9911796707
TMI Blog2010 (10) TMI 912X X X X Extracts X X X X X X X X Extracts X X X X ..... oner is whether the Appellate Authority for Industrial and Financial Reconstruction (hereinafter will be referred to as "the AAIFR", for short) was justified in appointing the State Bank of Mysore as the operating agency. 3. The brief facts which are required to be stated are that the petitioner-company is engaged in the business of manufacturing pulses, food products, etc., and it borrowed funds from various financial institutions, which have been arrayed as respondents Nos. 3, 8, 10 and 12. The petitioner filed an application for reference before the second respondent, the Board for Industrial and Financial Reconstruction (hereinafter will be referred to as "the BIFR" for short) in its application dated April 27, 2009, seeking for a declaration to declare the petitioner as a "sick industrial company" having regard to its financial position. Initially, the BIFR passed an order on July 23, 2009, directing the secured creditors/banks to submit their objections on the sickness of the company and the petitioner to submit its rejoinder. The parties were directed to file their written submissions for change of statutory auditors. The hearing was fixed on October 21, 2009. After the hea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the first place, the petitioner contended that the BIFR ought not to have restricted the verification of the accounts only up to March 31, 2008, but should have extended it up to March 31, 2009. The other contention was that HSBC was not one of the notified institutions of the BIFR and, therefore, it had no jurisdiction to function as the operating agency. It was then contended that none of the secured creditors can be appointed as the operating agency. 5. By the impugned order, the AAIFR modified the BIFR's order in so far as it related to restricting the scrutiny of accounts up to March 31, 2008 and extended it up to March 31, 2009. The AAIFR also sustained the grievance of the petitioner that HSBC being not a notified institution of the BIFR ought not to have been appointed as the operating agency. However, the AAIFR appointed one of the secured creditors, viz., the State Bank of Mysore itself to be its operating agency in the place of HSBC. It is as against the said order of the AAIFR, dated June 15, 2010, the petitioner has come forward with this writ petition. 6. We heard Mr. Murari, learned counsel for the petitioner ; Mr.G. Desingu, Special Government Pleader for respon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ded that there is no legal impediment for the BIFR for appointing any one of the secured creditors as the operating agency. It was lastly contended that since sufficient safeguards have been provided in the order of the BIFR as well as in the order of the AAIFR, the apprehension of the petitioner has no basis. 9. Having heard learned counsel for the respective parties and having perused the order of the BIFR and the guidelines annexed to the order of the BIFR, dated October 28, 2009, as well as the order of the AAIFR, we are convinced that none of the grievances expressed by the petitioner can be countenanced in order to interfere with the order impugned in this writ petition. Under section 16(2) of the SICA, every power has been vested with the BIFR to appoint an operating agency to hold necessary enquiries and make a report with respect to such matters which are specified in its order. Even under section 27 of the SICA, the restriction with regard to delegation of powers of the BIFR while imposing conditions and limitations is only relating to appointment of the operating agency itself to be made under section 16(2) of the SICA. In other words, if once the operating agency is id ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he petitioner along with other financial institutions, it was entitled to place before the BIFR any discrepancy which might have been noticed by the secured creditors and put forth their stand before the BIFR while resisting the claim of the petitioner for being declared as a "sick industrial company". That by itself cannot be a ground to hold that that it will operate as a disqualification for the secured creditor, which is otherwise a notified institution to be validly recognised as an operating agency by the BIFR. Moreover, the order of the BIFR as well as that of the AAIFR disclose that the BIFR only steps into the shoes of the operating agency to collect facts and figures relating to the financial status of the petitioner in order to determine as to whether or not the petitioner can be declared as a "sick industrial undertaking" and whether its net worth has been eroded to that extent for making such a declaration. For that purpose, both the BIFR and the AAIFR only directed the operating agency to suggest the names of three chartered accountants and the one to be appointed is also to be ultimately made only by the petitioner. In the order of the BIFR, as regards the said direc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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