Hire-purchase ownership and BIFR jurisdiction: machinery retained by financier was outside section 22 protection.

A sale notice based on proceedings under section 9 of the Arbitration and Conciliation Act, 1996 could not be challenged on the mistaken assumption that it arose from a BIFR order, so the writ and interim protection could not be sustained. Hired machinery under hire-purchase agreements remained the financier's property until all instalments were paid, and therefore did not form part of the sick company's estate. On that basis, section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985 did not apply and BIFR had no jurisdiction to authorise sale of the machinery. The interim stay was set aside.

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Issues: (i) Whether the writ petition challenging the sale notice could be entertained when it proceeded on an incorrect factual premise that the sale was pursuant to the BIFR order. (ii) Whether the hired machinery could be treated as property of the sick company so as to attract the BIFR's jurisdiction and section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985.

Issue (i): Whether the writ petition challenging the sale notice could be entertained when it proceeded on an incorrect factual premise that the sale was pursuant to the BIFR order.

Analysis: The sale notice was found to have emanated from the orders passed in proceedings under section 9 of the Arbitration and Conciliation Act, 1996, and not from any direction of the BIFR. The writ petition was therefore founded on a mistaken factual basis. Once the foundational fact was incorrect, the interim relief granted on that premise could not stand, and equitable considerations could not be used to bypass the legal position.

Conclusion: The writ petition ought not to have been entertained on the facts placed before the Court, and the stay order could not be sustained.

Issue (ii): Whether the hired machinery could be treated as property of the sick company so as to attract the BIFR's jurisdiction and section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985.

Analysis: Under the hire-purchase agreements, ownership of the machinery remained with the financier until all instalments were paid. Since the machinery did not belong to the sick company, it was outside the ambit of section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985, and the BIFR had no jurisdiction to authorize its sale. The Court accepted the earlier view that the BIFR could not direct sale of property not owned by the sick company.

Conclusion: The hired machinery was not subject to BIFR control, and the sale could not be traced to the BIFR proceedings.

Final Conclusion: The appellant succeeded because the writ proceedings were built on an incorrect factual foundation and the machinery in question remained the financier's property, outside the BIFR's jurisdiction. The interim stay was set aside and the vacate-stay application was allowed.

Ratio Decidendi: Property retained by a financier under a hire-purchase arrangement does not become part of the sick company's estate for the purposes of section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985, and a writ founded on a mistaken factual assumption cannot sustain interim protection.

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