HINDUSTAN TRANSMISSION PRODUCTS LIMITED Vs. APPELLATE AUTHORITY FOR INDUSTRIAL AND FINANCIAL RECONSTRUCTION

JUDGEMENT

(1.) Challenge in this writ petition is to the orders dated 14/03/2000, 2 1/05/1998 arid 5/08/1999, passed by Appellate Authority for Industrial and Financial Reconstruction (in short "AAIFR") and the Board for Industrial and Finan- cial Reconstructions (in short '"BIFR") respectively in proceedings under the Sick In- dustries Companies (Special Provisions) Act, 1985 (in short "Act").

(2.) In a nutshell the background facts are as follows : Petitioner set up a unit for manufacturing Super Enamelled Copper wires at Chandivali, Mumbai in 1958. Subsequently it set up another unit at Waluj, Auran- gabad for manufacturing Copper wires, Commercial production commenced in the second unit in September 1992. A lock-out was declared at the 1st unit in January 1993. Subsequently, in September 1995 lock-out was declared at the second unit. Lock-out declared at the second unit was lifted in April 1996. On 15/01/1996 petitioner made a reference to the BIFR under Section 15(1) of the Act. On 1 8/03/1996 BIFR declared the petitioner a sick company within the meaning of the Act and appointed Industrial Development Bank of India (in short "IDBI") as the Operating Agency (in short "O.A.") to formulate a rehabilitation scheme. In the order, it was mentioned that, it would not be practical for the company on its own to make its net worth exceed its accumulated losses within a reasonable time. In view thereof, it was felt necessary in public interest to adopt the measures specified in Sections 18 & 19 of the Act.'As indicated above, IDBI was appointed as the O.A. under Section 17(3) of the Act to prepare a rehabilitation report, keeping in view the guide-lines in- dicated. By order dated 21/05/1998, BIFR observed that the company was no longer viable and was not likely to make its net worth exceed its accumulated losses within a reasonable time while meeting all its obligations. In that background, it was considered just and equitable and in the larger public interest to wind up the com- pany. On 30/06/1998, petitioner filed an appeal before the AAIFR, which was numbered as Appeal No. 79/98. By order dated 29/01/1999, AAIFR dismissed the appeal. On 5/08/1999 BIFR, in the proceedings held to hear objections/sug- gestions to the show cause notice for winding up, confirmed its prima-facie opinion that petitioner was not likely to make its net worth exceed its accumulated losses within a reasonable time, while meeting all its financial obligations, and as a result thereof was not likely to become viable in future. In essence, it was held that, it was just and equitable and in public interest that the company should be wound up under Section 20(1) of the Act. Petitioner preferred an appeal, which was numbered as Ap- peal No. 4/2000 against BIFR's order dated 5/08/1999; By the impugned order dated 14/03/2000 the appeal was dismissed.

(3.) In support of the writ petition, it was strenuously urged that after having taken resort to Section 17(3) of the Act, it was not open either to BIFR or AAIFR to con- clude that, there was no scope for any viability. Winding up of a sick company brings in a civil death and should be the last resort. Looking at the object for which the Act was enacted, the course adopted by the BIFR and AAIFR is not legal and proper. Ef- fort should have been made to see that the extreme step of winding up is not resorted to. There-was no scheme submitted by O.A. inspite of specific directions by the BIFR. After having applied its. judicial mind and taken a decision that provisions of Section 17(3) ar to be applied, it was not open to the BIFR to recommend winding up. By such a recommendation purpose of enactment of the Statute, has been frustrated. With ref- erence to a Division Bench decision of this Court in Upper India Couper Paper Mills Company Ltd. v. Appellate Authority for Industrial & Financial Reconstruction & Others 1994 (4) Delhi Lawyer 209, it is submitted that there was no application for review made by O.A. in case it was of the view that formulation of a scheme was not prac- ticable or possible. That course having not been adopted, the orders passed by the BIFR and AAIFR are indefensible.