2016 (11) TMI 1733 - SC - Indian Laws

Supreme Court limits BIFR's power over non-sick companies under Section 22A

The Supreme Court clarified that Section 22 A of the Sick Industrial Companies (Special Provisions) Act, 1985 only applies to sick industrial companies, ... Seeking an injunction against the First Respondent from selling, removing or dismantling any assets of the Kota units till the entire amount due to the workmen was determined and settled - BIFR held that the Second Respondent cannot escape responsibility towards the rehabilitation of the Kota unit on the ground that there is change in management - HELD THAT:- It is clear from a plain reading of Section 22 A of the Act that the Board can issue a direction not to dispose of assets only to a sick inACdustrial company. There is no dispute that the First Respondent is not a sick industrial company and that it purchased the assets from a sick industrial company in accordance with the Sanctioned Scheme. The BIFR was not correct in passing an order of status quo and directing the First Respondent not to alienate/transfer the assets by its orders dated 05.05.2008 and 30.06.2008. Several contentions have been raised by both sides during the course of hearing of these Appeals which we have not adverted to as they are not relevant for adjudication of the dispute in these appeals. We express no opinion on the jurisdiction of BIFR under other provisions of the Act. It is open to the BIFR to review the implementation of the Sanctioned Scheme and pass suitable directions. The AAIFR held that the Second Respondent has no liability in respect of Kota units which have been sold to the First Respondent. The said findings were not challenged by the First Respondent in the Writ Petition filed in the High Court. The High Court set aside the entire order dated 11.12.2008 without taking note of the findings in favour of the Second Respondent - Appeal dismissed. Issues:1. Interpretation of Section 22 A of the Sick Industrial Companies (Special Provisions) Act, 1985.2. Jurisdiction of the Board for Industrial and Financial Reconstruction (BIFR) over companies not classified as sick industrial companies.3. Liability of parties regarding the rehabilitation and payment of dues to workmen in the context of industrial restructuring.Issue 1: Interpretation of Section 22 A of the Sick Industrial Companies (Special Provisions) Act, 1985The case involved a dispute regarding the scope of Section 22 A of the Act, which empowers the Board to issue directions not to dispose of assets to a sick industrial company. The court emphasized that this provision applies only to sick industrial companies, clarifying that the Board cannot issue such directions to a company that is not classified as a sick industrial company. The judgment cited a previous case to support this interpretation, highlighting the limited power of the Board under Section 22 A.Issue 2: Jurisdiction of the Board for Industrial and Financial Reconstruction (BIFR)The High Court ruled that the BIFR and the Appellate Authority for Industrial and Financial Reconstruction (AAIFR) do not have jurisdiction to issue directions to a company that is not classified as a sick industrial company under Section 22 A of the Act. This decision was based on the understanding that the BIFR cannot intervene in matters concerning companies not falling under the definition of sick industrial companies. The court upheld the High Court's judgment in this regard, emphasizing the limited authority of the BIFR under Section 22 A.Issue 3: Liability of parties in industrial restructuring and payment of dues to workmenThe judgment addressed the liability of parties involved in the rehabilitation and restructuring of industrial units, particularly concerning the payment of dues to workmen. It highlighted the findings of the AAIFR that the Second Respondent had no liability regarding the Kota units sold to the First Respondent. The High Court's decision to set aside the AAIFR's findings in favor of the Second Respondent without challenge from the First Respondent was criticized. The court emphasized that the High Court should not have disregarded the findings in favor of the Second Respondent, as they were not contested in the Writ Petition filed by the First Respondent.In conclusion, the Supreme Court's judgment clarified the interpretation of Section 22 A of the Act, affirmed the limited jurisdiction of the BIFR over non-sick industrial companies, and addressed the liability of parties in industrial restructuring, emphasizing the importance of upholding findings not challenged in legal proceedings.