9911796707
TMI Blog2010 (8) TMI 183X X X X Extracts X X X X X X X X Extracts X X X X ..... emented and the fruits of which are available and are even being enjoyed by the petitioner in terms of a much higher face value of the share at almost three times of the face value as against less than 10 per cent of the face value. We are, thus, not inclined to re-open this chapter. Appeal dismissed. - WP (C) NO. 7341 OF 2009 - - - Dated:- 30-8-2010 - SANJAY KISHAN KAUL AND VALMIKI J. MEHTA, JJ. T.K. Ganju, A.K. Thakur, R.K. Mishra, Anesh Paul and Rajiv Arora for the Petitioner. Ms. Maneesha Dhir, Ms. Geeta Sharma, Ms. Purti Marwah, Ms. Jayshree Shukla and Ms. Preeti Dalal for the Respondent. JUDGMENT Sanjay Kishan Kaul, J. - The petitioner is a Government Corporation duly incorporated and registered under the provisions of the Companies Act, 1956 engaged in the business of promotion and development of small-scale industries. The petitioner was holding a stake of about 7.76 per cent of the equity capital of respondent No. 1 company which went into financial difficulties resulting in proceedings under The Sick Industrial Companies (Special Provision) Act, 1985 (for short, the SICA ). Respondent No. 1 was registered as a sick company as its net wort ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e petitioner of preferring an appeal before the Appellate Authority for Industrial Financial Reconstruction (for short, AAIFR ). The petitioner also sought to challenge the notice dated 27-6-2008 of holding of the AGM on 19-8-2008 in CS (OS) No. 1697/2008 filed on the Original Side of this Court. Initially, interim orders were granted in favour of the petitioner company restraining respondent No. 1 company from giving effect to the resolution to be passed in the AGM, but on an appeal being filed by respondent No. 1 company, the Division Bench of this Court disposed off the appeal on 23-9-2008 in terms whereof the interim orders were to continue to operate only for two weeks to enable the petitioner to approach the AAIFR. It is in these circumstances that the petitioner preferred the appeal before the AAIFR against the order dated 28-4-2008 passed by the BIFR in Case No. 119/2005. The appeal was registered as Appeal No. 203/2008. This appeal was dismissed on 20-2-2009, which order is now sought to be assailed in the present writ petition under Articles 226 and 227 of the Constitution. 4. A perusal of the impugned order of the AAIFR dated 20-2-2009 shows that only three aspect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he interests of the reconstruction, revival or rehabilitation of the sick industrial company or for the maintenance of the business of the sick industrial company;" 8. Section 81 of the Companies Act deals with the further issue of capital, while sections 100 to 103 deal with the special resolution for reduction of share capital. The SICA has been enacted in public interest making special provisions with a view to have remedial measures in respect of a sick company. It is in view thereof that primacy has been given to the provisions of the SICA in terms of section 32 of the said Act, which reads as under:- "32. Effect of the Act on other laws. (1) The provisions of this Act and of any rules or schemes made thereunder shall have effect notwithstanding anything inconsistent therewith contained in any other law except the provisions of the Foreign Exchange Regulation Act, 1973 (46 of 1973) and the Urban Land (Ceiling and Regulation) Act, 1976 (33 of 1976) for the time being in force or in the Memorandum or Articles of Association of an industrial company or in any other instrument having effect by virtue of any law other than this Act. (2) Where there has been under any sche ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... preciated in the context of how it was made to invest in respondent No. 1 company which was as per the directions of the Government of India in view of the provisions of the FERA coming into force. It was, thus, pleaded that there is no difference between the provision of financial assistance to a sick company by way of loan, advance, guarantee, sacrifice, relief or concession by a financial institution and a sacrifice by the petitioner as a shareholder. It is, thus, pleaded that the consent of the petitioner was required under section 19 of the SICA, which was admittedly not obtained. The relevant provisions of section 19 read as under :- "19. Rehabilitation by giving financial assistance. (1) Where the scheme relates to preventive, ameliorative, remedial and other measures with respect to any sick industrial company, the scheme may provide for financial assistance by way of loans, advances or guarantees or reliefs or concessions or sacrifices from the Central Government, a State Government, any scheduled bank or other bank, a public financial institution or State level institution or any institution or other authority (any Government, bank, institution or other authority requ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s to be by way of loans, advances or by way of guarantees or by way of reliefs or concessions or sacrifices. Reduction of equity capital does not fall in this category. The power of reduction under section 18(2)( f ) of the SICA was also simultaneously discussed. 14. In our considered view, the issue is no more res integra in view of our judgment in Oman International Bank S.A.O.G. v. AAIFR 2010 (169) DLT 618 1 wherein it was observed that in view of the provisions of section 19(1) read with section 19(4), the BIFR has the power to adopt such measures as may be necessary in view of section 18(3)( b ) of the SICA and those measures are not restricted to the ones prescribed under section 18(1)( a ) to section 18(1)( e ) of the SICA. Section 19(4) of the SICA has been introduced by Act 54 of 2002 and the objective is that secured creditors of not less than 3/4th should not be able to prevent rehabilitation by the BIFR. 15. The petitioner, who was originally holding 30 per cent of the share capital, itself diluted it to 7.76 per cent and is currently holding 1.31 per cent of the equity capital. We may also note at this stage that though the investment of the petitioner h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecify." 20. Learned counsel for respondent No. 1 has urged that, though there may be a technical defect, the fact remains that the AGM was held where the petitioner as a shareholder has had the full right to participate, but did not even participate while all other shareholders were overwhelmingly in favour of the scheme. It is also submitted that the requirement of the aforesaid sub-section is only publication of the draft scheme in brief in such daily newspaper as the Board (BIFR) may consider necessary and, thus, there is no mandate that it must be in a national newspaper or in a vernacular newspaper, though such a direction has undisputedly been passed by the BIFR on 12-2-2008. 21. A reading of the impugned order shows that what has weighed with the AAIFR is the non-participation of the petitioner in the process of the draft scheme. 22. We find that undisputedly there has been a violation of the direction passed by the BIFR on 12-2-2008. The publication has taken place in terms of section 18(3)( a ) of the SICA, but not as per the aforesaid direction. There is, thus, a technical defect. The question is whether such a technical defect should be made to now negate the ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
