Abated revival proceedings cannot validate unauthorized asset dealings; illegal share allotment and undisclosed scrap sale were set aside.

After abatement of the revival proceedings under the insolvency regime, GDCL had no subsisting authority to deal with the assets or shareholding of JUL and JAIL, and legitimate expectation or Article 142 could not validate unauthorized acts. The Court held that the JAIL share allotment was illegal and set aside the undisclosed scrap sale at the Sawai Madhopur unit with refund and interest, while leaving other impugned sales undisturbed for want of necessary parties and evidence. It rejected third-party rehabilitation proposals as premature because no proper valuation or inventory had been made and the unit was not realistically revivable. Workmen's dues were to be verified and paid expeditiously under an administrator's supervision, with asset inventory and valuation directed.

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Issues: (i) whether, after repeal of SICA and abatement of pending proceedings, GDCL retained any authority to deal with the assets and shareholding of JUL and its subsidiary JAIL; (ii) whether the sales of assets and the allotment of shares in JAIL were lawful; (iii) whether the proposed rehabilitation schemes submitted by third-party applicants could be accepted; and (iv) what consequential reliefs should follow for the workmen, the assets, and the pending company petition.

Issue (i): Whether, after repeal of SICA and abatement of pending proceedings, GDCL retained any authority to deal with the assets and shareholding of JUL and its subsidiary JAIL.

Analysis: The rehabilitation scheme had failed, BIFR had recommended winding up, and the appeal before AAIFR stood abated when the statutory window under the new insolvency regime was not used. Once the proceedings abated, the earlier rehabilitation arrangement lost efficacy and GDCL could not continue to act as if it had ownership rights. The Court also held that the doctrine of legitimate expectation could not sanitise illegality, and Article 142 could not be used to condone repeated unlawful acts. Consequently, GDCL had no subsisting locus to deal with JUL or JAIL as owner.

Conclusion: GDCL had no authority to deal with the assets or shareholding of JUL and JAIL after abatement, and its continuing control was unlawful.

Issue (ii): Whether the sales of assets and the allotment of shares in JAIL were lawful.

Analysis: The Court found that the Kanpur Jute Mill was sold without following the scheme-prescribed process and without seeking the Court's permission. The two sales of JAIL properties were also effected without disclosure to the Court. The scrap sale at the Sawai Madhopur unit was not properly disclosed and the proceeds remained with GDCL. The allotment of fresh shares in JAIL to GDCL group companies was treated as unsupported by the record and outside the scope of the rehabilitation scheme, which had never included JAIL. The Court declined to reopen the sale of the Kanpur unit and the two JAIL sales in the absence of necessary parties and evidence, but it set aside the scrap sale and directed refund with interest.

Conclusion: The share allotment in JAIL was illegal, the scrap sale of the Sawai Madhopur unit was set aside, and the other impugned sales were left undisturbed.

Issue (iii): Whether the proposed rehabilitation schemes submitted by third-party applicants could be accepted.

Analysis: The Court held that no proposed scheme could be accepted without a proper valuation and inventory of the assets of JUL and JAIL. The unit could not realistically be revived after decades of closure, the workers were largely at or beyond superannuation, and the proposals were conditional and asset-driven. The Court therefore treated the applications as premature and outside the stage at which a transfer or revival arrangement could be approved.

Conclusion: The proposed schemes of the third-party applicants were rejected.

Issue (iv): What consequential reliefs should follow for the workmen, the assets, and the pending company petition.

Analysis: The Court directed a time-bound exercise for verification and payment of workmen's dues, including provident fund dues, with an administrator appointed to supervise the process and valuation of the assets. It directed preparation of inventories of assets and occupied quarters and stated that further sale or use of assets could occur only after valuation. The pending company petition before the Rajasthan High Court was held infructuous in view of the present directions and the factual position that the company was no longer in debt. The contempt petition also required no separate order.

Conclusion: Workmen's dues were to be verified and paid expeditiously, an administrator was appointed, the balance assets were to be inventoried and valued, and the company petition was disposed of as infructuous.

Final Conclusion: The writ petition was disposed of with substantial reliefs in favour of the workmen, invalidation of illegal share allotment and scrap sale, rejection of the third-party revival proposals, and appointment of an administrator for further implementation and asset management.

Ratio Decidendi: After statutory abatement of the pending revival proceedings, a promoter or manager without subsisting legal authority cannot invoke legitimate expectation or Article 142 to validate unauthorized dealings with company assets or shareholding; such acts remain unlawful unless supported by due process and court-sanctioned valuation and supervision.

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