{"id":255880,"date":"2008-05-23T00:00:00","date_gmt":"2008-05-22T18:30:00","guid":{"rendered":"https:\/\/www.legalindia.com\/judgments\/shri-kurian-paulose-vs-appellate-authority-for-on-23-may-2008"},"modified":"2018-03-08T03:32:58","modified_gmt":"2018-03-07T22:02:58","slug":"shri-kurian-paulose-vs-appellate-authority-for-on-23-may-2008","status":"publish","type":"post","link":"https:\/\/www.legalindia.com\/judgments\/shri-kurian-paulose-vs-appellate-authority-for-on-23-may-2008","title":{"rendered":"Shri. Kurian Paulose vs Appellate Authority For &#8230; on 23 May, 2008"},"content":{"rendered":"<div class=\"docsource_main\">Kerala High Court<\/div>\n<div class=\"doc_title\">Shri. Kurian Paulose vs Appellate Authority For &#8230; on 23 May, 2008<\/div>\n<pre id=\"pre_1\">       \n\n  \n\n  \n\n \n \n  IN THE HIGH COURT OF KERALA AT ERNAKULAM\n\nWP(C).No. 6625 of 2007(L)\n\n\n1. SHRI. KURIAN PAULOSE, AGED 61 YEARS,\n                      ...  Petitioner\n\n                        Vs\n\n\n\n1. APPELLATE AUTHORITY FOR INDUSTRIAL\n                       ...       Respondent\n\n2. BOARD FOR INDUSTRIAL AND FINANCIAL\n\n3. M\/S. ALLUMINIUM INDUSTRIES LTD.,\n\n4. STATE BANK OF TRAVANCORE,\n\n5. M\/S. UNITED SHIPPERS LTD.,\n\n6. M\/S. ALIND EMPLOYEES UNION REVIVAL\n\n7. M\/S. ALIND WORKS UNION, REP. BY\n\n                For Petitioner  :SRI.MURALI PURUSHOTHAMAN\n\n                For Respondent  :SRI.P.M.POULOSE, ADDL.CGSC\n\nThe Hon'ble MR. Justice A.K.BASHEER\n\n Dated :23\/05\/2008\n\n O R D E R\n<\/pre>\n<p id=\"p_1\">                              A.K. Basheer, J.\n<\/p>\n<p id=\"p_1\">                   &#8211; &#8211; &#8211; &#8211; &#8211; &#8211; &#8211; &#8211; &#8211; &#8211; &#8211; &#8211; &#8211; &#8211; &#8211; &#8211; &#8211; &#8211; &#8211; &#8211; &#8211; &#8211; &#8211; &#8211; &#8211;\n<\/p>\n<p id=\"p_2\">                         W.P (C) Nos. 6625, 28280<br \/>\n                                &amp; 34185 of 2007\n<\/p>\n<p id=\"p_3\">                   &#8211; &#8211; &#8211; &#8211; &#8211; &#8211; &#8211; &#8211; &#8211; &#8211; &#8211; &#8211; &#8211; &#8211; &#8211; &#8211; &#8211; &#8211; &#8211; &#8211; &#8211; &#8211; &#8211; &#8211; &#8211; &#8211;\n<\/p>\n<p id=\"p_4\">                Dated this the 23rd day of May, 2008.\n<\/p>\n<p id=\"p_5\">                                     Judgment<\/p>\n<p>      These three writ petitions are being disposed of by this<\/p>\n<p>common judgment since the issues involved in them are common<\/p>\n<p>and closely inter- related. W.P.No.6625\/2007 will be treated as the<\/p>\n<p>leading case and the parties and documents in this petition will be<\/p>\n<p>referred to in the judgment unless otherwise indicated.<\/p>\n<p id=\"p_6\">      2.   The    primary question that arises for consideration is<\/p>\n<p>whether Ext.P8 order passed by the Appellate Authority for<\/p>\n<p>Industrial   and Financial Reconstruction, New Delhi granting a<\/p>\n<p>further opportunity to the promoters                to frame a comprehensive<\/p>\n<p>rehabilitation scheme to revive the               sick Aluminium Industries<\/p>\n<p>Limited, is illegal and invalid.\n<\/p>\n<p id=\"p_7\">      3. Petitioner who is stated to be a Non Resident Indian had<\/p>\n<p>submitted a proposal before the Operating Agency, State Bank of<\/p>\n<p>Travancore,    Thiruvananthapuram,               for taking over the Relays<\/p>\n<p>Division of the Company at Thiruvananthapuram. The Board for<\/p>\n<p>Industrial and Financial Reconstruction, New Delhi (BIFR for<\/p>\n<p>short),   accepted the above offer made by the petitioner and<\/p>\n<p>consequently approved sanction for the scheme to hive off the<\/p>\n<p>Relays Division from the parent company as an independent entity<\/p>\n<p>and to merge it with the firm of the petitioner.<\/p>\n<p>W.P(C).6625,2820,34185\/07<br \/>\n<span class=\"hidden_text\" id=\"span_1\">                                 2<\/span><\/p>\n<p id=\"p_8\">      4. The above order of the BIFR was challenged by the<\/p>\n<p>promoters\/major shareholders and several others before the<\/p>\n<p>Appellate Authority for Industrial and Financial Reconstruction,<\/p>\n<p>New Delhi (appellate authority for short). All these 8 appeals<\/p>\n<p>were heard and disposed of by the appellate authority by a<\/p>\n<p>common order (Ext.P8).\n<\/p>\n<p id=\"p_9\">      5. Petitioner while calling in question the legality and<\/p>\n<p>propriety of the above order contends that the appellate authority<\/p>\n<p>ought not to have entertained the appeals preferred by the<\/p>\n<p>promoters and other shareholders since they were hopelessly<\/p>\n<p>time barred. More importantly, they had not challenged the<\/p>\n<p>earlier order passed by the BIFR way back in 2003 accepting<\/p>\n<p>the proposal made by the petitioner for revival of the Relays<\/p>\n<p>Division.   It is further contended by the petitioner that the<\/p>\n<p>appellate authority was not justified in interfering with the order<\/p>\n<p>of the BIFR at the instance of the promoters who had admittedly<\/p>\n<p>failed to revive the Company. The BIFR had recorded its dis-<\/p>\n<p>satisfaction about the indifferent attitude of the promoters who<\/p>\n<p>had evinced no interest in the affairs of the Company for the last<\/p>\n<p>several years.\n<\/p>\n<p id=\"p_10\">      6. Petitioners in the other two writ petitions viz.<\/p>\n<p>W.P.Nos.28280\/07 and 34185\/07 are respectively some of the<\/p>\n<p>senior executives and two of the employees&#8217; organisations in the<\/p>\n<p>Company. While the officers of the Company pray for issuance<\/p>\n<p>of a writ of mandamus or such other writ, order or direction to<\/p>\n<p>W.P(C).6625,2820,34185\/07<br \/>\n<span class=\"hidden_text\" id=\"span_1\">                                3<\/span><\/p>\n<p>the operating agency not to accept the proposal for change of<\/p>\n<p>authorised signatories in view of the interim order passed by this<\/p>\n<p>court in WP.6625\/2007, the employees&#8217; organizations pray for a<\/p>\n<p>direction to the operating agency to honour the cheques issued<\/p>\n<p>by the Company for its day today          operations through its<\/p>\n<p>authorised signatory. They further pray for a declaration that the<\/p>\n<p>decisions taken at the extra ordinary general meeting of the<\/p>\n<p>shareholders of the Company on March 21, 2007 to constitute<\/p>\n<p>new Board of Directors is violative of the order passed by the<\/p>\n<p>appellate authority and also the interim order issued by this<\/p>\n<p>Court in W.P.No.6625\/2007.\n<\/p>\n<p id=\"p_11\">      7.   A brief reference to the chequered history of the<\/p>\n<p>beleaguered sick company is necessary to decide the issue<\/p>\n<p>involved in these cases.\n<\/p>\n<p id=\"p_12\">      8. The Company which was incorporated in 1946 had<\/p>\n<p>been giving thrust to manufacture of products primarily to cater<\/p>\n<p>to the needs of the power sector. It has got 5 manufacturing<\/p>\n<p>units (consisting of 3 manufacturing divisions and 2 contracting<\/p>\n<p>divisions) spread over Kerala, Andhra Pradesh and Orissa with<\/p>\n<p>more than 1600 employees.          The manufacturing divisions<\/p>\n<p>consist of Conductor Division at Kundara (Kerala), Hirakud<\/p>\n<p>(Orissa) and Hyderabad (Andhra Pradesh). There is a Steel<\/p>\n<p>Products Division at       Kundara,      Machinery Division at<\/p>\n<p>Hyderabad,     Switch Gear Division at Mannar (Kerala) and<\/p>\n<p>Relays Division at Thiruvananthapuram. The Services Division<\/p>\n<p>W.P(C).6625,2820,34185\/07<br \/>\n<span class=\"hidden_text\" id=\"span_2\">                                 4<\/span><\/p>\n<p>of the Company are:         (a) Material Handling Division at<\/p>\n<p>Hyderabad and (b) Contracts and Agencies Division at<\/p>\n<p>Thiruvananthapuram.\n<\/p>\n<p id=\"p_13\">      9. The Company was declared sick under <a href=\"\/doc\/1039608\/\" id=\"a_1\">Section 3(1)(O)<\/a><\/p>\n<p>of the Sick Industrial Companies (Special Provisions) Act 1985<\/p>\n<p>(for short, the Act) by the BIFR in October 1987. A Scheme for<\/p>\n<p>rehabilitation of the sick Company was sanctioned by the BIFR<\/p>\n<p>by its order dated October 5, 1989. Term liabilities of financial<\/p>\n<p>institutions and Banks were restructured and fixed at Rs.4040<\/p>\n<p>lakhs. The cost of rehabilitation Scheme was put at Rs.949 lakhs<\/p>\n<p>out of which Rs.300 lakhs had to be brought in by M\/s.Somani<\/p>\n<p>Group of Industries, the promoters, and Rs.649 lakhs by the<\/p>\n<p>financial institutions and banks. M\/s. Somani was inducted into<\/p>\n<p>the management with an initial investment of Rs.300 lakhs to<\/p>\n<p>the equity capital. The promoters had to arrange a further sum<\/p>\n<p>of Rs.100 lakhs after one year in the form of equity and\/or<\/p>\n<p>unsecured loans.\n<\/p>\n<p id=\"p_14\">      10. It is beyond controversy that the Somani Group of<\/p>\n<p>Industries owns approximately 45% of the equity share capital<\/p>\n<p>of the Company and M\/s. United Shippers Limited, which is a<\/p>\n<p>part of the Somani Group, owns 29.02%. It is also on record<\/p>\n<p>that the promoters had      taken unsecured loans amounting to<\/p>\n<p>Rs.239 lakhs and also arranged finance of Rs.240 lakhs, after<\/p>\n<p>sanctioning of the Rehabilitation Scheme by the BIFR.<\/p>\n<p id=\"p_15\">        11. But the revival package did not achieve the results<\/p>\n<p>W.P(C).6625,2820,34185\/07<br \/>\n<span class=\"hidden_text\" id=\"span_3\">                                5<\/span><\/p>\n<p>envisaged in the rehabilitation scheme. At the hearing held on<\/p>\n<p>August 5, 1993 the BIFR recorded its disillusionment over the<\/p>\n<p>failure of the promoters to implement the rehabilitation scheme<\/p>\n<p>and directed the operating agency (IIBI) to submit a revised<\/p>\n<p>Scheme within 3 months.\n<\/p>\n<p id=\"p_16\">      12.    At the meeting held on July 26, 1994, the BIFR<\/p>\n<p>noticed that no viable scheme had emerged.         Therefore the<\/p>\n<p>operating agency was directed &#8220;to issue a comprehensive<\/p>\n<p>advertisement within      15 days for take over of the<\/p>\n<p>Company\/divisions of the Company, to formulate a viable<\/p>\n<p>rehabilitation package, hold joint meeting of the involved<\/p>\n<p>parties and submit the Scheme to the Board within 2 = months&#8221;.<\/p>\n<p id=\"p_17\">       13. At its next meeting held on December 19, 1994 the<\/p>\n<p>BIFR considered the status report filed by the operating agency.<\/p>\n<p>It was noticed that several enquiries from various groups\/parties<\/p>\n<p>had been received in response to the advertisement issued in the<\/p>\n<p>newspapers for take over of the Company\/divisions of the<\/p>\n<p>Company and to formulate a viable rehabilitation package. But<\/p>\n<p>no concrete proposal had been received from any of the parties.<\/p>\n<p id=\"p_18\">      14. Several meetings were held by the BIFR thereafter<\/p>\n<p>between 1995 and 2001. A perusal of the summary record of<\/p>\n<p>proceedings of the BIFR will reveal that several attempts were<\/p>\n<p>made at various levels involving Banks, financial institutions,<\/p>\n<p>State Governments, employees organizations, promoters etc. to<\/p>\n<p>evolve a viable scheme for take over\/change of management of<\/p>\n<p>W.P(C).6625,2820,34185\/07<br \/>\n<span class=\"hidden_text\" id=\"span_4\">                                6<\/span><\/p>\n<p>the Company.\n<\/p>\n<p id=\"p_19\">       15. In the hearing held on November 8, 2001, the BIFR<\/p>\n<p>concluded that only 3 units of the Company were operational<\/p>\n<p>and considered viable. They were the Switch Gear Division<\/p>\n<p>(SD) and Relays Division (RD) in Kerala and Machinery<\/p>\n<p>Division (MD) in Hyderabad. It was also observed by the BIFR<\/p>\n<p>that even after a lapse of 14 years since the proceedings had<\/p>\n<p>commenced, no         workable proposal for revival could be<\/p>\n<p>evolved. It was clarified that sale of the above three operational<\/p>\n<p>units on &#8220;going concern&#8221; basis with whatever liabilities, to the<\/p>\n<p>willing parties for takeover, would have to be done.<\/p>\n<p id=\"p_20\">      16. At the meeting held on June 27, 2002 the operating<\/p>\n<p>agency informed the BIFR that in response to the advertisement<\/p>\n<p>issued by it on February 22, 2002 as directed by the BIFR, five<\/p>\n<p>offers had been received for the individual running units, out of<\/p>\n<p>which only 2 were accompanied by Earnest Money Deposits<\/p>\n<p>(EMD). Petitioner had made an offer of Rs.1.22 crores for the<\/p>\n<p>Relays Division at Thiruvananthapuram. It was further informed<\/p>\n<p>by the operating agency that the petitioner had subsequently<\/p>\n<p>increased his offer to 1.35 crores, apart from agreeing to take<\/p>\n<p>over the liability of the workers&#8217; dues to the extent of Rs.60<\/p>\n<p>lakhs. The BIFR also noticed that the consensus at the joint<\/p>\n<p>meeting of the representatives of the Banks and other parties<\/p>\n<p>was that the offer made by the petitioner was too low as<\/p>\n<p>compared to the value of the assets and therefore it was not<\/p>\n<p>W.P(C).6625,2820,34185\/07<br \/>\n<span class=\"hidden_text\" id=\"span_5\">                                7<\/span><\/p>\n<p>acceptable. A similar view was taken regarding the offer for the<\/p>\n<p>Switch Gear Division at Mannar. In this proceeding (Ext.P3)<\/p>\n<p>the BIFR ordered that the operating agency be changed since it<\/p>\n<p>omitted to discharge its duties and responsibilities properly.<\/p>\n<p>Accordingly State Bank of Travancore was appointed as the new<\/p>\n<p>operating agency under <a href=\"\/doc\/1130791\/\" id=\"a_1\">Section 17(3)<\/a> of the Act, in place of<\/p>\n<p>IIBI. Certain other directions were also issued in the matter of<\/p>\n<p>take over of the        other revivable units through merger,<\/p>\n<p>amalgamation etc. I will revert back to the above record of<\/p>\n<p>proceedings of the BIFR (dated June 27, 2002) a little later.<\/p>\n<p id=\"p_21\">      17. In the meeting held on December 19, 2002 the BIFR<\/p>\n<p>directed the operating agency to issue advertisements in 2<\/p>\n<p>prominent newspapers for unit-wise      sale of    Switch Gear<\/p>\n<p>Division and Relays Division in Kerala and Machinery Division<\/p>\n<p>at Hyderabad on a &#8220;going concern basis&#8221; with or without<\/p>\n<p>some or all their liabilities,    within one month. For the<\/p>\n<p>remaining divisions which were admittedly non revivable, the<\/p>\n<p>BIFR directed the operating agency to issue advertisements for<\/p>\n<p>sale of assets (inlcuding land, buildings, plant and machinery<\/p>\n<p>etc) in convenient packages. Several other directions were also<\/p>\n<p>issued with regard to the manner in which the bids were to be<\/p>\n<p>submitted by the parties and the procedure to be followed<\/p>\n<p>thereafter.\n<\/p>\n<p id=\"p_22\">      18.   At the meeting held on November 10, 2003, the<\/p>\n<p>operating agency informed the BIFR that the petitioner had<\/p>\n<p>W.P(C).6625,2820,34185\/07<br \/>\n<span class=\"hidden_text\" id=\"span_6\">                                  8<\/span><\/p>\n<p>offered Rs.234.50 lakhs for take over and revival of the Relays<\/p>\n<p>Division     at    Thiruvananthapuram     in   response    to   the<\/p>\n<p>advertisement issued in this regard. It is not necessary to refer to<\/p>\n<p>the other issues which came up for consideration            in the<\/p>\n<p>hearing, at this stage. However it may be mentioned that the<\/p>\n<p>BIFR made it clear that separate orders for rehabilitation of the<\/p>\n<p>three revivable units will be issued later. Accordingly a draft<\/p>\n<p>rehabilitation Scheme (DRS) in respect of Relays Division was<\/p>\n<p>circulated by the BIFR along with its order dated January 28,<\/p>\n<p>2005 calling for objections\/suggestions to be considered at the<\/p>\n<p>next hearing on April 13, 2005. A copy of the said order issued<\/p>\n<p>by the BIFR is on record as Ext.P5.\n<\/p>\n<p id=\"p_23\">       19. When the Draft Rehabilitation Scheme came up for<\/p>\n<p>consideration before the BIFR on July 26, 2005, sanction was<\/p>\n<p>accorded making it clear that the sanctioned Schemes for the<\/p>\n<p>machinery\/Conductor Division at Hyderabad, Relays Division at<\/p>\n<p>Thiruvananthapuram and Switch Gear Division at Mannar shall<\/p>\n<p>come into force with immediate effect.           A copy of the<\/p>\n<p>sanctioned scheme          in respect of the Relays Division,<\/p>\n<p>Thiruvananthapuram is on record as Ext.P7.<\/p>\n<p id=\"p_24\">       20. Under Ext.P7 Scheme the entire Relays Division of<\/p>\n<p>the Company had to be hived off into a new Company that<\/p>\n<p>would be floated as ALIND Relays Ltd.                 Transfer of<\/p>\n<p>liabilities to the extent of Rs.234.50 lakhs under the provisions<\/p>\n<p>of <a href=\"\/doc\/1506373\/\" id=\"a_2\">Section 18(1)(d)<\/a> of Act 1985 was to be allowed. The Scheme<\/p>\n<p>W.P(C).6625,2820,34185\/07<br \/>\n<span class=\"hidden_text\" id=\"span_7\">                                  9<\/span><\/p>\n<p>envisaged that on and after the date of transfer (April 1, 2004),<\/p>\n<p>the newly floated Company would be merged into the firm of<\/p>\n<p>the petitioner . Yet again, it is not necessary to refer to the other<\/p>\n<p>terms contained in the sanctioned Scheme at this stage.<\/p>\n<p id=\"p_25\">      21. As mentioned in the earlier part of the judgment, the<\/p>\n<p>orders passed by the BIFR on January 28, 2005 and July 26,<\/p>\n<p>2005 have been set aside by the appellate authority in the<\/p>\n<p>impugned order (Ext.P8). Since we are concerned in these cases<\/p>\n<p>only with the sanctioned Rehabilitation Scheme in respect of<\/p>\n<p>Relays Division, for which the petitioner had submitted his bid,<\/p>\n<p>it is not necessary to refer to the other schemes in respect of<\/p>\n<p>Machinery Division at Hyderabad or Switch Gear Division at<\/p>\n<p>Mannar.\n<\/p>\n<p id=\"p_26\">      22.    As has been noticed already, the Company was<\/p>\n<p>declared sick under <a href=\"\/doc\/1039608\/\" id=\"a_3\">Section 3(1)(O)<\/a> of the Act 1985, way back<\/p>\n<p>in the year 1987. M\/s.Somani Group of Industries was inducted<\/p>\n<p>into the management under a Scheme of revival sanctioned by<\/p>\n<p>the BIFR in 1989. It is true that the promoters (M\/s.Somani<\/p>\n<p>Group) had not succeeded in implementing the Scheme of<\/p>\n<p>revival though they had been in charge of the sick Company for<\/p>\n<p>more than a decade. It is on record that in the year 1994, the<\/p>\n<p>BIFR had noticed that the Scheme for revival had not taken<\/p>\n<p>wings as envisaged or expected. The promoters who had<\/p>\n<p>pumped in funds in accordance with the terms provided under<\/p>\n<p>the scheme,      seemed to have lost interest and        enthusiasm<\/p>\n<p>W.P(C).6625,2820,34185\/07<br \/>\n<span class=\"hidden_text\" id=\"span_8\">                               10<\/span><\/p>\n<p>midway through. The proceedings of the BIFR clearly revealed<\/p>\n<p>that various study reports from qualified technical groups and<\/p>\n<p>other financial institutions were kept in view while considering<\/p>\n<p>ways and means to keep up the momentum for revival and<\/p>\n<p>rehabilitation of the sinking Company.\n<\/p>\n<p id=\"p_27\">       23.    It is   borne out by records that the assets and<\/p>\n<p>liabilities of the Company had been      reckoned on more than<\/p>\n<p>two or three occasions. Understandably, the liabilities had<\/p>\n<p>grown manifold over the years.        Curiously at one stage the<\/p>\n<p>value of the assets had reportedly come down; obviously for<\/p>\n<p>the reason that the valuation of the plant and machinery had<\/p>\n<p>been reduced because of depreciation and other similar factors.<\/p>\n<p>But significantly the value of the land owned by the Company<\/p>\n<p>in the 3 States of Andhra Pradesh, Kerala and Orissa had<\/p>\n<p>appreciated considerably over the years. Yet another factor<\/p>\n<p>which apparently persuaded the appellate authority to set aside<\/p>\n<p>the orders passed by the BIFR was the potential for growth of<\/p>\n<p>the power sector in the rapidly changing industrial scenario of<\/p>\n<p>the country.\n<\/p>\n<p id=\"p_28\">       24. Reference has been made to the above aspects only<\/p>\n<p>as a prelude to the consideration of the main issue as to whether<\/p>\n<p>the appellate authority was justified in         giving another<\/p>\n<p>opportunity to the promoters and other share holders to revive<\/p>\n<p>the Company in a bid to put it back on rails.\n<\/p>\n<p id=\"p_29\">       25. I have heard learned counsel for the parties at length.<\/p>\n<p>W.P(C).6625,2820,34185\/07<br \/>\n<span class=\"hidden_text\" id=\"span_9\">                                 11<\/span><\/p>\n<p>The orders passed by the BIFR at various stages of the<\/p>\n<p>proceedings have been placed for my perusal in a compilation,<\/p>\n<p>which is marked as Ext.X1. A large number of other documents<\/p>\n<p>have also been produced, not only on behalf of the petitioner<\/p>\n<p>and the contesting respondents, but also by the various<\/p>\n<p>employees&#8217; organisations        in support of their respective<\/p>\n<p>contentions.\n<\/p>\n<p id=\"p_30\">      26. It is primarily contended by the learned senior counsel<\/p>\n<p>for the petitioner that the appellate authority was not justified in<\/p>\n<p>showing indulgence towards promoters by granting them yet<\/p>\n<p>another opportunity to revive the Company, and that too at a<\/p>\n<p>stage when most of its manufacturing units have remained<\/p>\n<p>closed down for years. It is the admitted position that those<\/p>\n<p>units were declared unviable and unrevivable. They have been<\/p>\n<p>irredeemably lost for all practical purposes.        It is further<\/p>\n<p>contended by the learned counsel that the promoters who have<\/p>\n<p>been at the helm of affairs eversince 1989 had given up the<\/p>\n<p>Company as a lost cause. They had not shown any interest to<\/p>\n<p>give any sustenance to the Company. The employees of two or<\/p>\n<p>three units, by dint of their hard work and determination, had<\/p>\n<p>managed to keep them afloat. It is also pointed out by the<\/p>\n<p>learned senior counsel that the promoters never bothered to co-<\/p>\n<p>operate with the operating agency for revival of the Company.<\/p>\n<p>They had also not effectively participated in the proceedings<\/p>\n<p>before the BIFR. While inviting my attention to some of the<\/p>\n<p>W.P(C).6625,2820,34185\/07<br \/>\n<span class=\"hidden_text\" id=\"span_10\">                                 12<\/span><\/p>\n<p>summary record of proceedings of the BIFR, it is contended by<\/p>\n<p>the learned senior counsel that the promoters had not challenged<\/p>\n<p>any of the orders issued by the BIFR during 2002-2003. In<\/p>\n<p>those orders, the BIFR had directed the Operating Agency to<\/p>\n<p>publish advertisement for sale of the assets of the Company&#8217;s<\/p>\n<p>closed\/unviable units in Kerala and Orisssa         and also the<\/p>\n<p>Regional Offices at Delhi, Calcutta and Kochi and the corporate<\/p>\n<p>office at Thiruvananthapuram under <a href=\"\/doc\/1739308\/\" id=\"a_4\">Section 18(2)(i)<\/a> and<\/p>\n<p><a href=\"\/doc\/262489\/\" id=\"a_5\">Section 18(ii)<\/a> of the Act.\n<\/p>\n<p id=\"p_31\">       27. It is true that in the proceedings dated December 19,<\/p>\n<p>2002, the BIFR had noticed that only 3 units of the Company<\/p>\n<p>viz., the Switch Gear Division (SD) and Relays Division (RD)<\/p>\n<p>in Kerala and Machinery Division (MD) (including Conductor<\/p>\n<p>Division) in Hyderabad were operational and considered viable.<\/p>\n<p>Significantly in these proceedings the BIFR had further<\/p>\n<p>observed thus:\n<\/p>\n<p id=\"p_32\">            &#8220;&#8230;.Fifteen years    had lapsed since the<\/p>\n<p>            company came to BIFR and it had still not<\/p>\n<p>            been possible to work out a concrete<\/p>\n<p>            revival proposal, essentially because the<\/p>\n<p>            company&#8217;s original promoters were not<\/p>\n<p>            resourceful enough to work out and support<\/p>\n<p>            a meaningful revival plan that could be<\/p>\n<p>            acceptable to all its major stake holders.<\/p>\n<p>            Instead of proceeding for winding up of the<\/p>\n<p>W.P(C).6625,2820,34185\/07<br \/>\n<span class=\"hidden_text\" id=\"span_11\">                                 13<\/span><\/p>\n<p>            company      in   2001     the   Bench    had<\/p>\n<p>            nevertheless allowed some more time as a<\/p>\n<p>            last effort for reviving at least the above<\/p>\n<p>            three units in the workers&#8217; interest and<\/p>\n<p>            directed for issuing      advertisements for<\/p>\n<p>            change of management (COM) including<\/p>\n<p>            sale of the operational units on a &#8220;going<\/p>\n<p>            concern&#8221; basis&#8230;.&#8221;\n<\/p>\n<p id=\"p_33\">      28. In the above proceedings it was ordered that the<\/p>\n<p>divisions located    in Hyderabad should be spun off into a<\/p>\n<p>separate company with segregated assets and liabilities as<\/p>\n<p>certified by the company&#8217;s auditors. It was further ordered that<\/p>\n<p>the operating agencies shall issue advertisements in two<\/p>\n<p>prominent newspapers for unit-wise sale of            Switch Gear<\/p>\n<p>Division and Relays Division situated in Kerala on a &#8220;going<\/p>\n<p>concern&#8221; basis with or without some or all their liabilities within<\/p>\n<p>one month&#8217;s time. As far as the remaining divisions which were<\/p>\n<p>admittedly non-revivable were concerned, it was directed that<\/p>\n<p>advertisements for sale of assets (including land, buildings,<\/p>\n<p>plants and machinery etc.)      in convenient packages may be<\/p>\n<p>issued separately giving similar time limits. The other direction<\/p>\n<p>was to prepare the book and market values of the assets and the<\/p>\n<p>detailed list of partywise liabilities of the two revivable units in<\/p>\n<p>Kerala.    The BIFR had directed         the Company to submit<\/p>\n<p>revised\/corrected unit-wise statements of all its assets and<\/p>\n<p>W.P(C).6625,2820,34185\/07<br \/>\n<span class=\"hidden_text\" id=\"span_12\">                                14<\/span><\/p>\n<p>liabilities as on 31\/3\/2002 and 31\/12\/2002, with break up into<\/p>\n<p>actual and contingent liabilities, after reconciling once again the<\/p>\n<p>figures in respect of the dues of the workers, secured lenders,<\/p>\n<p>statutory dues etc.<\/p>\n<p id=\"p_34\">       29. It was obviously in terms of the above order that the<\/p>\n<p>newly appointed operating agency viz., State Bank of<\/p>\n<p>Travancore had issued Annexure C advertisement in the<\/p>\n<p>newspaper dated       January 4, 2003.        The petitioner had<\/p>\n<p>submitted his offer for take over and revival of Relays Division<\/p>\n<p>at Thiruvananthapuram in response to Annexure C. I shall deal<\/p>\n<p>with the contents of the above advertisement a little later.<\/p>\n<p id=\"p_35\">       30. From the record of proceedings of the hearing of the<\/p>\n<p>BIFR held on November 10, 2003 it can be seen that the<\/p>\n<p>representative of the operating agency had informed the BIFR<\/p>\n<p>that as against the valuation of Rs.133.75 lakhs for the Relays<\/p>\n<p>Division     at  Thiruvananthapuram,         Sri.Kurian    Poulose<\/p>\n<p>(petitioner) had made an offer of Rs.234.50 lakhs, out of which<\/p>\n<p>Rs.150 lakhs was offered to the secured debtors. The operating<\/p>\n<p>agency submitted before the BIFR that the offer made by the<\/p>\n<p>petitioner was acceptable to it. In these proceedings the BIFR<\/p>\n<p>recorded that separate orders in respect of circulation of the<\/p>\n<p>rehabilitation proposals for the 3 revivable units including the<\/p>\n<p>Relays Division at Thiruvananthapuram will be issued later.<\/p>\n<p>Accordingly in its proceedings dated November 18, 2003 the<\/p>\n<p>BIFR stated thus:\n<\/p>\n<p id=\"p_36\">W.P(C).6625,2820,34185\/07<br \/>\n<span class=\"hidden_text\" id=\"span_13\">                                15<\/span><\/p>\n<p>              &#8220;The proposal for revival of RD submitted<\/p>\n<p>              by Shri Kurien Poulose vide letter dated<\/p>\n<p>              10\/5\/2003 is also prima facie acceptable.<\/p>\n<p>              The OA (SBT) shall submit its final report<\/p>\n<p>              along with the minutes of the JM and a<\/p>\n<p>              draft of a workable rehabilitation scheme<\/p>\n<p>              within 3 weeks&#8217; time. Copies of the OA<\/p>\n<p>              Report should be simultaneously made<\/p>\n<p>              available to Shri Poulose, ALIND and all<\/p>\n<p>              secured    creditors\/Govt.    and      other<\/p>\n<p>              Departments\/Organizations from whom<\/p>\n<p>              reliefs are expected. The Bench will<\/p>\n<p>              consider circulating the scheme for consent<\/p>\n<p>              u\/s 19(2) read with <a href=\"\/doc\/701813\/\" id=\"a_6\">Section 19(1)<\/a> of the<\/p>\n<p>              Act.&#8221;\n<\/p>\n<p id=\"p_37\">It may be noticed that in the above proceedings, the BIFR<\/p>\n<p>further directed issuance of advertisement for sale of the assets<\/p>\n<p>of only the unviable units in Kerala and Orissa as well as its<\/p>\n<p>Regional Offices at Delhi, Calcutta and Kochi and the Corporate<\/p>\n<p>office at Thiruvananthapuram.\n<\/p>\n<p id=\"p_38\">      31. But curiously, in the Draft Rehabilitation Scheme in<\/p>\n<p>respect of Relays Division, Thiruvananthapuram, a copy of<\/p>\n<p>which is available in Ext.X1 at page 279,     it is seen stated by<\/p>\n<p>the BIFR thus:\n<\/p>\n<p id=\"p_39\">             &#8220;&#8230;After several hearings, BIFR, finally<\/p>\n<p>W.P(C).6625,2820,34185\/07<br \/>\n<span class=\"hidden_text\" id=\"span_14\">                                16<\/span><\/p>\n<p>             ordered in June 2002 for sale of running<\/p>\n<p>             units on a merger cum revival\/takeover<\/p>\n<p>             basis and outright sale of non-running<\/p>\n<p>             units of the Company in a bid to revive it.<\/p>\n<p id=\"p_40\">\n             Accordingly Sri.Kurian Poulose evinced<\/p>\n<p>             interest in taking over the Relays<\/p>\n<p>             Division,          Thiruvanangthapuram,<\/p>\n<p>             corporate office at Thiruvananthapuram<\/p>\n<p>             and land at Kochi. Sri.Kurian Poulose<\/p>\n<p>             submitted his proposal in response to the<\/p>\n<p>             advertisement released by State Bank of<\/p>\n<p>             Travancore, the Operating Agency (OA)<\/p>\n<p>             appointed by BIFR calling for bids.\n<\/p>\n<p id=\"p_41\">             Subsequently, a joint meeting was called<\/p>\n<p>             by the OA at Thiruvananthapuram on<\/p>\n<p>             6\/3\/2002 wherein the representatives of<\/p>\n<p>             the lenders, bidder and AIL were present<\/p>\n<p>             and the bid by Mr.Kurian Poulose for<\/p>\n<p>             taking    over  the   Relays    Division,<\/p>\n<p>             Thiruvananthapuram, the corporate office<\/p>\n<p>             at Thiruvananthapuram and land at Kochi<\/p>\n<p>             was found acceptable to the lenders.<\/p>\n<p id=\"p_42\">\n             Sri.Kurian Paulose agreed to improve his<\/p>\n<p>             offer to the lenders for Rs.145 lakhs to<\/p>\n<p>             Rs.150 lakhs.&#8221;       (emphasis supplied)<\/p>\n<p>W.P(C).6625,2820,34185\/07<br \/>\n<span class=\"hidden_text\" id=\"span_15\">                                 17<\/span><\/p>\n<p>It is in the above context that Annexure C advertisement has to<\/p>\n<p>be perused. The relevant entry in relation to Relays Division,<\/p>\n<p>Thiruvananthapuram comprised only of 3 acres and 13 cents of<\/p>\n<p>land in Vilappilsala village of Thiruvananthapuram district,<\/p>\n<p>apart from factory and non-factory buildings. Nothing more,<\/p>\n<p>nothing less. In other words, Annexure C advertisement did not<\/p>\n<p>refer to or include the corporate office of the Company at<\/p>\n<p>Thiruvananthapuram or the land at Kochi at all. There is no clue<\/p>\n<p>as to how these two assets were also included in the Draft<\/p>\n<p>Rehabilitation Scheme, which was ultimately sanctioned by the<\/p>\n<p>BIFR two months thereafter, in September 2005, as could be<\/p>\n<p>seen from Ext.P7.\n<\/p>\n<p id=\"p_43\">       32. A perusal of the record of proceedings of the hearing<\/p>\n<p>of the BIFR held on June 27, 2002 reveals that the petitioner<\/p>\n<p>had made an offer of Rs,.1.22 crores for the Relays Division in<\/p>\n<p>response to the advertisement issued on February 22, 2002. Of<\/p>\n<p>course, the petitioner had later increased the offer to 1.35 crores,<\/p>\n<p>over and above the liability on account of the workers&#8217; dues to<\/p>\n<p>the extent of Rs.60 lakhs.    The said offer was found to be too<\/p>\n<p>low and unacceptable at the joint meeting of the parties<\/p>\n<p>concerned and it was not accepted.\n<\/p>\n<p id=\"p_44\">       33. Relevant portion of clause (ii) of paragraph 20 of the<\/p>\n<p>record of proceedings dated June 27, 2002 is extracted<\/p>\n<p>hereunder:\n<\/p>\n<p id=\"p_45\">             &#8220;The OA shall issue advertisements in<\/p>\n<p>W.P(C).6625,2820,34185\/07<br \/>\n<span class=\"hidden_text\" id=\"span_16\">                                 18<\/span><\/p>\n<p>           two prominent newspapers for unit-wise<\/p>\n<p>           sale of SD, RD and MD of the company<\/p>\n<p>           on a &#8220;going concern&#8221; basis      (U\/s.18 of<\/p>\n<p>           SICA), with or without some or all their<\/p>\n<p>           liabilities, within two months&#8217; time. For<\/p>\n<p>           the remaining divisions, which were<\/p>\n<p>           admittedly non-revivable, advertisements<\/p>\n<p>           for sale of assets (including land,<\/p>\n<p>           buildings, plant and machinery etc. in<\/p>\n<p>           convenient packages) only will be issued<\/p>\n<p>           separately, giving similar time-limits. The<\/p>\n<p>           advertisements      should    contain   the<\/p>\n<p>           available details of valuation of lands,<\/p>\n<p>           buildings, plant &amp; machinery and other<\/p>\n<p>           assets of each unit. The drafts of the<\/p>\n<p>           advertisements may be got approved by<\/p>\n<p>           the Board by fax&#8230;.&#8221;\n<\/p>\n<p id=\"p_46\">Clause (iii)(a) of the above order reads thus:<\/p>\n<blockquote id=\"blockquote_1\"><p>          &#8220;In case of take over of the revivable units<\/p>\n<p>          through merger\/amalgamation etc. either<\/p>\n<p>          all the liabilities will be taken over (as<\/p>\n<p>          negotiated\/or the revival proposal should<\/p>\n<p>          ensure payment of full principal amount<\/p>\n<p>          and, if possible, a part of interest<\/p>\n<p>          apportioned to the unit &#8230;.&#8221;\n<\/p><\/blockquote>\n<p id=\"p_47\">W.P(C).6625,2820,34185\/07<br \/>\n<span class=\"hidden_text\" id=\"span_17\">                                19<\/span><\/p>\n<p id=\"p_48\">      34.   A perusal of the above clauses contained in the<\/p>\n<p>proceedings of hearing held by the BIFR on June 27, 2002 will<\/p>\n<p>undoubtedly show that no orders had been issued to sell the<\/p>\n<p>corporate office at Thiruvananthapuram or the land at Kochi<\/p>\n<p>along with the Relays Division at Thiruvananthapuram, either<\/p>\n<p>as a package or otherwise.\n<\/p>\n<p id=\"p_49\">      35. At the risk of repetition it may be stated again that<\/p>\n<p>Annexure C advertisement in the newspaper did not include<\/p>\n<p>either the corporate office at Thiruvananthapuram or the land at<\/p>\n<p>Kochi. Moreover, there is nothing on record to show that the<\/p>\n<p>joint meeting called by the operating agency on March 6, 2002<\/p>\n<p>had given its approval for sale of the above two properties to<\/p>\n<p>the petitioner. Significantly, petitioner had only stated that the<\/p>\n<p>joint meeting had &#8220;considered&#8221; the proposal made by him.<\/p>\n<p id=\"p_50\">      36. hus having regard to the various earlier orders passed<\/p>\n<p>by the BIFR in relation to the Relays Division at<\/p>\n<p>Thiruvananthapuram, it cannot be said that there was          any<\/p>\n<p>direction for sale of the corporate office at Thiruvananthapuram<\/p>\n<p>and the land at Kochi, while sanctioning the Scheme for take<\/p>\n<p>over\/rehabilitation of the same. Therefore the order passed by<\/p>\n<p>the BIFR in relation to the Relays Division cannot be sustained.<\/p>\n<p>Consequently the sanctioned Scheme in respect of the Relays<\/p>\n<p>Division,     Thiruvananthapuram (Ext.P7) also cannot be<\/p>\n<p>sustained.\n<\/p>\n<p id=\"p_51\">      37. It is true that there is some force in the contention<\/p>\n<p>W.P(C).6625,2820,34185\/07<br \/>\n<span class=\"hidden_text\" id=\"span_18\">                                20<\/span><\/p>\n<p>raised by the petitioner that the promoters had not evinced<\/p>\n<p>interest to revive the sick Company over the years as expected<\/p>\n<p>of them. The Scheme of revival sanctioned by the BIFR in the<\/p>\n<p>year 1989 could not yield any desired result. Similarly the<\/p>\n<p>conduct of the promoters before the BIFR on almost all<\/p>\n<p>occasions, as revealed from the proceedings, was also not very<\/p>\n<p>positive or satisfactory. Petitioner may also be justified in<\/p>\n<p>contending that the promoters ought not to have been allowed<\/p>\n<p>to impugn      the last two orders issued by the BIFR while<\/p>\n<p>allowing the earlier orders for sale of the assets of the Company<\/p>\n<p>to attain finality.\n<\/p>\n<p id=\"p_52\">      38. Petitioner has pointed out that the promoters had<\/p>\n<p>never contended before the appellate authority that they had<\/p>\n<p>prepared a comprehensive revival or rehabilitation package for<\/p>\n<p>the sick company. It is also contended by the petitioner that the<\/p>\n<p>promoters or their allies had never made a prayer before the<\/p>\n<p>appellate authority to give them an opportunity to revive the<\/p>\n<p>Company. Learned Senior counsel submits that the enthusiasm<\/p>\n<p>now shown by the promoters is not bona fide or genuine at all<\/p>\n<p>and that interest of the workers and creditors of the sick<\/p>\n<p>Company will be at peril if the order of the appellate authority is<\/p>\n<p>sustained.\n<\/p>\n<p id=\"p_53\">      39. I have carefully perused the order passed by the<\/p>\n<p>appellate authority which has been impugned in these cases. It<\/p>\n<p>has already been found that the order issued by the BIFR in<\/p>\n<p>W.P(C).6625,2820,34185\/07<br \/>\n<span class=\"hidden_text\" id=\"span_19\">                                21<\/span><\/p>\n<p>respect of Relays Division as well as the sanctioned Scheme for<\/p>\n<p>its rehabilitation cannot be sustained for the reasons stated by<\/p>\n<p>me earlier.\n<\/p>\n<p id=\"p_54\">      40. The other question that remains to be considered is<\/p>\n<p>whether in the absence of any challenge, the other part of the<\/p>\n<p>order passed by the appellate authority should be interfered with<\/p>\n<p>at this stage in these proceedings. The appellate authority had<\/p>\n<p>noticed that the operating agency as        well as the secured<\/p>\n<p>creditors had offered support for revival of the Company and<\/p>\n<p>that they were agreeable for settlement of their dues under the<\/p>\n<p>one time settlement scheme. It was also noticed by the appellate<\/p>\n<p>authority that the       Central Government and the State<\/p>\n<p>Governments concerned, were also in support of revival. The<\/p>\n<p>appellate authority had observed that there was complete lack of<\/p>\n<p>information about the Company with BIFR and the operating<\/p>\n<p>agency and that the operating agency       and the Company had<\/p>\n<p>failed to conduct proper valuation of the assets of various<\/p>\n<p>divisions of the Company.\n<\/p>\n<p id=\"p_55\">      41.    It has to be noticed that the phenomenal rise in the<\/p>\n<p>land value will be a very determinative factor in the process of<\/p>\n<p>revival as things stand now. But above all, the prime factor<\/p>\n<p>which has to be borne in mind is that disintegration of the<\/p>\n<p>Company may not be to the benefit or advantage of many,<\/p>\n<p>barring only a few. There is no harm in giving one more chance<\/p>\n<p>to resurrect the Company, especially since it is seen from the<\/p>\n<p>W.P(C).6625,2820,34185\/07<br \/>\n<span class=\"hidden_text\" id=\"span_20\">                               22<\/span><\/p>\n<p>order that the representatives of Government of Kerala,<\/p>\n<p>Financial Institutions,    employees&#8217; organisations etc. and<\/p>\n<p>particularly the operating agency,        have expressed their<\/p>\n<p>willingness to give one more try for revival. Therefore the<\/p>\n<p>appellate authority, in my view, was justified in deeming it fit<\/p>\n<p>to afford further opportunity to the promoters to prepare a<\/p>\n<p>comprehensive rehabilitation\/revival Scheme for the sick<\/p>\n<p>Company.\n<\/p>\n<p id=\"p_56\">      42. Needless to mention the BIFR may have to play a<\/p>\n<p>more pro-active role henceforth. It has to be ensured that the<\/p>\n<p>promoters do not fail yet again in their duty to put the Company<\/p>\n<p>back on rails. If the BIFR notices any slackness or lack of<\/p>\n<p>enthusiasm, it will always be open to take appropriate steps in<\/p>\n<p>accordance with law.\n<\/p>\n<p id=\"p_57\">      43.    In this context it may be mentioned that the<\/p>\n<p>promoters, in response to a query made by this Court, had<\/p>\n<p>submitted the Scheme of rehabilitation         of the Company<\/p>\n<p>prepared by them in June 2007.          On the face of it, the<\/p>\n<p>proposal\/Scheme looks encouraging enough; but it depends on<\/p>\n<p>how earnest the promoters are in implementing the Scheme.<\/p>\n<p>The above proposal submitted by the promoters shall form part<\/p>\n<p>of the record and it is marked as Ext.X2.      The Registry shall<\/p>\n<p>forward the same to the BIFR.\n<\/p>\n<p id=\"p_58\">      44. In view of the conclusions made by me as above, I do<\/p>\n<p>not deem it necessary to go into the correctness of the order<\/p>\n<p>W.P(C).6625,2820,34185\/07<br \/>\n<span class=\"hidden_text\" id=\"span_21\">                               23<\/span><\/p>\n<p>passed by the BIFR in the context of the provisions contained<\/p>\n<p>in <a href=\"\/doc\/262489\/\" id=\"a_7\">Section 18<\/a> of the Act. In the larger interest of the Company<\/p>\n<p>and all parties concerned, I am satisfied that Ext.P8 order<\/p>\n<p>passed by the appellate authority need not be disturbed at this<\/p>\n<p>juncture. As mentioned earlier, the BIFR shall keep a close<\/p>\n<p>watch of the functioning of the Company. It shall be ensured<\/p>\n<p>that the promoters do not allow the Company to go to ruins.<\/p>\n<p id=\"p_59\">      45. In the result W.P.No.6625\/2007 shall stand dismissed.<\/p>\n<p>W.P.Nos.22820 and 34185\/2007:\n<\/p>\n<p id=\"p_60\">      In view of the orders passed in W.P.No.6625\/2007<\/p>\n<p>petitioners are not entitled to get any relief in these two writ<\/p>\n<p>petitions. They are accordingly dismissed.<\/p>\n<p id=\"p_61\">                                              A.K. Basheer<br \/>\n                                                   Judge<\/p>\n<p>an.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Kerala High Court Shri. Kurian Paulose vs Appellate Authority For &#8230; on 23 May, 2008 IN THE HIGH COURT OF KERALA AT ERNAKULAM WP(C).No. 6625 of 2007(L) 1. SHRI. KURIAN PAULOSE, AGED 61 YEARS, &#8230; Petitioner Vs 1. APPELLATE AUTHORITY FOR INDUSTRIAL &#8230; Respondent 2. BOARD FOR INDUSTRIAL AND FINANCIAL 3. M\/S. ALLUMINIUM INDUSTRIES LTD., [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_lmt_disableupdate":"","_lmt_disable":"","_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[8,21],"tags":[],"class_list":["post-255880","post","type-post","status-publish","format-standard","hentry","category-high-court","category-kerala-high-court"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.4 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>Shri. 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