2001 (2) TMI 921 - HC - Companies Law

Court permits Core Healthcare Ltd. to approach BIFR, dismissing sharp practice claims. Order stayed pending further action.

The court allowed the applicant, Core Healthcare Ltd., to withdraw its statement not to approach the Board for Industrial and Financial Reconstruction ... Reference to Board Issues Involved:1. Review of the order dated 2-5-2000.2. Permission to withdraw the statement not to approach the Board for Industrial and Financial Reconstruction (BIFR).3. Alleged sharp practice by the applicant.4. Obligations under the Sick Industrial Companies (Special Provisions) Act, 1985.5. Impact of the Bombay Relief Undertakings (Special Provisions) Act, 1958 notification.Issue-wise Detailed Analysis:1. Review of the order dated 2-5-2000:The applicant, Core Healthcare Ltd., sought a review of the order dated 2-5-2000, which directed them not to approach the BIFR until the hearing and final disposal of the appeal from Order No. 167 of 2000. The court had fixed the hearing for 22-6-2000, but the appeals were not heard due to a notification issued by the Government of Gujarat under the Bombay Relief Undertakings (Special Provisions) Act, 1958, which suspended all proceedings.2. Permission to withdraw the statement not to approach the BIFR:The applicant finalized its accounts as of 30-6-2000, which indicated that it had become a sick industrial company under the Sick Industrial Companies (Special Provisions) Act. This necessitated a mandatory reference to the BIFR. The applicant argued that it was not responsible for the delay in hearing the appeals and sought permission to withdraw its statement not to approach the BIFR. The court found substance in the applicant's submission, noting that the accounts were finalized and approved after the statement was made, thus justifying the request to withdraw the statement.3. Alleged sharp practice by the applicant:The respondent argued that the applicant adopted a sharp practice by not disclosing its application to the State Government for relief under the Bombay Relief Undertakings (Special Provisions) Act while assuring the court it would not approach the BIFR. The court acknowledged that the applicant could have disclosed this fact but accepted the applicant's explanation that the notification under the Bombay Relief Undertakings Act operates in a different field and was unrelated to the BIFR proceedings. The court concluded that the applicant had not suppressed material facts or adopted sharp practices.4. Obligations under the Sick Industrial Companies (Special Provisions) Act, 1985:Section 15 of the Sick Industrial Companies (Special Provisions) Act, 1985, obligates the board of directors of a sick industrial company to make a reference to the BIFR within 60 days of finalizing the duly audited accounts. The court emphasized that this statutory obligation could not be foreclosed by the statement made in court. The applicant's need to comply with this obligation justified the request to withdraw the statement.5. Impact of the Bombay Relief Undertakings (Special Provisions) Act, 1958 notification:The notification issued under the Bombay Relief Undertakings (Special Provisions) Act, 1958, suspended all proceedings, including the hearing of the appeals. The court found that the applicant's request for relief under this Act was unrelated to the BIFR proceedings and did not constitute a sharp practice. The court noted that the notification provided temporary relief and did not aim at restructuring debt, further justifying the applicant's actions.Conclusion:The court concluded that the applicant had made a valid case for withdrawing its statement not to approach the BIFR. It allowed the applications, permitting the applicant to withdraw from its statement and approach the BIFR. The court also stayed the order until 12-3-2001 to enable the respondents to approach the Hon'ble Apex Court. Both civil applications were allowed with no order as to costs.