Star Industrial & Textile ... vs Board For Industrial & Financial ...
1994 Latest Caselaw 197 Del

JUDGMENT

D.K. Jain, J.

(1) In this petition under Article 226 of the Constitution of India, the petitioner, a Public Limited Company and its Chairman and Managing Director seek a writ of Certiorari or any other appropriate writ, order or direction calling for records of the petitioner company from the Board for Industrial and Financial Reconstruction (in short BIER), established under Section 4 of the Sick Industrial Companies(Special Provisions) Act, 1985 (in short SICA) and after scrutiny for quashing the alleged oral directions given by the BiEr on 5 August 1993 for issuance of an advertisement for the sale of the petitioner company's undertaking and for enforcing immediate recovery of arrears of interest and other dues of an aggregated stated amount of Rs. 2.5 crores from the petitioner company and for the enforcement of the personal guarantees given by the petitioner company's Directors/Promoters. The petitioners further pray for a writ of mandamus, directing the BiEr to withdraw or rescind the said oral directions. They also seek await of prohibition or any other writ or order or direction, prohibiting and restraining the respondents from acting on or implementing or taking any action in pursuance of the said directions. Apart from the BiEr and Union of India, there are eleven other respondents. Respondent No.3 is the Industrial Development Bank of India (for short IDBI). the lead financial institution and the operating agency appointed by the BiEr under Section 17(3) of the SICA. respondent Nos. 4 to 9 are the banks who had advanced various loans to the petitioner company, respondent No. 10 is the Export Credit and Guarantee Corporation to india, respondent No. 11 is the State of Maharashtra and respondent Nos.12 and 13 are the two trade unions of the petitioner compony.

(2) The petitioner company is engaged in the manufacture of textile machinery, It appears that due to recession in the textile industry and for some other reasons the company became sick: it approached the BiEr for its rehabilitation, who vide its order dated 19 July 1988 sanctioned a scheme for its rehabilitation and appointed Idbi as the operating agency. The said scheme was reviewed by the Bier vide its order dated 18 February 1991 and it was again substantially modified in June 1991. It appears that the Bier is not satisfied with the progress of the sanctioned scheme and seems to have come to the conclusion that it cannot be implemented and has, therefore, issued the directions. now impugned in this petition. The petitioners allege that the said oral directions have been issued without affording any opportunity to the petitioners to explain that the operating agency has infact given a favorable report in which it is clearly stated that the petitioner company is a viable undertaking and steps to revive the same have been indicated therein. It is further alleged that while giving such directions the Bier has ignored the proposal given by the petitioners expressing their willingness to consider the amalgamation of the petitioner company with its sister undertaking viz., Associated Precision Spindles Ltd (APS) and the fact that an agreement/consensus had been reached' between the company and the operating agency and the financial institution for the grant of required financial facilities reliefs to the company to enable it to complete its rehabilitation. It is thus submitted that the Bier has acted in an extremely high handed, arbitrary, irrational and oppressive manner in issuing the said orders and directions to the operating agency, banks and institutions and in further directing them to comply with the said orders, without waiting for the written orders from it and if the impugned directions are allowed to be implemented, these wilt have disastrous effect on the petitioner company and its Directors/Promoters.

(3) While issuing notice to show cause why the petition he not admitted, by means of an ex parte order, operation ofthe impugned directions of the BIER. allegedly given at its meeting held on 5 August 1993 was stayed subject to the condition that neither title company nor the promoters or Directors will dispose of, alienate or encumber any of their assets except in the one course. The said interim order still continues.

(4) Answer to the show cause notice has been filed on behalf of respondents 3. 4, 6, 12 and 13. Respondents 3,4 and 6 oppose the grant of any relief to the petitioners whereas respondents 12 and 13 support the writ petitioners and pray for quashing of the impugned directions.

(5) It appears that pending further hearing in the writ petition, some proposal was mooted by the petitioner company with the Idbi, the operating agency, for amalgamating the petitioner company with Aps and taking note of the said proposal, this Court vide order dated 29 October 1993. directed the operating agency to consider the proposal given by the petitioner company and. within eight weeks from that date, submit a report to the BIER. who were also directed to consider the said report and make an order thereon as expeditiously as possible, but preferably before 28 February 1994, the next dale of Financial Reconstruction & Ors. hearing. Apprehending that it may not be possible for the Idbi to submit its report within the time fixed by this Court, the petitioner company moved an application, being Cm 9373/93, seeking extension of time by eight weeks for the lDBI to file its report with BIER. Vide order dated 22 December 1993 the learned Vacation Judge allowed the said application as none of the parties, represented on that date, had any objection in that behalf, though it appears on 20 December 1993 counsel for Idbi had informed the Court that the report in terms of the orders passed by this Court on 29 October 1993, had already been submitted to the BIER. Now an additional affidavit has also been filed on behalf of the petitioner company wherein it is stated that on a consideration of the report submitted by the Idbi, the Bier has made an order on 25 February 1994. A copy of the said order has also been placed on record.

(6) Mr. Ganesh, Advocate, appearing for the petitioners, while shifting his stance from the case initially set up in the petition, aggrieved of the alleged oral directions dated 5 August 1993 now seeks to base his argument on the order passed by Bier on 25 February 1994, pursuant to the directions given by this Court on 29 October 1993 and has strenuously contended before us that the Bier has misdirected itself in not properly considering minutes of the Joint meeting of the banks and financial institutions convened 01123 February 1994 and in coming to the conclusion that there are many uncertainties in the proposal for amalgamation of the petitioner company and Aps and, therefore, it is not possible to process the proposed scheme of amalgamation. He submits that all the issues raised by the Bier in its order dated 25 February 1994 have been resolved and, therefore, we should direct the Bier to pass a final order after hearing the petitioners.

(7) A copy of the order dated 5 August 1993 passed by the Bier has been placed on record by respondent No.3, which takes out the bottom of the petitioner's case in the writ petition. Having perused the order passed by the Bier on 5 August 1993 and the counter-affidavits filed on behalf of Respondents 3, 4 and 6, we are of the view that the grievance of the petitioners that they have not been heard by the Bier before issuing the impugned directions is misplaced. The basis of challenge in the writ petition to "oral directions" dated 5 August 1993 is also contrary to record.

(8) Infact the order passed by the Bier on 5 August 1993 is a detailed one. It is evident from the said order that before issuing the directions contained in the said order, the Bier has taken into consideration the details of progress in implementation of the sanctioned scheme, forming part of the review report of the operating agency dated 26 July 1993 and has felt satisfied that the revised sanctioned scheme has also failed and the new proposals given by the petitioner company involving further concessions by the banks and the financial institutions and its association with Aps were not acceptable to the banks and the institutions. It is clearly recorded in the said order that having found so the Bier invited fresh suggestions from the representatives of the banks/financial institutions, which were put to the representative of the petitioner company, who could neither give any commitment to these proposals nor could he suggest any other altenative. As a matter of fact the Bier has also taken note of certain acts of contravention of the scheme by the promotors; for instance it leas been pointed out that as per the provisions of the sanctioned scheme, some vacant land available with the petitioner company was sold to Aps, a sister concern with common management, for Rs. 93 lakhs out of which Aps adjusted Rs.75 lakhs for the supplies made by them to the petitioner company. It is pointed out that this was in flagrant contravention of the directions given by the Bier in its proceedings held on 12 June 1991. The Bier has also observed that the promoters have failed to honour the undertaking given by them to meet the shortfall in the projected cash flow Along with their personal guarantees for meeting the commitments under the scheme. In this view of the matter we not only find it difficult to hold that the order passed by the Bier on 5 August 1993 either suffers from the vice of arbitrariness or that there has been violation of principles of natural justice, it also appears to us that the present writ petition is primarily meant to save the Directors/Promoters of the petitioner company from possible recovery proceedings and penal action against them under Section 33 of the SICA. rather than to safeguard the interest of the petitioner Company.

(9) We are also of the view that there was no cause for the petitioners to rush to this Court under Article 226 of the Constitution instead of taking recourse to the normal remedy of appeal to the Appellate Authority under Section 25 of the SICA. If the petitioners were infact aggrieved of the directions issued by the Bier they could have very well taken the matter in appeal to the Appellate Authority who has wide powers to confirm, modify or set aside the order appealed against. On a pointed query by the Bench, Mr. Ganesh, learned counsel for the petitioners, candidly admitted that in the absence of any written order by the BIER. the petitioners were apprehensive about getting any relief from the Appellate Authority. We are unable to appreciate the conduct of the petitioners, rather we deprecate it. It is not for the litigant, aggrieved of an order of a particular authority, to assume that the Appellate Authority will not entertain or will not grant him any relief in its discretion if at all a case is made out turn the same. When we refer to the order passed by the Bier, we feel that this Court was misled to believe that despite favorable report from the operating agency and the financial institutions, the Bier was bent upon passing adverse orders to the detriment of the petitioners and as a result whereof they would suffer irreparable loss or injury. We have little doubt in our mind that had the written orders passed by the Bier on 5 August 1993 been placed before the Court, perhaps title interim orders passed on 10 August 1993 would not have been passed as it appears to us that the orders passed by the Bier are exploratory in nature and not final. Perhaps this was the reason that the petitioners were apprehensive about getting any order in their favor from the Appellate Authority in the normal course.

(10) We now advert to the contention of Mr. Ganesh that all the issues raised by the Bier initsorderdated25 February 1994 having been resolved. the Bier should be directed to pass a final order in terms of the order passed by this Court on 29 October 1993- the contention is stated to he rejected. Apart from the fact that the directions now sought by the petitioners are beyond the scope of the present writ petition and cannot he allowed to he agitated, we are of the view that these are beyond the scope of judicial review as well. In the first instance the order passed by this Court on 29 October 1993 was for a limited purpose to ensure that the proposal given by the petitioner company suggesting its amalgamation with Aps is duly considered expeditiously by the Idbi & Bier before a final decision in the matter is taken. We are satisfied that it has been done. Secondly on a due consideration of the said report the BIER. as an expert body. has recorded in its order dated 25 February 1994. that tierce are many uncertainties in the proposal for amalgamation of the petitioner company and Aps for which definite commitments have to be given by both the said companies and in the absence of these commitments, the proposed amalgamation cannot he processed by the BIER. It is not for us to examine in these proceedings the correctness of the view taken by the Bier and to find out whether the amalgamation is feasible or not. We feel that if the petitioners are (India) Pvt. Ltd. & Anr. aggrieved of the order, they may, if so advised, challenge the same before the Appellate Authority under the Sica and we are confident that the Appellate Authority will not decline to consider all tile aspects of the scheme of amalgamation only on the ground that the writ proceedings during which the said proposal was mooted have ultimately resulted in the dismissal of the writ petition. The powers conferred on the Appellate Authority under Section 25 of the Sica are wide and it is authorised to make any order as appears to it to he necessary for the ends of justice and there are no restrictions on its power to make such an order. The Appellate Authority has the power to go through the entire record of the petitioner's case. make such further enquiries as it deems fit and then pass appropriate orders.

(11) For the aforesaid reasons we do not find any merit in the writ petition and the same is accordingly dismissed with costs, which we quantify at Rs. 5.000.00 . Interim orders stand vacated. Costs, when realised, will he paid to the Indian Council of Legal Aid & Advice, 3, Lawyers Chambers, Delhi High Court, New Delhi.

(12) Before parting we may also deal with the submission made by Ms. Tasneem Ahmadi, learned counsel for respondents 12 and 13. She has submitted that if the impugned directions issued by the Bier are not quashed, the petitioner company is likely to be wound up and in the process a large number of workers would be rendered jobless. We feel that the language of Section 25 of the Sica is wide enough so as to entitle the said respondents also to challenge any order of the Bier, if they were or are aggrieved of the same.

(13) After we had reserved the orders, an application (CM 1958/94) was filed by the petitioners which was listed before us on 15 March 1994 and since we had fixed the main case for orders for 18 March 1994 we directed that this application may also come up on that date. By this application the petitioners pray that this Court may clarify that title commitments mentioned in the BIER's order dated 25 February 1994 may be given by the petitioners to the Bier through the operating agency and to permit the petitioners to withdraw the petition without prejudice to their rights and contentions. However, in view of our aforesaid order we do not think this application has any merit and the same is also dismissed.