Delhi High Court
M/S Naturol Biochemical And Foods ... vs Board For Industrial & Financial ... on 26 May, 2015
Author: S.Ravindra Bhat
$~12
* IN THE HIGH COURT OF DELHI AT NEW DELHI
Decided on : May 26, 2015.
+ W.P.(C) 4569/2015
M/S NATUROL BIOCHEMICAL AND FOODS LIMITED
..... Petitioner
Through Mr. Rejeeve Mehra, Sr. Adv. with
Mr. Gautam Awasthey, Mr. Ayush
and Ms. Shruti Aggarwal, Advs.
versus
BOARD FOR INDUSTRIAL & FINANCIAL RECONSTRUCTION
& ANR
..... Respondents
Through Mr. Sanjay Bhatt and Ms. Vidushi
Shubham, Advs. for IDBI
CORAM:
HON'BLE MR. JUSTICE S. RAVINDRA BHAT
HON'BLE MR. JUSTICE R.K. GAUBA
MR. JUSTICE S. RAVINDRA BHAT (OPEN COURT)
%
1. The petitioner seeks a declaration that it is not a sick company within
the meaning of the expression under the Sick Industrial Companies (Special
Provisions) Act, 1985 (SICA) by virtue of its net worth having turned
positive. The petitioner had applied to be declared as a sick company -
which was eventually accepted and the Board of Industrial and Financial
Reconstruction (BIFR) registered its application and declared it to be such
on 07.04.2011. Pursuant to this development, the Industrial Development
Bank of India (IDBI) was nominated as the operating agency to oversee
W.P.(C) 4569/2015 Page 1
rehabilitation efforts and ensure that the company achieved positive net
worth.
2. In the course of the proceedings before BIFR, the petitioner-
company's, efforts to achieve positive net worth were largely supplemented
by capital infused from a strategic investor, and it managed to pay off its
dues to both secured and unsecured creditors. It also cleared liabilities of six
statutory authorities (sales tax, central excise, customs, provident fund, etc.).
In the light of these subsequent efforts and developments, and the fulfillment
of the OTS agreements which it had entered into with the secured creditors,
the company applied by filing MA 443/14 before the BIFR contending that
it has positive net worth as in 2014. The BIFR's proceedings reflected in its
minutes of meeting for proceedings dated 15.12.2014. The petitioner
contends that it complied with various directions issued by BIFR such as
filing of the Chartered Accountant's certificate, lodging No Dues Certificate
issued by erstwhile secured creditor etc. The petitioner's Director also filed
an affidavit on 10.2.2015 indicating the pattern of shareholding at the time
of filing the reference and the present shareholding. On 15.4.2015, the
operating agency i.e. IDBI filed its report. After recounting the sequences of
events leading up to the filing of the application for seeking discharge of the
company from SICA, the OA also noted the affidavit of company's Director
and, inter alia stated as follows :
"In this connection, we wish to inform that IDBI Bank (OA) has
received the following letters/documents from the company
furnishing the clarifications/information called for by
IDBI(OA)/directed by BIFR.
1. An endorsement of company's letter dated 10.02.2015
(Annexure-IV) originally addressed to the Board
W.P.(C) 4569/2015 Page 2
forwarding therewith (1) Affidavit signed by Shri Y.
Gopalkrishna, Director of the company, (2) Screen shot
of page on MCA web
site giving list of signatories of the company & (3) A
statement showing details of Equity and Preference
Shareholders as on date of filing reference, 31.03.14
and 31.03.15.
2. Company's letter dated 10.04.15 (Annexure-V)
giving status of listing of company's shares at Stock
Exchanges.
3. Company's letter dated 09.04.15 (Annexure-VI) in
reply to IDBI(OA) letter dated 16.12.14.
On scrutiny of the above letters/documents and information
available on record the facts which emerge are as under:-
(i) Shri C.S. Bhaskar resigned from the post of
(Managing Director of the company on 08.11.2014 due
to his personal reasons and pre-occupations.
(ii) The information as at (i) above was received at
IDBI(OA) office on 15.12.14 in the afternoon i.e. after
the hearing at BIFR had held.
(iii) IDBI(OA) called for explanation from the company
vide letter dated 16.12.15 with copy to BIFR.
(iv) Subsequently Shri Bhaskar withdrew his
resignation and the company informed BIFR about this
development vide its letter dated 23.12.14. A copy of the
screen shot (Annexure-
VII) taken from MCA site confirms the same. He has
been reappointed as Director for the period from
10.12.14 to 13.11.2016.
(v) As per the affidavit submitted by Shri
Y.Gopalakrishna the share holding of the promoters as
on the date of reference to BIFR, 31.03.14 and 31.03.15
is unchanged at 17.83%. However there are changes in
the remaining shareholding as the Strategic Investors
W.P.(C) 4569/2015 Page 3
have acquired majority shares from public and Venture
Capitalist.
(vi) It has been also confirmed by the company that
shares of the company had never been listed and since
inception it is a closely held company.
In view of the foregoing IDBI(OA) has no objection in case the
prayer of the company for deregistration is acceded to by the
Hon'ble BIFR. You are requested to please place the above
facts before the Hon'ble Bench."
3. Learned senior counsel contends that since the BIFR has virtually
been rendered non-functional on account of vacancies, prolonged delay in
the disposal of the application MA 443/14 has led to a mass view that even
though the company actually achieved net worth, it cannot secure fresh lines
of credit. Learned counsel submits that BIFR is already burdened with
several references and that if the matter is relegated, the petitioner would
meet a fate no different from what it had to grapple with all the while after
the filing of MA 443/2014. Counsel for IDBI submitted that the report
furnished to the BIFR substantiates the petitioner's argument that it has
achieved positive net worth. He also submitted that the report filed before
BIFR, which is a part of the record, clearly shows that on IDBI's
independent appraisal, the petitioner's dues have been cleared and in this
circumstance this Court may pass appropriate orders.
4. We have considered the submissions and the record. Ordinarily, upon
a company fulfilling the requisite criteria to be treated as a sick company, a
declaration to that effect is granted under Section 15. This declaration in
effect effectuates Section 22 which in turn suspends legal obligations or
their enforcements against the company. At the same time, the negative
W.P.(C) 4569/2015 Page 4
effect of such declaration is that there is a freeze upon the company's
functioning till the time it is within the purview of SICA. The rehabilitation
effort then proceeds through the orders made under Section 17(2) or Section
17(3), as the case may be, and in the event BIFR is of the opinion that
rehabilitation in the normal sense is not possibly a scheme is mandated
under Section 18 which is duly considered and then sanctioned. In the
present case, after the petitioner was declared a sick company under 17(2),
the material on record discloses that according to the OA, the company had
achieved net worth as on 31.3.2014. The petitioner did approach the BIFR
for a declaration to that effect - because it can continue to function only
upon securing credit or establishing its credit worthiness. BIFR, however,
has been plagued by vacancies on account of retirement. What is evident is
that in the peculiar circumstance of this case, the OA after independent
appraisal of the petitioner's application and verification of its claims
concluded that it is no longer sick and had achieved positive net worth on
31.3.2014. More than a year has elapsed since then. In these circumstances,
this Court hereby declares that the petitioner has achieved its positive net
worth and can no longer be treated as a sick company. The writ petition is
allowed in the above terms.
S. RAVINDRA BHAT
(JUDGE)
R.K. GAUBA
(JUDGE)
MAY 26, 2015
vld
W.P.(C) 4569/2015 Page 5
