SICA rehabilitation scheme jurisdiction: BIFR alone could interpret promoter rights and shield scheme-driven share allotment from collateral challenge.
Disputes arising directly from implementation of a sanctioned rehabilitation scheme under SICA, including the identity of promoters entitled to exercise a buy-back right, fall within the BIFR's exclusive jurisdiction because only the BIFR may clarify, modify, or remove implementation difficulties. The Company Law Board therefore could not determine that question under Sections 397 and 398 of the Companies Act, 1956. Where share allotment and capital restructuring formed part of the sanctioned scheme and the BIFR had granted exemption from compliance with procedural requirements, the Company Law Board could not treat the allotment to IDBI as ultra vires or defeat the scheme in collateral proceedings.
Issues: (i) whether a dispute as to who were the "promoters" entitled to buy back shares under the sanctioned rehabilitation scheme fell within the exclusive jurisdiction of the BIFR or could be determined by the Company Law Board in proceedings under Sections 397 and 398 of the Companies Act, 1956; (ii) whether the Company Law Board could hold the allotment of shares to IDBI ultra vires the memorandum and articles of association notwithstanding the rehabilitation scheme and the exemption granted by the BIFR from compliance with the relevant provisions of the Companies Act, 1956.
Issue (i): Whether the dispute concerning the identity of the promoters entitled to exercise the buy-back right under the sanctioned scheme was within BIFR's exclusive jurisdiction.
Analysis: The sanctioned scheme under the Sick Industrial Companies (Special Provisions) Act, 1985 governed the allotment of shares to IDBI and the later buy-back of those shares by the promoters. The dispute was not independent of the scheme but arose directly from its implementation. Since the scheme could be clarified, modified, or difficulties in implementation could be removed only by the BIFR under the statutory framework, the expression "promoter" used in the scheme had to be construed and, if necessary, clarified by the BIFR. The non obstante effect of Section 32 of SICA therefore operated, because the issue related to a matter the BIFR was empowered to determine under the Act.
Conclusion: The issue was within the exclusive jurisdiction of the BIFR and not the Company Law Board.
Issue (ii): Whether the Company Law Board could declare the allotment of shares to IDBI ultra vires the memorandum and articles of association despite the sanctioned scheme and the BIFR's exemption order.
Analysis: The allotment of shares to IDBI and reduction or restructuring of share capital were integral parts of the sanctioned rehabilitation scheme. The BIFR had subsequently granted exemption from compliance with the relevant procedural provisions of the Companies Act, 1956 to facilitate implementation of the scheme. In that situation, the Company Law Board could not insist on the very procedures from which exemption had been granted, nor could it treat the allotment as ultra vires on the ground that the statutory procedure had not been followed. The scheme had binding force, and the steps required for its implementation could not be nullified in collateral proceedings before the Company Law Board.
Conclusion: The Company Law Board could not hold the allotment of shares to IDBI ultra vires.
Final Conclusion: The appeals questioning the Company Law Board's assumption of jurisdiction succeeded, the impugned order was set aside, and the dispute was left to be dealt with within the BIFR framework.
Ratio Decidendi: Where a dispute arises directly out of the implementation or interpretation of a sanctioned rehabilitation scheme under SICA, the BIFR alone has jurisdiction to clarify, modify, or remove difficulties in implementation, and proceedings before other fora cannot override the scheme or the exemption orders made to give it effect.
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