Sick company reference abatement under securitisation law upheld; no fresh Board enquiry required into creditor action.

Under the sick industrial companies law, abatement follows once secured creditors representing three-fourths in value take measures under the securitisation law; the Board is not required to conduct a fresh independent enquiry into the legality or numerical sufficiency of those measures, and any challenge lies under the securitisation statute itself. The Court also rejected the contention that the reference could be retained for the company's surviving units, holding that the taking over of one unit materially altered the financial position and that a fresh reference on a modified balance sheet was the proper course. The impugned orders were sustained and writ relief was refused.

---

---

Issues: (i) whether the industrial reference pending before the Board had abated on account of measures taken under the securitisation law by secured creditors representing three-fourths in value of the outstanding secured debt, without a fresh independent enquiry by the Board into the legality or numerical sufficiency of that action; (ii) whether the reference could be retained for the surviving units of the company instead of treating it as abated and leaving the company to seek a fresh reference on a modified balance sheet.

Issue (i): whether the industrial reference pending before the Board had abated on account of measures taken under the securitisation law by secured creditors representing three-fourths in value of the outstanding secured debt, without a fresh independent enquiry by the Board into the legality or numerical sufficiency of that action.

Analysis: The statutory scheme of the third proviso to section 15(1) of the sick industrial companies law links abatement to measures taken under section 13(4) of the securitisation law by secured creditors representing three-fourths in value. Once such measures are shown to have been taken, the Board and the appellate authority are not required to sit in independent adjudication over the legality or adequacy of the secured creditors' action; any challenge to that action lies within the mechanism provided under the securitisation law. The Court held that the Board was therefore not obliged to conduct a separate enquiry to re-determine whether the secured creditors satisfied the three-fourths threshold.

Conclusion: The reference had validly abated, and the challenge on the ground of want of independent determination failed, against the petitioner.

Issue (ii): whether the reference could be retained for the surviving units of the company instead of treating it as abated and leaving the company to seek a fresh reference on a modified balance sheet.

Analysis: The taking over of one unit materially affected the company's financial profile. In that backdrop, the liberty granted to file a fresh reference on a modified balance sheet was treated as a lawful and practical course. The Court found no legal basis to direct continuation of the existing reference only for the remaining units or to characterise the respondents' approach as perverse or unsustainable.

Conclusion: The request to continue the reference for the surviving units was rejected, against the petitioner.

Final Conclusion: The impugned orders were sustained, no writ interference was warranted, and the petition stood dismissed.

Ratio Decidendi: Where secured creditors representing the statutory majority have taken measures under the securitisation law, the Board cannot undertake a fresh merits enquiry into that action while deciding abatement under the sick industrial companies law, and the remedy against such action lies under the securitisation statute itself.

---