2014 (4) TMI 1311 - HC - Indian Laws

BIFR bench composition change during proceedings doesn't breach natural justice before final arguments stage

RR Kabel Limited Versus M/s Incab Industries Ltd. & Ors., Pegasus Assets Reconstruction Pvt. Ltd. Versus Tata Steel Limited and Ors, Incab Sramik Sangh & Ors Versus Appellate Authority For Industrial & Ors, and All India Incab Industries Employees Federation & Ors. Versus Aaifr & Ors.

The Delhi HC rejected petitioners' challenge to BIFR proceedings on grounds of 'hearing by one, decision by another.' The court held that BIFR proceedings ... Judicial Propriety and Bench Composition - nature of the proceedings before the BIFR - Whether the order passed by the BIFR suffers from the vice of “hearing by one, decision by another”? What is the nature of the proceedings before the BIFR? In particular, do they require personal hearing to be given to the parties? - HELD THAT:- Section 18(3) empowers the BIFR, once the OA submits the scheme, to examine it and make necessary modifications thereof; thereafter a copy of the scheme, as modified, shall be sent to the sick company and the OA. If there is provision in the scheme for any amalgamation, the scheme shall be sent to the company involved in the amalgamation. Once this process is completed, the BIFR shall publish the scheme, which is referred to as “the draft scheme”, in brief, in newspapers “for suggestions and objections, if any, within such period as the Board may specify”. If any suggestions or objections are received, the BIFR may, under section 18(3)(b) make such modifications to the draft scheme as it considers necessary in the light of the suggestions and objections. Objections or suggestions may also be received from any company involved in the amalgamation (if any), any shareholder or any creditor or employees of the company. Section 18(4) empowers the BIFR to sanction the scheme and specify the date on which it shall come into force. These provisions do not per se contemplate any hearing, as contended on behalf of TSL; however, such a requirement is in our opinion implicit in the provisions of clause (b) of sub-section (3) of section 18 for it is difficult to see how the objections and suggestions can be taken into consideration and the draft scheme be modified in their light unless those who have raised the objections or made suggestions are heard. When there is a requirement to consider the suggestions and objections to the draft scheme, we believe that there is a duty to act judicially. Was the hearing before the BIFR complete at any time before 24.11.2009? - HELD THAT:- The Bench which heard the matter from 24.11.2009 also heard it on merits and the reason why we say so is, as pointed out earlier, that not only this Bench had the benefit of the earlier proceedings, but the Bench also applied its mind to the record and issued further directions to the OA as well as the parties. If the contention taken on behalf of the petitioners is accepted, the result would be that the hearings before the Courts and the tribunals would ever remain inconclusive; with every change in the constitution of the Bench, the entire matter will have to be reargued from the inception. This would clog the judicial and quasi- judicial machinery and matters will get stuck without being disposed of. Can it be said that the Bench consisting of the Chairman and V.K. Malhotra, Member did not have the benefit of the earlier proceedings and the arguments/ submissions made therein? Could they not have proceeded on the basis of the record of the earlier proceedings without breaching the rules of natural justice? - HELD THAT:- It is only because the proceedings had not reached the stage of final arguments and were still at the stage of exchange of the pleadings, written submissions, clarifications, written objections, etc. that even the petitioners believed that the proceedings had not reached such a crucial stage that a change in the constitution of the Bench would have put them to prejudice. The later Bench consisting of the Chairman and Mr. Malhotra continued the proceedings and it was before this Bench that considerable progress was made not only in the completion of the exchange of papers, written submissions, written objections, etc. but also in the matter of oral arguments and this Bench also issued directions to the parties to react to the supplementary report filed by the OA and once the reaction of the parties was brought on record in writing, directed the OA to submit its reply, which completed the proceedings. All this was done from 24.11.2009 to 07.12.2009 and on 09.12.2009 the orders were pronounced by the BIFR. Thus there was no breach of the rules of natural justice. Do the provisions of the Code of Civil Procedure apply to the proceedings before the BIFR? - HELD THAT:- The provisions of the SICA do not specifically provide for a situation where a particular Bench, after recording evidence or a memorandum is unable to continue with the proceedings for some reason or the other. In such a case, having regard to Regulation 12(2), the provisions of Order XVIII, Rule 15 prima facie seem to apply. In any case we are unable to demur to the proposition that the principles behind the provisions of the CPC can be properly invoked in the absence of any specific provision in the SICA to cover the situation. The argument of Mr. Rajiv Nayar, however, was that this can be permitted only in the case of death or transfer of the Members of the BIFR and not otherwise. But if it is the prerogative of the Chairman to constitute the Benches and such prerogative was not questioned by the petitioners, there is no reason why the principle behind Order XVIII, Rule 15 of the CPC should not be invoked and applied. Are the petitioners estopped from raising the objection before the AIFR or this court? - Did they acquiesce in the proceedings, thus disabling themselves from raising the objection at any time later? - HELD THAT:- In a technical sense it cannot be said that the petitioners consciously waived their right to object to the proceedings being continued before another Bench or acquiesced in the same. The second possibility is that the petitioners themselves were aware that there was no conclusion of the hearing on 12.11.2009 and therefore there is no question of any waiver of their right to claim that the same Bench should continue the proceedings or any acquiescence. This is the correct position. It is for this reason that we say that there can be no question of any waiver or acquiescence on the part of the petitioners. The preliminary question raised by the petitioners in the writ petition to the effect that the proceedings before the BIFR offends the fundamental principle of natural justice that the one who hears, must decide, is rejected - writ petitions would, therefore, have to be heard on merits - they be listed before the roster Bench on 05.05.2014. Issues Involved:1. Judicial Propriety and Bench Composition2. Merits of Rehabilitation Schemes3. Applicability of Civil Procedure Code to BIFR Proceedings4. Estoppel and Acquiescence5. Prejudice to PetitionersIssue-wise Detailed Analysis:1. Judicial Propriety and Bench Composition:The primary contention revolved around whether the BIFR's decision-making process violated the principle that the same bench should hear and decide the case. The petitioners argued that the final order dated 09.12.2009 was passed by a bench different from the one that heard the final arguments on 12.11.2009. The respondents countered that the BIFR's practice of recording the summary of proceedings ensured continuity, and Section 10 of the SICA supports the validity of proceedings despite changes in bench composition. The majority of the AIFR upheld this view, emphasizing that requiring rehearings with every bench change would indefinitely delay proceedings. The minority view dissented, suggesting a remand to BIFR for reconsideration due to judicial propriety concerns.2. Merits of Rehabilitation Schemes:The judgment also addressed the merits of the rehabilitation schemes proposed for the sick industrial company. The BIFR and subsequently the AIFR found the scheme proposed by TSL to be the most viable, particularly in terms of securing the future of the workers. The OA's comprehensive analysis favored TSL's proposal over others, noting that RRK and PARL's schemes involved selling immovable assets, which was not in the workers' best interests. The majority of the AIFR upheld the BIFR's decision on these grounds.3. Applicability of Civil Procedure Code to BIFR Proceedings:There was a debate over whether the provisions of the Code of Civil Procedure (CPC) applied to BIFR proceedings. The court noted that Regulation 12(2) allows the CPC to apply where no specific provision is made in the regulations. Order XVIII Rule 15 of the CPC, which allows a successor judge to continue proceedings, was deemed applicable, supporting the continuity of the BIFR's proceedings despite changes in bench composition.4. Estoppel and Acquiescence:The respondents argued that the petitioners were estopped from raising objections about bench composition at a late stage since they did not object during the BIFR proceedings. The court observed that the petitioners did not raise this issue during the hearings on 24.11.2009 or 30.11.2009, indicating acquiescence. The court emphasized that objections should be raised at the earliest possible stage, and failure to do so could preclude raising them later.5. Prejudice to Petitioners:The court examined whether the petitioners suffered any prejudice due to the change in bench composition. It concluded that no prejudice was caused, as the petitioners were given full opportunities to present their case, submit written objections, and participate in hearings. The court found that the BIFR's process ensured that all parties had a chance to be heard, and the continuity of proceedings was maintained through written records and summaries.In conclusion, the court rejected the preliminary objection regarding the bench composition and upheld the BIFR's decision-making process. The writ petitions were to be heard on merits subsequently.