SICA rehabilitation scheme binding effect prevails over tender conditions and requires exclusion of closure period in bid evaluation.
A sanctioned rehabilitation scheme under SICA can bind the Railways where consent to concessions is deemed under Section 19, and Sections 18 and 19 operate in distinct fields. Clause 11.6 of the scheme was treated as mandatory, requiring exclusion of the company's closure period from past-performance evaluation, because a contrary reading would defeat revival. The company's later improved financial position did not end the Railways' obligation during the scheme's operative period. The clause was also not invalidated by tender conditions or the General Financial Rules, 2005, since the statutory scheme had overriding force under Section 32.
Issues: (i) Whether the sanctioned rehabilitation scheme under the Sick Industrial Companies (Special Provisions) Act, 1985 could bind the Railways and whether consent to the scheme's concessions was deemed under Section 19. (ii) Whether Clause 11.6 of the sanctioned scheme was binding and required exclusion of the company's closure period while evaluating bids. (iii) Whether the company's improved financial position and the nearing end of the scheme could defeat enforcement of the concession. (iv) Whether enforcement of Clause 11.6 was invalid because it allegedly conflicted with tender conditions and the General Financial Rules, 2005.
Issue (i): Whether the sanctioned rehabilitation scheme under the Sick Industrial Companies (Special Provisions) Act, 1985 could bind the Railways and whether consent to the scheme's concessions was deemed under Section 19.
Analysis: Sections 18 and 19 operate in different fields. Section 18(8) binds the sick company and certain connected persons, whereas Section 19 governs rehabilitation measures involving Government departments, banks, public financial institutions and similar authorities. Under Section 19, a draft scheme may include concessions or sacrifices from such entities, and the scheme is circulated to obtain their consent. If no objection or refusal is made within the stipulated period, consent is deemed to have been given.
Conclusion: The Railways was capable of being bound under Section 19, and its consent to the scheme was deemed.
Issue (ii): Whether Clause 11.6 of the sanctioned scheme was binding and required exclusion of the company's closure period while evaluating bids.
Analysis: Clause 11.6 was framed to aid revival of the sick company by excluding the closure period from past-performance evaluation. The words used in the clause did not make it merely advisory. Once consent was obtained or deemed under Section 19, the concession became binding for the currency of the sanctioned scheme. A narrow interpretation treating the clause as only recommendatory would defeat the object of rehabilitation.
Conclusion: Clause 11.6 was mandatory in operation and required exclusion of the closure period for bid evaluation.
Issue (iii): Whether the company's improved financial position and the nearing end of the scheme could defeat enforcement of the concession.
Analysis: The fact that a sick company later shows positive net worth does not by itself terminate the effect of a sanctioned scheme. A sanctioned scheme continues to bind the concerned parties for its operative period unless set aside or modified by the proper forum. Individual assessment by a party cannot override the statutory scheme.
Conclusion: The company's improved financial position did not extinguish the Railways' obligation under the scheme.
Issue (iv): Whether enforcement of Clause 11.6 was invalid because it allegedly conflicted with tender conditions and the General Financial Rules, 2005.
Analysis: The concession did not nullify the tender process but only required a modified method of assessing past performance. The statutory scheme under SICA had overriding force under Section 32 and prevailed over inconsistent tender conditions or internal financial rules. The clause was also supported by internal legal opinions obtained by the Railways.
Conclusion: The clause was not invalidated by the tender conditions or the General Financial Rules, 2005.
Final Conclusion: The writ petition failed because the rehabilitation scheme was binding on the Railways, Clause 11.6 was enforceable, and no conflict was shown that could defeat the statutory scheme.
Ratio Decidendi: A rehabilitation scheme sanctioned under SICA, once consent is given or deemed under Section 19, binds the concerned authority for the scheme period, and any inconsistent tender condition must yield to the statutory scheme's overriding effect.
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