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TMI Blog2003 (7) TMI 582X X X X Extracts X X X X X X X X Extracts X X X X ..... oard in the form of reference by the board of directors of the first petitioner-company has not received due consideration at the hands of the Board and their appeal to the 1st Appellate Authority also met with the same fate and as such the petitioners are before this court seeking for quashing of these orders as also for quashing the show-cause notice dated February 2, 2001, and the advertisement pursuant to the notice carried out in the Indian Express daily, Bangalore edition dated February 23, 2000. The show-cause notice is a proposal for winding up the affairs of the first petitioner limited company under the provisions of section 21 of the Act. 2. The petitioners claim that the first petitioner-company had become a sick industrial company within the meaning of this phrase occurring in section 3(1)( o ) of the Act and as such had submitted a proposal for rehabilitation and had requested the Board to declare the company a sick industrial company placing necessary information before the Board under section 15 of the Act. The Board on examination of the information placed before it prima facie being of the view that the applicant-company has become a sick industrial compan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a resourceful co-promoter. In case the proposal is based on settlement of the dues of the secured creditors by way OTS, the same should have the approval of secured creditors. The schemes submit- ted in response to the advertisement may provide for the measures listed in sections 18(2)( i ) and 18(11) of the Act. The relative merits of the offers received would be examined by the OA, a comparative statement prepared, a joint meeting held after circulation of background note to all concerned and a report submitted to the Board based on the evaluation of the relative merits of the offers received and the consensus arrived at in the joint meeting within a further period of four weeks. The cost of the advertisement would initially be borne by the OA and would subsequently be reimbursed by the company. ( ii )The OA would prepare a profile of the company based on the details available with them and would also prepare a list of the inventory and make the same available to the interested bidders. ( iii )The OA would furnish to the Board on the expiry of ten weeks the details of the offers received in response to the advertisements. In the event that no concrete rehabilitation proposa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is also in violation of the principles of natural justice and the petitioner had not been supplied with the copy of the minutes of the joint meeting, that the board has not applied its mind before passing the order; that the Appellate Authority has committed serious mistake by not examining various grounds urged in support of the appeal; that neither the Board nor the Appellate Authority have appreciated the proposal put forth by the petitioner; that it was a practical and viable proposal for the rehabilitation of the sick unit; that the Board and the Appellate Authority should have accepted the proposal suggested by the petitioner and should have passed orders thereafter; that the failure on the part of the petitioner to attend the meeting held on June 9, 2000, could not have been held against the petitioner. Particularly as they had very valid and justifiable reasons for not attending the same; that the Board as well as the Appellate Authority acted in dereliction of their duty in blindly accepting the report of the operating agency; that the Board as well as the Appellate Authority rather than considering the proposal on the part of the petitioner from the point of rehabilitatin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Learned counsel submits that the order of the Board suffers from a basic infirmity inasmuch as the board itself is required to assume a proactive role as it is set up for the purpose of looking into schemes for reviving or rehabilitating sick units particularly having regard to the objectives of the Act. It is submitted that the Board has instead viewed the matter as though it is a lis between the petitioner-company and the financial institutions; that in fact, such approach has vitiated the entire proceedings; that the board failed to notice that proceedings before the Board were not adversary in nature as between the parties. Learned counsel also submits that the Board, after having passed an order directing the operating agency to submit the report about viability of the company, particularly, that the detailed techno-economic study about the viability of the company should have been carried out as directed; that keeping in view of the current industrial profile as well as the prospects for the next six to seven years with appropriate demand forecasting and taking into account competent segments in the other units. Learned counsel submits that the Board has given a go by to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... make it sick; that the company and the Board of management have not inspired confidence in the financial institutions; that the petitioner-company and the Board of management were not prepared to work for the rehabilitation of the company, but they wanted only the financial institutions to meet the financial liability for further rehabilitation of the sick company; that the financial institutions have every right to disapprove a scheme of proposal put forth by the petitioner which they found was neither workable within parameters of the guidelines issued by the Reserve Bank of India nor in public interest; that the board of management failed to realise that there is absolutely no possibility for reviving the petitioner-unit. The resolution as enacted in the minutes of the meeting held on November 30, 1999, was submitted to the Board by the operating agency that the Board has consciously examined the various aspects of the report submitted by the operating agency and the Board also realised that it was not possible to revive the company and had issued directions for further action as per its order dated June 19, 2000. That the said order was in conformity with the provisions of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ale Distilleries Ltd. v. Appellate Authority for Industrial and Financial Reconstruction [2002] 108 Comp. Cas. 166 (AP). 15. Learned counsel seeks to distinguish the single Bench decision of this court in the case of Bharat Gold Mines Officers Association (supra) .That was a decision rendered in the context of the welfare of the employees and not merely for the purpose of rehabilitation, that the employees should not suffer as the closure of the company involved loss of jobs to thousands of employees, whereas in the present case, the employees of the sick unit have already been retrenched and that the unit has come to a stand-still totally and the aspect of the interest of the employees being safeguarded does not survive for consideration in the present case. Leaned counsel also submits that the question of issuing directions by setting aside the orders at this point of time, does not arise at all, particularly when the company became sick long back. 16. I have given my anxious consideration to the rival submissions of learned counsel at the Bar on behalf of the parties. The matter is one which arises in the context of the reference made to the Board for Industrial and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e the objects of the Act and that not only an industry which has become sick should be detected and more importantly the proceedings for revival or rehabilitation should be completed within a short time-frame and at any rate within six months thereafter, i.e., after such notification. The Supreme Court observed that it is very essential for the companies to realise the purpose and object of the Act. The Supreme Court has also held that the proceedings should not be allowed to be used by the other companies for restraining rehabilitation of the sick company, in particular by rival company. This observation equally applies to any other deliberate tactics for protracting the proceedings, by a company to take undue advantage of the facilities provided under section 22 of the Act. See Deputy Commercial Tax Officer v. Corromandal Pharmaceuticals [1997] 14 SCL 154 (SC). 20. Mr. Raghavan, learned counsel for the petitioner could have been more correct when he submitted that the proceedings before the Board are not adversary in nature. It is true there is no lis which is sought to be resolved as between the sick industrial unit and its lenders/financial institutions before the B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... It is for the management of such financial institutions to gain the confidence of the financial institutions. In the present case, I am satisfied that the Board has discharged its function within the parameters of such guidelines and in accordance with the statutory provisions. 22. So far as the contention that the Board failed in its duty in not ensuring that the operating agency conducted a techno-economic viability study and did not insist on the report of operating agency on this aspect, it has to be noticed that the nomenclature in itself is not the criterion. The report of the operating agency itself is self-evident and sufficient for rejecting the argument as the report on the face of it indicates that it has taken into consideration all relevant aspects. It is also significant to note that the petitioner-company nor the board of directors attended the joint meeting held for this purpose. It is not good for the petitioner to come up with execuses or come up with explanations later. It has sought for rehabilitating the company and should have attended such a meeting and put forth its views and proposals. In the absence of the same, no exception can be taken against either ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reference was such that the financial institutions became more suspicious of the bona fides of the petitioner-company, particularly by the company indulging in sharp practices by selling away the assets of the company behind the back of the financial institutions and confirming their doubts. Financial institutions are persons who have vital interest in the matter of rehabilitation of the sick industry units. Even in the matter of providing additional finance for such rehabilitation, they have every right to be heard and their views cannot be discarded. Financial institutions have a right to point out as to whether the proposals are one which can make the company viable or otherwise. The Supreme Court had occasion to observe in S.R.F. Ltd. s case ( supra ), that even in a scheme for rehabilitation of a sick company for merger of the sick company in a healthy company under the provisions of section 18 of the Act, as the merger involves the question of tax benefits by the Central Government. Central Government and the Central Board of Direct Taxes are necessary parties before the Board and notice to them should be issued before the Board approves the scheme. 25. I am pointing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t is quite possible there is considerable deterioration in the plant and machinery and the state of affairs as prevailed in the year 1998 may not be the same now. It is not merely a matter where private rights of parties are required to be determined as in an adversarial litigation.As I have observed earlier, no rights of any party are involved in a proceeding of this nature. It is not as though the petitioner has acquired a right in the matter to seek for a remand to the original authority for a reconsideration of the proposal. With the passage of time, things have naturally changed and court orders cannot put the clock back. The court cannot lose sight of this obvious position. This court will issue a writ only if the directions issued by this court can be worked out. The court will not issue futile writs as issuing of such writs will only bring down the efficacy of the court orders. I am of the clear view that in the present case there is no possibility of issuing any writ either for quashing of the impugned orders as even assuming for argument s sake they can be quashed, no consequential directions can be issued inasmuch as the scenario is totally changed now. 28. In the ci ..... X X X X Extracts X X X X X X X X Extracts X X X X
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