Delhi High Court
M/S R.R.Kabels Ltd. vs Aaifr & Ors. on 9 April, 2009
Author: V.K.Shali
* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ W.P.(C) NO.942/2007, W.P.(C) NO.2865/2007 AND
W.P.(C) NO.2880/2007
Reserved on : 05.09.2008
Date of Decision : 09.04.2009
1. W.P.(C) NO.942/2007 & CM Nos.1652/2007, 2274/2007,
5412-13/2007, 14869/2007, 16129/2007, 16139-40/2007
& 17629/2007
M/S R.R.KABELS LTD. ...... Petitioner
Through Mr. Harish Salve, Mr. Rajiv
Nayyar, Sr. Advs. with Ms.
B. Sunita, Mr. Darpan Wadhwa &
Mr. Anil, Advocates
Versus
AAIFR & ORS. ...... Respondents
Through Ms. Indira Jaisingh, Sr. Adv.
with Mr. B. K. Sinha, Adv.
for Respondent.
Mr. V.P. Singh, Sr. Adv. with Mr.
Buddy Ranganathan,
Ms. Shruti Verma, Advs. for M/s
Pegasus Asset Reconstruction for the
respondent.
Mr. Dewan, Adv. for the respondent.
Mr. Jayant Bhushan, Sr. Adv. with for
the respondent.
Mr. C.A. Sundaram, Sr. Adv. with Ms.
Sushmita Banerjee, Advocate for
respondent no.36.
Ms. Indu Malhotra, Sr. Adv. with Mr. P.
K. Seth, Mr. Abhishek Kumar, Mr.
Kush Chaturvedi, Advs. for the
respondent no.26.
Mr. A.S. Chandiok, Sr. Adv., Mr. Parag
P. Tripathi, ASG with Mr. Prateek
Jalan, Ms. Ranjita, Ms. Vismai Rao,
Advs. for respondents.
Mr. P. S. Sudheer, Ms. Anne Mathew,
Advs. for respondent no.4.
Mr.Rajeev Sahney, Sr.Adv. for
respondent no.14.
Mr. P. R. Sikka, Adv. for respondent
no.2
Mr. D.K. Aggarwal with Shanto
Mukerjee, Advs. for respondent no.29.
Mr. Anil Devan, Sr. Adv. with Mr.
Sanjiv Sen, Mr. Sameer
Dewan, Advs. for respondent
no.27/34.
Mr.Dushyant Dave, Sr.Adv. and Mr.
W.P.(C) Nos.942/07, 2865/07 & 2880/07 Page 1 of 25
Jayant Bhushan, Sr. Adv. with Mr. D.
Kundu and Mr. Tarun, Adv. for TATA
Steel Ltd./respondent no.24.
Mr. Vivek Sibal, Mr. Tarunvir Singh,
Advs. for respondent no.31.
Mr.Radha Rangaswamy, Adv. for
respondent/Govt. of West of Bengal.
AND
2. W.P.(C) NO.2865/2007 & CM No. 5354/2007
PEGASUS ASSETS RECONSTRUCTION PVT. LTD.
...... Petitioner
Through : Same as in WP(C)
No.942/2007
Versus
AAIFR & ORS. ...... Respondents
Through : Same as in WP(C)
No.942/2007
AND
3. W.P.(C) NO.2880/2007 & CM No.5387/2007
THE INDIAN KABELS WORKERS UNION ...... Petitioner
Through : Same as in WP(C)
No.942/2007
Versus
AAIFR & ORS. ......Respondents
Through : Same as in WP(C)
No.942/2007
CORAM :
HON'BLE MR. JUSTICE MUKUL MUDGAL, J
HON'BLE MR. JUSTICE V.K.SHALI, J
1. Whether reporters of local papers may be
allowed to see the judgment? YES
2. To be referred to the Reporter or not? YES
3. Whether the judgment should be reported in the Digest? YES
JUDGMENT
V.K. SHALI, J:
1. This order shall dispose of three Writ Petition No.942/2007
(M/s R.R.Kabels Ltd. Vs. AAIFR & Ors.), WP(C) No. 2865/2007 (M/s
Pegasus Assets Reconstruction Pvt. Ltd. Vs. AAIFR and Ors.) and
WP(C) No.2880/2007 (The Indian Kabels Workers Union Vs. AAIFR &
Ors.). All these three writ petitions are challenging the same order
dated 22nd September, 2006 passed by AAIFR though for different
reasons. By virtue of the said order, AAIFR has passed the following
directions:-
"46. We also give the following directions to the BIFR
which we expect will be followed by the Board. All
parties are also directed to fully cooperate with the
BIFR so that the time frame given to the BIFR can be
maintained.
i) All four parties who have been permitted by
the BIFR order dated 12.04.2006 shall give
their respective proposals to the OA i.e. SBI for
its evaluation within two weeks of the passing
of this order, during which period all the four
parties, namely, SJIL (Silver Jubilee
Infrastructure Ltd.), Pegasus (Pegasus Assets
Reconstruction Pvt. Ltd.), RRK (M/s R. R.
Kabels Ltd.) and LLL (Land Lease Company
(India) Ltd. respectively shall hold discussions
with the secured creditors and others.
Thereafter, operating agency (hereinafter
referred to as „OA‟) shall hold discussions with
the secured creditors and others. All the four
parties shall deposit 100% of their envisaged
promoters‟ contribution in an interest bearing
No Lien Account with the OA and give proof of
their deposit to the satisfaction of the OA.
ii) OA upon receipt of the proposals from all or
any of; the four parties as enumerated
hereinabove, shall satisfy itself about the
deposit in an interest bearing No Lien Account
of the entire promoters‟ contribution and,
thereafter, examine the proposals. The said
examination by the OA shall be done within a
period of four weeks after expiry of two weeks
from the passing of this order.
iii) OA after examination of the proposals shall call
for a joint meeting of all concerned parties and
conduct negotiations and prepare a viable and
fully tied up Draft Rehabilitation Scheme
(DRS) and submit the same to BIFR latest upon
the expiry of ten weeks time of the passing of;
this order. OA along with DRS shall also
submit a report to BIFR giving respective
merits and demerits of each of the proposal
evaluated for consideration of BIFR."
2. The petitioner M/s R.R.Kabels Ltd.had challenged the order
dated 12th April, 2006 passed by the BIFR in AAIFR permitting all the
above mentioned four parties to submit the revised proposal to the
OA on the ground that it is the scheme for rehabilitation of the sick
company was superior as compared to the schemes given by
Peagasus Assets Reconstruction Pvt. Ltd. and SJIL and LLJ because
Peagasus was an asset reconstruction company and could not run
the sick company in view of the bar contained in Section 10(2) of the
SICA and the guidelines framed by the RBI. It had also failed to
deposit the promoter‟s contribution in the no lien account while as
the petitioner had already deposited 25 crores and further made
arrangement for another 35 crores of investment to revive the sick
company. Similarly, the schemes of SJIL and LLJ also did not
conform to this direction of the BIFR and accordingly these schemes
could not be considered. The petitioner had further contended that
it had already purchased 85% of the secured credit, signed MOU
with Union not to retrench any employee and the direction given by
the BIFR for submission of the fresh scheme to be given by these four
parties would further cause delay in the rehabilitation of the sick
company which has already been lying closed for a considerable
length of time. It was also contended that the petitioner is doing the
same business which the sick company was doing.
These submissions of the petitioner company were negatived
and the appeal was dismissed by the impugned order dated 22nd
September, 2006 by which the petitioner is feeling aggrieved and
has challenged it by filing the present petition.
3. Pursuant to this order, M/s R.R.Kabels Ltd. submitted a revised
and duly tied up proposal with the operating agency and also
deposited a sum of Rs.21 crores on 21st April, 2006 and a sum of Rs.5
crores on 9th May, 2006. Simultaneously, it preferred the present
Writ Petition bearing WP(C) No.942/2006 before this Court praying
for quashing of the impugned order dated 22nd September, 2006 and
further praying that the rehabilitation scheme proposed by the
petitioner namely M/s R.R.Kabels Ltd. ought to be sanctioned by the
respondents under the provisions of The Sick Industrial Companies
(Special Provisions) Act, 1985.
4. There are 39 respondents in the Writ Petition. This Court
passed an order on 13th February, 2007 staying further proceedings
both before AAIFR and BIFR till the next date of hearing which order
continued to be in existence till date. Counter affidavits have been
filed by respondents No.32, 38 and 39 opposing the writ petition.
5. The other two writ petitioners have also challenged the order
dated 22nd September, 2006 of AAIFR though for different reasons.
In Writ Petition bearing No.2865/2007 petitioner, M/s Pegasus
Assets Reconstruction Pvt. Ltd., has prayed for various reliefs, main
among them being that the MOU signed by the petitioner M/s
R.R.Kabels Ltd. with the respondents No.29, 32 and 33 and with the
various secured creditors and the purchase of the secured debt by
them is bad in law. It was the case of Pegasus that purchase of
secured debt by M/s R.R.Kabel even after, it, itself had obtained an
order of status quo from AAIFR is not only violative of AAIFR order
and contemptuous but it has also upset the level playing field for all
the prospective bidders.
6. So far as third Writ Petition bearing No.2880/2007 by The
Indian Kabels Workers Union Vs. AAIFR & Ors. is concerned, it has
prayed for summoning of the record of the case from AAIFR in
respect of miscellaneous application bearing No.176/2007 in Appeal
No.110/2006 culminating into the order of 22nd September, 2006
passed by AAIFR and further issuance of an appropriate mandamus
or direction or order commanding that M/s Tata Iron & Steel
Company Ltd. give a proposal and to consider the said proposal of
rehabilitation of M/s Incab Industries Ltd. by the BIFR. It was also
prayed that the respondents be prohibited except respondent
no.24-M/s Tata Iron & Steel Co. Ltd., their service agency etc.
interfering from rehabilitation proposal or taking over M/s Incab
Industries Ltd. by M/s Tata Iron & Steel Co. Ltd.
7. In order to appreciate the real point in controversy, it may be
pertinent here to mention the brief facts. M/s Incab Industries Ltd.
(hereinafter referred to as „the Company‟) was having its main plant
at Jamshedpur and another plant at Pune apart from its Head Office
at Calcutta. The aforesaid Company does not seem to have been
managed properly on account of which the Company had to be closed
down as it had suffered losses. In October, 1999, a reference was
made to BIFR for the purpose of declaring the Company as a sick
unit. On 4th April, 2000, BIFR declared the Company as a sick unit
under The Sick Industrial Companies (Special Provisions) Act, 1985
and the State Bank of India was appointed as an operating agency.
On 20th October 2000, since no viable rehabilitation scheme could be
framed, BIFR directed the operating agency to issue an
advertisement for change of management of the Sick Company.
However, no party came forward for taking over the management of
the company. In the year 2006, BIFR formed a prima facie opinion
that the company could not be revived and therefore, should be
wound up on account of the fact that there was no viable or agreed
rehabilitation proposal with means of finance tied up, as no party
was available to take over the grant of rehabilitation. However, as a
last measure, BIFR gave an opportunity to various parties to submit
a rehabilitation proposal in respect of the aforesaid company. As a
consequence of this, three proposals were submitted before BIFR,
one by M/s R.R.Kabels Ltd. (petitioner in WP(C) 942/06), the second
by M/s Pegasus Assets Reconstruction Pvt. Ltd. (respondent no.32
and petitioner in WP(C) 2865/07 and third by M/s Silver Jubilee
infrastructure Ltd. (respondent no.31). In addition to this, one
company M/s Land Lease Company (India) Ltd. (LLL)-respondent no.
33 were also permitted to submit a proposal to the BIFR along with
certified copy of the High Court order permitting M/s Land Lease
Company (India) Ltd. to submit the proposal. All these proposers
were to negotiate with the secured creditors/workers and other
necessary parties and submit a revised and improvised rehabilitation
proposal to the operating agency because the proposal submitted by
them were found to be not fully tied up on all counts.
8. Pursuant to this, BIFR also directed that any proposal
submitted by any party would also be required to submit 25% of the
finance required for the purpose of rehabilitation with the operating
agency.
9. Accordingly, M/s R.R.Kabels Ltd. deposited a sum of Rs.25
crores with the operating agency and claimed that it had further
made a provision of Rs.34 crores to invest as a capital expenditure
for the revival of the company. Although it complied with the
portion of the order of BIFR but simultaneously it preferred an
Appeal No.110/2006 wherein the order dated 12th April, 2006 passed
by BIFR was challenged under Section 25 of The Sick Industrial
Companies (Special Provisions) Act, 1985 on the grounds stated
hereinabove. The said appeal came to be heard on 12th May, 2006
and AAIFR passed an order of status quo with regard to the
properties of the Company.
10. In Writ Petition No.942/2007, titled as M/s R. R. Kabels Vs.
AAIFR & Ors., this Court on the application bearing No.5413/2007
filed by M/s Incab Industries Ltd., The Indian Kabels Workers Union,
M/s Incab Credit Staff Association and Kabels Union (INTEC) sought
intervention in this petition, as well as leave of this Court to
approach M/s Tata Iron & Steel Company Ltd. for rehabilitation and
revival of M/s Incab Industries Ltd. The Court permitted the
intervention and directed M/s Tata Iron and Steel Co. Ltd. to file a
proposal for the purpose of rehabilitation of M/s Incab Unit which
has already been done.
11. We have heard the learned counsel for the main contesting
parties namely M/s R.R.Kabels Ltd. in Writ Petition No.942/2007,
M/s Tata Iron & Steel Co. Ltd. respondent no.24, M/s Pegasus Assets
Reconstruction Pvt. Ltd., Respondent no.32 and The Indian Kabels
Workers‟ Union-respondent no.27, apart from other counsel.
12. So far as the submissions which have been made by the
respective sides are concerned essentially constitute three groups.
One group is headed by M/s R.R. Kabels Ltd. which is getting the
support of respondent No.27-The Indian Kabels Workers‟ Union,
Respondent no. 28-Jamshedpur Mazdoor Union, respondent
no.30-All India Trade Union Congress, respondent no.38-M/s Kamala
Mills Ltd. and respondent no.39-M/s Fasqua Investment Pvt. Ltd.
13. The second group is represented by M/s Tata Iron & Steel Co.
Ltd. which is respondent No.24 and although it had not given the
scheme for rehabilitation originally but by virtue of the interim order
passed by this Hon‟ble Court on 23rd April, 2007, M/s Tata Iron &
Steel Co Ltd., respondent no.24 was permitted to submit a proposal
without prejudice to the rights and contentions of the other bidders.
This proposal of M/s Tata Iron & Steel Co. Ltd. is supported by
respondent nos.27, 29 and interveners which are stated to be M/s
Incab group Staff and M/s Karamchari Union and 763 Individual
Workers‟ whose individual affidavits are also purported to have been
filed separately. It may be pertinent here to mention that both M/s
RR Kabels and Tata Iron & Steel Co. Ltd. were claiming the support
from the substantial number of workers of respondent no. 27 - a
union. However, we feel it is not necessary to go into the question
of which of the Union or a part thereof is supporting which of the
proposal because once this is sought to be done, the main issue with
regard to the seeing the validity of the impugned order for the
purpose of rehabilitation of the sick company itself gets sidetracked.
14. The third scheme is that of M/s Pegasus Assets Reconstruction
Pvt. Ltd.-respondent no.32. As regards, the forth party namely, LLJ
there was really no serious claim to consider the said proposal.
15. All the three proposals which are purported to have been
submitted by the three parties essentially raise the question as to
which scheme is the best and for the larger benefit of the workers of
the company which has been lying closed since 1995 and has now got
embroiled into litigation. So far as M/s Pegasus Assets
Reconstruction Pvt. Ltd.-respondent no.32 is concerned, its
grievance is not to the effect that its scheme has not been accepted
but its grievance is to the effect that the order which was passed by
AAIFR have not considered its appeal of restoring the status quo
with regard to the assets of M/s Incab Industries Ltd. which are
purported to have purchased by R. R. Kabels. It is alleged that M/s
R. R. Kabels despite the status quo order having been passed by the
AAIFR on 12th May, 2006 has purchased 85% of the secured credit of
the company and thus upsetting the level playing field for all the
players.
16. So far as the scheme of Pegasus is concerned R.R. Kabels had
raised an objection to it on the ground that it is an asset
reconstruction company under Securitization and Reconstruction of
Financial Assets and Enforcement of Security Act, 2002 it cannot
commence business without the approval of the RBI and thus it
ought not be considered. The two schemes purported to have been
formulated or submitted by M/s R.R.Kabels and M/s Tata Iron &
Steel Co. Ltd. are really the main contesting parties before this
Court.
17. So far as the grievance of the petitioner M/s R.R.Kabels Ltd. is
concerned, it has raised the contention that AAIFR has fallen into
error by giving a direction to BIFR permitting all the four parties
namely, M/s Silver Jubilee Infrastructure Ltd., M/s Pegasus Assets
Reconstruction Pvt. Ltd., M/s R.R.Kabels Ltd. and M/s Land Lease
Company (India) Ltd. to submit a revised rehabilitation proposal
despite the fact that M/s R.R.Kabels Ltd. had already complied with
the directions of BIFR inasmuch as it had deposited Rs.25 crores as
its share in the interest bearing no lien account in addition to have
been able to obtain a commitment for investment of Rs.34 crores into
the capital assets of the company for its revival. In addition to this,
it was contended on behalf of M/s R.R.Kabels Ltd. that it is
essentially dealing with in the business of cables and so was the
Incab and therefore, it was best suited for revival of the company. It
was urged that the proposal which was submitted by it would have
not only rehabilitated the Incab company but it was also going to
ameliorate the condition of the workers in general. It was
contended by M/s R.R.Kabels Ltd. that before passing of the order by
BIFR on 21st April, 2006, it had entered into a memorandum of
Understanding on 27th March, 2006 with respondent Nos.26, 27, 28
and 34 which are Union of workers who had supported the scheme of
M/s R.R.Kabels Ltd. as it would have been highly beneficial to the
workers in general. In addition to this, it had also been assigned
85% of the secured debt of Incab to M/s R.R.Kabels Ltd. from various
statutory and financial institutions namely ARCIL, ICICI Bank Ltd.,
Kamla Mills, Specified Undertaking, UTI, UTI Mutual Fund and
therefore, it was contended by them that no proposal for
rehabilitation of the company floated by any other company
including M/s Tata Iron & Steel Col Lt. would be workable without
the approval of M/s R.R.Kabels Ltd. and thus the proposal which has
been floated by M/s R.R.Kabels Ltd. ought to be accepted and all the
other proposals be rejected.
18. As regards the proposal which was submitted by M/s Tata Iron
& Steel Co. Ltd. it was contended on behalf of the petitioner that the
proposal which was submitted by M/s Tata Iron and Steel Co. Ltd.
was highly belated inasmuch as despite M/s Tata Iron and Steel Co.
Ltd. being a party both before BIFR as well as AAIFR for almost a
period of seven years, they did not submit any proposal for
rehabilitation of the company. No doubt M/s Tata Iron & Steel Co.
Ltd. was an unsecured creditor but during the course of negotiations
with the secured creditors they had also supported the scheme of
M/s R.R.Kabels Ltd. It was contended that Tata‟s proposal was
highly belated and therefore it cannot and may not be considered
now. Further this proposal was permitted to be submitted without
prejudice to the rights and contentions of the other parties.
19. It is further urged that the proposal which has been now
submitted by M/s Tata Iron & Steel Co. Ltd. is a self-serving proposal
which has been permitted to be submitted by virtue of an ad interim
order passed by the High Court on 23rd April, 2007 without prejudice
to the rights and contentions of the parties and if the said proposal
is permitted to be entertained, it will only give a back door entry to
M/s Tata Iron & Steel Co. Ltd. It was also urged that even on
merits, the proposal which has been submitted by M/s Tata Iron &
Steel Co. Ltd. is not better than the proposal submitted by M/s
R.R.Kabels Ltd. inasmuch as the proposal which has been submitted
by M/s Tata Iron & Steel Co. Ltd. involved „right sizing‟ the work
force which would result in retrenchment of workmen and it would
also ensure that it retrieves its total unsecured loss while as the
interest of other secured creditors will not be fully protected. It was
also urged on behalf of the respondent Nos.27,28 and 30 that so far
as the proposal which has been given by M/s Tata Iron and Steel
Company Ltd. is concerned, it has been invited by way of a surrogate
interim applications in the shape of so called interveners/applicants
namely M/s Incab Graded Staff Association, M/s Kabels Karamchari
Union and 763 individual workers/Deponents whose affidavits are
attached. It was also urged that so far as the interveners are
concerned, such an application cannot be entertained inasmuch as
no permission under Order 1 Rule 8 of CPC has been sought to place
on record the individual affidavits and reliance in this regard has
been placed on case titled as R.C.Sunita Vs. UOI & Others 1999 (9)
SCC 105. It was further urged that according to Section 36 of the
Industrial Disputes Act, 1947, the representation of parties before a
Tribunal can be only through its Trade Union and not by individual
workmen and therefore, these applications with individual affidavits
cannot be taken cognizance of by the Court. Reliance was placed on
Shramik Uttarsh Sabha vs. Raymond Woolen Mills Ltd & Ors. JT
1995 (II) SC 284 para 15.
20. It was urged that the interest of the workers in general as well
as in particular is governed by the Trade Unions which have already
entered into the Memorandum of Understanding on 27th March,
2006 with the petitioner. The respondent No.38 M/s Kamla Mills
Ltd. and respondent no.39 Fasqua Investment Pvt. Ltd. are also
assignees of the secured debt of the financial institutions and are
vehemently supporting the scheme of the petitioner on all counts.
21. Per contra, it was contended on behalf of respondent
no.24-M/s Tata Iron & Steel Company Ltd. and respondent no.27-The
Indian Kabels Workers‟ Union and respondent no.29- Incab
Employees‟ Association and the interveners that the proposal which
has been submitted by M/s Tata Iron and Steel Company Ltd. is
better than the proposal of M/s R.R. Kabels Ltd. inasmuch as not only
it did not envisage any retrenchment but the benefits which are
being given by M/s Tata Iron and Steel Company Ltd. are better than
the benefits which would accrue to the workers in general if the
scheme of M/s R.R.Kabels Ltd. is accepted. It was also contended
on behalf of M/s Tata Iran and Steel Company Ltd. that the entire
township where the main plant of the sick industrial unit M/s Incab
Industries Ltd. is located in Jamshedpur which land belongs to M/s
Tata Iron and Steel Company Ltd. Even the essential amenities like
water, electricity, sanitation and other facilities in the township are
maintained by M/s Tata Iron and Steel Company Ltd. In addition to
this, so far as M/s Tata Iron and Steel Company Ltd. is concerned, it
has a brand name and goodwill in the industrial set up of the country
and therefore, there is absolutely no reason to ignore its scheme
from the purview of consideration for the purpose of rehabilitation of
the sick industrial unit.
22. So far as the proposal which is purported to have been
submitted by M/s R.R.Kabels Ltd. is concerned, it was urged that it
has a sister concern in the M/s Kamala Mills Ltd. and M/s Fasqua
Investment Pvt. Ltd. respectively which are respondents No. 38 and
39. It was contended that so far as M/s Kamala Mills Ltd. is
concerned, it is a real estate company and the entire exercise of M/s
R.R.Kabels Ltd. is actuated not with the intention of rehabilitation of
the sick industrial unit but only to develop the land which belongs to
the sick industrial unit and thereafter make a substantial profit by
either development of the property or the sale of the property. So far
as the stand of the M/s R.R. Kabels Ltd. that consideration of Tata‟s
proposal would cause further delay is concerned, it was contended
that no delay would be caused because after the passing of the order
by the BIFR the revised proposal which was submitted by the M/s
R.R. Kabels Ltd. on 10.5.2006 was yet to be examined by the OA
alongwith the other proposals submitted by other parties. Learned
counsel for M/s Tata Iron and Steel Company Ltd. has placed
reliance on case titled as Navnit R.Kamani & Ors. Vs. R.R.Kamani
(1988) 4 SCC 387 to para 7 at page 397 reads as under:-
"8. When the two schemes are viewed in
juxtaposition, there is no manner of doubt that
the scheme presented by the applicant appears
in a rather poor light. In fact the said scheme
suffers from some fundamental infirmities. It is
not shown that there is any commitment on
behalf of any bank or financial institution to
provide the requisite financial resources to
enable the applicant to modernize the plant and
to run it. The applicant „hopes‟ to purchase a
second hand plant from some foreign country.
It is not known whether any such second hand
plant in working condition with reasonable life
expectancy is available. It is not known what
would be the cost thereof. It is not known
whether the Central Government would release
foreign exchange in order to enable the applicant
to purchase the said plant. Thus the entire
scheme is wrapped in imponderables and there is
no concrete basis to entertain a reasonable belief
that the „hope‟ entertained by the applicant
would materlise at all in the foreseeable future.
It is proposed to finance the cost of the additional
plant and machinery to the tune of Rs. 694 lakhs
out of which it is stated that Rs. 520 lakhs will be
by way of term loan assistance from banks and
financial institutions. It is conceded that there
have been no negotiations with any bank or
financial institution and there has not been even
a tentative, not to speak of a firm commitment in
this behalf. With regard to the remaining
Rs.174 lakhs it is stated that it will be by way of
promoters contribution or through issue of share
capital. Whether or not Rs. 174 lakhs can be so
raised is in the realm of wishful thinking and
conjecture. It merely reflects the hope of the
applicant which is not rooted in reality. It is
built on a non-existent foundation. Nor is it
shown whether the applicant himself has any
sizeable financial resources of his own. Or
whether he is in a position to raise such
resources. The scheme is a manifestation of
the „hope‟ and „desire‟ of the applicant and no
more. There is little doubt about the fact that
no useful purpose will be served by granting the
request of the applicant in these circumstances.
Even so we would have considered the matter
further if the applicant had satisfied this Court
about his bona fides and provided an assurance
that delay will not be to the detriment or
prejudice of the workers or at their cost. An
enquiry was accordingly made from the learned
counsel for the applicant whether the applicant
was prepared to deposit a sum of Rs. 1 crore
representing about 15 per cent of the arrears of
wages which have by now become payable to the
workers to enable the court to examine the
matter notwithstanding the aforesaid
shortcomings. The learned counsel for the
applicant frankly stated that the applicant was
not in a position to deposit such a sum. In fact
he did not even mention that the applicant was
prepared to deposit a lesser sum in order to show
his good faith and bona fides and in order to
protect the legitimate interests of the workers.
Counsel wanted the court to consider the scheme
without any such provision being made merely on
the assertion that the scheme presented by the
applicant was the only feasible scheme which
appears to be an altogether ill-founded assertion
for the foregoing reasons. Under the
circumstances we do not have the slightest
hesitation in refusing the applicant‟s prayer in
this behalf."
23. Reliance was also placed on Aarey Drugs & Pharmaceuticals
Ltd. Vs. Appellate Authority 1995 (34) DRF (DB), para 4 at page
148-149 reads as under:-
"4. On filing of this petition, we issued notice to
show cause as to why rule nisi by not issued and
in answer thereto respondents 5,6 and 7 do not
object to the prayer being allowed. There is no
response from respondent No.4, the Operating
Agency, and from that it would appear that it
also has no objection to this petition support the
petition, of course it has also the support of the
second respondent, the sick industrial company.
The Appellate Authority had noticed that the
matter had been pending for number of years
and no solution could be found in spite of the
efforts of the BIFR who be proceeded against
judicially."
24. On the basis of the aforesaid two authorities, it was contended
by M/s Tata Iron and Steel Co. Ltd. that the Court can refer the
proposal submitted by M/s Tata Iron and Steel Co. Ltd. as well as the
proposal which are already submitted by M/s R.R.Kabels Ltd. and
M/s Pegasus Assets Reconstruction Pvt. Ltd. or the other two
companies for fresh evaluation by the Operating Agency so that
there is maximum benefit to the maximum number of workers.
25. As regards, the proposal which has been submitted by M/s
Pegasus Assets Reconstruction Pvt. Ltd. although there was no
serious submission on the part of the learned counsel to contend that
their scheme is in any manner better than M/s Tata Iron and Steel
Company Ltd. or M/s R.R.Kabels Ltd. but it was contended on their
behalf that if at all this Court refers the proposals for fresh
evaluation by Operating Agency that they be permitted to submit a
fresh proposal duly tied up for fresh evaluation of the revival of the
company in question.
26. We have considered the submissions of the respective sides.
We are cognizant of the fact that the scope of Judicial Review is
hedged in with certain limitations. It is also true that this Court is
also ill equipped to assess the comparative merit of the proposal
submitted by the contesting parties and arrive at a finding whether
proposal A or proposal B is for the betterment and the benefit of the
majority of the workers. This is a specialized job which is to be done
by the operating agency.
27. But it cannot be lost sight of the fact that despite such highly
intricate, contentious issues involved, there are precedents where
the Apex Court has considered the proposal of a party even though it
has been submitted at a late stage and judged its comparative merits
in the light of the other schemes. Reliance in this regard can safely
be placed on Navnit R.Kamani's case (Supra).
28. So far as the proposal submitted by M/s Tata Iron & Steel
Company Ltd. is concerned, the same has been submitted by virtue
of an interim order passed in this writ petition by Division Bench.
Though the said proposal was permitted to be submitted without the
prejudice to the rights and contentions of the respective sides but we
feel that this Court in exercise of its jurisdiction neither has the
expertise nor ought to sit as a body to evaluate the respective merits
and demerits of the proposal. This exercise ought to be done by the
Operating Agency only. So far as the objection which has been
raised by the petitioner herein that the scheme which has been
floated by M/s Tata Iron and Steel Co. Ltd. is highly belated or has
come on record through surrogate intervention of a group of
applicants who have joined hands together and filed individual
affidavits and not sought the permission of the Court, we are of the
view that these pleas are too technical and that these objections
which should not deter the Court to pass an order in its writ
jurisdiction to consider the merit of the scheme floated by Tata in
comparison to the other schemes given by M/s R.R.Kabels or
Peagasus. No doubt the Tatas had initially not filed any scheme
despite being a party to the proceedings before BIFR or AAIFE for
more than seven years. We are of the view that ideally this was a
very valid objection raised by the petitioner but keeping in view the
fact that even the revised scheme submitted M/s R.R. Kabels Ltd.
on10.5.1996 after the passing of the order dated 12.4.2006, is yet to
be examined by the OA, therefore, the consideration of the proposal
submitted by Tatas will not in our view cause any serious delay. The
present ultimate goal of the entire exercise is not only to revive the
sick company which has been lying closed for almost a decade but
also the formulation of a scheme for the rehabilitation which will see
minimum retrenchment of the workers. We are of the view if this is
the consideration, then this objection of the petitioner also looses its
sting to stop the consideration of the scheme of the Tatas. Further,
one cannot loose sight of the fact that notwithstanding the fact that
originally Tata Iron & Steel Co. Ltd. did not submit the proposal
before the BIFR or the AAIFR despite being a party, almost six/seven
years. But in our view that should hardly a ground to oust it now
specially when this Court has permitted it to submit the present
proposal during the pendency of the writ petition apart from the fact
that the schemes of M/s R.R. Kabels Ltd. and others are yet to be
evaluated by the OA.
29. But there is another aspect of the matter which can also not be
ignored. This is the fact that M/s R.R.Kabel in terms of the proposal
has blocked its substantial amount of Rs.25 crores for the last more
than two years and further made arrangements to pool in resources
to the tune of Rs.34 crores. This shows their bonafides and sincerity
to go ahead with their revival proposal. Further they have
purchased 85% of the secured credit. Therefore, these
considerations have also to be borne in account while considering
the efficacy of the relative merits of the two schemes by OA.
30. So far as the objection raised by M/s R.R. Kabels Ltd. with
regard to the locus of the interveners or the individual/applicants
duly supported by their affidavits is concerned, we feel that the
judgment which has been referred by the learned counsel in support
of its contention would not be applicable to the present case for the
simple reason that in the said judgment what was observed was that
an independent writ petition of an individual workman without
seeking permission under Order 1 Rule 8 of CPC would not be
maintainable. While as in the instant case, the
interveners/applicants or the individuals whose affidavits have
placed on record are not seeking any independent relief but are only
voicing their concern before the Court to urge that „A‟ proposal or „B‟
proposal is better for their interest which ought not to be ignored
because this exercise cannot be done by the High Court but only by a
specialized agency which is called the Operating Agency in the
instant case. Therefore, we are of the considered opinion that the
matter deserves to be remanded back to the Operating Agency for
considering the two proposals , (a) of the petitioner and (b) that of
M/s Tata Iron and Steel Co. Ltd. for fresh evaluation by Operating
Agency. However, it is made clear that this consideration would be
open only to the petitioner and M/s Tata Iron and Steel Co. Ltd.
This would be notwithstanding the fact that M/s R.R. Kabels Ltd. is
purported to have deposited Rs.25 crores in pursuance to the
directions passed by BIFR earlier and the fact that it is purported to
have purchased 85% of the secured debt from various statutory/
financial institutions. But at the same time we want to add a caveat
that as the M/s R.R. Kabel has already deposited 25 crores of rupees
and has shown its bonafide and has also purchased the 85% of the
secured credit, this would certainly be a factor which may weigh in
their favour if all other parameters of the rival schemes are equal or
are marginally differential. We hope and trust that on submission of
these proposals will be finalized by Operating Agency as
expeditiously as possible.
WP(C) No.2865/2007
31. One of the submissions, which was made before us by M/s
Peagaus was that the order of AAIFR is bad in law inasmuch as it has
not considered the application of M/s Pegasus Assets Reconstruction
Pvt. Ltd. for initiation of contempt proceedings on account of M/s
R.R.Kabels Ltd. having violated the order of status quo dated 12th
May, 2006 which in fact M/s R.R.Kabels Ltd. itself had obtained from
AAIFR. For this purpose, it was contended by M/s Pegasus Assets
Reconstruction Pvt. Ltd. and other respondents that after filing of
the appeal by M/s R.R.Kabels Ltd. is purported to have purchased
85% of the secured debt of the financial institutions and statutory
bodies and thus it has not only violated the orders willfully of AAIFR
but also altered the level playing field for various parties who had
submitted proposal before the Operating Agency. This argument
was supported by Tata‟s also along with its unions of fraction of
unions that M/s R.R. Kabels Ltd. has itself breached the order of
status quo passed by the AAIFR. It was also urged that this charge
in the status quo has affected the viability of the other schemes. For
this purpose, learned counsel has relied upon the following
authorities; Delhi Development Authority vs. Skipper
Construction & Another (1995) 3 SCC 507, Surjit Singh &
Others etc. etc. vs. Harbans Singh & Others etc. etc. 1995(6)
SCC 50 and Satyabrata Biswas & Others vs. Kalyan Kumar
Kisku & others (1994) 2 SCC 266.
32. As against this, M/s R.R.Kabels Ltd. contended that there is no
infirmity in the order passed by AAIFR dated 22nd September, 2006
in not taking cognizance of the applications filed by M/s Pegasus
Assets Reconstruction Pvt. Ltd. for having violated the order dated
12th May, 2006 inasmuch as there was no violation of the order dated
12th May, 2006. It was contended that under Section 22A of The
Sick Industrial Companies (Special Provisions) Act, 1985, AAIFR and
BIFR has the power to pass an order only with regard to the assets of
the Sick Industrial Unit and admittedly the debt of the Sick Industrial
unit or Non-Performing Asset of the industrial unit could hardly be
said to be an asset of the sick company and thus if the petitioner M/s
R.R.Kabels Ltd. has purchased the debt or the non-performing asset
of the sick industrial unit it can hardly be said to be violation of the
order dated 12th May, 2006. For this purpose, learned counsel for
the petitioner relied upon on the judgment of the Division Bench of
this Court in case titled as Haryana Steel & Alloy Ltd. Vs. IFCI Ltd.
(137) 2007 DLT 554 where the Division of the High Court has held
that a Non-Performing Asset of a sick industrial company could not
be said to be an asset.
33. We have gone through the provision of Section 22A of The Sick
Industrial Companies (Special Provisions) Act, 1985, which reads as
under:-
"[22A, Direction not to dispose of
assets.--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 an order in writing direct the
sick industrial company not to dispose of, except
with the consent of the Board, any of its assets--
(a) during the period of preparation or
consideration of the scheme under
section 18; and
(b) during the period beginning with
the recording of opinion by the Board
for winding up o f the company under
sub-section (1) of section 20 and up to
commencement of the proceedings
relating to the winding up before the
concerned High Court.]"
34. A perusal of the aforesaid provision would clearly show that
the power of the Tribunal to issue interim orders only pertains to the
disposal of assets of the sick industrial company and in the light of
the judgment of Division Bench of our own High Court is to the effect
that a non-performing asset of a sick industrial company cannot be
said to be an asset. We are of the view that the purchase of
non-performing asset of the sick industrial company by the petitioner
cannot be said to be violation of order of status quo, which was
passed by the AAIFR though it was obtained by the petitioner
himself. In any case, it will be too technical to give such an
interpretation to the provision so as to read as non-performing asset
of a sick company to be treated as an asset and thereby hold that the
interim order dated 12th May, 2006 passed by the AAIFR precluded
or restrained the appellant from purchasing the non-performing
asset would be doing not only violence to the Section 22A of the Act.
It will be also against the letter and spirit of the Section. The
authorities which are also cited by the learned counsel for Tatas also
pertain to different facts, situations and for punishment of the
alleged contemnor in the said case which are distinguishable from
the facts of the present case. Accordingly, we hold that the
purchase of non-performing assets by M/s R.R. Kabels Ltd. cannot be
considered to be a violation of orders of status quo passed by AAIFR.
WP(C) No.2880/2007
35. So far as the writ petition No. 2880/2007 is concerned does not
call for passing a separate order as no notice were issued in the same
and it was simply tagged along with WP(C) 942/2007 and the both
writ petition has been disposed with certain directions.
Conclusion
36. We, therefore, feel that the writ petition of the M/s Pegasus
Assets Reconstruction Pvt. Ltd. bearing WP(C) No. 2865/2007 is
totally misconceived and accordingly the same is dismissed.
37. So far as the writ petition bearing 942/2007 titled R. R. Kabels
Vs. AAIFR & Ors. is concerned, the same is disposed of with the
direction that the proposal submitted by M/s Tata Iron and Steel Co.
Ltd. which was submitted by way of an interim order before this
Court deserves to be evaluated by the Operating Agency along with
the scheme which has been submitted by the M/s R. R. Kabels and
both the parties are given three weeks time for the purpose of
submission of schemes, from the date of the judgment and further
the said schemes will be evaluated by the Operating Agency as
expeditiously as possible but not later than four months from the
date of pronouncement of the judgment. However, it is also
clarified that the deposit of Rs. 25 cores by the petitioner herein or
the purchase of 85% of secured debt by the petitioner M/s
R.R.Kabels Ltd. will not come in the way of Operating Agency to
evaluate the respective merits of the scheme though while
evaluating the said factum, if the operating agency considers is a
factor which has an overall bearing on the respective merits of the
scheme, it may do so.
38. The BIFR would take into account while evaluating the
schemes inter alia :-
(a) The petitioner R.R. Kabels proposal was given earlier than
the Tata‟s and that they had purchased 85% of the secured
debt of the financial institutions and that the petitioner had
invested a sum of Rs.25.00 crores in the company.
(b) Which of the two schemes protects the interests of the
workmen better by taking into account
(i) The payment of arrears of wages.
(ii) The wage packet and security of service.
(iii) Whether retrenchment is contemplated and if so of how
many?
(c) Even if the petitioner R.R. Kabel‟s proposal is not found
acceptable, then the amount invested by them not only in
purchasing 85% if the secured debts but also the amount
invested by them in the sick company has to be returned to
the petitioner at the option of the petitioner with reasonable
interest by the party chosen by the BIFR for reviving the
company.
39. It is further clarified that the order of stay of proceedings
before AAIFR and BIFR passed on 13th February, 2007 stands
vacated however, status quo with regard to the assets and the
properties of the Sick Industrial Unit shall be maintained till the time
the scheme is approved by the BIFR or till the time the BIFR modifies
the interim order, whichever is earlier. With this observation all the
pending CMs in this writ petition also stands disposed of and they do
not warrant passing of any separate order.
No order as to costs.
(V.K.SHALI)
JUDGE
(MUKUL MUDGAL)
JUDGE
April 9th, 2009
RN/KP/RS
