2004 (6) TMI 326 - HC - Companies Law

Court rejects challenge to BIFR orders, emphasizes expert body decisions.

Kamdar Ladat Simiti of Nanikram Shobraj Mills Ltd. Versus Nanikram Shobraj Mills Ltd.

Kamdar Ladat Simiti of Nanikram Shobraj Mills Ltd. Versus Nanikram Shobraj Mills Ltd. - [2004] 56 SCL 409 (GUJ.) , (2005) 125 Company Cases 740 Issues Involved:1. Legality of the Board of Industrial and Financial Reconstruction (BIFR) and Appellate Authority's orders.2. Consideration of the revival scheme proposed by the petitioner.3. Moulding of relief in light of subsequent developments.4. Jurisdiction and powers of the High Court under Article 226 of the Constitution of India.5. Locus standi of the petitioner.6. Public interest and the objectives of the Sick Industrial Companies (Special Provisions) Act, 1985.Detailed Analysis:1. Legality of the BIFR and Appellate Authority's Orders:The petitioner challenged the orders of the BIFR dated 31-12-1997 and the Appellate Authority dated 27-7-1998 under section 20(1) of the Sick Industrial Companies (Special Provisions) Act, 1985. The petitioner claimed that these orders were bad in law as neither the Board nor the operating agency, IDBI, examined the merits of the revival proposal. The Court noted that the orders of the BIFR and the Appellate Authority were quasi-judicial proceedings and found that the petitioner was not a necessary party as it was an unincorporated association of persons without legal personality. The Court held that the orders made by the BIFR and the Appellate Authority did not suffer from any jurisdictional error or breach of natural justice principles.2. Consideration of the Revival Scheme Proposed by the Petitioner:The petitioner argued that the revival scheme proposed to IDBI was not considered as required under law. The Court observed that the BIFR and the Appellate Authority had looked into the proposals received and found them lacking in sufficient particulars and viability. The Court noted that the decision-making process of the BIFR was reflected in its earlier orders and that the Appellate Authority had considered the scheme on merits. The Court emphasized that the decision of expert bodies like the BIFR is not ordinarily interfered with unless it is palpably wrong or unreasonable.3. Moulding of Relief in Light of Subsequent Developments:The petitioner contended that subsequent facts and a modified scheme approved by IDBI should be considered for moulding relief. The Court acknowledged that subsequent events had supervened and that the modified scheme's technical viability had been examined. However, the Court held that the rejection of the petition would not prejudice the petitioner as the subsequent developments were being considered in related proceedings (Company Petition No. 2 of 1998 and allied matters).4. Jurisdiction and Powers of the High Court under Article 226:The Court reiterated the principles governing the exercise of jurisdiction under Article 226, emphasizing that it is not an appellate jurisdiction but an extraordinary original jurisdiction. The Court's role is to review the decision-making process rather than the decision itself. The Court found that the BIFR and the Appellate Authority had not exceeded their powers, committed any error of law, or breached the rules of natural justice.5. Locus Standi of the Petitioner:The respondents argued that the petitioner, being an unincorporated association, lacked the legal personality to file the petition. The Court agreed, noting that the petitioner was not a registered union or cooperative society at the relevant time. The Court held that the petitioner's grievance about not being impleaded as a necessary party was not valid, as the petitioner did not have the legal standing to participate in the proceedings before the BIFR.6. Public Interest and the Objectives of the Act:The Court considered the objectives of the Sick Industrial Companies (Special Provisions) Act, 1985, which aims for the timely detection and remedial measures for sick industrial companies. The Court found that the BIFR and the Appellate Authority had acted in accordance with the Act's objectives. The Court emphasized that the decision of expert bodies like the BIFR should not be interfered with unless it is unreasonable or not in public interest.Conclusion:The petition was rejected as the Court found no jurisdictional error, breach of natural justice, or irrationality in the orders of the BIFR and the Appellate Authority. The Court held that the subsequent developments and the modified scheme could be addressed in the ongoing related proceedings, ensuring that the interests of all parties, including the petitioner, secured creditors, and workers, are considered.