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TMI Blog2003 (10) TMI 408X X X X Extracts X X X X X X X X Extracts X X X X ..... on the annual accounts for the financial year 1999-2000 (Financial year 2000 ending 31-3-2000), when its losses had mounted to Rs. 8862.35 lakhs which had exceeded its net worth (in terms of section 3(ga) of the SICA) amounting to Rs. 2060 lakhs. It is also incorporated in the petition that due to factors beyond the control of the company/its Board of Directors and the statutory obligation cast upon them, the Board of Directors of the petitioner company vide resolution dated 3-5-1999 resolved to make a reference under section 15 of SICA before the BIFR for declaring the petitioner company a sick industrial company in terms of section 3(1)(o) of SICA. 3. It is mentioned that the BIFR after having made an enquiry in terms of section 16 of SICA gave certain guidelines to the operating agency to formulate its revised proposal which was to be rendered by 31-3-2000. Four appeals were filed against the said order and the AAIFR allowed the appeals and set aside the order dated 11-8-1999. The petitioner company had preferred a writ petition against the said order of AAIFR before this Court. The writ petition was disposed of by the High Court in view of the fact that appeals were preferred ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aw these items. AAIFR reprimanded the Director of BIL and decided not to rely on these documents. 9.0 SICA is a beneficent legislation passed by Parliament for the purpose of examining revival of companies which have become sick in a genuine manner. The legislation was not enacted for the purpose of encouraging unscrupulous promoters who have indulged in acts of fraud, serious manipulation of accounts and large scale diversion/siphoning away of funds. We are conscious that every reference filed by a company has to be considered on its merits and we have done so. The balance sheet of the company as on 31-3-2000 cannot be considered to present a true and fair picture of its financial state of affairs. The company/promoters have indulged in large scale manipulation in accounts, fabrication of figure work and diversion of funds of more than Rs. 48 crores. The promoters have approached the Board with very unclean hands. The networth of the company has not been fully eroded. In the circumstances, the company's reference based on accounts as on 31-3-2000 is rejected as non-maintainable." 5. Against the order of BIFR, appeals were preferred before the AAIFR. The AAIFR disposed of Appeal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g on the rule of res judicata would be applied. For the application of the general principle of res judicata it is not necessary to go into the question whether the previous decision was right or wrong (MSM Sharma v. Shree Krishna Sinha AIR 1960 SC 1186)." 6. The AAIFR also placed reliance on the Supreme Court judgment in K.K. Modi v. K.N. Modi [1998] 3 SCC 573 wherein it was held that it is an abuse of the process of the court and contrary to justice and public policy for a party to relegate the same issue which has already been held and decided earlier against him. The counsel appearing for the petitioner relied on a judgment of the Delhi High Court in Madhurmilan Syntex Ltd. v. AAIFR [CWP No. 6266 of 2000 dated 19-10-2003]. The said judgment does emphasise that notwithstanding that the reference of earlier year was dismissed, reference for subsequent year which is based on subsequent year's accounts and so on new cause of action is to be dealt with and examined by taking note of accounts position of that year and other relevant aspects requisite for adjudication whether the appellant company is a sick company or not. On that basis the losses booked in financial year 2000 amount ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ully examined the impugned order. The AAIFR has mentioned that the SICA is a socio-economic legislation enacted in public interest to keep alive sick or potentially sick industries by injecting mostly public funds and by providing various concessions so that inter alia employment of the workers and loss of revenue of the Central and State Governments could be safeguarded. 9. The principal object of the SICA is to rehabilitate genuinely sick companies where because of factors beyond their control the companies have become sick. This Act is not really meant to help those companies where the company has become sick due to dishonesty, siphoning of funds and misappropriation of funds by its promoters and managements. The protection of section 22 has been grossly misused by the petitioner company. The creditors who have invested money are deprived from even taking steps for recovering their dues during the pendency of the revival except with the consent of the BIFR of the AAIFR. 10. In this case it is absolutely evident that all methods have been employed to defraud the creditors for the dishonest and wrongful gain of the management. All kinds of irregularities and illegalities have be ..... X X X X Extracts X X X X X X X X Extracts X X X X
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