ASHOK ORGANIC INDUSTRIES LTD Vs. ASSET RECONSTRUCTION COMPANY

JUDGEMENT

(1.) The Reference for our consideration is :-

(2.) The Company, Ashok Organic Industries Limited made a reference to the Board of Industrial Finance and Reconstruction (BIFR) under the provisions of the Sick Industrial Companies (Special Provision) Act, 1985, hereinafter referred to as "SICA". They were informed by letter dated 15th May, 2002 that the case was registered under No.195/02.

(3.) A learned Judge heard Counsel for the parties who appeared. The attention of the learned single Judge was invited to the Judgments of co-ordinate Benches of this Court in National Organic Chemical Industries Limited and Ors. vs. N.O.C.I.L. Employees Union 2005 (126) Companies Cases 922, Sharp Industries Limited, (2006) 131 Company Cases, 535 (Bom.) and in Pharmaceutical Products of India Ltd. in re (2006) 131 Company 747 Cases 747, where co-ordinate Benches have taken a view that the provisions of SICA and the Companies Act, in the matter of sanction of a scheme for re-arrangement of the companies business by way of amalgamation, demerger or compromise were not inconsistent and consequently the Company Court inspite of proceedings pending before the B.I.F.R. under Section 22 of the S.I.C.A. and inspite of Section 32 of S.I.C.A. would have jurisdiction to grant sanction of the scheme under Sections 391 and 394 of the Companies Act, 1956. To hold that the provisions of the two Acts were not inconsistent, and the Company Court would have jurisdiction, the learned Judge noted that the provisions of Sections 15 to 19 of SICA, pursuant to which a company which has become sick can register itself with B.I.F.R., which is vested with the power under the provisions of the SICA, to make enquiry and provide for a scheme for rehabilitation of the company or make the company viable so that the business of the company can continue. The Court also noted that the provisions of Sections 391 to 394 of the Companies Act, 1956, also similarly provide for rearrangement of the company s business by way of amalgamation, demerger or compromise, which also has the very same purpose and object to revive and/or make the company more viable and efficient. The Court observed that the provisions of the Act though provide for different methods of doing so, they are not inconsistent with each other. The Court noted that the provisions of SICA operate in a slightly different sphere i.e. in a case where the net worth of the company has become negative, whereas the provisions of Sections 391 to 394 of the Companies Act have no such requirement as condition precedent and this provision can even operate in cases where the companies are doing well and seek to rearrange their business for the efficient management or better business prospects and thus seek to amalgamate or demerge business operations of the Company. This view of the learned Single Judge was followed in Sharp Industries Limited (supra) and Pharmaceutical Products of India Ltd. (supra).