SHIVA SUITINGS LTD Vs. UNION OF INDIA

JUDGEMENT

(1.) SHIVA Suitings Limited-the first petitioner is a company incorporated under the Companies Act. The company was incorporated in the year 1985. The company at the relevant time was engaged in the activity of processing of manmade fabrics and cotton fabrics with the aid of power. The first petitioners factory is situate at MIDC Industrial Area, Dombivli (East), District Thane, Maharashtra. It is petitioners case that the production was commenced in January 1987. They had paid up capital of Rs. 154. 78 lakhs. On 31st March, 1993 for the year 1992-93 the value of plant and machinery of the first petitioner company was Rs. 3. 74 crores and the paid up capital was Rs. 154. 78 lakhs. The accounts of the first petitioner company for the year ended 31st March, 1993 were finalised on 30th September, 1993. At that time the net worth of first petitioner company eroded and they had accumulated losses exceeding the entire net worth. Sick Industrial Companies (Special Provisions) Act, 1985 (for short "sica") was amended by Sick Industrial Companies (Special Provisions) Amendment Act, 1993. The amendment Act came into force on 1st February, 1994 whereby the definition of "sick industrial company" was substituted. It is the petitioners case that upon amendment of SICA by Amendment Act of 1993 with effect from 1st February, 1994, the first petitioner company satisfied all the conditions of sick industrial company and the Board of Directors of the first petitioner company passed a resolution in its meeting held on 1st April, 1992 forming an opinion that petitioner company was sick industrial company and therefore a reference be made to the Board for Industrial and Financial Reconstruction under section 15 of SICA. Accordingly on 12th April, 1994, the reference was made. The Registar of Board for Industrial and Financial Reconstruction (for short "bifr") declined to register the reference on the ground that there were no workmen engaged in the first petitioner company and therefore it was not an industrial company. The communication was sent accordingly to the petitioners on 30th June, 1994. Admittedly no steps were taken in challenging the order dated 30th June, 1994 of the Registrar whereby he declined to register the reference. It appears that thereafter the Board of Directors again passed resolution on 27th January, 1995 to lodge a fresh reference before BIFR and pursuant thereto fresh reference was filed by the first petitioner company on 4th March, 1995. The Registrar of BIFR again declined to register this reference on the ground that from the available material it could not be ascertained that the workers were employed in the factory for the relevant period. The communication dated 29th June, 1995 sent by Registrar of BIFR to the first petitioner declining registration of the reference was also not challenged by the first petitioner company. It appears that thereafter third reference was lodged by the first petitioner company on 11th September, 1995. Certain defects were found in the said reference and first petitioner company was called upon to rectify the said defects. It appears that ultimately the said reference was held as not maintainable by BIFR by its order dated 8th February, 1996 as according to BIFR the first petitioner company ceased to be an industrial company since March 1993 and it did not fulfil the requirement under section 3 (1) (o) of SICA. Aggrieved thereby the petitioners preferred appeal before the Appellate Authority for Industrial and Financial Reconstruction (for short "aaifr" ). AAIFR set aside the order of BIFR passed on 8th February, 1996 and sent the matter back to BIFR for fresh hearing and consideration of the matter. After hearing the first petitioner company by the order dated 11th August, 2000, BIFR did not find the case fit for registration of reference and rejected the same. Aggrieved thereby the petitioners preferred appeal. The AAIFR on 30th April, 2001 rejected the appeal. The order of AAIFR dated 30th April, 2001 and the order of BIFR dated 11th August, 2000 are impugned in the present writ petition.

(2.) MR. Sathe, learned Counsel appearing for petitioner, invited our attention to the amended provisions of section 3 (1) (o) of SICA and submitted that the AAIFR seriously erred in holding that cause of action occurred to the first petitioner company on 1st October, 1993 and since reference was not made within sixty days by the first petitioner company it was not maintainable. Relying upon the explanation appended to Clause (o) of section 3 (1) of SICA, the learned Counsel submitted that the first petitioner company shall be deemed to have become sick industrial company on 31st March, 1993 and therefore the reference ought to have been considered by the BIFR on merits and the AAIFR ought to have set aside the order of BIFR. The learned Counsel submitted that the first petitioner company submitted voluminous record before the BIFR to show that as on 31st March, 1993 fifty or more workers were employed in the factory of the first petitioner company. In substance submission of the learned Counsel for the petitioners is that on 31st March, 1993, the first petitioner company established to be a sick industrial company and therefore the reference should have been entertained and considered on merits.

(3.) THERE is no dispute that in respect of the accounts for the year ended 31st March, 1993 the Auditors submitted their report on 30th August, 1993 and the accounts were finalised and approved by the Board of Directors on 30th September, 1993. The Auditors in their report made on 30th August, 1993 opined this: