JUDGMENT
Vijender Jain, J.
1. Aggrieved by the order passed by the AAIFR, the present writ petition has been filed by the petitioner. Ms.Maneesha Dhir, learned counsel for the petitioner has contended that the order passed on 18.6.2003 by BIFR has erroneously sanctioned a scheme in terms of Section 18(2)(i) read with Section 18(11) of the Sick Industrial Companies (Special Provisions) Act, (SICA) based upon the take over of 2 units of the petitioner company situated at Marhowrah and Padrauna along with the distillery and RMU estate by respondent JHV Distillery and Sugar Mills Ltd., a new company incorporated by JHV Sugars Ltd.
2. It was contended that the scheme has been sanctioned in utter disregard of law and said scheme would cause wrongful enrichment to respondent at the cost of the petitioner company as also its creditors/statutory authorities and workers. It was also contended that the scheme as sanctioned was bad as the same is based upon the acquisition of the assets of two units of the petitioner company, i.e. Padrauna Sugar Unit and Marhowrah sugar unit along with the distillery and RMU estate with part liabilities. It has been contended that the dues of the cane growers as well as the workmen have not been taken into consideration. It was also contended that the BIFR and AAIFR have ignored an important aspect that the sanctioned scheme shall not result in the net worth of the petitioner company turning positive. It has also been contended that the sanctioned scheme was contrary to the provisions of Section 18 as well as Section 18(11) of the SICA. It was contended that no fresh valuation was conducted and the valuation report of 31st March, 1997 has been taken into consideration. It was also contended that AAIFR has erred in upholding the scheme swayed by the fact that the respondent is inducting Rs. 7777.18 lakhs for the revival of the Padrauna and Marhowrah units when in actuality on the bare perusal of the terms of the sanctioned scheme, it is evident that the scheme entails the settlement of the dues of Banks/Financial Institutions at Rs. 267.18 lakhs and the balance amount was proposed to be utilized for incurring capital expenditure for running the operations of respondent company, which shall not in any manner be contributory to the revival of the petitioner company.
3. As we are dismissing the writ petition in liming, we are dealing with the submissions of learned counsel for the petitioner in detail. On 1st February, 1993 BIFR had appointed IFCI as the Operating Agency under Section 17(3) of the Act to examine the viability of the company and submit the report. BIFR had later on sanctioned a scheme for rehabilitation of the petitioner vide order dated 31st December, 1998 envisaging change in management in favor of M/s Gangotri Enterprises Ltd. and one time settlement of dues of financial institutions. However, the sanctioned scheme could not be implemented due to non-infusion of the required fund by M/s Gangotri Enterprises Ltd. Therefore, the BIFR on 28th September, 2000 declared the sanctioned scheme as failed and directed IFCI to advertise for change in management. As no response to the advertisement for change in management was received, a show cause notice was issued by BIFR for winding up of the company vide order dated 10.5.2001. The BIFR in its meeting on 24.7.2001 discussed objections/suggestions to the winding up notice and thereafter directed the IFCI to issue a fresh advertisement for change in management including adoption of measures contemplated under Sections 18(2)(i) and 18(11) of the Act. Two parties submitted their proposals. IFCI vide its letter dated 12.6.2002 indicated that the proposal received from M/s JHV Sugar Ltd. (JSL) for transfer of part of assets of petitioner with part liabilities under Section 18(2)(i) and sale of balance assets through an Asset Sales Committee to clear balance liabilities was workable. Operating Agency, therefore, circulated draft rehabilitation scheme vide order dated 26.7.2002 for obtaining consent of all concerned under Section 19(2) of the Act. All financial institutions were agreeable to the terms of the draft rehabilitation scheme, in the meantime JSL had settled with SBI. Efforts were made by the BIFR to get consent from other Government departments as well as worker unions and correspondence with regard to grant of license which was required as a pre-condition by the JSL, BIFR further directed negotiations with the workers, secured creditors and concerned Governments and asked JSL to submit a revised proposal to operating agency before 22.12.2002. Pursuant to the said direction, revised proposal was submitted by JSL on 20.12.2002 which was supported by majority workmen numbering 1070 as against the union with a registered strength of 210 workers, who were opposing the proposal. Union of workers of Marhowrah unit did not oppose the proposal submitted by the JSL. Subsequently, the Government of Bihar also wrote a letter on 10.2.2003 inter alia spelling their conditions to the draft rehabilitation scheme. After hearing the said schemes and changes accepted by all the secured creditors, the scheme was finalised on a complete consensus among the secured creditors. That order was passed on 18.6.2003. Aggrieved by the said order, the petitioner preferred an appeal before the AAIFR.
4. The points which have been raised by the learned counsel before this Court were same as raised before AAIFR. It is pertinent to note that when an advertisement was issued by the Operating Agency on 10.8.2001, JSL responded with their proposal. However, the promoters of the petitioner company, i.e. M/s Gangotri Enterprises Ltd. did not respond to the advertisement. It is important to note some of the features of the rehabilitation scheme which envisages :-
“take over of Padrauna Sugar unit and Marhowrah sugar unit (along with Distillery Unit, RMU Estate) by JHV Sugars Ltd. (JSL);
ii) One time settlement (OTS) of dues of Financial Institutions (payment of only 50% of principal outstanding towards full and final settlement of FI’s dues within 6 months from sanction of the scheme by BIFR);
iii) Scrapping the existing sugar and distillery unit at Marhowrah and setting up a new sugar unit of 3500 TCD capacity and new distillery of 60 kilo litre per day with latest technology at Marhowrah;
iv) Incurring capital expenditure for restarting the Padrauna unit and also setting up a new distillery of 60 kilo litre per day with latest technology at Padrauna;
v) Deferred payment of part of workers dues and cane arrears pertaining to above two units;
The balance dues of FIs/SBI, the dues of unsecured creditors, cane growers and workers dues pertaining to Gauri Bazar and Kathkuiyan units, unsecured loan from Govt. of UP/Govt. of Bihar and SDF loan are to be paid out of sale proceeds of these Gauri Bazar and Kathkuiyan units. The sale of assets were to be done by an Asset Sale Committee (ASC) of CSWL, comprising a representative each from IFCI (Monitoring Agency), special Director of BIFR and a representative from the State Governments of UP and Bihar as per the guidelines framed by BIFR.”
5. From the plain reading of Section 17 of the Act it is clear that if the Board after making enquiry decides that it is not practicable for the company to make its net worth exceed the accumulated losses within a reasonable time frame, the Board is empowered to adopt any of the measures specified in Section 18 in relation to the said company. Therefore, the argument of the learned counsel for the petitioner that the scheme results only in part settlement of the liabilities and the net worth of the petitioner will not become positive and a scheme which does not result turning the net worth of the petitioner company positive, is not permissible under SICA, does not hold any ground. We are in complete agreement with the finding of the AAIFR that while approving the scheme under Section 17(2) it is obligatory on the part of the Board to satisfy itself with the scheme that the company will not be able to make its net worth positive within a reasonable time frame. AAIFR has rightly observed that no such restriction has been placed for a scheme which is to be formulated under Section 17(3) of the Act. BIFR can resort to other measures listed under Section 18, if it is of the opinion that it is not possible to make the net wroth of the company positive within a reasonable time frame. The BIFR vide its order dated 1.2.1993 declared petitioner as a sick industrial company and appointed IFCI as the Operating Agency to formulate a scheme under Section 17(3) of SICA. It was on that date that the BIFR arrived at the conclusion that it was not practicable for the company to make its net worth positive and, therefore, the measures under Section 18 were required to be taken. Strangely, the order dated 1.2.1993 passed by the BIFR was never challenged by the petitioner. As a matter of fact, the promoters of the company M/s Gangotri Enterprises Ltd. were granted opportunity earlier when their scheme was sanctioned, same could not succeed on account of failure of M/s Gangotri Enterprises Ltd. as they could not infuse required funds. Therefore, there is no force in the argument of the petitioner that BIFR cannot resort to any one of the remedial measures listed under Section 18.
6. Dealing with the second argument of the learned counsel for the petitioner that the sale of the assets under Section 18 can be carried out only after fixation of the reserved price. From 1.2.1993 when the petitioner company became sick, the BIFR has been making efforts to rehabilitate the company. All efforts were made by BIFR to rehabilitate the company. In 1998 rehabilitation scheme of the petitioner by change of management was sanctioned. As observed earlier, M/s Gangotri Enterprises Ltd. (promoter of the petitioner company) failed to carry out the rehabilitation. Another revival exercise was undertaken. Advertisement was issued on 12.10.2000. No proposal was received and only thereafter on 10.5.2001 it was decided that the company would be wound up and notice in this regard was issued. Again in view of some objections, BIFR directed IFCI, the OA to issue fresh advertisement for change of management involving take over/leasing/amalgamation/merger under the provisions of Section 18 of the Act. It was in this background the present rehabilitation proposal was considered and after evaluation of the proposal, financial institutions, bankers and other parties came to the conclusion that the proposal of JSL was more acceptable and in the best interest of the stake holders. The arguments of the learned counsel for the petitioner that non-fixation of reserved price vitiates the scheme has to be judged keeping in view the larger interest of cane-growers, workers and financial institutions. Even otherwise the valuation was done in 1997. Petitioner cannot come and say that fresh valuation be done now. If that is accepted then there will be no end to the process and company can never be rehabilitated. The petitioner neither at the stage of consideration of rehabilitation proposal nor at the stage of fixation of the draft rehabilitation scheme had raised the issue of valuation or fixation of reserved price. It is too late in the day to set the clock back. Therefore, the reliance placed by learned counsel for the petitioner on Divya Manufacturing Co. (P) Ltd. v. Union of India and Ors. , Union Bank of India v. Official Liquidator, High Court of Calcutta and Ors. 2000 (101) CC 317 and Allahabad Bank v. Bengal Paper Mills Co. Ltd. and Ors. 1999 (96) CC 804 is of no help to the case of the petitioner.
7. We also find no substance in the argument of the learned counsel for the petitioner that the rehabilitation scheme would cause unlawful enrichment of the respondent at the expense of the petitioner company and its stake holders. The respondent is taking over two sugar units as a running concern, same will continue to provide employment to the workers. The respondents are infusing a sum of Rs. 77.77 crores in the form of equity share capital. As a matter of fact, the stake holders, the employees, cane-growers and statutory authorities all have participated in the formulation of the rehabilitation scheme. They have given their consent and the promoters of the petitioner company i.e. M/s Gangotri Enterprises who took the responsibility of rehabilitating the petitioner failed and cannot now challenge the scheme.
8. We find nothing on record to show that the sale of the assets of the company was at a throw-away price. The sale of the petitioner was done by public notice. No other better proposal was received and the stake holders have given their consent and the BIFR has also taken into consideration the valuation made in 1997. A unit cannot be allowed to remain sick for indefinite period of time on one pretext or other. It not only affects the workers, the cane growers, financial institutions, banks but also does not help in revival of the company. It is a desperate attempt by the petitioner to delay the proceedings. We are conscious of the fact that four sugar mills of the petitioner are lying closed since 1998. Now under the present scheme the respondent is going to start production at Padrauna sugar unit from October-November, 2005 and will replace the old sugar plant at Marhowrah and set up a modern distillery and make it operational by October-November, 2008 and will establish a new distillery of 60000 liters at Padrauna from October-November, 2006. When no objection has been raised by the Government of UP, Government of Bihar and the respondent company have accepted the liabilities of clearing the dues of cane-growers this Court will be reluctant while exercising its jurisdiction under Article 226 of the Constitution of India to put the clock back by admitting this petition.
Writ petition has no merit.
Dismissed in liming.