CANARA BANK Vs. SHIMOGA STEELS LIMITED

JUDGEMENT

(1.) The petitioner Canara Bank is assailing the order dated 25.06.2007 passed by the Board for Industrial and Financial Reconstruction ('BIFR' for short) in Case No. 254/2002 and the order dated 07.07.2008 passed by the Appellate Authority for Industrial and Financial Reconstruction ('AAIFR' for short) in Appeal No. 266/2007. By the said order, the rehabilitation scheme in respect: of the first respondent herein has been sanctioned and the same has been upheld by the Appellate Authority.

(2.) The brief facts are that the first respondent which is a company incorporated under the Companies Act and engaged in the manufacture of steel billets and rolled products availed financial assistance from the petitioner to the tune of Rs. 3.05 crores on the security of its assets and lands as second charge. The first respondent which suffered financial set back made a reference to BIFR as provided under Section 15 of the Sick Industrial Companies (Special Provisions) Act, 1985 ('SICA' for short) as its net worth had eroded as on 30.09.2001. The first respondent was accordingly declared as a Sick Industrial Company by the BIFR on 10.08.2005. The petitioner herein was appointed as the Operating Agency for the purpose of preparing a rehabilitation scheme. Prior to the same, on 13.06.2005, the petitioner permitted One Time Settlement (OTS) of Rs. 151.16 lakhs and payment was to commence from October 2005 and the entire amount should have been repaid on or before 31.03.2006. The first respondent though paid a sum of Rs. 7.16 lakhs on 27.07.2005, no further amount was paid and the OTS was recalled.

(3.) In the meanwhile, the Draft Rehabilitation Scheme ('DRS' for short) was submitted during July 2006 and circulated among all Creditors, Though all the Creditors agreed to support the rehabilitation in the meeting held on 25.10.2006, the KSFC and the petitioner informed that the OTS offer made earlier had lapsed. Accordingly, a fresh OTS based on the modified DRS was to be submitted. The first respondent made a revised offer of Rs. 175 lakhs. The petitioner sought for reconsideration of a minimum offer of Rs. 200 lakhs subject to sanction by the Appropriate Authority. This is stated to have been made keeping in view the offer made to KSFC and KSIIDC at Rs. 194.56 lakhs and Rs. 336.71 lakhs respectively. However, since nothing'' materialised and sufficient time passed by, the petitioner keeping in view all aspects of the matter indicated that the first respondent should offer Rs. 520 lakhs and interest from 01.04.2007. This demand was made by the petitioner since according to them, the dues was to the tune of Rs. 1233.18 lakhs. Despite all these, the DRS was sanctioned by the BIFR by its order dated 25.06.2007 whereunder the petitioner was allocated Rs. 200 lakhs. The petitioner therefore assailed the order before AAIFR and having failed is before this Court.