Natural justice in BIFR proceedings: adverse reliance on inquiry material without hearing the company vitiated the orders.

Reliance on inquiry reports and material without first giving the affected company a reasonable opportunity to submit its case under the BIFR Regulations and the Sick Industrial Companies Act breached natural justice, so the adverse orders could not stand. A subsequent reference for a later period did not render the earlier reference infructuous or cure the procedural illegality in the earlier proceedings. The writ petition succeeded, the BIFR and AAIFR orders were quashed, and the matter was remitted to the BIFR for fresh consideration after hearing the company.

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Issues: (i) Whether the BIFR and AAIFR could rely on reports and material obtained during inquiry without first giving the affected company a reasonable opportunity of making submissions under Regulations 21 and 40 of the BIFR Regulations, 1987; (ii) whether the filing of a subsequent reference for a later period rendered the earlier reference infructuous so as to cure the legality of the impugned orders.

Issue (i): Whether the BIFR and AAIFR could rely on reports and material obtained during inquiry without first giving the affected company a reasonable opportunity of making submissions under Regulations 21 and 40 of the BIFR Regulations, 1987.

Analysis: The statutory scheme under section 16 of the Sick Industrial Companies (Special Provisions) Act, 1985 and Regulations 21 and 40 required that before the Board relied on information or reports collected during inquiry, the concerned company had to be afforded a reasonable opportunity of making submissions. Those provisions embody the principles of natural justice. On the admitted facts, that opportunity was not given before the adverse determination was made.

Conclusion: The impugned orders were vitiated for breach of the mandatory requirement of reasonable opportunity and natural justice, and the finding against the company could not be sustained.

Issue (ii): Whether the filing of a subsequent reference for a later period rendered the earlier reference infructuous so as to cure the legality of the impugned orders.

Analysis: Section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985 shows that pendency of inquiry and related proceedings has statutory consequences, but a later reference does not wipe out an earlier reference if the earlier one was decided illegally or improperly. The later filing therefore did not remove the effect of the procedural illegality in the earlier proceedings.

Conclusion: The earlier reference did not become infructuous, and the challenge to the orders remained maintainable.

Final Conclusion: The writ petition succeeded, the BIFR and AAIFR orders were quashed, and the matter was sent back to the BIFR for fresh consideration after giving the petitioner a proper opportunity of hearing.

Ratio Decidendi: Where statutory regulations require a reasonable opportunity before reliance is placed on inquiry material, non-compliance vitiates the decision, and a subsequent reference for a later period does not cure the illegality of an earlier improperly decided reference.

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