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of <h1>High Court Upholds BIFR Decision on Company Rehabilitation Proposal, Emphasizes Secured Creditors' Rights</h1> <h3>Indore Wire Co. Ltd. Versus Union of India</h3> Indore Wire Co. Ltd. Versus Union of India - [2004] 53 SCL 204 (MP) Issues:Challenge to order passed by BIFR under SICA, non-consideration of revised proposal for company's revival, viability of company's proposal, rights of secured creditors, rejection of company's proposal by creditors, consideration of company's past prosperity in decision-making.Analysis:The petitioner challenged the order passed by the Board for Industrial and Financial Reconstruction (BIFR) under the Sick Industrial Companies (Special Provisions) Act, seeking to challenge the order dated 28-5-2003. The petitioner approached the High Court under Article 226/227 of the Constitution of India, contending that the appellate authority had not yet been reconstituted. The BIFR had appointed an operating agency (OA) and issued directions for the takeover, leasing, amalgamation, or merger for rehabilitation of the company. The petitioner felt aggrieved by these directions, claiming they were uncalled for. The High Court clarified its role, stating it was not acting as an original or appellate authority but had to examine the issue within jurisdictional constraints.The petitioner, a limited company engaged in manufacturing special steel items, had suffered significant financial losses and sought the status of a Sick Industrial Company under SICA. The BIFR had considered the company's proposal for rehabilitation, including conversion of term loans into zero coupon debentures, but the secured creditors had not found the proposal acceptable. The Court noted that the BIFR had examined the revised proposal submitted by the company and found it non-viable from the perspective of secured creditors. The Court emphasized the importance of considering the interests of creditors who had invested in the company and upheld the BIFR's decision not to accept the proposal in the absence of creditor agreement.The Court rejected the petitioner's argument that their past prosperity should be a factor in accepting the proposal, stating that such considerations were present in all cases before the BIFR. The judgment highlighted that the BIFR's directions were based on a proper consideration of all relevant facts and circumstances, supported by reasons, and therefore, did not warrant interference. The Court concluded that there was no infirmity in the BIFR's directions, which were made after a thorough assessment of the case, and dismissed the petition.In summary, the High Court upheld the BIFR's decision regarding the company's proposal for rehabilitation, emphasizing the importance of considering the rights of secured creditors and the overall viability of the proposal. The judgment underscored that past prosperity alone could not justify accepting a proposal and that the BIFR's directions were well-founded on a comprehensive evaluation of the case.
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