Manipulated accounts and unclean hands defeat sickness-law protection and bar discretionary writ relief.

Protection under the sick industrial companies framework is unavailable where later accounts continue the earlier pattern of fabricated losses, fund siphoning, and manipulation of depreciation and income items. The reference was treated as not maintainable because the claimed sickness could not be accepted at face value when the financial statements were found unreliable and tainted by the same practices previously identified. Discretionary writ relief was also refused where the company approached the statutory forums with unclean hands and used the statutory process as an abuse of protection intended only for bona fide sick industrial units.

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Issues: (i) Whether a fresh reference under the Sick Industrial Companies (Special Provisions) Act, 1985 could be rejected where the later accounts were found to continue the earlier pattern of fabricated losses, siphoning of funds and manipulation of depreciation and income items. (ii) Whether the writ petition challenging the Appellate Authority's order could succeed when the company had approached the statutory forums with unclean hands and abused the protection available under the Act.

Issue (i): Whether a fresh reference under the Sick Industrial Companies (Special Provisions) Act, 1985 could be rejected where the later accounts were found to continue the earlier pattern of fabricated losses, siphoning of funds and manipulation of depreciation and income items.

Analysis: The relevant statutory scheme permits reference and examination of a genuinely sick industrial company, but the protection is not meant for a concern whose financial statements are found to be unreliable because of manipulation, diversion of funds and artificial inflation of losses. The later reference was examined against the background of earlier findings, and the same tainted methods were found to have continued in the subsequent year. The Authority therefore treated the earlier adjudication as relevant and held that the claimed losses could not be accepted at face value for determining sickness.

Conclusion: The reference was not maintainable and was rightly rejected.

Issue (ii): Whether the writ petition challenging the Appellate Authority's order could succeed when the company had approached the statutory forums with unclean hands and abused the protection available under the Act.

Analysis: The court held that the protective provisions for revival of sick units are intended to aid bona fide sick industrial companies, not promoters who indulge in fraud, dishonesty, manipulation of accounts and siphoning of funds. The conduct disclosed abuse of the statutory process and attracted the principle that a litigant seeking discretionary relief must come with clean hands. In that background, no interference was warranted with the reasoned rejection of the reference.

Conclusion: The writ petition failed and the impugned order was upheld.

Final Conclusion: The statutory remedy under the sickness legislation could not be used as a shield for fabricated claims of sickness, and the challenge to the rejection of the reference was dismissed.

Ratio Decidendi: Relief under a revival-oriented fiscal or industrial statute is unavailable where the claimant's accounts are found to be manipulated and the proceedings amount to an abuse of process; discretionary writ relief will not be granted to a litigant acting without clean hands.

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