Dabriwala Steel & Engineering Co. ... vs Aaifr
1996 Latest Caselaw 1022 Del

JUDGMENT

Manmohan Sarin, J.

(1) The petitioner in this writ petition under Article 226 of the Constitution of India is seeking a writ of certiorari for quashing of orders dated 6.12.1994, Annexure P/10; order dated 25.5.1993, Annexure P/6; Order dated 15.9.1993, Annexure P/8; and order dated 8.2.1995, Annexure P/11.

(2) The BIRF in a reference made by the appellant sick company under Section 15 of the Sick Industrial Industrial Companies (Special Provisions) Act, 1985 (hereinafter referred to as the 'Act'), vide orders dated 25.5.1993, Annexure P/6, formed a prima facie opinion that the appellant company was economically and commercially non-viable on a long term basis and it would be just and equitable to wind it up. The BIRF further vide orders passed in proceedings dated 15.9.1993, Annexure P/8, after publication of general notices in newspapers considered the objections/suggestions of the involved parties. The Haryana Financial Corporation, which had taken possession of the petitioner's factory, objected to the winding up by the official liquidator and sought to sell the assets mortgaged to it prior to winding up proceedings. The State Bank of India, the I.R.B.I., Operating Agency, as well as the Government of Haryana conveyed their no objection to the winding up. The BIRF vide orders dated 15.9.1993, Annexure P/8, recorded its final opinion under Section 20(1) of the Act, that it was just, equitable and in public interest to wind up the company and the objections of the Haryana Financial Corporation were held to be not sustainable.

(3) Order dated 6.12.1994 is the order passed by the AAIFR in the appeals that had been preferred by the petitioner, Dabriwala Steel and Engineering Co.Ltd.; M/s.Jai Hind Investment and Industries Ltd., a subsidiary of the petitioner; and M/s.Haryana Financial Corporation. It is not necessary to advert to the appeals filed by M/s.Jai Hind Investment and Industries Ltd. as well as M/s.Haryana Financial Corporation ltd., except to notice that the former had filed the appeal against the order of BIRF dated 25.5.1993 asking the said company to furnish information to enable the State Bank of India to prepare the rehabilitation scheme. While the appeal filed by Haryana Financial Corporation was against the rejection of their plea that the official liquidator should not proceed with the winding up, since it had taken possession of the assets. This objection, as noted earlier, had been found to be unsustainable.

(4) Vide order dated 8.2.1995, Annexure P/11, the BIRF directed that the final opinion for winding up of the company contained in the proceedings dated 15.9.1993 be forwarded to the concerned High Court for necessary action. The appellant also assails this order being a consequential one to the orders dated 15.9.1993 and 6.12.1994.

(5) We are concerned, in the present writ petition, primarily with the dismissal of the appeal filed by the appellant before the AAIFR vide order dated 6.12.1994, Annexure P/10. The petitioner is aggrieved by the rejection of its submission that the petitioner company was entitled to be treated as a small scale industry and, thereby, outside the jurisdiction of the Board for Industrial and Financial Reconstruction by virtue of notification dated 2.4.1991, Annexure P/2 to the petition.

(6) It is not disputed before us that the petitioner company, which was earlier engaged in the business of manufacturing steel, ran into financial difficulties and its liabilities went on multiplying, leading to the petitioner company as well as the State Bank of India, initiating proceedings under the Act. It is also not disputed that the efforts of the operating agency in preparing the scheme for rehabilitation did not yield any fruitful results. In fact, learned counsel for the petitioner has not assailed before us the findings that it was just, equitable and in public interest that the company should be wound up. It is also not disputed that the Haryana Financial Corporation had taken possession of the petitioner company's factory under Section 29 of the Haryana Financial Corporation Act.

(7) Learned counsel for the petitioner, Mr. Rakesh Tikku, very fairly confined his submissions to challenging the jurisdiction of the BIRF to proceed with the reference contending that the petitioner company had become eligible as a small scale industrial unit, in terms of notification dated 2.4.1991, which ousted the jurisdiction of the BIRF. The precise submission being that at the time when the reference was made, the petitioner company's fixed assets and plant and machinery exceeded the prescribed limit of Rs.35 lakhs for small scale industries. However, by virtue of the notification dated 2.4.1991, which was issued in super cession of all previous notifications and contained a non-obstante clause, the limit for small scale industries was raised to Rs.60 lakhs. It is urged that the assets of the petitioner company were less than Rs.58 lakhs.

(8) The BIRF in its preliminary order dated 25.5.1993 had negatived this contention of the petitioner company, holding that the statutory auditors of the company, while certifying the accounts had commented that this was a sick industrial company within the meaning of Section 3(1)(o) of the Act. Further, the petitioner had failed to get itself registered as a small scale unit within a period of six months from the date of the notification and, hence, the petitioner company was not entitled to the benefit of the notification dated 2.4.1991. It was observed that the operating agency was appointed, which went into determination of measures for rehabilitation. Besides, the petitioner company did not avail of any of the benefits of a small scale industrial unit.

(9) As stated above, learned counsel for the petitioner has confined his submissions to the question of jurisdiction and argued that the notification dated 2.4.1991 was clearly applicable and it had to be applied to all pending cases. Mr. Rakesh Tikku, in particular, relied on the following extracts from the notification dated 2.4.1991: "Now, therefore, in exercise of the powers conferred by sub-section (i) of Section 11-B and sub-section (i) of Section 29B of the said Act, and notwithstanding anything contained in any earlier notification issued by this Department, the Central Government hereby specifies having regard to the factors mentioned in sub-section (2) of the said Section 11B, the requirements mentioned in the Table below, which shall be complied with the industrial undertakings to enable them to be regarded as an ancillary, or a small scale industrial undertaking for the purpose of the said Act. Table I) Requirements to be complied with by an industrial undertaking for being regarded as small scale industrial undertaking: a) An industrial undertaking in which the investment in fixed assets in plant and machinery whether held on ownership terms or on lease or by hire purchase does not exceed rupees sixty lakhs. @SUBPARA = Note : No small scale or ancillary industrial undertaking referred to above shall be subsidiary of, or owned or controlled by any other industrial undertaking."

(10) Learned counsel for the petitioner urged that the petitioner company was eligible and qualified in terms of the above notification as a small scale industry and, therefore, outside the jurisdiction of the BIRF. The impugned order passed by the AAIFR as well as the other respondents relied on the subsequent notification dated 1.1.1993, Annexure P/9, appearing at pages 52 to 57 of the paper book, which was not permissible.

(11) Notification dated 1.1.1993, specified the requirements to be complied with by industrial undertakings to enable them to be regarded as ancillary or a small scale undertaking. The notification made amendments to the existing notification dated 2.4.1991. Reliance is placed by the respondents on Note V of the Notification dated 1.1.1993, which reads as follows: "V)Where an industrial undertaking is a subsidiary or is owned or controlled by any other industrial undertaking or undertakings in terms of sub-clause (i), sub- clauses (ii), or sub-clause (iii), and if the total investment in fixed assets in plant and machinery of the first mentioned industrial undertaking and the other industrial undertaking or undertakings clubbed together exceeds the limit of investment specified in paragraph I or Ii of this Table, as the case may be, none of the industrial undertaking shall be considered to be a small scale or ancillary industrial undertaking."

(12) Notification dated 1.1.1993, provides that where an industrial undertaking is a subsidiary or is controlled by another industrial undertaking and if the total investment in fixed assets in plant and machinery of the industrial undertaking and the other industrial undertaking or undertakings clubbed together exceeds the limits of investment specified therein, then none of the industrial undertakings shall be considered to be a small scale or ancillary industrial undertaking. Mr. Tikku assailed the reliance on this notification on the part of the AAIFR as well as the other respondents and submitted that this notification did not contain any non-obstante clause or superceding clauses, as were present in the notification dated 2.4.1991, extracted earlier. Besides, Mr. Tikku urged that in the petitioner's case, the petitioner company was not a subsidiary or owned by another company. Note V would not be attracted since, according to him, its applicability is confined to cases where assets of the subsidiary or the controlled undertaking were only being considered. According to him, where petitioner itself is the holding company and owns 100 per cent shares of the subsidiary company, this notification would not be applicable.

(13) The submission of Mr. Tikku, learned counsel for the petitioner, is without merit. The notification dated 2.4.1991 makes specific amendments to the earlier notification. The absence of a superceding clause or non-obstante clause, viz. "notwithstanding", is not at all a pre-requisite. Moreover, the language of Note V is clear and runs counter to petitioner's submission. In the instant case the petitioner is the controlling company and the assets of the petitioner and the subsidiary taken together would exceed the prescribed limit. The criterion is that "none of the industrial undertaking shall be considered a small scale or ancillary industrial undertaking". In our view the word "none" would include not only the subsidiary undertaking or the controlled company, but also the industrial undertaking which controls or owns the other company. This would be in consonance with the principle of purposeful interpretation.

(14) In this view of the matter, the petitioner would not be eligible to the benefit of being regarded as a small scale undertaking even with the enhanced limit of Rs.60 lakhs, with assets of M/s. Jai Hind Industries being clubbed with it.

(15) Even otherwise, the decision of the AAIFR in taking note of the subsequent notification cannot be faulted with, especially when the petitioner had not obtained registration as a small scale unit under the notification dated 2.4.1991 and not availed of any of the benefits of a small scale unit. Besides, at the time of the passing of the impugned orders, the notification dated 1.1.1993 had come into force and was fully applicable and the previous notification stood amended by it.

(16) Accordingly, we do not find any error in the impugned order or any miscarriage of justice which would warrant interference in the exercise of jurisdiction under Article 226 of the Constitution of India.

(17) The writ petition is, accordingly, dismissed.