TaxTMI 
TaxTMI 
TaxTMI 
2014 (4) TMI 1311
X X X X Extracts X X X X
X X X X Extracts X X X X
....WP No.5971/2011, respondents No.15, 22, 23, 29, 46 in CWP No.5197/2011, respondents No.15, 22, 23, 28, 46 in CWP No.5954/2011. Mr Barun Kumar Sinha, Adv. with Ms Pratibha Sinha and Mr Aayush Raj, Adv. in WPC Nos. 5954/11, 5197/11, 5010/11, 5971/11. ORDER R. V. EASWAR, J. 1. In these proceedings, under Article 226 of the Constitution of India the petitioners have called in question the order passed by the Appellate Authority for Industrial and Financial Reconstruction ("AIFR"), New Delhi on 30.6.2011 in the following circumstances. 2. M/s Incab Industries Ltd (hereinafter referred to as IIL) was a sick industrial company. Some time in October, 1999 a reference was made by it to the Board for Industrial and Financial Reconstruction (hereinafter referred to as "BIFR") and it was declared a sick industrial company by an order passed by BIFR on 4.4.2000. The State Bank of India ("SBI") was appointed as the Operating Agency ("OA") under section 17(3) of the Sick Industrial Companies (Special Provisions) Act, 1985 (hereinafter referred to as "SICA") to examine the viability of the company and submit a rehabilitation scheme. There were several teething troubles in the preparation of th....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... PARL had no experience in running a manufacturing unit as it was only an asset reconstruction company. The OA also noted that the motive of RRK and PARL appeared to be to grab valuable real estate of the sick company as was evident from their proposal to sell the immoveable assets of the sick company to finance their schemes which invited strong objections from the workers. Compared to this, TSL did not propose to sell any of the immoveable assets to finance their rehabilitation scheme. This was the gist of the report dated 26.10.2009. 5. The report was submitted to the BIFR which held a hearing on 12.11.2009. On this date, the parties opposing the scheme prepared by TSL objected to the report of the OA, upon which the BIFR directed them to file written objections; the OA as well as the sick company were directed to give their comments on the objections received. The coram of the BIFR was represented by Mr K Cherian Verghese, Chairman, Mr Pawan Raina, Member and Smt Saroj Bala, Member. The parties submitted their respective written objections to the report of the OA. 6. On 20.11.2009 the OA submitted its comments to the objections raised by RRK and PARL to the BIFR in compliance....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ppeals were filed before the AIFR which issued notices. On 27.7.2010 the Supreme Court directed BIFR to hear all the six appeals on day-to-day basis from 1.9.2010. Hearings were concluded by the BIFR on 9.5.2011 and judgment was reserved. 13. Before the AIFR several pleas were taken by the appellants with regard to the merits of the rival schemes. One of the contentions raised before the AIFR by the appellant was that the Bench of the BIFR which passed the final order on 9.12.2009 (impugned in appeal before the AIFR) was not the Bench which heard the entire proceedings and therefore could not have passed the final order. TSL resisted the contention by submitting that it is not possible for the same members to hear the proceedings before BIFR since the proceedings go on for several years during which members of the BIFR regularly change on account of retirement etc. It was further submitted that BIFR adopts the procedure regularly to record the gist or the summary of proceedings of each hearing in the subsequent orders. It was pointed out that in its order passed on 9.12.2009, the BIFR followed the same procedure and recorded the gist of the meetings of each and every previous proc....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ase needs to be re-heard, it will lead to constant rehearings as a result of which the adjudication and decisions in BIFR cases can be indefinitely prolonged, which, in the context of revival of such companies will not be a desirable consequence. Moreover, Section 10 of SICA clearly lays down the following: - "Vacancies, etc., not to invalidate proceedings of Board and Appellate Authority - No act or proceeding of the Board or, as the case may be, the Appellate Authority shall be questioned on the ground merely of the existence of any vacancy or defect in the constitution of the Board or the Appellate Authority or any defect in the appointment of a person acting as a Member of the Board or the Appellate Authority." Therefore, we feel that the objectivity of evaluation and adjudication has been by no means compromised because of the fact that the Bench that gave the impugned order was partially different in composition from the Bench that heard the final arguments. Therefore, we think this does not constitute any legal infirmity. In the interest of expeditious justice, we hold that the impugned order has been validly delivered by the Bench and does not suffer from any infirmit....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... of the hearing on the preliminary point the parties were requested to file brief written submissions which they have done; they have also been taken into consideration. 19. Mr. Rajiv Nayar, learned senior counsel for the petitioner in W.P.(C) No.5010/2011 (R.R. Kabel Ltd.) put forth the following submissions: - (a) It is a well settled principle that the same Bench which heard the arguments shall pass the orders, but this principle has been given a go-by in the present case by the BIFR as pointed out by the minority view of the AIFR. (b) Final arguments were heard on 12.11.2009 by the BIFR (Coram: Cherian Verghese, the Chairman, Pawan Raina and Saroj Bala, Members) but the final order was passed on 09.12.2009 by a different Bench consisting of Cherian Verghese, the Chairman and V.K. Malhotra, Member. The hearings which took place on 2 dates in between i.e. on 24.11.2009 and 30.11.2009 were not on the issue of the comparison of the three schemes propounded by R.R.K., PARL and TSL, but were on a different issue. It is not known why Pawan Raina and Saroj Bala were not on the Bench on 09.12.2009 though they continued to be the members of the BIFR. (c) Oral arguments were conc....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ers' union. Therefore, it should not be allowed to be taken at such a late stage in writ proceedings, which fall under the discretionary and equitable jurisdiction of this Court. (b) The BIFR was considering the scheme of the operating agency with respect to the sick company and the measures to be taken for the proper management of the company by change in, or takeover of the management of the company in accordance with Section 18(1)(b) of the SICA. Sub-sections (1) and (2) of Section 18 does not even contemplate a hearing. Therefore, to say that since oral arguments were concluded before a particular Bench on 12.11.2009, but orders thereon were passed by a different Bench on 09.12.2009 and, therefore, the entire proceedings of the BIFR are vitiated is untenable. The BIFR was actually examining the scheme prepared by the OA in accordance with sub-section (3) of Section 18 of the SICA. The duty cast on the BIFR is only to examine the scheme submitted by the OA. When copious record of the proceedings is left by the Bench which heard the submissions on 12.11.2009 and that record had in fact been taken into consideration by the later Bench, though constituted by different Members, th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....uranga vs. State of Karnataka, (2013) 3 SCC 721. 24. Mr. Vikas Singh, the learned senior counsel appearing for the workers' union supporting TSL made the following submissions: - (i) Under Section 13 of the SICA, the BIFR has the power to regulate the procedure and conduct of the business as well as procedure of the Benches. Regulation 12 (2) of the BIFR Regulation, 1987 enables the provisions of the Code of Civil Procedure, 1908 to be applied to the proceedings to the extent as may be deemed expedient by the Board, where no specific provision has been made in the regulations to cover a particular situation. Therefore, Section 99 of the Code of Civil Procedure applies to proceedings before the BIFR, according to which no decree shall be reversed or substantially varied nor shall any case be remanded in appeal on account of, inter alia, "any error, defect or irregularity in any proceedings in the suit, not affecting the merits of the case or the jurisdiction of the Court". (ii) Order XVIII Rule 15 of the CPC also applies to the present case. This provision enables a successor-Judge to deal with any evidence or memorandum taken down or made by the predecessor- Judge as if such e....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t respondent in W.P.(C) No.5010/2011 (Incab Industries Ltd.) supported the arguments of the petitioner only to the limited extent that in the final order passed by the BIFR there is reference only to the directions of the earlier Bench but not to the proceedings in entirety and, therefore, there was no continuity of the proceedings. He submitted that the hearing which took place on 12.11.2009 before the Bench constituted by Cherian Verghese (Chairman), Pawan Raina and Saroj Bala, (Members) was the final hearing. Pawan Raina, Member retired only in July, 2010 and Saroj Bala, Member retired only in November, 2012. These Members were, therefore, available in the BIFR even when final orders were passed on 09.12.2009. 26. Mr. Kirti Uppal, who appeared for Incab Industries Ltd. supported the arguments of Mr. Vikas Singh. He further submitted that the objection raised by the petitioners was a mere technicality and it should not be accepted as it will result in "setting the clock back by several years". 27. In W.P.(C) No.5197/2011, the learned counsel appearing for the All India Incab Industries Employee's Association put forth two points. The first was that the provisions of the Code of....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... BIFR on that date. (ii) The contention that the appellate court can remedy the situation by giving a full hearing at the appellate stage is fallacious because a hearing in the appellate court is not a substitute for hearing in the trial court and cannot cure the fatal flaw as held by Megarry, J. in Leary's case (1970) 2 All ER 713. The said principle is followed in India in the following cases: - (a) Institute of Chartered Accountants of India vs. L.K. Ratna & Ors., (1986) 4 SCC 537 (b) Oxy Fisheries (P) Ltd. vs. Union of India, (2010) 13 SCC 427 (c) State of U. P. vs. Mohammad Nooh, AIR 1958 SC 86 (iii) The contention of the respondent that this objection is taken for the first time at a very late stage is without merit, because it is impossible and improper to tell the BIFR that it cannot constitute different Benches for different hearings. Moreover, a fundamental error of jurisdiction, correctible by a writ of certiorari, can be taken at any stage and can be taken for the first time before the High Court as held by the Supreme Court in Rattan Lal Sharma vs. Managing Committee, Dr. Hari Ram (Co-Education) Higher Secondary School, (1993) 4 SCC 10. (iv) The arguments b....
X X X X Extracts X X X X
X X X X Extracts X X X X
....who decides must hear. 34. The following issues inter alia arise for consideration and decision: (a) What is the nature of the proceedings before the BIFR? In particular, do they require personal hearing to be given to the parties? (b) Was the hearing before the BIFR complete at any time before 24.11.2009? (c) (i) Even if the answer to (b) is in the affirmative, 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? (ii) Do the provisions of the Code of Civil Procedure apply to the proceedings before the BIFR? (d) 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? (e) Was any prejudice caused to the petitioners? 35. So far as the issue (a) is concerned, it cannot be and nor was it seriously disputed that the proceedings before the BIFR are quasi-judicial proceedings. The po....
X X X X Extracts X X X X
X X X X Extracts X X X X
....raft 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. 37. So far as issue (b) is concerned, the question is whether the petitioner, who included the unsuccessful propounders, were given an opportunity of being heard at the stage of considering their objections. It cannot be disputed that oral arguments were heard on 12.11.2009 as to the objections to the report of the OA dated 26.10.2009. On 12.11.2009, the Bench consisted of the Chairman, Mr. Pawan Raina and Ms. Saroj Bala, Members of the BIFR. They directed the parties to file written objections on 16.11.209. Accordingly, TSL, RRK and PARL filed the written objections on 16.11.2009. On this, parties before us are agreed. The next hearing took place on 24.11.2009, on which date the Bench consisted of only the Chairman, BIFR and Mr. V.K. Malhotra, Member. On this date, though the Bench was of a different composition, the written objections of the parties were already on record and were taken into consideration by the Bench. The pet....
X X X X Extracts X X X X
X X X X Extracts X X X X
....argument that the hearing before the BIFR was concluded on 12.11.2009 before a Bench consisting of the Chairman and Mr. Pawan Raina and Ms. Saroj Bala, Members, as claimed by the petitioners. Even if such an assumption is made, we are of the opinion that there was no impropriety in another Bench consisting of the Chairman and V.K. Malhotra, Member continuing the hearing on 24.11.2009. The reason is that the earlier Bench had directed the parties to file written objections to the report of the OA dated 26.10.2009 and these were filed on 16.11.2009. These written objections were on record when the Bench consisting of the Chairman and Mr. V.K. Malhotra took up the hearing on 24.11.2009. They had the opportunity to go through the written objections as also the comments made by the OA and placed on record on 20.11.2009. After going through these material, the Bench on 24.11.2009 directed the parties to file further clarifications and the OA was directed to reconcile the figures and recast its report and file a supplementary report. These directions would demonstrate the application of mind by the Bench which heard the matter on 24.11.2009 to the issues before it. Unless this Bench had a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t 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. 40. It needs mention here that when a different Bench consisting of the Chairman and Mr. Malhotra, Member took up the hearing of the proceedings under Section 18(3) on 24.11.2009, no objection was raised by the petitioners that the Bench should not continue with the hearing since the matter was earlier heard by a different Bench for a considerable period of time during which considerable arguments have been advanced. Mr. Nayar, as noted earlier, raised the point that it would be impossible or impractical for the litigant to object to the constitution of the Bench. It is true that under Section 12(2) of the SICA, it is the prerogative of the Chairman to constitute the Benches. Ho....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the purpose of holding any inquiry or for any other purpose under the SICA. Such powers are in respect of the following matters: - "(a) the summoning and enforcing the attendance of any witness and examining him on oath; (b) the discovery and production of document or other material object producible as evidence; (c) the reception of evidence on affidavit; (d) the requisitioning of any public record from any court or office; (e) the issuing of any commission for the examination of witnesses; (f) any other matter which may be prescribed." 42. Section 14 says that the proceedings before the BIFR and AIFR shall be deemed to be judicial proceedings for the purposes of certain Sections of the Criminal Procedure Code and the Indian Penal Code. Section 10 provides that no act or proceeding of the BIFR or AIFR shall be questioned on the ground merely of the existence of any vacancy or "defect in the constitution of the Board". Regulation 12 of the BIFR Regulations, 1997 reads as under: - "12. Effect of non-compliance and application of Code of Civil Procedure. - (1) Failure to comply with any requirement of these regulations shall not invalidate the proceeding merel....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... it had resulted in failure of justice or there has been a prejudice on merits. Section 99 of the CPC, which embodies this principle is partly reflected in Section 10 of the SICA which, inter alia, says that no act or proceeding of the Board shall be questioned on the ground merely of the existence of any defect in the constitution of the Board. Regulation 16(3) also states that subject to the other provisions of the Regulations, "every order made or act done by a Bench in exercise of its powers shall be deemed to be the order or act, as the case may be, of the Board". 44. So far as the issues (d) and (e) are concerned, it is possible to hold that the petitioners, having not raised the objection before the BIFR itself, cannot raise the question either before the AIFR or this Court in writ proceedings. There are two ways of looking at this. First, that the petitioners were well aware that they could validly raise the objection before the BIFR on 24.11.2009 but consciously waived the same. This assumes that the hearing was concluded on 12.11.2009 before the Bench consisting of the Chairman, and two other members. We have already attempted to show that this is not the factual positio....
X X X X Extracts X X X X
X X X X Extracts X X X X
....es cited before us. The judgment of the Supreme Court in Gullapalli Nageswara Rao and Ors. V. APSRTC and Anr. (supra) cited by the petitioners, is a case which arose under the Motor Vehicles Act, 1939. That Act and the rules framed thereunder imposed a duty on the State Government to give a personal hearing. The Rules provided that it was the duty of the Secretary of the Transport Department of the State to hear and the Transport Minister to decide. By a majority of 3 : 2, the Supreme Court held that such a procedure defeats the object of personal hearing and such divided responsibility is destructive of the concept of judicial hearing. It was held that personal hearing enables the authority concerned to watch the demeanour of the witnesses and clear his doubts during the arguments and the party appearing is enabled to persuade the authority to accept his point of view by a reasoned argument. It was held that if one person hears and another decides, then personal hearing becomes an empty formality. This case which arose under the administrative law does not have any application to the case before us. There is no divided responsibility in the present case which can be said to be des....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the present case since in the case before the Supreme Court, admittedly the entire material had been collected by the predecessor - DA, who had allowed the interested parties and their representatives to present the relevant information before him in terms of the applicable rule, but the final findings in the form of an order were recorded by the successor - DA who had no occasion to hear the appellants before the Supreme Court. It was in these circumstances held that the final order passed by the successor-DA offended the basic principle of natural justice. It would be apparent from the aforesaid narration that the present case stands on a different footing on facts. Whereas in the case before the Supreme Court, the predecessor-DA had collected all the relevant material and information from the parties and the successor-DA merely passed orders without collecting any further information or material and without giving a hearing to the parties, in the present case not only did the Bench which heard the matter on and from 24.11.2009 collected further material by issuing appropriate directions to the parties and the OA, but also applied its mind to the material so collected and also to....
X X X X Extracts X X X X
X X X X Extracts X X X X
....uments. The Supreme Court further held that there was no violation of the fundamental principle of law that "one who hears must decide the case". This was because of Order XVIII, Rule 15 of the CPC. We have already held that there is no bar on the principles of the CPC being invoked to the proceedings before the BIFR. This judgment supports the contention of Mr Vikas Singh. The judgment of the Supreme Court in the case of Dr. G. Sarana (supra) cited by Mr Singh lays down that if there is any objection to the constitution of the Selection Committee that should be brought out at the earliest point of time by the candidate and he should not be permitted to question the constitution of the Selection Committee after voluntarily appearing before it and having lost. The Supreme Court observed that the appellant wanted to take a chance to secure a favourable report from the Tribunal which was constituted and when he found that he was confronted with an unfavourable report, he adopted the device of raising a technical point. The position appears to be that such objection should be taken at the earliest point of time before any decision is taken by the Tribunal or the body constituted for th....