Secured creditor consent in rehabilitation schemes is material, and direct financial interest supports locus standi in writ proceedings.

Where a sick industrial company's rehabilitation scheme depends on financial assistance, reliefs or concessions from a secured creditor, the creditor's consent is a material statutory requirement, and if consent is not secured the authorities may proceed towards winding up. On the facts, the proposed revival could not be finalised because the secured creditor did not agree to the required concessions or sacrifice, so the winding-up direction was sustained. The secured creditor bank was also held to have locus standi to be impleaded in the writ proceedings because its recovery rights were directly affected and it was not a stranger to the dispute.

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Issues: (i) Whether the Board and the appellate authority were justified in directing winding up of the sick industrial company without securing consent for a rehabilitation scheme under the statutory framework; (ii) whether the secured creditor bank had locus standi to be impleaded in the writ proceedings.

Issue (i): Whether the Board and the appellate authority were justified in directing winding up of the sick industrial company without securing consent for a rehabilitation scheme under the statutory framework.

Analysis: The statutory scheme requires the Board, after inquiry, to determine whether the company can make its net worth exceed accumulated losses within a reasonable time, and if not, whether measures under the rehabilitation provisions are necessary in public interest. Where the proposed scheme involves financial assistance, reliefs, concessions, or sacrifices from persons such as banks or financial institutions, the scheme must be circulated for consent and, if consent is not forthcoming, the Board may adopt other measures including winding up. On the facts, the proposed rehabilitation could not be finalized because the secured creditor was not agreeable to the proposed concessions or sacrifice, and the Court found no legal infirmity in the authorities' decision to proceed towards winding up.

Conclusion: The decision to direct winding up was upheld and is against the petitioner.

Issue (ii): Whether the secured creditor bank had locus standi to be impleaded in the writ proceedings.

Analysis: The bank had a statutory role in the sick industrial company proceedings and its rights to recover the amounts due would be directly affected by the result of the writ petition. In that context, the bank was not a stranger to the dispute and its presence was necessary for effective adjudication.

Conclusion: The bank had locus standi and was properly impleaded.

Final Conclusion: The writ petition failed because the challenged winding-up decision was sustained on the statutory scheme and the secured creditor's participation in the proceedings was recognised.

Ratio Decidendi: When a rehabilitation scheme under the sick industrial company requires financial assistance or concessions from a secured creditor, the creditor's consent is a material statutory requirement, and its direct financial interest gives it locus standi in proceedings affecting the company's revival or winding up.

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