M TIRUPATHAIAH Vs. RAYALASEEMA PAPER MILLS LTD

JUDGEMENT

(1.) The first respondent-M/s. Rayalaseema Paper Mills Limited was promoted by M/s. T.G. Vasanth Gupta and Associates during 1974-75 with an equity participation of the Andhra Pradesh Industrial Development Corporation (APIDC). It is registered under the provisions of the Companies Act, 1956. The said company appears to have availed loans from various financial institutions including the IDBI and with such financial assistance set up a plant on the banks of river Tungabhadra, near Kurnool and started its commercial production during 1979. The unit was established to make use of the waste material and forest material to manufacture the paper of required sizes. The first respondent-company appears to have run profitably upto 1985 and for whatever reasons started incurring losses thereafter. The unit was closed down during 1989 and thereafter the matter has been referred to the Board for Industrial and Financial reconstruction (BIFR) for rehabilitation. The BIFR having registered the case declared the company as a sick company under the provisions of the Sick Industrial Companies (Special Provisions) Act. It is not necessary to notice the further details as to what transpired before the BIFR.

(2.) During 1994 even while the proceedings were pending before the BIFR, the company was on the verge of liquidation. The present promoters have come forward and taken over the reins of the respondent company in terms of the rehabilitation scheme sanctioned by the BIFR vide its order dated 7-8-1995. There is no dispute whatsoever that the new promoters have invested enormous amounts and reopened the company during January, 1996. The new promoters claim to have paid huge outstanding amounts to a tune of Rs. 33.00 crores to the banks and financial institutions, which remained unpaid by the erstwhile promoters. For whatever reasons, even the present promoters could not successfully sustain the company and in the process the company again got closed during March, 1998 and continues to be under closure.

(3.) It appears that the BIFR, in the facts and circumstances, sanctioned a modified rehabilitation scheme and accordingly directed the banks to provide the required working capital facilities, vide its order dated 2-8-1999. The banks preferred appeals before the AAIFR and obtained interim stay orders. It is unnecessary to notice the further details thereof.