W.P.(C) Nos.942/07, 2865/07 & 2880/07 Page 1 of 25 * IN THE HIGH COURT OF DELHI AT NEW DELHI + W.P.(C) NO.942/2007, W.P.(C) NO.2865/2007 AND W.P.(C) NO.2880/2007 Reserved on : 05.09.2008 Date of Decision : 09.04.2009 1. W.P.(C) NO.942/2007 & CM Nos.1652/2007, 2274/2007, 5412-13/2007, 14869/2007, 16129/2007, 16139-40/2007 & 17629/2007 M/S R.R.KABELS LTD. …… Petitioner Through Mr. Harish Salve, Mr. Rajiv Nayyar, Sr. Advs. with Ms. B. Sunita, Mr. Darpan Wadhwa & Mr. Anil, Advocates Versus AAIFR & ORS. …… Respondents Through Ms. Indira Jaisingh, Sr. Adv. with Mr. B. K. Sinha, Adv. for Respondent. Mr. V.P. Singh, Sr. Adv. with Mr. Buddy Ranganathan, Ms. Shruti Verma, Advs. for M/s Pegasus Asset Reconstruction for the respondent. Mr. Dewan, Adv. for the respondent. Mr. Jayant Bhushan, Sr. Adv. with for the respondent. Mr. C.A. Sundaram, Sr. Adv. with Ms. Sushmita Banerjee, Advocate for respondent no.36. Ms. Indu Malhotra, Sr. Adv. with Mr. P. K. Seth, Mr. Abhishek Kumar, Mr. Kush Chaturvedi, Advs. for the respondent no.26. Mr. A.S. Chandiok, Sr. Adv., Mr. Parag P. Tripathi, ASG with Mr. Prateek Jalan, Ms. Ranjita, Ms. Vismai Rao, Advs. for respondents. Mr. P. S. Sudheer, Ms. Anne Mathew, Advs. for respondent no.4. Mr.Rajeev Sahney, Sr.Adv. for respondent no.14. Mr. P. R. Sikka, Adv. for respondent no.2 Mr. D.K. Aggarwal with Shanto Mukerjee, Advs. for respondent no.29. Mr. Anil Devan, Sr. Adv. with Mr. Sanjiv Sen, Mr. Sameer Dewan, Advs. for respondent no.27/34. Mr.Dushyant Dave, Sr.Adv. and Mr. W.P.(C) Nos.942/07, 2865/07 & 2880/07 Page 2 of 25 Jayant Bhushan, Sr. Adv. with Mr. D. Kundu and Mr. Tarun, Adv. for TATA Steel Ltd./respondent no.24. Mr. Vivek Sibal, Mr. Tarunvir Singh, Advs. for respondent no.31. Mr.Radha Rangaswamy, Adv. for respondent/Govt. of West of Bengal. AND 2. W.P.(C) NO.2865/2007 & CM No. 5354/2007 PEGASUS ASSETS RECONSTRUCTION PVT. LTD. …… Petitioner Through : Same as in WP(C) No.942/2007 Versus AAIFR & ORS. …… Respondents Through : Same as in WP(C) No.942/2007 AND 3. W.P.(C) NO.2880/2007 & CM No.5387/2007 THE INDIAN KABELS WORKERS UNION …… Petitioner Through : Same as in WP(C) No.942/2007 Versus AAIFR & ORS. ……Respondents Through : Same as in WP(C) No.942/2007 CORAM : HON’BLE MR. JUSTICE MUKUL MUDGAL, J HON’BLE MR. JUSTICE V.K.SHALI, J 1. Whether reporters of local papers may be allowed to see the judgment? YES 2. To be referred to the Reporter or not? YES 3. Whether the judgment should be reported in the Digest? YES J U D G M E N T V.K. SHALI, J: 1. This order shall dispose of three Writ Petition No.942/2007 (M/s R.R.Kabels Ltd. Vs. AAIFR & Ors.), WP(C) No. 2865/2007 (M/s W.P.(C) Nos.942/07, 2865/07 & 2880/07 Page 3 of 25 Pegasus Assets Reconstruction Pvt. Ltd. Vs. AAIFR and Ors.) and WP(C) No.2880/2007 (The Indian Kabels Workers Union Vs. AAIFR & Ors.). All these three writ petitions are challenging the same order dated 22nd September, 2006 passed by AAIFR though for different reasons. By virtue of the said order, AAIFR has passed the following directions:- “46. We also give the following directions to the BIFR which we expect will be followed by the Board. All parties are also directed to fully cooperate with the BIFR so that the time frame given to the BIFR can be maintained. i) All four parties who have been permitted by the BIFR order dated 12.04.2006 shall give their respective proposals to the OA i.e. SBI for its evaluation within two weeks of the passing of this order, during which period all the four parties, namely, SJIL (Silver Jubilee Infrastructure Ltd.), Pegasus (Pegasus Assets Reconstruction Pvt. Ltd.), RRK (M/s R. R. Kabels Ltd.) and LLL (Land Lease Company (India) Ltd. respectively shall hold discussions with the secured creditors and others. Thereafter, operating agency (hereinafter referred to as „OA‟) shall hold discussions with the secured creditors and others. All the four parties shall deposit 100% of their envisaged promoters‟ contribution in an interest bearing No Lien Account with the OA and give proof of their deposit to the satisfaction of the OA. ii) OA upon receipt of the proposals from all or any of; the four parties as enumerated hereinabove, shall satisfy itself about the deposit in an interest bearing No Lien Account of the entire promoters‟ contribution and, thereafter, examine the proposals. The said examination by the OA shall be done within a period of four weeks after expiry of two weeks from the passing of this order. iii) OA after examination of the proposals shall call for a joint meeting of all concerned parties and conduct negotiations and prepare a viable and fully tied up Draft Rehabilitation Scheme (DRS) and submit the same to BIFR latest upon the expiry of ten weeks time of the passing of; this order. OA along with DRS shall also submit a report to BIFR giving respective W.P.(C) Nos.942/07, 2865/07 & 2880/07 Page 4 of 25 merits and demerits of each of the proposal evaluated for consideration of BIFR.” 2. The petitioner M/s R.R.Kabels Ltd.had challenged the order dated 12th April, 2006 passed by the BIFR in AAIFR permitting all the above mentioned four parties to submit the revised proposal to the OA on the ground that it is the scheme for rehabilitation of the sick company was superior as compared to the schemes given by Peagasus Assets Reconstruction Pvt. Ltd. and SJIL and LLJ because Peagasus was an asset reconstruction company and could not run the sick company in view of the bar contained in Section 10(2) of the SICA and the guidelines framed by the RBI. It had also failed to deposit the promoter‟s contribution in the no lien account while as the petitioner had already deposited 25 crores and further made arrangement for another 35 crores of investment to revive the sick company. Similarly, the schemes of SJIL and LLJ also did not conform to this direction of the BIFR and accordingly these schemes could not be considered. The petitioner had further contended that it had already purchased 85% of the secured credit, signed MOU with Union not to retrench any employee and the direction given by the BIFR for submission of the fresh scheme to be given by these four parties would further cause delay in the rehabilitation of the sick company which has already been lying closed for a considerable length of time. It was also contended that the petitioner is doing the same business which the sick company was doing. These submissions of the petitioner company were negatived and the appeal was dismissed by the impugned order dated 22nd September, 2006 by which the petitioner is feeling aggrieved and has challenged it by filing the present petition. W.P.(C) Nos.942/07, 2865/07 & 2880/07 Page 5 of 25 3. Pursuant to this order, M/s R.R.Kabels Ltd. submitted a revised and duly tied up proposal with the operating agency and also deposited a sum of Rs.21 crores on 21st April, 2006 and a sum of Rs.5 crores on 9th May, 2006. Simultaneously, it preferred the present Writ Petition bearing WP(C) No.942/2006 before this Court praying for quashing of the impugned order dated 22nd September, 2006 and further praying that the rehabilitation scheme proposed by the petitioner namely M/s R.R.Kabels Ltd. ought to be sanctioned by the respondents under the provisions of The Sick Industrial Companies (Special Provisions) Act, 1985. 4. There are 39 respondents in the Writ Petition. This Court passed an order on 13th February, 2007 staying further proceedings both before AAIFR and BIFR till the next date of hearing which order continued to be in existence till date. Counter affidavits have been filed by respondents No.32, 38 and 39 opposing the writ petition. 5. The other two writ petitioners have also challenged the order dated 22nd September, 2006 of AAIFR though for different reasons. In Writ Petition bearing No.2865/2007 petitioner, M/s Pegasus Assets Reconstruction Pvt. Ltd., has prayed for various reliefs, main among them being that the MOU signed by the petitioner M/s R.R.Kabels Ltd. with the respondents No.29, 32 and 33 and with the various secured creditors and the purchase of the secured debt by them is bad in law. It was the case of Pegasus that purchase of secured debt by M/s R.R.Kabel even after, it, itself had obtained an order of status quo from AAIFR is not only violative of AAIFR order and contemptuous but it has also upset the level playing field for all the prospective bidders. W.P.(C) Nos.942/07, 2865/07 & 2880/07 Page 6 of 25 6. So far as third Writ Petition bearing No.2880/2007 by The Indian Kabels Workers Union Vs. AAIFR & Ors. is concerned, it has prayed for summoning of the record of the case from AAIFR in respect of miscellaneous application bearing No.176/2007 in Appeal No.110/2006 culminating into the order of 22nd September, 2006 passed by AAIFR and further issuance of an appropriate mandamus or direction or order commanding that M/s Tata Iron & Steel Company Ltd. give a proposal and to consider the said proposal of rehabilitation of M/s Incab Industries Ltd. by the BIFR. It was also prayed that the respondents be prohibited except respondent no.24-M/s Tata Iron & Steel Co. Ltd., their service agency etc. interfering from rehabilitation proposal or taking over M/s Incab Industries Ltd. by M/s Tata Iron & Steel Co. Ltd. 7. In order to appreciate the real point in controversy, it may be pertinent here to mention the brief facts. M/s Incab Industries Ltd. (hereinafter referred to as „the Company‟) was having its main plant at Jamshedpur and another plant at Pune apart from its Head Office at Calcutta. The aforesaid Company does not seem to have been managed properly on account of which the Company had to be closed down as it had suffered losses. In October, 1999, a reference was made to BIFR for the purpose of declaring the Company as a sick unit. On 4th April, 2000, BIFR declared the Company as a sick unit under The Sick Industrial Companies (Special Provisions) Act, 1985 and the State Bank of India was appointed as an operating agency. On 20th October 2000, since no viable rehabilitation scheme could be framed, BIFR directed the operating agency to issue an advertisement for change of management of the Sick Company. However, no party came forward for taking over the management of W.P.(C) Nos.942/07, 2865/07 & 2880/07 Page 7 of 25 the company. In the year 2006, BIFR formed a prima facie opinion that the company could not be revived and therefore, should be wound up on account of the fact that there was no viable or agreed rehabilitation proposal with means of finance tied up, as no party was available to take over the grant of rehabilitation. However, as a last measure, BIFR gave an opportunity to various parties to submit a rehabilitation proposal in respect of the aforesaid company. As a consequence of this, three proposals were submitted before BIFR, one by M/s R.R.Kabels Ltd. (petitioner in WP(C) 942/06), the second by M/s Pegasus Assets Reconstruction Pvt. Ltd. (respondent no.32 and petitioner in WP(C) 2865/07 and third by M/s Silver Jubilee infrastructure Ltd. (respondent no.31). In addition to this, one company M/s Land Lease Company (India) Ltd. (LLL)-respondent no. 33 were also permitted to submit a proposal to the BIFR along with certified copy of the High Court order permitting M/s Land Lease Company (India) Ltd. to submit the proposal. All these proposers were to negotiate with the secured creditors/workers and other necessary parties and submit a revised and improvised rehabilitation proposal to the operating agency because the proposal submitted by them were found to be not fully tied up on all counts. 8. Pursuant to this, BIFR also directed that any proposal submitted by any party would also be required to submit 25% of the finance required for the purpose of rehabilitation with the operating agency. 9. Accordingly, M/s R.R.Kabels Ltd. deposited a sum of Rs.25 crores with the operating agency and claimed that it had further made a provision of Rs.34 crores to invest as a capital expenditure W.P.(C) Nos.942/07, 2865/07 & 2880/07 Page 8 of 25 for the revival of the company. Although it complied with the portion of the order of BIFR but simultaneously it preferred an Appeal No.110/2006 wherein the order dated 12th April, 2006 passed by BIFR was challenged under Section 25 of The Sick Industrial Companies (Special Provisions) Act, 1985 on the grounds stated hereinabove. The said appeal came to be heard on 12th May, 2006 and AAIFR passed an order of status quo with regard to the properties of the Company. 10. In Writ Petition No.942/2007, titled as M/s R. R. Kabels Vs. AAIFR & Ors., this Court on the application bearing No.5413/2007 filed by M/s Incab Industries Ltd., The Indian Kabels Workers Union, M/s Incab Credit Staff Association and Kabels Union (INTEC) sought intervention in this petition, as well as leave of this Court to approach M/s Tata Iron & Steel Company Ltd. for rehabilitation and revival of M/s Incab Industries Ltd. The Court permitted the intervention and directed M/s Tata Iron and Steel Co. Ltd. to file a proposal for the purpose of rehabilitation of M/s Incab Unit which has already been done. 11. We have heard the learned counsel for the main contesting parties namely M/s R.R.Kabels Ltd. in Writ Petition No.942/2007, M/s Tata Iron & Steel Co. Ltd. respondent no.24, M/s Pegasus Assets Reconstruction Pvt. Ltd., Respondent no.32 and The Indian Kabels Workers‟ Union-respondent no.27, apart from other counsel. 12. So far as the submissions which have been made by the respective sides are concerned essentially constitute three groups. One group is headed by M/s R.R. Kabels Ltd. which is getting the support of respondent No.27-The Indian Kabels Workers‟ Union, W.P.(C) Nos.942/07, 2865/07 & 2880/07 Page 9 of 25 Respondent no. 28-Jamshedpur Mazdoor Union, respondent no.30-All India Trade Union Congress, respondent no.38-M/s Kamala Mills Ltd. and respondent no.39-M/s Fasqua Investment Pvt. Ltd. 13. The second group is represented by M/s Tata Iron & Steel Co. Ltd. which is respondent No.24 and although it had not given the scheme for rehabilitation originally but by virtue of the interim order passed by this Hon‟ble Court on 23rd April, 2007, M/s Tata Iron & Steel Co Ltd., respondent no.24 was permitted to submit a proposal without prejudice to the rights and contentions of the other bidders. This proposal of M/s Tata Iron & Steel Co. Ltd. is supported by respondent nos.27, 29 and interveners which are stated to be M/s Incab group Staff and M/s Karamchari Union and 763 Individual Workers‟ whose individual affidavits are also purported to have been filed separately. It may be pertinent here to mention that both M/s RR Kabels and Tata Iron & Steel Co. Ltd. were claiming the support from the substantial number of workers of respondent no. 27 - a union. However, we feel it is not necessary to go into the question of which of the Union or a part thereof is supporting which of the proposal because once this is sought to be done, the main issue with regard to the seeing the validity of the impugned order for the purpose of rehabilitation of the sick company itself gets sidetracked. 14. The third scheme is that of M/s Pegasus Assets Reconstruction Pvt. Ltd.-respondent no.32. As regards, the forth party namely, LLJ there was really no serious claim to consider the said proposal. 15. All the three proposals which are purported to have been submitted by the three parties essentially raise the question as to which scheme is the best and for the larger benefit of the workers of W.P.(C) Nos.942/07, 2865/07 & 2880/07 Page 10 of 25 the company which has been lying closed since 1995 and has now got embroiled into litigation. So far as M/s Pegasus Assets Reconstruction Pvt. Ltd.-respondent no.32 is concerned, its grievance is not to the effect that its scheme has not been accepted but its grievance is to the effect that the order which was passed by AAIFR have not considered its appeal of restoring the status quo with regard to the assets of M/s Incab Industries Ltd. which are purported to have purchased by R. R. Kabels. It is alleged that M/s R. R. Kabels despite the status quo order having been passed by the AAIFR on 12th May, 2006 has purchased 85% of the secured credit of the company and thus upsetting the level playing field for all the players. 16. So far as the scheme of Pegasus is concerned R.R. Kabels had raised an objection to it on the ground that it is an asset reconstruction company under Securitization and Reconstruction of Financial Assets and Enforcement of Security Act, 2002 it cannot commence business without the approval of the RBI and thus it ought not be considered. The two schemes purported to have been formulated or submitted by M/s R.R.Kabels and M/s Tata Iron & Steel Co. Ltd. are really the main contesting parties before this Court. 17. So far as the grievance of the petitioner M/s R.R.Kabels Ltd. is concerned, it has raised the contention that AAIFR has fallen into error by giving a direction to BIFR permitting all the four parties namely, M/s Silver Jubilee Infrastructure Ltd., M/s Pegasus Assets Reconstruction Pvt. Ltd., M/s R.R.Kabels Ltd. and M/s Land Lease Company (India) Ltd. to submit a revised rehabilitation proposal W.P.(C) Nos.942/07, 2865/07 & 2880/07 Page 11 of 25 despite the fact that M/s R.R.Kabels Ltd. had already complied with the directions of BIFR inasmuch as it had deposited Rs.25 crores as its share in the interest bearing no lien account in addition to have been able to obtain a commitment for investment of Rs.34 crores into the capital assets of the company for its revival. In addition to this, it was contended on behalf of M/s R.R.Kabels Ltd. that it is essentially dealing with in the business of cables and so was the Incab and therefore, it was best suited for revival of the company. It was urged that the proposal which was submitted by it would have not only rehabilitated the Incab company but it was also going to ameliorate the condition of the workers in general. It was contended by M/s R.R.Kabels Ltd. that before passing of the order by BIFR on 21st April, 2006, it had entered into a memorandum of Understanding on 27th March, 2006 with respondent Nos.26, 27, 28 and 34 which are Union of workers who had supported the scheme of M/s R.R.Kabels Ltd. as it would have been highly beneficial to the workers in general. In addition to this, it had also been assigned 85% of the secured debt of Incab to M/s R.R.Kabels Ltd. from various statutory and financial institutions namely ARCIL, ICICI Bank Ltd., Kamla Mills, Specified Undertaking, UTI, UTI Mutual Fund and therefore, it was contended by them that no proposal for rehabilitation of the company floated by any other company including M/s Tata Iron & Steel Col Lt. would be workable without the approval of M/s R.R.Kabels Ltd. and thus the proposal which has been floated by M/s R.R.Kabels Ltd. ought to be accepted and all the other proposals be rejected. 18. As regards the proposal which was submitted by M/s Tata Iron & Steel Co. Ltd. it was contended on behalf of the petitioner that the W.P.(C) Nos.942/07, 2865/07 & 2880/07 Page 12 of 25 proposal which was submitted by M/s Tata Iron and Steel Co. Ltd. was highly belated inasmuch as despite M/s Tata Iron and Steel Co. Ltd. being a party both before BIFR as well as AAIFR for almost a period of seven years, they did not submit any proposal for rehabilitation of the company. No doubt M/s Tata Iron & Steel Co. Ltd. was an unsecured creditor but during the course of negotiations with the secured creditors they had also supported the scheme of M/s R.R.Kabels Ltd. It was contended that Tata‟s proposal was highly belated and therefore it cannot and may not be considered now. Further this proposal was permitted to be submitted without prejudice to the rights and contentions of the other parties. 19. It is further urged that the proposal which has been now submitted by M/s Tata Iron & Steel Co. Ltd. is a self-serving proposal which has been permitted to be submitted by virtue of an ad interim order passed by the High Court on 23rd April, 2007 without prejudice to the rights and contentions of the parties and if the said proposal is permitted to be entertained, it will only give a back door entry to M/s Tata Iron & Steel Co. Ltd. It was also urged that even on merits, the proposal which has been submitted by M/s Tata Iron & Steel Co. Ltd. is not better than the proposal submitted by M/s R.R.Kabels Ltd. inasmuch as the proposal which has been submitted by M/s Tata Iron & Steel Co. Ltd. involved „right sizing‟ the work force which would result in retrenchment of workmen and it would also ensure that it retrieves its total unsecured loss while as the interest of other secured creditors will not be fully protected. It was also urged on behalf of the respondent Nos.27,28 and 30 that so far as the proposal which has been given by M/s Tata Iron and Steel Company Ltd. is concerned, it has been invited by way of a surrogate W.P.(C) Nos.942/07, 2865/07 & 2880/07 Page 13 of 25 interim applications in the shape of so called interveners/applicants namely M/s Incab Graded Staff Association, M/s Kabels Karamchari Union and 763 individual workers/Deponents whose affidavits are attached. It was also urged that so far as the interveners are concerned, such an application cannot be entertained inasmuch as no permission under Order 1 Rule 8 of CPC has been sought to place on record the individual affidavits and reliance in this regard has been placed on case titled as R.C.Sunita Vs. UOI & Others 1999 (9) SCC 105. It was further urged that according to Section 36 of the Industrial Disputes Act, 1947, the representation of parties before a Tribunal can be only through its Trade Union and not by individual workmen and therefore, these applications with individual affidavits cannot be taken cognizance of by the Court. Reliance was placed on Shramik Uttarsh Sabha vs. Raymond Woolen Mills Ltd & Ors. JT 1995 (II) SC 284 para 15. 20. It was urged that the interest of the workers in general as well as in particular is governed by the Trade Unions which have already entered into the Memorandum of Understanding on 27th March, 2006 with the petitioner. The respondent No.38 M/s Kamla Mills Ltd. and respondent no.39 Fasqua Investment Pvt. Ltd. are also assignees of the secured debt of the financial institutions and are vehemently supporting the scheme of the petitioner on all counts. 21. Per contra, it was contended on behalf of respondent no.24-M/s Tata Iron & Steel Company Ltd. and respondent no.27-The Indian Kabels Workers‟ Union and respondent no.29- Incab Employees‟ Association and the interveners that the proposal which has been submitted by M/s Tata Iron and Steel Company Ltd. is W.P.(C) Nos.942/07, 2865/07 & 2880/07 Page 14 of 25 better than the proposal of M/s R.R. Kabels Ltd. inasmuch as not only it did not envisage any retrenchment but the benefits which are being given by M/s Tata Iron and Steel Company Ltd. are better than the benefits which would accrue to the workers in general if the scheme of M/s R.R.Kabels Ltd. is accepted. It was also contended on behalf of M/s Tata Iran and Steel Company Ltd. that the entire township where the main plant of the sick industrial unit M/s Incab Industries Ltd. is located in Jamshedpur which land belongs to M/s Tata Iron and Steel Company Ltd. Even the essential amenities like water, electricity, sanitation and other facilities in the township are maintained by M/s Tata Iron and Steel Company Ltd. In addition to this, so far as M/s Tata