initiated against the company, by virtue of the umbrella of protection given under section 22 of the Act . The Board for Industrial and Financial Reconstruction and Appellate Authority for Industrial and Financial Reconstruction are not Courts to which section 5 of the Limitation Act is applicable." [Emphasis supplied] 10. The unreported decision of the Division Bench of the Delhi High Court in the case of Empire Jute Co. Ltd. ( supra ) also does not support Mr. Gangapurwala. On the other hand, it supports the interpretation suggested by Mr. Datar. In that case the reference was filed after almost eleven years. The Board stated that it found no reason to condone delay of unusual and unexplained period. The decision of the Board was confirmed by the Division Bench. The observations of the Division bench in para 5 are extremely material and are ..... X X X X Extracts X X X X X X X X Extracts X X X X
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