2009 (11) TMI 1037 - HC - Indian Laws

Court Upholds Orders Requiring Issuance of 'No Dues Certificate' to Sick Company, Citing Implied Consent in Settlement.

The writ petition was dismissed by the court, affirming the orders of the BIFR and the Appellate Authority, which directed the petitioner, KSFC, to issue ... - Issues:1. Validity of the order directing the petitioner to issue a 'no dues certificate' to a Sick Industrial Company.2. Interpretation of legal fiction under section 19(2) of the Sick Industrial Companies (Special Provisions) Act, 1985.3. Compliance with the provisions of the draft rehabilitation scheme and consent of concerned parties.4. Assertion of the petitioner regarding non-consent for a 'one time settlement' and subsequent actions by the Board for Industrial and Financial Reconstruction (BIFR).Analysis:1. The writ petition challenged an order by the Appellate Authority for Industrial and Financial Reconstruction, confirming the directive for the petitioner, Karnataka State Financial Corporation (KSFC), to issue a 'no dues certificate' to a Sick Industrial Company. The petitioner contended that it had not agreed to a 'one time settlement' and had not approved any such settlement. However, the respondent company claimed that the KSFC had received a settlement amount and had not objected to the proposed settlement in the draft rehabilitation scheme.2. The judgment analyzed the legal fiction under section 19(2) of the Sick Industrial Companies (Special Provisions) Act, 1985, which states that if no objection is raised within the specified period, consent is deemed to have been given. The court found that the petitioner's silence on the proposed 'one time settlement' in the draft scheme amounted to deemed consent. The petitioner's failure to object or appeal against the scheme's sanction led to the conclusion that consent was implied, invoking the legal fiction provision.3. The court reviewed the correspondence between the parties and found that the petitioner had not expressly dissented to the 'one time settlement' proposed in the draft scheme. The BIFR had circulated the scheme for consent, and since the petitioner did not object, the scheme was sanctioned based on implied consent. The court emphasized that the petitioner's acceptance and affirmation of the asset transfer and payment received precluded it from denying the obligation to issue the 'no dues certificate.'4. The judgment highlighted that the petitioner's argument that section 19 of the SICA Act was not applicable was rejected, considering the financial sacrifice envisaged for the petitioner as a public financial institution. The court concluded that there was no legal infirmity in the orders of the BIFR and the Appellate Authority directing the petitioner to issue the 'no dues certificate.' Consequently, the writ petition was dismissed as devoid of merit.This comprehensive analysis of the judgment addresses the issues related to the validity of the order, interpretation of legal provisions, compliance with the rehabilitation scheme, and the petitioner's assertions, providing a detailed overview of the court's reasoning and decision.