AAREY DRUGS AND PHARMACEUTICALS LTD Vs. APPELLATE AUTHORITY FOR INDUS AND FIN RECONSTRUCTION TARAPUR ACID AND ALKALIES PRIVATE LIMITED

JUDGEMENT

(1.) In this petition under Article 226 of the Constitution of India the petitioners seek a writ of certiorari or any other writ, order of direction requiring the first respondent to consider the proposal of the petitioner along with that of third respondent for rehabilitation of the second respondent, a sick industrial company, and then to accept the same, if found to be viable.

(2.) The second respondent was declared a sick company within the meaning of clause (o) of section 3 of the Sick Industrial Companies (Special Provisions) Act, 1985, (for short 'the Act'). This was by an order of the Board for Industrial and Financial Reconstruction (for short 'the BIFR') established under the Act. Since the BIFR was of the opinion that that the second respondent was not likely to make its net worth exceed the accumulated losses within a reasonable time while meeting all its financial obligations and that the company as a result thereof was not likely to become viable in future and that it was just and equitable that the company should be wound up, it directed that the second respondent be wound up. This was by order dated 20 October 1993. The second respondent filed an appeal against this order before the Appellate Authority, also constituted under the Act. From the order of the BIFR it would appear that a great deal of efforts were made to see if the second respondent Would be revived and/or rehabilitated. The BIFR also examained the report of the Operating Agency, respondent No.4. It also noticed that the banks and the financial institutions had no objection to the proposed winding up of the second respondent. Yet thr BIFR examined another proposal of the second respondent for taking over its assets by M/s. Pluto Chemicals Ltd. for a certain amount payable over the time frame of three years. The BIFR found prima facie that the proposal for acquisition of assets without liabilities might not be acceptable to financial institutions/banks. Since the operating agency had already concluded that the second respondent would become commercially non-viable on its present operations and could not be revived unless resourceful entrepreneur joined the promoters to put up facilities for forward integration at substantial cost, and that there being no acceptable proposal for rehabilitation of the second respondent, it, therefore, concluded that the second respondent be wound up. In its order dated 20 October 1993 the BIFR laid certain guidelines and terms and conditions for sale of assets of the second respondent.

(3.) The second respondent filed an appeal against this order before the Appellate Authority, also constituted under the Act. Before the Appellate Authority it was emphasised that proposal of Pluto Chemicals Ltd. had not been given due consideration and that there was possibility of revival of the sick industrial company. The Appellate Authority found that the BIFR had given adequate opportunity to the sick industrial company, the second respondent, to rehabilitate itself or to bring some new entrepreneur to be a co promoter or to take over the company. The Appellate Authority found substance in the conclusion arrived at by the BIFR that proposal of Pluto Chemicals Ltd. to acquire the assets of the second respondent for Rs. 170 lakhs was incomplete as it did not indicate the revival of the sick industrial company. The Appellate Authority also noticed that the banks and financial institutions were also correct in hot objecting to the winding up of the company in that situation. However, on the request of the appellant, the second respondent, and there being no objection from the financial institutions and the banks, the matter was adjourned by the Appellate Authority for some discussion regarding revival of the company. Since it was submitted by the sick industrial company, the appellant, that Pluto Chemicals Limited was still interested and was prepared to improve upon the position, as was stated before the BIFR and that was supported by the banks and the financial institutions, the Appellate Authority gave more lime to the sick industrial company to have its efforts with Pluto Chemicals Limited in case that company was prepared to improve upon its previous proposal so as to make it possible for the sick industrial company to revive. For this purpose the case was adjourned by order dated 29 July 1994. When it was stated before the Appellate Authority that apart from Pluto Chemicals Limited there were other parties also interested in the revival of the company, the Appellate Authority declined that request and said that it would not enter into the field of permitting new parties coming and exploring the possibiity of the revival of the company. Aggrieved by this observation, the petitioner, who claims to be interested in the revival of the second respondent, has filed this petition. It is prayed that the Appellate Authority be directed to consider its proposal for rehabilitation of the second respondent, the sick industrial company.