NAYAGARA TECHNOLOGIES LTD. Vs. BIFR AND OTHERS

JUDGEMENT

(1.) THIS appeal filed by Nayagara Technologies Ltd. (hereinafter referred to 'appellant company'), is directed against the order of the Board for Industrial and Financial Reconstruction (for short BIFR) dated 21.11.2006 whereby the BIFR confirmed its prima facie opinion to wind up the company under Section 20(1) of Sick Industrial Companies (Special Provisions) Act of 1985 (hereinafter referred to as SICA).

(2.) THE brief facts of the case are that the appellant company was declared (sic) under section 3(1)(o) of SICA on 11.9.2002. Since the appellant company failed to submit a fully tied up rehabilitation package, the BIFR, vide its order (sic) 8.4.2003, directed to issue advertisement for change of management (COM) appointed ICICI Bank as the operating agency (OA) under Section 17(3) of (sic) Subsequently, since no viable and acceptable proposal was received in response to the advertisement for COM, the BIFR ordered issue of show cause notice (SCN) for winding up of the company. After hearing objections/suggestions/on the SCN for winding up, the appellant company was given a last chance to formulate a viable rehabilitation proposal for rehabilitation of the company. In the hearing held on 21.11.2005, the BIFR observed that the DRS has been submitted belatedly by the appellant company which lacks clarity and that, except Bank of Baroda (BOB), the company has failed to settle the dues of other secured creditors. Again, the BIFR, as a last opportunity, allowed the company to submit a fully tied up and viable rehabilitation proposal to the BIFR within four weeks accompanied by a deposit of 25% of the promoters' contribution in a no -lien account (NLA) with Central Bank of India (CBI). In the hearing held on 21.11.2006, the BIFR observed that sufficient time and opportunity had been granted to the company for coming up with a fully tied up revival proposal, but to no avail. Therefore, the BIFR passed the impugned order of winding up on the ground that the promoters were not serious in rehabilitating the company nor were they resourceful enough to mobilize the funds required for this purpose. Hence this appeal.

(3.) DURING the pendency of this appeal, CBI, respondent No. 3 (hereinafter referred to as the respondent bank') filed Miscellaneous Applications No. 133 of 2010 and 243 of 2010 praying for abatement of the reference of the appellant company on the ground that the respondent bank on 27.11.2009 has issued the possession notice by taking symbolic possession of the secured assets under Section 13(4) of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (hereinafter referred to as SARFAESI Act). It is further submitted by the respondent bank that, aggrieved by the possession notice, the appellant company had approached the DRT/Hyderabad under section 17 of the SARFAESI Act and the DRT passed orders on 14.12.2009 restraining the respondent bank from taking physical possession of the property But made it clear that the respondent bank is entitled to take symbolic possession. It is further submitted that the respondent bank has already taken steps under Section 13(4) of the SARFAESI Act and, therefore, in view of the third proviso of Section 15(1) of SICA, the reference before this Authority has abated. The appellant company, in its reply to the MA's filed by the respondent bank, submitted that the respondent bank after taking action under section 13(14) of the SARFAESI Act had fixed the date of auction of the assets on 30.3.2010 in spite of the stay granted by the DRT restraining the respondent bank from taking (sic) possession of the property, vide order dated 14.12.2009. The appellant company filed an application for interim stay; against auction notice dated 2.2010 and the DRT granted interim stay of all further proceedings in (sic) of the auction notice on condition of depositing of Rs. 10 lakhs, out of which Rs. 3 lakhs was payable on or before 30.3.10 and the balance amount of Rs. 7 lakhs was payable on or before 30.4.10. In compliance of the order of the DRT the appellant company deposited Rs. 3 lakhs with the CBI and stated that the balance amount of Rs. 7 lakhs would be deposited on or before 30.4.2010.