SUBHASH KUMAR BHUWALKA Vs. APPELLATE AUTHORITY FOR INDUSTRIAL AND FINANCIAL RECONSTRUCTION BOARD FOR INDUSTRIAL AND FINANCIAL RECONSTRUCTION INDUSTRIAL DEVELOPMENT BANK OF INDIA

JUDGEMENT

(1.) M/s. Shree Bajrang Jute Mills Ltd., a sick company under the Sick Industrial Companies (Special Provisions) Act, 1985 (for short 'the Act') first filed this petition under Article-226 of the Constitution challenging the orders of the Board for Industrial and Financial Reconstruction ('BIFR' for short) confirmed by the Appellate Authority both under the Act sanctioning a scheme for its rehabilitation under the provisions of the Act. Under the scheme the sick company has been taken over by the East India Commercial Co. Ltd (EJCC) which is respondent No.5 in this petition. This petition was filed by the sick company through Shri Subhash Kumar Bhuwalka claiming to be the Director thereof. After we had issued notice to show cause as to why rule nisi be not issued and which was limited to the question as to what was the effect of the Operating Agency not itself coming up with the scheme, an application (C.M. No. 8942/94) was filed on behalf of the sick company stating that the petition was incompetent inasmuch Subhash Kumar Bhuwalka was no longer a Director of the sick company. It-was submitted in this application that the BIFR in the exercise of its powers under section 18(g) of the Act had directed by order dated, 13 September '1994 that the existing Directors of the sick company shall be deemed to have forthwith vacated their offices without any further act or deed and that the Board of Directors was reconstituted. In this view of the matter, an application (C.M. 8937/94) was filed by the sick company as well as by Subhash Kumar Bhuwalka and Murari Lal Bhuwalka that they all be impleaded as petitioners. Both Subhash Kumar Bhuwalka and Murari Lal Bhuwalka claim to be original promoters and erstwhile Directors of the sick company. Accordingly, we directed that both these persons shall be substituted as petitioners and that the sick company itself would be transposed as respondent. There are some other applications for intervention, but we do not think it is necessary for us to refer to those as we had issued the show cause notice on a limited question and heard the ar- arguments on that of the substituted petitioners and EICC; Union Bank of India; IDBI - the operating agency, and the sick company.

(2.) There is no dispute that the company Shri Bajrang Jute Mills Ltd. was declared a sick company as per the provisions of sections 15 and 16 of the Act. It is also not disputed that BIFR found that it was not practicable for the sick company to make its net worth exceed the accumulated losses 'within a reasonable time, and so the stage under sub-section (3) of section 17 of the Act was reached.

(3.) Reference to the BIFR under section 15 of the Act.was made on 18 October 1989. During the hearing held on 6 March 1991 Industrial Development Bank of India (IDBI) was appointed as the Operating Agency to prepare a rehabiliation scheme if feasible after examining the technical viability of the sick company. Thereafter, proceedings Of the BIFR were held on 7 January 1992, 17 Setpember 1992, I November 1993 and 21 February 1994. The Operating Agency could not come up with any rehabilitation scheme. It, however, introduced EICC as the intending promoters. Schemes furished by the petitioners being the existing promoters and that by EICC, the intending promoters, were not found to beacceptable. The BIFR came to a prima facie opinion that it was fair and just to wind up the sick company. The relevant portion of the minutes of the BIFR of its meeting dated I November 1993 are as under :- "On a consideration of the material on record and the submissions made, the Bench observed that so far there had been no viable scheme to run the unit. The proposal of the existing promoters has not been found to beacceptable by the all concerned. Not only the workers 'but also the bank has expressed lack of confidence in the present promoters. Besides, the elements of the Scheme and the assumptions underlying the same have not been found to be acceptable. The proposal from the intending new promoters does not find acceptance from the bank specially in regard to the offer of settlement of its dues. Similarly, the State Government would not be forthcoming with the reliefs/ concessions as sought for by the new promoters. A section of workers are not willing to support the new promoters. As there is no agreed rehabilitation :heme, the Bench has formed a prima facie opinion that it is fair and just to wind up the company Shree Bajrang Jute Mills Limited in terms of Section 20 of the Act. Further the Bench directs issue of notices fixing 21st Feb., 94 at 10.30 AM for considering objections/suggestions relating thereto alongwith an alternative proposal, if any, from anyone concerned in this regard, which should reach the Board latest by 6th Feb., 94."