IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH. C.W.P. No.5630 of 2008 Date of decision: 6.11.2008 Jagjit Singh. -----Petitioner Vs. Punjab State Industrial Development Corporation Ltd. -----Respondent CORAM:- HON'BLE MR JUSTICE ADARSH KUMAR GOEL HON'BLE MR JUSTICE L.N. MITTAL Present:- Mr. Anil Kumar Aggarwal, Advocate for the petitioners. Mr. B.B.S. Sobti, Advocate for the respondent. ----- ORDER: 1. This petition seeks a direction to the respondent Punjab State Industrial Development Corporation Limited (PSIDC) to honour One Time Settlement (OTS) scheme and to quash the resolution of the Board of Directors dated 18.9.2006 (Annexure P-8) conveyed to the petitioner vide letter dated 19.10.2006 (Annexure P-9). 2. Case of the petitioner is that he entered into a collaboration agreement with the respondent (PSIDC) for setting up a dairy milk plant in the name of M/s Milk Specialities Limited (MSL) on 1.1.1993. The PSIDC contributed equity to the extent of 26%. MSL became a sick company. Reference was made to the Board for Industrial and C.W.P. No.5630 of 2008 Financial Reconstruction (BIFR) under the provisions of Sick Industrial Companies (Special Provisions) Act, 1985 (SICA) on 5.7.2000. MSL also entered in OTS with financial institutions i.e. IFCI and IDBI and got the concession of interest waiver, on account of which the net worth of the company became positive. Resultantly, reference was disposed of by the BIFR on 20.2.2001 as not maintainable. In the year 2004, the PSIDC announced OTS policy (Annexure P-3). The OTS contemplated buy back of shares by the collaborators on certain payments being made. The petitioner submitted a proposal which was accepted by the Board of Directors in its meeting held on 26.10.2005 (Annexure P-6). However, conditions for acceptance were that the petitioner will pay not less than principal amount within three years and with post dated cheques in equal quarterly instalments. The petitioner was also required to execute an agreement within 30 days. 3. Vide letter dated 18.9.2006, Board of Directors passed resolution withdrawing from the OTS. 4. Contention raised in the writ petition is that once the Board of Directors has approved the OTS, the same could not be withdrawn. 5. In the reply, the Corporation has defended the resolution dated 18.9.2006 and apart from merits, it has been submitted that arbitration award dated 7.7.2008 has already been rendered between the parties which has been challenged by the petitioner before the District Judge, Chandigarh, wherein cancellation of OTS is also in issue. The petitioner never executed agreement in terms of approval by the Board. It has also been submitted that OTS could not be 2 C.W.P. No.5630 of 2008 enforced in a writ of mandamus, the same being purely on disputed facts. The writ petition has been filed after great delay only in March, 2008. 6. We have heard learned counsel for the parties. 7. Learned counsel for the respondent Corporation refers to the impugned resolution (Annexure P-8) to the following effect:- “.....This company had come out of BIFR in February, 2001 but while the promoter in his offer letter dated 30.08.2005 mentioned the factum of registration with BIFR in the year July, 2000, he deliberately did not mention that this company, after just seven months, had come out of BIFR in February, 2001 i.e. about 40 months before the last date of expiry of OTS Policy. On the last date of expiry of OTS policy i.e. on 30th June, 2004, the company, as per its balance sheets, had been making profits for the last 2-3 years. The Board of further observed that on one hand, the collaborator had asked for concession from PSIDC in the equity buy back obligation as available to a sick (concealing the fact that it was a non-sick unit after February, 2001) while on the other he had applied for consent of PSIDC to induct Rs.3 crores as additional equity out of his own resources and for a no objection for grant of incentives of Rs.25 crores from Industries Department for his mega project with an outlay of about Rs.100 crores meaning thereby that he was a willful defaulter. From the above, it was clear that at the time of expiry of OTS policy on 30.06.2004 and at the time of making the offer on 30.08.2005, MSL was a profit-making company. The Comptroller & Auditor General of India (CAG);s Audit as well as the Committee on Public Undertaking (COPU) have already made very serious objections to extending of 3 C.W.P. No.5630 of 2008 concessions under OTS policy to profit making companies and extending the BIFR package to a profit-making company will lead to huge financial loss to the Corporation and will also lead to very serious audit paras. In light of the above, the Board decided to review the earlier ‘in-principle’ decision to consider to extend BIFR package to this company on the following grounds: i- The company had come out of BIFR in February, 2001. Therefore, as per OTS policy approved by the CMM, it was not entitled to be given the package of BIFR. ii- Extending the BIFR package to this company involves a sacrifice of over Rs.14 crores as per FCA and around Rs.9.67 crores as per OTS for profit-making companies as approved by the CMM. iii- As per the decision of the CMM, the last date for applying for OTS for equity buy back was 30.06.2004 and so the request dated 30.08.2005 of the promoter was hopelessly time-barred by 14 months. iv- The Comptroller & Auditor General of India (CAG)’s Audit as well as The Committee on Public Undertaking (COPU) have already made very serious objections to extending of concessions under OTS policy to profit-making companies and extending the BIFR package to a profit-making company will lead to huge financial loss to the Corporation and will also lead to very serious audit paras. v- This huge concession to MSL will invite similar requests from similarly situated companies like Industrial Organics Ltd. (IOL) etc. and will 4 C.W.P. No.5630 of 2008 become a very bad precedent and thus, a continuous drain on the already precarious financial position of the Corporation.” 8. He submitted that withdrawal from OTS by the Corporation was for valid reasons. He also submitted that no mandamus could be issued for enforcing the OTS. Reliance has been placed on judgment of this Court in Knittex Overseas Pvt. Ltd. v. State Bank of Patiala & others AIR 2008 Punjab and Haryana 59. 9. We find merit in the preliminary objection raised on behalf of the respondent-Corporation that the award having already been rendered on the issue, which is subject matter of consideration before the concerned Court, this Court may not go into the same question. Moreover, no concluded contract in terms of OTS had been reached between the parties. The writ petition has been filed 1½ years after the impugned resolution was passed. 10. In these circumstances, we are not inclined to entertain this petition, at this stage. 11. Dismissed. ( ADARSH KUMAR GOEL ) JUDGE November 06, 2008 ( L. N. MITTAL ) ashwani JUDGE 5