Rehabilitation under sick industrial law must favour revival, stakeholder consent and asset sale over rigid public auction requirements.

Under the Sick Industrial Companies (Special Provisions) Act, 1985, rehabilitation must be advanced through a purposive exercise of statutory discretion, with winding up treated as a last resort. The note states that BIFR and AAIFR must consider stakeholder consent, protection of employment, recovery of secured dues, and revival prospects before rejecting a scheme or asset sale. It further highlights that disposal of private corporate assets may be approved where the sale process has been tested and the proceeds, together with promoter contributions, support an immediate settlement of dues and further revival measures. A rigid insistence on public auction is treated as inconsistent with the statute's remedial object.

---

---

Issues: Whether the BIFR and AAIFR failed to exercise their statutory powers under the Sick Industrial Companies (Special Provisions) Act, 1985 in a manner consistent with the object of rehabilitation, by rejecting the revised draft rehabilitation scheme and the proposed sale of 1260 grounds of land at Perambur, Chennai.

Analysis: The Sick Industrial Companies (Special Provisions) Act, 1985 is remedial legislation enacted to secure timely detection of sickness and expeditious revival and rehabilitation of sick industrial companies in public interest. The statutory authorities are required to balance their powers with the duty to protect employment, salvage productive assets, and recover dues of secured creditors, while treating winding up as a last resort. The Court found that the revised scheme had been considered by the operating agency and had received the consent of secured creditors, workers, and other concerned authorities. It also found that the earlier direction of the BIFR had disbanded the Asset Sale Committee, and that the later insistence on transparency and public auction ignored the fact that the proposed sale concerned private corporate assets and that the sale process had already been tested through advertisement, with only one bid received. The Court further held that the authorities failed to consider that the proposed sale proceeds, together with promoter and co-promoter contributions, would enable immediate one time settlement of dues and further revival steps.

Conclusion: The rejection of the revised rehabilitation scheme and the confirmation of that rejection by the AAIFR were unsustainable. The issue was decided in favour of the petitioner.

Final Conclusion: The impugned orders were set aside and the rehabilitation proposal, including the sale of the land and revival measures, was directed to proceed under supervised timelines.

Ratio Decidendi: In proceedings under the Sick Industrial Companies (Special Provisions) Act, 1985, the BIFR and AAIFR must exercise their discretion in furtherance of rehabilitation and not as a rigid bar to disposal of assets where the proposed scheme has secured stakeholder consent and serves the statutory object of revival.

---