Shree Hari Agro Industries Ltd And ... vs Appellate Authority For ...
2012 Latest Caselaw 5902 Del

*      IN THE HIGH COURT OF DELHI AT NEW DELHI

+                         Date of Decision: 01.10.2012

%      W.P. (C) NO. 4998/2012

       SHREE HARI AGRO INDUSTRIES LTD AND ANR
                                                ..... Petitioners
                      Through: Mr.Ramesh Singh, Mr. Gaurav
                               Khanna & Mrs. Abhinandini
                               Sharma, Advocates.
               versus

       APPELLATE AUTHORITY FOR INDUSTRIAL AND
       FINANCIAL RECONSTRUCTION AND ORS ..... Respondents
                    Through:

       CORAM:
       HON'BLE MR. JUSTICE SANJAY KISHAN KAUL
       HON'BLE MR. JUSTICE VIPIN SANGHI


VIPIN SANGHI, J.

1. The petitioner has preferred the present writ petition to assail

the order dated 29.5.2012 passed by the Appellate Authority for Industrial

and Financial Re-construction, New Delhi (AAIFR) passed in Appeal

No. 197/2010 as well as the original order dated 28.6.2012 passed by the

Board for Industrial and Financial Re-construction (BIFR) in M.A. No.

239/2011 in case No. 344/2000. The petitioner also seeks an appropriate

writ declaring that the net worth of the petitioner No. 1 company has

turned positive and to seek a direction to the BIFR to discharge the

petitioner No.1 - company from the purview of Sick Industrial Companies

Act, 1985, (SICA) on the basis of the annual balance-sheet for the year

ending 31.3.2000.

FACTS

2. The petitioner No. 1 - company was declared a sick

industrial undertaking under the provisions of SICA on 13.6.2001.

Respondent No.3 - IDBI was appointed as the operating agency to

examine the viability of petitioner No. 1 and formulating a re-habilitation

scheme for its revival. The Draft Re-habilitation Scheme (DRS) was

submitted on 14.7.2001. However, BIFR was of the view that no

workable DRS could emerge and issued a show cause notice to petitioner

No. 1 for its winding up. The BIFR also permitted the secured creditors

under Section 22 (1) of the SICA to file/continue recovery proceedings

against petitioner No. 1 with the condition that the decrees would not be

executed without its approval. The challenge to the issuance of show

cause notice, by way of a writ petition before the High Court of Rajasthan

by petitioner No. 1 failed.

3. It appears that on 29.8.2007, the petitioner company

submitted before BIFR that they had identified M/s Deepak Vespro Pvt.

Ltd. (DVPL) - respondent No. 17 as a strategic investor to whom the

debts of SASF and IDBI had been transferred. It was also submitted that

they had tied up with M/s Raghuvir (India) Ltd. (RIL) -respondent No. 21

- a sister concern of DVPL for investing Rs. 3.5 crores to be utilized for

settling the dues of the secured creditors.

4. The revival proposal was submitted by the petitioner

company before the BIFR on 17.7.2007. On 12.8.2008, BIFR circulated

the DRS inviting objections and suggestions which were to be heard on

11.2.2009. On 11.2.2009, RIL submitted that it could not give interest

free unsecured loan of Rs. 3.5 crores to the petitioner company as

envisaged in the DRS. While the matter was still pending consideration

and was heard on 21.5.2009, 23.7.2009 and 29.9.2009, the petitioner

moved M.A. No. 239 dated 7.11.2009 claiming that its net worth had

turned positive as per the Audited Balance Sheet (ABS) as on 31.3.2009

and sought discharge of the petitioner company from the purview of

SICA.

5. The petitioner claimed its net worth to be positive by

Rs.622.44 lacs. While claiming so, the petitioner No. 1 claimed that

DVPL had waived off the loan/funds infused by it, as well as the interest

thereon, aggregating to Rs. 947.40 lacs, out of which Rs. 543 lacs was the

principal amount and Rs. 404.40 lacs was the interest amount. (We may

note that, according to petitioner No. 1, the principal amount infused by

DVPL was only Rs. 250 lacs and not Rs. 543 lacs as claimed by DVPL).

That apart, in the calculation made by petitioner No. 1, in consideration of

amount of Rs. 200 lacs received by it towards share application money,

the petitioner No. 1 had issued 90% redeemable Convertible Preference

Shares (CPS) with effect from 29.12.2009 and the said amount was added

towards the paid up equity capital of petitioner No. 1.

6. DVPL, RIL and respondent No. 25 - Mr. Vijay Data,

contested the aforesaid M.A. filed by the petitioner No. 1 to seek

discharge of the reference before BIFR and after hearing the parties, BIFR

by the impugned order dated 28.6.2010 disallowed the said application of

petitioner No. 1. BIFR concluded that the aforesaid entries could not have

been made and that they were incorrectly made by the petitioner. A show

cause notice was also issued to petitioner No. 1 requiring it to explain as

to why action should not be taken against it for change of management of

the company without the consent of the BIFR, as it appeared that one M/s

Saurabh Agrotech Pvt. Ltd. had acquired the petitioner No. 1 company.

The said order of the BIFR was assailed before the AAIFR, which has

dismissed the first appeal by the impugned order.

DISCUSSION

7. We have heard learned counsel for the petitioner and perused

the record - particularly the two impugned orders. The submission of

learned counsel for the petitioner is that the waiver of the loan and the

interest by DVPL is recorded in the minutes drawn by the operating

agency IDBI which is an independent agency, and that the denial of the

said waiver by DVPL was an afterthought. It is also alleged that the

appropriation of the share application money of Rs.200 lacs was rightly

done by including it in the paid up share capital of the petitioner company,

and the said amount could not be shown as an outstanding liability of the

company.

8. The BIFR returned the factual finding that DVPL as the

original strategic investor had infused funds to the tune of Rs. 543 lacs

and the interest thereon payable to DVPL worked to Rs. 404.40 lacs. The

petitioner company had written off Rs. 947.40 lacs as waived by DVPL

without the consent of DVPL. DVPL had also confirmed that they had

not received any payment from the petitioner company and the waiver of

the amount due to DVPL was the unilateral act of the petitioner company,

which was disputed by DVPL. The BIFR noted that in its application the

petitioner company had claimed to have positive net worth of Rs. 622.44

lacs on the basis of the audited balance sheet as on 31.3.2009 displaying

the following figures:-

Paid up share capital                     -   Rs. 795.84 lakh
Reserve & surplus                         -   Rs. 1458.61 lakh
Total                                     -   Rs. 2254.45 lakh
Less Accumulated losses (-)               -   Rs. 1632.01 lakh
NET WORTH                                 -   Rs. 622.44 lakh

The BIFR observed that the amount of Rs. 200 lacs had been converted

into redeemable CPS and this amount could not be considered as the paid-

up share capital for the reason that the shares could be redeemed by the

share-holders. The said amount had to be shown as a liability. After

writing back the deduction of Rs. 947.40 lacs, and the deduction of Rs.200

lacs from the paid up share capital, the revised net-worth worked out by

the BIFR came to a negative figure of Rs. 544.96 lacs.

9. The AAIFR has observed that the share application money of

Rs.200 lacs was converted into redeemable CPS with effect from

29.12.2009, although the petitioner company had sought discharge from

the purview of SICA on the basis of ABS as on 31.03.2008 and

31.03.2009, i.e. much before the share application money was converted

into redeemable CPS on 29.12.2009. However, the impugned order had

been passed by the BIFR on 28.06.2010 after the share application money

was so converted into redeemable CPS. The AAIFR has held that the

judgment of this Court in Patodia Cements Limited & Another Vs.

Appellate Authority for Industrial and Financial Reconstruction &

Others, W.P.(C.) No. 208/2000 decided on 17.01.2000, was not applicable

in the facts of this case after discussing the facts of the said case. Before

us, the said aspect has not been questioned by the petitioner.

10. The decision of AAIFR in M/s Om Steels and Ispat Udyog

Ltd. in Appeal No.222/2006 was also distinguished, since in the present

case, the conversion of the share application money is into redeemable

CPS, which means that the said CPS could be redeemed by the

shareholders. In our view, the petitioner has not been able to point out

any error in the reasoning or the approach of the BIFR or AAIFR in

including the amount of Rs.200 lacs received by it towards the share

application money as an outstanding liability in its books of account. The

AAIFR has held that the writing off of Rs.947 lacs does not appear to be

justified because DVPL had not given its prior consent to the same.

Without their written consent, such a huge amount could not be accepted

to have been validly written off. Any such waiver could have been given

after circulation of the DRS and at the time of hearing objections and

suggestions under section 18(3)(a) and (b) of SICA. Since DVPL denied

the same, the writing off of Rs.947 lacs could not be accepted and the said

amounts had also to be included as an outstanding liability of the

petitioner company. If these two amounts of Rs.200 lacs and Rs.947 lacs

are added back towards the outstanding liability, admittedly, the petitioner

company's net worth remains negative.

11. Learned counsel for the petitioner has laid emphasis on the

minutes of meeting recorded by the operating agency to claim that DVPL

had given its consent. We may note that DVPL relied upon the report

dated 07.06.2011 of the operating agency (IDBI), wherein the operating

agency had reported that the write off of Rs.947 lacs claimed by the

petitioner was without the consent of DVPL. Moreover, DVPL has

alleged collusion between the petitioner and one Shri Ramesh

Khandelwal, who has purportedly given consent on behalf of DVPL and

claimed that Shri Ramesh Khandelwal was an employee of the petitioner.

In these proceedings, we cannot determine these disputed questions of fact

and we see no reason to discard the factual premise on which the BIFR

and AAIFR have proceeded.

12. So far as the aspect of change of management is concerned,

in our view, the AAIFR has rightly rejected the petitioners appeal by

observing that the petitioner would have sufficient opportunity to reply to

the show cause notice issued by BIFR and there was no justification to

challenge the show cause notice at the preliminary stage.

13. The petitioners are primarily assailing the concurrent findings

of fact returned by BIFR and AAIFR in the present petition. It is well

settled that this Court while exercising its jurisdiction under Article 226 of

the Constitution of India does not decide the factual issues, particularly

when they have already been determined by concurrent findings by the

Courts/Tribunals below. The petitioner have not been able to satisfy this

Court that the findings of fact returned by either the BIFR or AAIFR are

patently erroneous or can be said to be perverse. On the contrary, we are

of the opinion that they are reasoned and proper.

14. For the aforesaid reasons, we are not inclined to interfere

with the impugned orders and the findings returned by the BIFR and the

AAIFR. The present petition is accordingly dismissed with costs

quantified at Rs.20,000/- to be deposited by the petitioner in the Delhi

High Court Mediation and Conciliation Centre A/c No. 48852 with UCO

Bank within two weeks.

C.M. Nos. 10255/2012 (for stay)

In view of the orders passed in the above appeal, this

application does not survive and the same is dismissed as such.

VIPIN SANGHI, J.

SANJAY KISHAN KAUL, J.

OCTOBER 01, 2012 sl/sr