2009 (10) TMI 968 - HC - Indian Laws

Court dismisses challenge to company deregistration as sick industrial company; positive net worth justifies jurisdiction cessation.

Catholic Syrian Bank Versus Board of Industrial and Financial Reconstruction and Ors.

The court dismissed the petition challenging the deregistration of a company as a sick industrial company by the Appellate Authority for Industrial and ... - Issues Involved:1. Jurisdiction of BIFR and AAIFR over the respondent company.2. Legitimacy of the respondent company's deregistration from BIFR.3. Petitioner's locus standi and rights affected by the impugned order.4. Delay and concealment in filing the petition.Summary:1. Jurisdiction of BIFR and AAIFR:The petitioner challenged the impugned order dated 03.03.2008 passed by AAIFR, which held that respondent No. 2 is no longer a sick industrial company u/s 3(1)(o) of SICA, as its net worth had turned positive. Consequently, BIFR and AAIFR ceased to have jurisdiction over the company.2. Legitimacy of Deregistration:Respondent No. 2, Dunlop India Ltd, was declared a sick industrial company on 22.06.1998. BIFR had directed the submission of a Draft Rehabilitation Scheme. Respondent No. 2 sought permission to issue equity shares for rehabilitation, which BIFR permitted. The petitioner and SEBI challenged this order, but AAIFR dismissed the appeal, citing the Madras High Court's judgment that the company's net worth had turned positive, thus ceasing BIFR's jurisdiction.3. Petitioner's Locus Standi and Rights Affected:The petitioner argued that the company showed profits by selling assets and should not have been deregistered. The petitioner contended that it was prevented from recovering dues due to the company's sick status and that the sale of assets to sister concerns affected its rights. However, the court noted that the petitioner, a secured creditor, had sufficient security in the form of a mortgaged property. The court found no merit in the petitioner's claims as the company's revival did not prejudice the petitioner's rights.4. Delay and Concealment:The court observed a delay in filing the petition and noted that the petitioner had concealed the fact of filing recovery proceedings before the Debts Recovery Tribunal, Calcutta. Despite these issues, the court did not dismiss the petition solely on these grounds but found no merits in the petition overall.Conclusion:The court dismissed the petition, finding no merit in the contentions raised by the petitioner and noting that the petitioner's rights were not adversely affected by the impugned order.