9911796707
TMI Blog2012 (6) TMI 19X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Act and the scheme of Section 22 and Section 22A empowers the Board to take all such measures which, in the opinion of the Board, are necessary to bring the company out of its sickness and make it viable on implementation of the scheme framed by the operating agency. The Appellate Authority fell in gross errors in holding that the agreements were concluded/finalised by the registered documents and, therefore the Board could not have exercised the powers under Section 22A of SICA. Regarding the powers of the Board under Section 22(3) of SICA, there could be no dispute that the Board has no powers to annul an existing agreement between the parties i.e., the petitioner company and respondent No.13. However, that by itself would not lead to a conclusion that the Board has no further powers in respect of a property which has been agreed to be sold by registration of an agreement for sale. - CIVIL WRIT PETITION NOS. 6450, 6462, 6750 AND 6831 OF 2010† CIVIL APPLICATION NOS. 940, 941, 943 AND 945 OF 2011 - - - Dated:- 29-7-2011 - B.H. MARLAPALLE AND U.D. SALVI, JJ. Sudhir Talsania, R.V. Paranjape, Levi Rubens, Manisha Virkahre, V.A. Thorat, K.S. Bapat, Vaibhav Sugdhare, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... restructuring. It signed a Memorandum of Understanding on 13/4/2006 with Respondent No.13 for the proposed sale of about 344 acres of land (at some places claimed to be about 350 acres), for a total consideration of Rs. 166.40 crores. After obtaining the NOCs from the lending banks it signed an agreement for sale on 1/3/2007 which was registered on the very same day and a supplementary agreement on 29/9/2007 with respondent No.13. On signing of the MOU it claims to have received Rs. 25 crores from respondent No.13 and balance consideration of Rs. 141.40 crores was to be paid as per the following instalments: (A)Second instalment of Rs. 20 crores payable as and when required to be utilised only to remove the first charge on the saleable land. (B)Third instalment of Rs. 48.90 Crores on receipt of Labour NOC, Kalyan Dombivli Municipal Corporation NOC, completion of fencing and the vacant possession of non-colony land etc. and (C)Fourth instalment would be of Rs. 72.50 crores. 5. However, it could not achieve its object of restructuring for improving the performance and to achieve positive results during the year 2006-07 and, therefore, on 25/5/2007 it submitted a proposal t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y of the company on long term basis. The OA (PNB) shall convene a joint meeting of all concerned and submit a fully tied up DRS, if it emerges, along with the minutes of the joint meeting within a further period of one month. ( ii )Bank of Baroda (BOB) shall submit an authenticated copy of the CDR scheme approved by consortium of banks within a period of 15 days. ( iii )PNB (OA) shall confirm to the Board within a period of 15 days under copy to the company that all the secured creditors who had charge over the land had approved sale of 350 acres of land belonging to the company at Kalyan, Thane Distt. to K. Raheja Universal Pvt. Ltd. For a sum of Rs. 166.40 crore. The secured creditors who had charge over the land shall clearly indicate whether the company had obtained their approval before entering into MOU and agreement for sale of 350 acres of land with K. Raheja Universal Ltd. under copy to the company the OA (PNB) and the Board. Secured creditors shall also similarly submit copy of their approval for sale of investments, giving details of the investments. OA shall also submit copies of the approvals given by the secured creditors for the sale of the said land along with t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... id not consider the impact of Section 22A on the transactions, contracts/agreements entered into between the company and the third parties prior to the filing of reference when the company was not a sick entity. The agreement for sale of land is a subsisting and a continuing contract of sale which is in the process of completion and even in the absence of conveyance and, therefore, it could not be held that the disputed land under sale is unencumbered. The provisions of Section 22A would not apply to the agreement for sale already entered into, registered and acted upon and is in the process of completion. But the BIFR failed to consider the settlement entered between the Management and the recognised union under Section 18(3) of the Industrial Disputes Act, 1947 on 5/9/2008 and the fact that all these employees were bound by the said settlement. Hence if any order passed under Section 22A would apply on all other assets of the company which are not part of the agreement for sale are absolutely and exclusively unencumbered assets of the company, the restriction imposed under Section 22A could apply to the remaining 103.15 acres and other assets of the company which were charged to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alleviate the hardships of the workers. 9. Thus the last part of the AAIFR's order directing to deposit the amount of Rs. 124.64 crores in interest bearing NLA with the operating agency is under challenge in this petition filed by the company. Whereas in Writ Petition No.6813 of 2010 filed by some employees who were heard by the AAIFR, challenge the impugned order for taking the land under the agreement for sale, out of the purview of Section 22A of SICA and the petitioners pray for restoration of the BIFR order in its entirety. Writ Petition No.6462 of 2010 has been filed by NRC Mazdoor Sangh which is a recognised union and Writ Petition No. 6750 of 2010 has been filed by the NRC Employees Union which mainly represents the office staff. Both these unions submitted before us that the efforts put in by this Court for bringing about an amicable settlement had crystallised in terms of an MOU signed with the company and the company had also agreed to earmark 18 acres of land for the proposed employees colony from the total land of 344/350 acres covered by the agreements for sale entered with respondent No.13. As per both these unions, if this MOU is acted upon they would support ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ry under Section 16, the Board is satisfied that a company has become a sick industrial company, it shall, after considering all the relevant facts and circumstances of the case, decide, as soon as may be, by order in writing, whether it is practicable for the company to make its net worth exceed the accumulated losses within a reasonable time. As per Section 17(3), if the Board decides under sub-section (1) that it is not practicable for a sick industrial company to make its net worth exceed the accumulated losses within a reasonable time and that it is necessary or expedient in the public interest to adopt all or any of the measures specified in section 18 in relation to the said company, it may, as soon as may be, by order in writing, direct any operating agency specified in the order to prepare, having regard to such guidelines as may be specified in the order, a scheme providing for such measures in relation to such company. Section 18 of SICA provides for preparation and sanction of the scheme in terms of the order made under Section 17(3) ordinarily within a period of ninety days from the date of such order and for any one or more of the following measures viz., ( a )the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which such industrial company is a party or which may be applicable to such sick industrial company immediately before the date of such order, shall remain suspended or that all or any of the rights, privileges, obligations and liabilities accruing or arising thereunder before the said date, shall remain suspended or shall be enforceable with such adaptations and in such manner as may be specified by the Board. 13. Section 22A has been inserted in the Act by an amendment brought into force from 1/2/1994. It states that the Board may, if it is of opinion that any direction is necessary in the interest of the sick industrial company or creditors or shareholders or in the public interest, by order in writing, direct the sick industrial company not to dispose of, except with the consent of the Board, any of its assets, during the period of preparation or consideration of the scheme under section 18. The statement of objects and reasons for Amendment Act 12 of 1994 has set out the main features of the amendment proposed and one of them is to enhance the effectiveness of BIFR. The provisions of Chapter III and Sections 15 to 22A of SICA are applicable to a sick industrial company, wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e current assets could be utilized for running day-to-day operations, subject to keeping proper records thereof and routing all transactions through the account with the company's financing bank(s) only. It is specifically directed that investments of the company shall also not be disposed of, sold or alienated without the prior permission of BIFR although the company may have classified investments under current assets. The cut-off-date (COD) for the scheme shall be taken as 30/7/2007 as indicated in the CDR scheme." 15. It is clear from the above reasoning that the BIFR examined the issue of public interest and noted that the provisions of Section 18 of the SICA are required to be explored in public interest in relation to the petitioner-company and appointed the Punjab National Bank as the Operating Agency by invoking the powers under Section 17(3) of the said Act. It also considered the interest of the company, its creditors, employees as well as the Government Departments to whom dues were payable. It also considered the interest of shareholder and emphasized its responsibility to ensure that the assets of the company are used under the BIFR directions. This aspect of publ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fer of Property Act. He also submitted that the Board has no authority to nullify the agreements signed between the petitioner-company and respondent No.13. So far as the price of the land is concerned, it was pointed out that valuations made were taken into consideration and after giving the discount, the sale price was fixed at Rs. 166.40 crs. 17. On behalf of the State of Maharashtra, the Deputy Collector and Competent Authority, Ulhasnagar Urban Agglomeration, Thane has filed an affidavit. It has been stated that from the land under the sale transaction, some land was found to be surplus and on an application submitted by the petitioner - company, an exemption under Section 20 of the Urban Land (Ceiling and Regulations) Act, 1976 was granted vide exemption order dated 16/7/1983. As per the said affidavit, the total land under exemption admeasures 12,21,471.89 sq.mtrs. and that the petitioner has not made full use of the land for industrial purpose. The petitioner cannot sell the land under transaction unless prior permission to that effect is obtained from the Urban Development Department of the Government of Maharashtra and the exemption granted under Section 20(1) of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... blic interest, not to dispose off, except with the consent of the Board, any of its assets and this term "any of its assets" will have to mean, "any of its existing assets", as on the date the reference is made and the BIFR passes the order. Section 8 of the Transfer of Property Act deals with the operation of transfer, whereas Section 54 of the said Act defines "sale" as a transfer of ownership in exchange for a price paid or promised or part-paid and part-promised. The said section also defines the term "contract for sale" and specifically states that it does not, of itself, create any interest in or charge on such property. In the case of Bishundeo Narain Rai v. Anmol Devi [1998] 7 SCC 498 observed, "Section 8 of the Transfer of Property Act declares that on a transfer of property, all the interests which the transferor has or is having at that time, capable of passing in the property and in the legal incidence thereof, pass on such a transfer unless a different intention is expressed or necessarily implied. A combined reading of Section 8 and Section 54 of the Transfer of Property Act suggests that though on execution and registration of a sale deed, the ownership and all ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aid the entire consideration (or if the vendor proves that the entire sale consideration was not paid to him, title in the property would not pass to the purchaser." 21. In the instant case, both the agreement for sale dated 1/3/2007 and the supplementary agreement for sale dated 29/9/2007 were on record before the Board as well as the Appellate Authority. We have gone through the terms and conditions of the said agreements. Undoubtedly, these are the agreements for sale and they are not sale deeds. We have also noted that the transactions are of conditional sale and it cannot be held that it is a concluded sale transaction passing on the title of the subject land to respondent No.13 either on part payment or on full payment of the consideration. In fact, the Annual Report of the petitioner-company for 2007-08, on the basis of which the application under Section 15(1) of SICA was moved before the Board by the company states as under about the status of the land covered by these two agreements:- "STATUS OF SALE OF LAND The Company has received NOC from all lenders except one institution. During April, 2006 the Company entered into a MOU with a leading developer in respec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or the shareholders or any other constituents of the company. In the case of U.P. State Sugar Corpn. Ltd. v. U.P. State Sugar Corpn. Karamchari Association [1995] 4 SCC 276, the Apex Court while dealing with the powers of the Board under Sections 15 and 22A in Chapter III of SICA held, inter alia, as under: "...In respect of a sick industrial company the Board has been assigned a more active role in the sense that on receipt of a reference under Section 15 or upon information received with respect to such a company or upon its own knowledge about the condition of the company, the Board is required to make such inquiry as it may deem fit for determining whether an industrial company has become a sick industrial company and under and under Sections 16 and 17 the Board makes suitable order after completion of the inquiry and a scheme may be prepared and sanctioned in relation to a sick industrial company under Section 18. There is provision for rehabilitation by way of financial assistance in Section 19 and express provision has been made in Section 22A empowering the Board to direct a sick industrial company not to dispose of any of its assets except with the consent of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... otecting the public interest as well as the interest of all other constituents of the company. In the instant case the recovery of the Banks due from the company is in excess of Rs. 240 crores and they are all nationalised banks. The remaining land i.e., land beyond the agreements between the petitioner company and respondent No.13 is about 100 acres. It is not known as to the exact acreage available by way of surplus to dispose off from this 100 acres so as to raise additional finance. The petitioner was to receive Rs. 120.64 cr. (or Rs. 124 crores) by way of balance consideration from Respondent No.13. As per the company the payment due to the ex-employees and to the employees who opted for ERS works out to Rs. 55 crores. Admittedly the employees on the rolls have yet to receive their legal dues either as per the settlement which is under challenge before this Court or otherwise and it is the claim of the employees that the recovery of the employees' dues may be around Rs. 80 crores. During the course of hearing we were also informed that if the company has to become viable, its employees' strength has to be less than 2000 which means at least another 900 to 1000 employees will ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... call upon the parties to vary the terms of the existing agreements between the petitioner company and respondent No.13. In Section 22(3) of SICA, the Parliament has specifically used the words, "or shall be enforceable with such adaptations and in such manner as may be specified by the Board." The language of Section 22(3), therefore, aims at empowering the Board to modify the terms of existing agreements in respect of the assets of the company and, therefore, it would be permissible for the Board to take all such steps to ensure that the consideration of the land under sale is revised upwards. Ultimately the aim of the Board would be to make the company operations viable and in that regard the powers under Section 22(3) of SICA cannot be read in a restricted language. 26. We were informed that out of the total consideration, an amount of Rs. 76.26 crores has been received by the company and the balance consideration is Rs. 92 crores. The company and respondent No.13 claim that they have signed one more agreement on 17th August, 2010 and pursuant to the same, respondent No.13 has taken over possession of a total of 270 acres out of the land covered by the agreements. The order ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
