* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ Date of Decision: 01.10.2012
% W.P. (C) NO. 4998/2012
SHREE HARI AGRO INDUSTRIES LTD AND ANR
..... Petitioners
Through: Mr.Ramesh Singh, Mr. Gaurav
Khanna & Mrs. Abhinandini
Sharma, Advocates.
versus
APPELLATE AUTHORITY FOR INDUSTRIAL AND
FINANCIAL RECONSTRUCTION AND ORS ..... Respondents
Through:
CORAM:
HON'BLE MR. JUSTICE SANJAY KISHAN KAUL
HON'BLE MR. JUSTICE VIPIN SANGHI
VIPIN SANGHI, J.
1. The petitioner has preferred the present writ petition to assail the order dated 29.5.2012 passed by the Appellate Authority for Industrial and Financial Re-construction, New Delhi (AAIFR) passed in Appeal No. 197/2010 as well as the original order dated 28.6.2012 passed by the Board for Industrial and Financial Re-construction (BIFR) in M.A. No. 239/2011 in case No. 344/2000. The petitioner also seeks an appropriate writ declaring that the net worth of the petitioner No. 1 company has WP(C) No. 4998/2012 Page 1 of 10 turned positive and to seek a direction to the BIFR to discharge the petitioner No.1 - company from the purview of Sick Industrial Companies Act, 1985, (SICA) on the basis of the annual balance-sheet for the year ending 31.3.2000.
FACTS
2. The petitioner No. 1 - company was declared a sick industrial undertaking under the provisions of SICA on 13.6.2001. Respondent No.3 - IDBI was appointed as the operating agency to examine the viability of petitioner No. 1 and formulating a re-habilitation scheme for its revival. The Draft Re-habilitation Scheme (DRS) was submitted on 14.7.2001. However, BIFR was of the view that no workable DRS could emerge and issued a show cause notice to petitioner No. 1 for its winding up. The BIFR also permitted the secured creditors under Section 22 (1) of the SICA to file/continue recovery proceedings against petitioner No. 1 with the condition that the decrees would not be executed without its approval. The challenge to the issuance of show cause notice, by way of a writ petition before the High Court of Rajasthan by petitioner No. 1 failed.
3. It appears that on 29.8.2007, the petitioner company WP(C) No. 4998/2012 Page 2 of 10 submitted before BIFR that they had identified M/s Deepak Vespro Pvt. Ltd. (DVPL) - respondent No. 17 as a strategic investor to whom the debts of SASF and IDBI had been transferred. It was also submitted that they had tied up with M/s Raghuvir (India) Ltd. (RIL) -respondent No. 21
- a sister concern of DVPL for investing Rs. 3.5 crores to be utilized for settling the dues of the secured creditors.
4. The revival proposal was submitted by the petitioner company before the BIFR on 17.7.2007. On 12.8.2008, BIFR circulated the DRS inviting objections and suggestions which were to be heard on 11.2.2009. On 11.2.2009, RIL submitted that it could not give interest free unsecured loan of Rs. 3.5 crores to the petitioner company as envisaged in the DRS. While the matter was still pending consideration and was heard on 21.5.2009, 23.7.2009 and 29.9.2009, the petitioner moved M.A. No. 239 dated 7.11.2009 claiming that its net worth had turned positive as per the Audited Balance Sheet (ABS) as on 31.3.2009 and sought discharge of the petitioner company from the purview of SICA.
5. The petitioner claimed its net worth to be positive by Rs.622.44 lacs. While claiming so, the petitioner No. 1 claimed that WP(C) No. 4998/2012 Page 3 of 10 DVPL had waived off the loan/funds infused by it, as well as the interest thereon, aggregating to Rs. 947.40 lacs, out of which Rs. 543 lacs was the principal amount and Rs. 404.40 lacs was the interest amount. (We may note that, according to petitioner No. 1, the principal amount infused by DVPL was only Rs. 250 lacs and not Rs. 543 lacs as claimed by DVPL). That apart, in the calculation made by petitioner No. 1, in consideration of amount of Rs. 200 lacs received by it towards share application money, the petitioner No. 1 had issued 90% redeemable Convertible Preference Shares (CPS) with effect from 29.12.2009 and the said amount was added towards the paid up equity capital of petitioner No. 1.
6. DVPL, RIL and respondent No. 25 - Mr. Vijay Data, contested the aforesaid M.A. filed by the petitioner No. 1 to seek discharge of the reference before BIFR and after hearing the parties, BIFR by the impugned order dated 28.6.2010 disallowed the said application of petitioner No. 1. BIFR concluded that the aforesaid entries could not have been made and that they were incorrectly made by the petitioner. A show cause notice was also issued to petitioner No. 1 requiring it to explain as to why action should not be taken against it for change of management of the company without the consent of the BIFR, as it appeared that one M/s WP(C) No. 4998/2012 Page 4 of 10 Saurabh Agrotech Pvt. Ltd. had acquired the petitioner No. 1 company. The said order of the BIFR was assailed before the AAIFR, which has dismissed the first appeal by the impugned order.
DISCUSSION
7. We have heard learned counsel for the petitioner and perused the record - particularly the two impugned orders. The submission of learned counsel for the petitioner is that the waiver of the loan and the interest by DVPL is recorded in the minutes drawn by the operating agency IDBI which is an independent agency, and that the denial of the said waiver by DVPL was an afterthought. It is also alleged that the appropriation of the share application money of Rs.200 lacs was rightly done by including it in the paid up share capital of the petitioner company, and the said amount could not be shown as an outstanding liability of the company.
8. The BIFR returned the factual finding that DVPL as the original strategic investor had infused funds to the tune of Rs. 543 lacs and the interest thereon payable to DVPL worked to Rs. 404.40 lacs. The petitioner company had written off Rs. 947.40 lacs as waived by DVPL without the consent of DVPL. DVPL had also confirmed that they had WP(C) No. 4998/2012 Page 5 of 10 not received any payment from the petitioner company and the waiver of the amount due to DVPL was the unilateral act of the petitioner company, which was disputed by DVPL. The BIFR noted that in its application the petitioner company had claimed to have positive net worth of Rs. 622.44 lacs on the basis of the audited balance sheet as on 31.3.2009 displaying the following figures:-
Paid up share capital - Rs. 795.84 lakh Reserve & surplus - Rs. 1458.61 lakh Total - Rs. 2254.45 lakh Less Accumulated losses (-) - Rs. 1632.01 lakh NET WORTH - Rs. 622.44 lakh
The BIFR observed that the amount of Rs. 200 lacs had been converted into redeemable CPS and this amount could not be considered as the paid- up share capital for the reason that the shares could be redeemed by the share-holders. The said amount had to be shown as a liability. After writing back the deduction of Rs. 947.40 lacs, and the deduction of Rs.200 lacs from the paid up share capital, the revised net-worth worked out by the BIFR came to a negative figure of Rs. 544.96 lacs.
9. The AAIFR has observed that the share application money of Rs.200 lacs was converted into redeemable CPS with effect from WP(C) No. 4998/2012 Page 6 of 10 29.12.2009, although the petitioner company had sought discharge from the purview of SICA on the basis of ABS as on 31.03.2008 and 31.03.2009, i.e. much before the share application money was converted into redeemable CPS on 29.12.2009. However, the impugned order had been passed by the BIFR on 28.06.2010 after the share application money was so converted into redeemable CPS. The AAIFR has held that the judgment of this Court in Patodia Cements Limited & Another Vs. Appellate Authority for Industrial and Financial Reconstruction & Others, W.P.(C.) No. 208/2000 decided on 17.01.2000, was not applicable in the facts of this case after discussing the facts of the said case. Before us, the said aspect has not been questioned by the petitioner.
10. The decision of AAIFR in M/s Om Steels and Ispat Udyog Ltd. in Appeal No.222/2006 was also distinguished, since in the present case, the conversion of the share application money is into redeemable CPS, which means that the said CPS could be redeemed by the shareholders. In our view, the petitioner has not been able to point out any error in the reasoning or the approach of the BIFR or AAIFR in including the amount of Rs.200 lacs received by it towards the share application money as an outstanding liability in its books of account. The WP(C) No. 4998/2012 Page 7 of 10 AAIFR has held that the writing off of Rs.947 lacs does not appear to be justified because DVPL had not given its prior consent to the same. Without their written consent, such a huge amount could not be accepted to have been validly written off. Any such waiver could have been given after circulation of the DRS and at the time of hearing objections and suggestions under section 18(3)(a) and (b) of SICA. Since DVPL denied the same, the writing off of Rs.947 lacs could not be accepted and the said amounts had also to be included as an outstanding liability of the petitioner company. If these two amounts of Rs.200 lacs and Rs.947 lacs are added back towards the outstanding liability, admittedly, the petitioner company's net worth remains negative.
11. Learned counsel for the petitioner has laid emphasis on the minutes of meeting recorded by the operating agency to claim that DVPL had given its consent. We may note that DVPL relied upon the report dated 07.06.2011 of the operating agency (IDBI), wherein the operating agency had reported that the write off of Rs.947 lacs claimed by the petitioner was without the consent of DVPL. Moreover, DVPL has alleged collusion between the petitioner and one Shri Ramesh Khandelwal, who has purportedly given consent on behalf of DVPL and WP(C) No. 4998/2012 Page 8 of 10 claimed that Shri Ramesh Khandelwal was an employee of the petitioner. In these proceedings, we cannot determine these disputed questions of fact and we see no reason to discard the factual premise on which the BIFR and AAIFR have proceeded.
12. So far as the aspect of change of management is concerned, in our view, the AAIFR has rightly rejected the petitioners appeal by observing that the petitioner would have sufficient opportunity to reply to the show cause notice issued by BIFR and there was no justification to challenge the show cause notice at the preliminary stage.
13. The petitioners are primarily assailing the concurrent findings of fact returned by BIFR and AAIFR in the present petition. It is well settled that this Court while exercising its jurisdiction under Article 226 of the Constitution of India does not decide the factual issues, particularly when they have already been determined by concurrent findings by the Courts/Tribunals below. The petitioner have not been able to satisfy this Court that the findings of fact returned by either the BIFR or AAIFR are patently erroneous or can be said to be perverse. On the contrary, we are of the opinion that they are reasoned and proper.
14. For the aforesaid reasons, we are not inclined to interfere WP(C) No. 4998/2012 Page 9 of 10 with the impugned orders and the findings returned by the BIFR and the AAIFR. The present petition is accordingly dismissed with costs quantified at Rs.20,000/- to be deposited by the petitioner in the Delhi High Court Mediation and Conciliation Centre A/c No. 48852 with UCO Bank within two weeks.
C.M. Nos. 10255/2012 (for stay) In view of the orders passed in the above appeal, this application does not survive and the same is dismissed as such.
VIPIN SANGHI, J.
SANJAY KISHAN KAUL, J.
OCTOBER 01, 2012 sl/sr WP(C) No. 4998/2012 Page 10 of 10