ARROW SYNTEX P LTD Vs. AAIFR

JUDGEMENT

(1.) THE short question that falls for consideration in this writ petition is whether the Board for Industrial and Financial Reconstruction (BIFR for short)was legally justified in declining to recognize a change in the management of respondent No. 3 on the ground that the said change was contrary to the provisions of the Sick Industrial Companies (Special Provisions) Act, 1985 having been introduced by the sick company without the permission of the Board. The incidental question that falls for consideration is whether the AAIFR was justified in dismissing the appeal filed by the petitioner on the ground that the same was not maintainable as the petitioners were not parties in the proceedings before the BIFR. The controversy arises in the following circumstances :

(2.) M/s Coral Newsprint Ltd. Respondent No. 3 in this petition appears to have filed a reference under Section 15 (1) of the Sick Industrial Companies (Special Provisions) Act, 1985 before the BIFR. By its order dated 4th October, 2001, the Board after hearing the parties declared the said company to be a sick industrial company and appointed Punjab National Bank (PNB) as the operating agency under Section 17 (3) of the Act to prepare a Draft Rehabilitation Scheme (DRS) keeping in view the guidelines set out by the BIFR in its order. Pursuant to the said order, the PNB formulated a draft rehabilitation scheme but before the scheme could be approved, PICUP, one of the secured creditors, expressed lack of confidence in the management of the company and declined to support the proposed scheme opting for a one time settlement of their claim. At the same time, the PNB appears to have also settled its dues on 15th May, 2004 accepting the payment of Rs. 1. 6 Crores as against a total of Rs. 2. 6 Crores approximately. These developments were reported by the operating agency to the BIFR who had in the meantime received an application from petitioner No. 1 company and its promoters collectively described as 'jalan Group' with a prayer that an agreement dated 11th October, 2003 entered into between the Jalan group and the directors of respondent No. 3 company also described as 'chauhan Group' may be recognized and an order confirming the change of management in favour of the jalan group passed enabling them to take charge and control of the management of the said company. Upon consideration, the BIFR rejected the said application filed by the petitioners on the ground that the suo moto back door change of management of the company which the two groups had arranged between themselves was without its approval and contrary to the provisions of the Act which could not be recognized. The BIFR further directed all concerned to maintain status quo failing which action under Section 24, 33 and 34 of the Act was threatened against the defaulters.

(3.) AGGRIEVED by the aforementioned order passed by the BIFR, the petitioners preferred an appeal before the AAIFR which failed and was dismissed by the said Tribunal by order dated 24th September, 2007 holding that the petitioners had no locus standi to maintain the appeal as they were not parties in case No. 328/2000 before the BIFR in which the order under appeal was passed. The present writ petition, as already noticed earlier, assails the correctness of the said two orders.