STAR INDUSTRIAL AND TEXTILE ENTERPRISES LIMITED Vs. BOARD FOR INDUSTRIAL AND FINANCIAL RECONSTRUCTION

JUDGEMENT

(1.) In this petition under Article 226 of the Constitution of India, the petitioner, a Public Limited Company and its Chairman and Managing Director seek a writ of Certiorari or any other appropriate writ, order or direction calling for records of the petitioner company from the Board for Industrial and Financial Reconstruction (in short BIFR), established under Section 4 of the Sick Industrial Companies(Special Provisions) Act, 1985 (in short SICA) and after scrutiny for quashing the alleged oral directions given by the BIFR on 5 August 1993 for issuance of an advertisement for the sale of the petitioner company's undertaking and for enforcing immediate recovery of arrears of interest and other dues of an aggregated stated amount of Rs. 2.5 crores from the petitioner company and for the enforcement of the personal guarantees given by the petitioner company's Directors/Promotors. The petitioners further pray for a writ of mandamus, directing the BIFR to withdraw or rescind the said oral directions. They also seek awrit of prohibition or any other writ or order or direction, prohibiting and restraining the respondents from acting on or implementing or taking any action in pursuance of the said directions. Apart from the BIFR and Union of India, there are eleven other respondents. Respondent No.3 is the Industrial Development Bank of India (for short IDBI). the lead financial institution and the operating agency appointed by the BIFR under Section 17(3) of the SICA. respondent Nos. 4 to 9 are the banks who had advanced various loans to the petitioner company, respondent No. 10 is the Export Credit and Guarantee Corporation ot india, respondent No. 11 is the State of Maharashtra and respondent Nos.12 and 13 are the two trade unions of the petitioner compony.

(2.) The petitioner company is engaged in the manufacture of textile machinery, It appears that due to recession in the textile industry and for some other reasons the company became sick: it approached the BIFR for its rehabilitation, who vide its order dated 19 July 1988 sanctioned a scheme for its rehabilitation and appointed IDBI as the operating agency. The said scheme was reviewed by the BIFR vide its order dated 18 February 1991 and it was again substantially modified in June 1991. It appears that the BIFR is not satisfied with the progress of the sanctioned scheme and seems to have come to the conclusion that it cannot be implemented and has, therefore, issued the directions. now impugned in this petition. The petitioners allege that the said oral directions have been issued without affording any opportunity to the petitioners to explain that the operating agency has infact given a favourable report in which it is clearly stated that the petitioner company is a viable undertaking and steps to revive the same have been indicated therein. It is further alleged that while giving such directions the BIFR has ignored the proposal given by the petitioners expressing their willingness to consider the amalgamation of the petitioner company with its sister undertaking viz., Associated Precision Spindles Ltd (APS) and the fact that an agreement/consensus had been reached' between the company and the operating agency and the financial institution for the grant of required financial facilities reliefs to the company to enable it to complete its rehabilitation. It is thus submitted that the BIFR has acted in an extremely high handed, arbitrary, irrational and oppressive manner in issuing the said orders and directions to the operating agency, banks and institutions and in further directing them to comply with the said orders, without waiting for the written orders from it and if the impugned directions are allowed to be implemented, these wilt have disastrous effect on the petitioner company and its Directors/Promoters.

(3.) While issuing notice to show cause why the petition he not admitted, by means of an ex parte order, operation of ths intpugned directions of the BIFR. allegedly given at its meeting held on 5 August 1993 was stayed subject to the condition that neither tlie company nor the promoters or Directors will dispose of, alienate or encumber any of their assets except in the one course. The said interim order still continues.