J K Jute Mills Company Limtied vs Ghanshyam Sarda And Others
2011 Latest Caselaw 1352 Del

30

*              THE HIGH COURT OF DELHI AT NEW DELHI

%                                Judgment delivered on : 08.03.2011

       WP(C) 2839/2010 & CM No. 5670/2010 (stay)

J K JUTE MILLS COMPANY LTD.                              ..... Petitioner



                                 -versus-




GHANSHYAM SARDA & ORS.                                ..... Respondents

Advocates who appeared in this case:

For the Petitioner : Mr Suman Doval with Mr Sumit Babbar, Advs.

For the Respondents : Mr Sidharth Agarwal withMr Gaurav Kejriwal, Mr Samanvya D Dwivedi & Ms Stuti Gujral, Advs.

CORAM :-

HON'BLE MR JUSTICE SANJAY KISHAN KAUL

HON'BLE MR JUSTICE RAJIV SHAKDHER

1. Whether the Reporters of local papers may

be allowed to see the judgment ?

2. To be referred to Reporters or not ?

3. Whether the judgment should be reported

in the Digest ?

SANJAY KISHAN KAUL, J (ORAL)

*1. M/s J K Jute Mills Ltd. (in short the „company‟) in view of its

financial position, filed a reference being: case 149/1994 with the

BIFR under the Sick Industrial Companies (Special Provisions) Act,

1985 (hereinafter referred to as „the said Act‟). The reference was

entertained and an endeavour was made to rehabilitate the

company.

2. In the said reference directions came to be passed on

20.07.2009 by the BIFR recording that despite ample time and

opportunity there had been done little to revive the company and

therefore it did not visualize the company reviving itself. The BIFR

went on to observe that the change of management ordered earlier

had also not produced the desired results and therefore it was just

and equitable and in public interest to wind up the company. In the

very same order it was also noticed that company had entered into a

lease arrangement with another entity without the by and leave of

the BIFR; which continued to operate despite BIFR‟s disapproval.

The BIFR thus directed issuance of show cause notice; firstly, under

Section 33 and 34 of the said Act on account of stated willful

disobedience of its orders, and secondly, to state reasons why it

should not be wound up under Section 20 of the said Act.

3. The management of the company filed an appeal before the

AAIFR being Appeal No. 186/2009; which is pending adjudication.

4. It is in the course of the appeal proceedings, that an interim

application being: MA No. 34/10 came to be filed by one Sh

Ghanshyam Sarda, i.e., respondent no.1, seeking impleadment. In

terms of the impugned order dated 18.03.2010, amongst other

directions, a direction came to be issued allowing the said

impleadment application.

5. This impleadment is sought to be assailed by the

petitioner/company in the present writ petition under Article 226 of

the Constitution of India.

6. The current management of the petitioner is with Mr Govind

Sarda. There are three brothers - Mr Govind Sarda, Mr Jagdish Sarda

and Mr Ghanshyam Sarda. There were inter se disputes between the

family members which were referred to arbitration and these

arbitration proceedings resulted in an award dated 18.07.2009. In

terms of the award, it is agreed before us, the three brothers are to

hold 1/3rd of the equity stake in each of the closely held entities

within the family fold. To be noted this award has been assailed by

Mr Govind Sarda in a proceeding initiated under Section 34 of the

Arbitration & Conciliation Act, 1996. This is as far as the family

dispute goes.

7. Now, turning to the impleadment application filed by Mr

Ghanshyam Sarda/respondent no.1, the plea of impleadment before

the AAIFR is predicated on the right claimed as a shareholder of one

Rainey Park Suppliers Pvt. Ltd. (in short „RPSL‟), which in turn holds a

substantial part of the equity share in the petitioner/company. RPSL

is stated to have acquired almost 87.63% of the equity of the

petitioner/company. In paragraph 36 of the award it is noted that

50% of the share is owned in the petitioner/company by the Sarda

family. Therefore, respondent no. 1 based on the very same award

has claimed that he has a stake in the share holding of the

petitioner/company to the extent 16.67%.

7.1 In the impleadment application various averments have been

made. Broadly, these reads as follows: Firstly, there are inter se

disputes in the Sarda group which were sought to be settled through

arbitration, though the award is pending challenge; secondly, given

the stake of respondent no.1 in the company if the show cause

notice issued by the BIFR evincing a prima facie view to wind up the

company is confirmed by the AAIFR, grave prejudice would be

caused to the applicant as he would have had no opportunity to file

a proposal for its revival.

7.2 Apart from the above, respondent no.1 has further pleaded

that he never interfered in the management of the

petitioner/company and that the same was being managed by the

board of directors appointed by Sh Govind Sarda since he had been

allowed to look after the affairs of the petitioner/company on behalf

of the three brothers. Mr Jagdish Sarda is alleged to have

transferred his right, title and interest in the property and that since

then the management of the petitioner/company was being carried

out in a manner detrimental to the interest of the company.

Endeavours are alleged to have been made to liquidate the assets of

the company. The management is stated to have been handed over

to third parties. It is thus the plea of the respondent no.1 that no

action is taken against persons presently controlling the

management of the company, and that the affairs of the company

are so ineptly handled that the possibility of revival would

increasingly become difficult. It is also averred that disputes

between the existing management and the workers have erupted as

the MOU between the two was not honoured. The workers are

stated to have formed an association and have purportedly

expressed their willingness to support the respondent no.1 to take

over the management of the petitioner/company.

8. We have heard learned counsel for the parties. There can be

no dispute about the proposition that it is not necessary to implead

each direct or even an indirect shareholder of the

petitioner/company. However, what has to be kept in mind is that

the principles applicable to impleadment of parties are not those

governed by the provisions of the Code of Civil Procedure, 1908 (in

short the „Code‟). The right of an applicant, in this case respondent

no. 1, is circumscribed by the provisions of Section 13(2) of the said

Act which reads as under:-

"13. Procedure of Board and Appellate Authority:-

       Xxxxxx                  xxxxx             xxxxx

       (2)    In particular and without prejudice to the

generality of the foregoing provisions, the powers of the Board or, as the case may be, the Appellate Authority, shall include the power to determine the extent to which persons interested or claiming to be interested in the subject-matter of any proceeding before it may be allowed to be present or to be heard, either by themselves or by their representatives or to cross- examine witnesses or otherwise to take part in the proceedings."

9. In terms of the said provision the BIFR or the AAIFR allows

parties to be represented or even be heard after determining the

extent of their interest or claimed interest "in the subject matter of

any proceeding" before it. In other words representation of a party,

by allowing his or her impleadment in a proceeding, is dependent on

the parties‟ interest in the subject matter, which is in issue before

BIFR/AAIFR.

10. If the aforesaid principle is applied to the facts of the present

case, we find that the petitioner/company and RPSL are companies

in which the Sarda group has a substantial stake. The award

provides for a 1/3rd stake to each of the brothers in each of the

entities (including RPSL) which of course, as noticed above, is

subject to challenge in an application filed under Section 34 of the

Arbitration & Conciliation Act. In view of the apprehensions

expressed by respondent no.1, which in turn to some extent is

supported by the orders passed by the BIFR proposing to wind up

the company, one cannot say that respondent no.1 is an outsider

having no interest in the proceedings before AAIFR wherein one of

the grounds of challenge is to the show cause notice issued by BIFR

to wind up the company. The order of the BIFR seeks to recommend

winding up and take action against the management for breach of

orders. This order is sought to be assailed before the AAIFR.

Respondent no.1, as submitted by the learned counsel, seeks revival

of the petitioner/company and to present an alternative mode of

management which may or may not be acceptable to the

AAIFR/BIFR. Therefore, looking at the totality of circumstances, it

cannot be said that respondent no.1 has no interest in the outcome

of the proceeding before AAIFR. In our view, respondent no .1 has

the right to present his point of view in the form of a

proposal/scheme before either the BIFR or the AAIFR to revive the

petitioner/company. The proceedings before the AAIFR are the

second step arising from the orders passed by the BIFR whereby it

has come to a prima facie view to wind up the petitioner/company.

It is in these circumstances that the AAIFR has deemed it

appropriate to implead respondent no.1 as a party. As far as we can

see the objective of the petitioner (represented by Govind Sarda)

and respondent no. 1 is not contrary to the interest of the company,

which on the face of it appears to be to seek its revival. To that

limited extent, both stand aggrieved by the order of the BIFR.

11. We thus see no reason to exercise our jurisdiction under

Article 226 to interfere with the impugned order.

12. Dismissed.

13. Interim order dated 28.04.2010 stands vacated.

SANJAY KISHAN KAUL, J.

MARCH 08, 2011                                     RAJIV SHAKDHER, J.
mb