K M A LIMITED Vs. UNION OF INDIA

JUDGEMENT

(1.) This writ petition is directed against the order dated 22.7.1994 passed by the Appellate Authority for Industrial and Financial Reconstruction (in short AAIFR) upholding and affirming the order passed by the Board for the Industrial and Financial Reconstruction (in short BIFR) holding that the reduction in the value of share of M/s. K.M.A. Limited was required in order to revive the company under the sanctioned scheme and accordingly, directing for transfer of shareholding of the existing promotors and their associate holders at the rate of Rupee I.00 for each share.

(2.) Originally this petition was preferred by M/s. K.M.A. Limited and Mr. Ashish Kamani as petitioner No. 1 & 2 respectively. After notice was served on the respondents and on an objection taken by respondents No.4 & 5 stating that BIFR bad restrained the second petitioner from acting on behalf of the first petitioner, learned counsel appearing for the petitioner made a request to this court that without prejudice to his rights and contentions and for the purpose of the present petition he had no objection to petitioner No.l being transposed as respondent No.6. In view of the aforesaid statement of the learned counsel for the petitioner, M/s. K.M.A. Limited, petitioner No.l was transposed as respondent No.6 and the present petition was being pursued by the respondent No.2, Mr. Ashish Kamani as the sole petitioner.

(3.) M/s .K.M.A. Limited under the old management headed by Mr. Ashish Kamani, the petitioner made an application under Section 15 of the Sick Industrial Companies (Special Provisions) Act (in short SICA) to the BIFR. In the said reference it was stated by Mr. Ashish Kamani that the net worth of M/s. K.M.A. Limited was negative. On such a reference being made, the BIFR took up the reference for consideration and on consideration of the records and after hearing the concerned parties declared the said company to be a sick company under the provisions of Section 15 of SICA. Consequently, BIFR appointed the Bank of Baroda as the Operating Agency to examine the viability of M/s. K.M.A.Limited and to prepare a scheme for its revival, rehabilitation and reconstruction. Consequently a draft scheme was prepared by the Operating Agency to provide for the rehabilitation of the workers. A viability report was also prepared by the Operating Agency which came up for consideration before the BIFR. During the proceedings before the BIFR the financial institutions and the banks expressed their total lack of confidence in the management headed by Mr. Ashish Kamani, the petitioner. A draft scheme was approved by the BIFR which provided for taking over the management of M/s. K.M.A. Limited by the workers Cooperative. The said draft scheme was published in accordance w ith Section 17 of SICA inviting objections/suggestions for hearing by the BIFR. During the proceedings before it the BIFR considered the draft scheme as well as the objections received along with the alternative proposals submitted by some of the parties. After due consideration of the draft scheme the BIFR asked for the consent of the financial institutions and the banks. The financial institutions including the banks, the IDB1 as also the State Governments of Maharashtra and Karnataka consented to the draft scheme and by its order dated 16.4.1993 the BIFR sanctioned the scheme. While doing so the BIFR specifically recorded that there was no alternative except to make an attempt to revive the company under the aegis of a Workers' Cooperative. In the said order the BIFR also recorded its view that substantial number of work force would be deprived of their livelihood if the scheme was not given a chance for implementation. The scheme which was approved by the Board by its order dated 16.4.1993 envisaged at para 3.4 that there should be transfer of the shareholding of the existing promoters and their associate holders to the Workers' Cooperative. It was, therefore, proposed that in order to give effect to the take over of management and speedy restart of the operations of the company, the shareholding of M/s. K.M.A. Limited in the existing group should be transferred and allotted to the Workers' Cooperative immediately on the sanction of the scheme. It was directed that the consideration for the shares would be at Rupee 1.00 for each share which would be offered by the Workers' Cooperative immediately on sanction of the scheme.