JUDGMENT Dalveer Bhandari, J.
1. In this writ petition the petitioner, M/s. BIL Industries has prayed that the order dated 25.1.2002 passed in Appeal No. 240 of 2001 passed by the Appellate Authority for Industrial and Financial Reconstruction (for short 'AAIFR') be set aside and observations made in the said order be expunged. The petitioner company filed an appeal under Section 25(1) of the Sick Industrial Companies (Special Provisions) Act, 1985 (for short 'SICA') against the order dated 31.7.2001 whereby the Board for Industrial and Financial Reconstruction (for short 'BIFR') had dismissed the reference made under Section 15(1) of SICA.
2. The reference made by the petitioner company was based 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 before the AAIFR and that being the appellate authority was an appropriate forum.
4. The petitioner company filed a fresh reference based on the accounts for the financial year 1999-2000 (year ending 31st March 2000). The BIFR rejected the reference as not maintainable. The BIFR passed a detailed order and the relevant portion of the order reads as under:-
" 7.01. It has also been brought out in the AAIFR order that about Rs. 49.55 crores had been siphoned away by the company/promoters. The company/promoters failed to show that any of the amounts diverted/siphoned away have been brought back into the company. The learned counsel of the company submitted that it primarily lost money in trading of stocks of 5706 MT of steel purchased in the past because the steel got rusted and as such was sold at below the purchase cost. Normally, a company engages in trading activity with a view to making profits. Any trader would like to ensure that he buys goods and sells them quickly so that the carrying cost of inventory in terms of interest and storage expenses etc are covered and he makes a profit on the trade. It is incredible to believe that the company acquired more than 5700 MT of steel and kept it stored for a long period till such time the goods got rusted and sold it at a huge loss. Prima facie explanation offered by the company defies logic and cannot be accepted. The loss of Rs. 2.29 crores incurred by the company is purely a manipulation of accounts for the purpose of siphoning away of funds in addition to what has been eaten away during the previous year 1998 as well as 1999. Further, the company has also failed to explain as to why it continued its manufacturing activity when the raw material consumption itself as a ratio to the cost of sales was more than 100% during the year 1999-2000. Here again it is a classic example of manipulation of accounts by an unscrupulous promoter. The company had provided for prior period expenses of Rs. 3.75 crores without any convincing explanation. The raw material consumption of the company had increased to 97% of the cost of production.
8.0 The unsavory conduct of company/promoters is fully revealed when BIL during proceedings in AAIFR had sought to file an affidavit along with an undated report on revaluation of assets and a copy of the Board resolution and when the inconsistencies were pointed out, sought to withdraw 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 Nos. 240/2001 and 273/2001 vide order dated 25.1.2002. The AAIFR in the said order observed as under:-
"7) The accounts of FY-99 did not present a true and fair picture of the financial position of the company and were held to have been fabricated and losses manipulated and funds siphoned away.
9. This Authority thus had not accepted the following expenses/losses:
(Rs. In lakhs)
1. Addl. Depreciation booked due to change in method from SLM to WDV 812.42
2. Lease rent income not accounted for 127.86
3. Loss booked on account of sale of investment 361.00
4. Other fabricated losses (appx) 4000.00 ====== Total 5301.28
10. This is besides the receivables and liabilities undetermined in respect of debtors and prior period income tax liability.
11. The decision of this Authority on the issues that arose in the earlier reference (based on the accounts for the FY-99) and which had been adjudicated upon would operate as bar and could not be reagitated on the principle of res judicata as noticed below. This was not disputed by learned counsel for the appellant and in fact is also so admitted in the reply dated 25.7.2001 submitted before the BIFR,
12. Even otherwise it is well established that where a matter, whether on a matter of fact or question of law has been decided between the parties in a suit or proceeding and the decision is final either because no appeal was taken to a higher court or because the appeal was dismissed or no appeal lies, neither parties will be allowed in future to file a suit or proceeding between the same parties to convass the matter again. The principle of res judicata is embodied in relation to suits in section 11 of the Code (Civil Procedure Code) but even where section 11 does not apply the principle of res judicata has been applied by the courts for the purpose of achieving the finality in litigation. The result is that the original court as well as any higher court must in any future litigation proceed on the basis that the previous decision was correct. Reliance has been placed on the decided case Satyadhan vs Deorajin Debi, .
13. The rule of res judicata is meant to give finality to a decision arrived at after due contest and after hearing the parties interested in the controversy. Even where the rule of res judicata was not applicable in that case the general principles of law bearing 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 vs. Shree Krishna Sinha and others, )."
6. The AAIFR also placed reliance on the Supreme Court judgment in K.K. Modi vs. K.N. Modi & ORS 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 vs. AAIFR and others in CWP 6266 of 2000 decided on 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 FY 2000 amounting to over Rs. 39 crores far exceeds the net worth of the company. The AAIFR correctly observed that the said decision does not contemplate that the finding/decision on the earlier reference is not relevant or should be ignored notwithstanding that the accounts found to be tainted for the financial year are carried forward and relied upon in such reference for subsequent year.
7. The AAIFR in the impugned judgment further observed as under:-
"20. In the earlier reference (FY - 99) this Authority had not accepted and disapproved the change in method of charging depreciation from SLM to WDVM, in FY - 2000 also the depreciation has been charged on WDV Method. There is no change in circumstances either on facts or law to justify the charge of depreciation on WDVM for FY-2000 also. Depreciation of Rs. 496.63 lakhs has been claimed in FY-2000 on the WDV Method. On SLM basis the depreciation for FY-2000 would be about Rs. 326 lakhs. The excess depreciation charged amounting to Rs. 170.63 lakhs is inadmissible and has to be deducted from the figure of Rs. 496.63 lakhs.
21. Similar is the position in respect of lease rent income amounting to Rs. 127.86 lakhs which has not been shown/credited as income in the accounts of the company in FY-2000. This amount is also similarly siphoned away and has to be excluded from the losses. Again income-tax liability of Rs. 375.64 lakhs has been booked as "prior period liability" in FY-2000. No material has been placed on record to support this claim.
22. Thus Rs. 5519.33 lakhs in FY-99 and Rs. 674.13 lakhs in FY-2000 i.e. Rs. 6193.46 lakhs are not admissible expenses towards losses. As noticed above, the promoters have siphoned away the funds of the company to the extent of over Rs. 43 crore in FY-99 which they are liable to restore with interest amounting to Rs. 9 crore. The loss would thus further get reduced by Rs. 9 crore. These losses to the extent of Rs. 7093.46 lakhs would not count towards accumulated losses. This leaves loss of Rs. 1768.87 lakhs as against the net worth of Rs. 2060 lakhs. The net worth thus remains positive and the company is not a sick industrial company and this reference is not maintainable."
8. We have heard the learned counsel for the parties at length. We have also carefully 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 to 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 or 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 been committed which would shake the confidence of the creditors. Their Lordships of the Supreme Court in S.P.C. Varaya Naidu (Dead) by LRs vs. Jagannath (Dead) by Lrs and Others have rightly observed and the relevant portion reads as under:-
'..the courts of law are meant for imparting justice between the parties. One who comes to the court, must come with clean hands. We are constrained to say that more often than not, process of courts is being abused. Property-grabbers, tax-evaders, bank-loan-dodgers and other unscrupulous persons from all walks of life find the court process a convenient lever to retain the illegal gain indefinitely. We have no hesitation to say that a person whose case is based on falsehood, has no right to approach the court. He can be summarily thrown out at any stage of the litigation.'
11. The AAIFR has also observed in the order that fraud and cheating vitiate all transactions. A deliberate deception with the design of seeking unfair advantage/gain by another's loss is guilty of fraud and cheating. To come to the rescue of such a person will give premium and reward for his dishonesty, cheating and fraud which is not countenanced by law. The AAIFR was constrained to make following observations in the concluding portion of the order:-
"Dishonesty of the promoters/managements of the company was discovered and established in the earlier reference when it had claimed sickness by manipulating false losses and siphoning of over Rs. 43 cr funds of the company. Obviously they are guilty of fraud and cheating. They have neither brought back nor have been shown inclination to bring back to the company the funds misappropriated/siphoned off. On the other hand, now soon thereafter, the second reference was made claiming sickness on further losses without bothering in the least about the findings of dishonesty on their part as found established by this Authority and without making even any efforts to set right false and fabricated accounts of the company. The intention of legislation could not be to encourage such dishonesty. Unless promoters/managements restore the wrongful gain derived by them and compensate for the wrongful loss caused to it, the management are not entitled to be heard. In the facts and circumstances, the reference has been rightly rejected by the BIFR and no interference is called for in the impugned order. The appeal is accordingly dismissed."
12. Extremely strong observations have been aptly incorporated in the impugned judgment, clearly demonstrate that the petitioner company by large scale manipulation, cheating, dishonesty and fraud has abused the entire process of the Court.
13. The provisions of Section 22 of SICA which have been incorporated in the wisdom of the Legislature to protect companies and industries which are genuinely in grave difficulty because of factors beyond their control, have been thoroughly abused and misused by the petitioner company, The entire legal process has been abused to defraud the creditors.
14. This petition is a total abuse of the process of law. No interference is called for with the well reasoned impugned judgment. This petition deserves to be dismissed with costs which we quantify at Rs. 25,000/-. We order accordingly.