BIFR rehabilitation directions prevail over internal lending guidelines when issued to secure settlement and revival of a sick company.

Section 19 of the Sick Industrial Companies (Special Provisions) Act, 1985 empowers the BIFR, while framing or sanctioning a rehabilitation scheme, to issue binding directions for financial assistance, concessions, reliefs or sacrifices from concerned institutions. Applying that principle, the court held that the BIFR could direct the operating agency to settle dues and proceed on RBI guidelines in aid of revival, and that the institution could not defeat those directions by relying on its own internal guidelines. The cited precedent was found inapplicable on its facts. The challenge to the winding up order succeeded and the writ petition was allowed.

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Issues: Whether the BIFR had jurisdiction under section 19 of the Sick Industrial Companies (Special Provisions) Act, 1985 to direct the operating agency to settle dues and proceed on the basis of RBI guidelines, and whether the impugned order directing winding up was sustainable.

Analysis: Section 19 empowers the BIFR, while framing and sanctioning a rehabilitation scheme for a sick industrial company, to require financial assistance, concessions, reliefs, or sacrifices from the concerned institutions and to issue binding directions to implement the scheme. The object of the statute is rehabilitation of a sick company and prevention of industrial sickness, and the provision is intended to operate effectively where a bona fide revival effort is being pursued. The record showed repeated directions by the BIFR to the operating agency to prepare and process a rehabilitation scheme and to settle the matter in terms of RBI guidelines, while the petitioner had already discharged substantial dues and remained willing to settle the balance as directed. The contention that the operating agency could disregard BIFR directions on the footing of its own guidelines was rejected, and the cited precedent was held inapplicable because it did not involve comparable directions under section 19.

Conclusion: The BIFR's jurisdiction to issue the impugned directions was upheld, the challenge to the winding up order succeeded, and the writ petition was allowed.

Ratio Decidendi: Where a rehabilitation scheme under the Sick Industrial Companies (Special Provisions) Act, 1985 is in issue, the BIFR may issue binding directions under section 19 to secure concessions, reliefs, or settlement from the concerned financial institution, and such directions cannot be defeated by the institution's own internal guidelines.

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