Delhi High Court
M/S. Synergy Steels Limited vs The Appellate Authority For ... on 21 September, 2010
Author: Valmiki J. Mehta
* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ W.P.(C) No. 13505/2009
% 21st September, 2010
M/S. SYNERGY STEELS LIMITED
...... Petitioner
Through: Ms. Pooja M. Saigal, Advocate.
VERSUS
THE APPELLATE AUTHORITY FOR INDUSTRIAL AND FINANCIAL
RECONSTRUCTION & ORS.
....Respondents
Through: Mr. Ajay Veer Singh Jain,
Advocate for the respondent
No.3.
Mr. Abhay Mani Tripathi,
Advocate for the respondent
No.6.
Ms. Prabjyot K. Chadha,
Advocate for the respondent
No.11.
CORAM:
HON'BLE MR. JUSTICE SANJAY KISHAN KAUL
HON'BLE MR. JUSTICE VALMIKI J.MEHTA
1. Whether the Reporters of local papers may be
allowed to see the judgment?
2. To be referred to the Reporter or not? Yes
3. Whether the judgment should be reported in the Digest? Yes
W.P.(C) No.13505/09 Page 1 of 6
VALMIKI J. MEHTA, J(Oral)
1. The petitioner company by this petition under Articles 226
and 227 of the Constitution of India impugns the order dated 21.9.09
passed by the Appellate Authority for Industrial and Financial
Reconstruction (AAIFR) upholding the order dated 22.3.06 passed by
the Board for Industrial and Financial Reconstruction (BIFR), whereby
the petitioner company has been discharged from the purview of the
Sick Industrial Companies (Special Provisions) Act, 1985 (SICA) on the
ground that its net worth turned positive, although, the sanctioned
scheme had not yet been fully implemented and the petitioner
company had not got the necessary concessions as envisaged from the
Govt. of Rajasthan under the sanctioned scheme.
2. The petitioner (earlier known as M/s. Paliwal Mini Steels (I)
Limited) M/s. Synergy Steels Limited was registered under Section 15
of SICA by the order dated 4.9.1990 passed by the BIFR. The draft
scheme after being circulated, was sanctioned by the BIFR with cut off
date fixed as 1.4.02. This sanctioned scheme is referred to as SS-02.
SS-02 was put into implementation. The net worth of the petitioner
company turned positive for the financial year ending on 31.3.03 and
remained positive at Rs.998.09 lacs at the end of financial year ending
on 31.3.05.
3. The BIFR found that since the company had ceased to be
sick industrial company, it was liable to be discharged from the purview
of SICA.
W.P.(C) No.13505/09 Page 2 of 6
4. The petitioner company was aggrieved by the order of BIFR
inasmuch as the concessions and reliefs as envisaged in the SS-02
were not given to the petitioner company by the Government of
Rajasthan. It was pleaded that the petitioner company had filed a writ
petition before the Rajasthan High Court for grant of the envisaged
reliefs and concessions.
5. After noting that the net worth of the petitioner company
had turned positive, AAIFR in the impugned order held as under:
"6. So far as directions on which the objections were
made, direction No.1 discharging the PNB from the
responsibility of M.A. is nothing but an order relating to
the appointment of PNB as M.A. and the direction relating
to payment of MA fee for the calendar year 2005 there is
no illegality therein as the payment was due for the
calendar year 2005. The direction No.(iv) regarding the
discharge of the Special Director appointed by the BIFR on
the Board of the company and complying the provisions of
the Companies' Act by the Company before the Registrar
of Companies are nothing but the consequential to the
orders of discharge. So far as other order relating to the
un-implemented provisions of SS-02 are concerned, these
provisions cannot be implemented by the concerned
agencies any more as the company has been discharged
from SICA on account of the fact that it is no more a sick
company as its net worth has turned positive. So far as
the pendency of the Writ Petition before the Rajasthan
High Court is concerned, it is the settled position in the
law that if any order is passed by the High Court of
Rajasthan in the Writ Petition, it shall be binding on the
parties."
6. Before us, the learned counsel for the petitioner argued
that it would result in an incongruous position prejudicial to the sick
company in case the sanctioned scheme is not implemented as a
whole. It was further argued that if the view as taken in the impugned
W.P.(C) No.13505/09 Page 3 of 6
order is upheld, then, a sick company which makes efforts to pay of its
secured creditors by arranging for finances, would be denied the
benefit of concessions which are necessary to again prevent the
company from becoming a sick company. It is said that the
sanctioned scheme necessarily has to be taken as a whole and it
cannot be torn into bits and pieces which would frustrate the entire
object of sanctioning of a scheme with respect to a sick company.
Learned counsel for the petitioner seeks to support his submissions by
relying on Section 18 more specifically sub-Section 12 of the SICA
which confers power on the authorities for monitoring and
implementing the sanctioned scheme. Learned counsel for the
petitioner has also drawn attention of this Court to a recent judgment
of the Supreme Court in the case of Bombay Dyeing & Manufacturing
Co. Ltd. vs. Bombay Environmental Action Group, 2006(3) SCC 434
(Head Note : YH) wherein it has been held that it is only the authorities
acting under SICA who have the power to decide on the violations and
the implementation of the sanctioned scheme.
7. We agree with all the contentions as raised by the counsel
for the petitioner. Surely, a sanctioned scheme is a scheme in its
entirety. Implementation is also therefore to be in entirety. To show
that a part implementation can result in absurdity, let us take the
example where under a sanctioned scheme a company takes all the
benefits of reliefs and concessions but does not perform the obligations
as envisaged in a sanctioned scheme. Surely, this is impermissible. If
W.P.(C) No.13505/09 Page 4 of 6
this is impermissible, then, it is equally impermissible that if the sick
company perform its obligations, then, it should be deprived of its
rights under the sanctioned scheme. Merely, because a writ petition
has been filed in the Rajasthan High Court would not mean that the
proceedings cannot continue under SICA. May be the petitioner was
not properly advised in filing of the writ petition or it took that action
out of abundant precaution though it need not have, yet it does not
mean that the authorities acting under SICA can simply discharge a
sick company from the provisions of SICA although the sanctioned
scheme is not fully implemented.
8. The Supreme Court in the aforesaid case of Bombay Dyeing
& Manufacturing Co. Ltd. (supra) has categorically held that all actions
with respect to breach or implementation of the sanctioned scheme
have necessarily to be either by BIFR or AAIFR under SICA.
9. In view of the above, we accept the petition and quash the
impugned orders dated 21.9.09 of AAIFR and 23.3.06 passed by the
BIFR. It is directed that the matter be listed before the BIFR on moving
an application by the petitioner for monitoring and implementation of
the sanctioned scheme in its entirety, especially as regards the reliefs
and concessions as are envisaged to be available to the petitioner
company in terms of the sanctioned scheme SS-02.
10. The writ petition is therefore allowed, leaving the parties to
bear their own costs.
C.M. No.15004/2009 in W.P.(C) No.13505/09
W.P.(C) No.13505/09 Page 5 of 6
No directions are called for in view of disposal of writ
petition.
Application stands disposed of.
VALMIKI J. MEHTA, J.
SEPTEMBER 21 , 2010 SANJAY KISHAN KAUL, J.
Ib/Ne
