Statutory rehabilitation review governs rival sick-company schemes; purchase of non-performing assets did not breach the status quo order.

Comparative evaluation of rival rehabilitation schemes for a sick industrial company lies with the statutory Operating Agency, not the writ court, so the directions for fresh consideration of the Tata and R.R. Kabels proposals were maintained with remand for reevaluation. Objections that Tata's proposal was delayed or procedurally introduced were treated as too technical to exclude consideration, especially since R.R. Kabels' revised proposal had also not yet been assessed. On section 22A, the Court held that a non-performing asset is not an asset of the sick company for restraint purposes, so R.R. Kabels' purchase of such debt did not breach the status quo order.

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Issues: (i) Whether the impugned directions requiring fresh consideration of rehabilitation proposals by the Operating Agency, including the proposal of Tata and the proposal of R.R. Kabels, warranted interference; (ii) Whether the purchase of non-performing assets by R.R. Kabels amounted to violation of the status quo order under section 22A of the Sick Industrial Companies (Special Provisions) Act, 1985.

Issue (i): Whether the impugned directions requiring fresh consideration of rehabilitation proposals by the Operating Agency, including the proposal of Tata and the proposal of R.R. Kabels, warranted interference.

Analysis: The matter concerned competing rehabilitation schemes for a sick industrial company. The Court held that assessment of the comparative merits of such schemes lies within the domain of the specialized statutory machinery, namely the Operating Agency, and not the writ court. It also held that objections to Tata's proposal on the ground of delay and the manner of its introduction were too technical to preclude consideration, particularly since the revised proposal of R.R. Kabels had also not yet been evaluated. At the same time, the Court noted that R.R. Kabels had deposited substantial funds and had purchased a large portion of the secured debt, which could be relevant in the overall evaluation.

Conclusion: The matter was remitted to the Operating Agency for fresh evaluation of the proposals of R.R. Kabels and Tata, and the writ petition was disposed of with directions.

Issue (ii): Whether the purchase of non-performing assets by R.R. Kabels amounted to violation of the status quo order under section 22A of the Sick Industrial Companies (Special Provisions) Act, 1985.

Analysis: Section 22A empowers the Board to restrain disposal of the sick industrial company's assets. The Court held that a non-performing asset of the sick industrial company could not be treated as an asset for this purpose. On that construction, the purchase of such debt could not be regarded as breach of the status quo order. The Court therefore rejected the contempt-based objection raised against R.R. Kabels.

Conclusion: The alleged violation was not made out, and the purchase of the non-performing assets was held not to contravene the status quo order.

Final Conclusion: The challenge to the AAIFR directions failed in part and succeeded only to the extent that the rehabilitation proposals of the rival bidders were to be reconsidered by the statutory forum. The contempt-style objection against R.R. Kabels was rejected, and the proceedings were finally concluded with a remand for fresh evaluation and continuation of status quo as directed.

Ratio Decidendi: The comparative merits of rival rehabilitation schemes under the sick industrial companies regime must be evaluated by the statutory Operating Agency, and a non-performing asset is not an asset of the sick company for the purpose of section 22A restraint orders.

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