*THE HON'BLE SMT. JUSTICE T.MEENA KUMARI And *THE HON'BLE SRI JUSTICE RAMESH RANGANATHAN +W.A.No.673 OF 2008 %Dated 01.09.2008 #ALIND Workers Congress …APPELLANT VERSUS $ M/s.United Shippers Limited and four others. …RESPONDENTS ! Counsel for Appellant: Sri Mehmood Ali for Sri N.Sreedhar Reddy ^ Counsel for the Respondent No.1: Sri S.Ravi Counsel for the Respondent No.2: Sri K.Ramamoorthy for Sri V.V.Prabhakara Rao Counsel for the Respondent No.5: Sri Arshad Hidayatullah for Sri R.Raghunandan Counsel for Respondent No.6: Sri G.Anil Rao. Counsel for Respondent Nos.7&8: Sri A.K.Jayaprakash Rao. < GIST: >HEAD NOTE: ?Cases Referred. [1] (2002) 1 SCC 567 2(2004) 6 SCC 254 3JT 2007 (4) SC 474 4(1999) 9 SCC 29 5(1985) 3 SCC 217 6(2007) 6 SCC 769 7(1975) 2 SCC 671 8 2007 (13) Scale 77 9(2004) 9 SCC 786 10 90 C.W.N. 438 11AIR 1987 Karnataka 113 12AIR 1981 AP 283 13AIR 1983 Cal 307 14(1888) Vol.XXII QBD 128 15AIR 1960 SC 1309 16 (2006) 6 SCC 207 17 (1994) 4 SCC 711 18 (2000) 7 SCC 640 19 AIR 1996 Calcutta 54 20 (2008) 3 SCC 456 21 1994(6) SCC 322 22 (1996)3 SCC 443 23 (1998)6 SCC 514 24 (2001) 2 SCC 294 25(1977)1 SCC 791 26 15 Ind App 156 27 (2002) 1 SCC 567 IN THE HIGH COURT OF JUDICATURE, ANDHRA PRADESH AT HYDERABAD MONDAY, THE FIRST DAY OF SEPTEMBER TWO THOUSAND AND EIGHT PRESENT THE HON'BLE MRS JUSTICE T.MEENA KUMARI and THE HON'BLE MR JUSTICE RAMESH RANGANATHAN WRIT APPEAL NO : 673 of 2008 (Writ Appeal under Clause 15 of the Letters Patent against the Order dated 10/06/2008 in WP NO : 3369 OF 2007 on the file of the High Court.) Between: Alind Workers Congress (affiliated to INTUC) rep. by its General Secretary, B. Ramakrishnan S/o. V.K. Bhaskara Pillai, R/o. Kollam, Kerala. ..... APPELLANT AND 1 M/s United Shippers Limited, United India Buildings, 2nd floor, Sir PM Road, Fort, Mumbai 400001, rep. by its Authorised Signatory, R. Pandu. 2 M/s. Volta Impex Pvt. Limited, having its Regd. Office at Plot No.123/3RT, First Floor, Sanjeevareddy Nagar, Hyderabad rep. by its Senior Manager. 3 Appellate Authority for Industrial and Financial Reconstruction, Jeevan Prakash Building, Kasturba Gandhi Marg. New Delhi. 4 Board for Industrial and Financial Reconstruction, Jawahar Vyapar Bhavan, No.1, Tolstory Marg, New Delhi. 5 M/s. Alluminium Industries Limited, rep. by its Chairman and Managing Director, No.1., Ceramic Factory Road, Kundara 681501, Kerala. 6 State Bank of Travancore, Poojapura, Trivandrum, Kerala, rep. by its Chairman & Managing Director. 7 M/s. Alind Employees Union revival Committee, M/s. Alluminium Industries Ltd., rep. by its Secretary, No.1, Ceramic Factory Road, Kundara -681 501, Kerala. 8 M/s. Alind works Union, rep. byits Secretary, No.1 Ceramic Factory Road, Kundara-681 501, Kerala. .....RESPONDENT(S) Counsel for the Appellant:MR.N.SRIDHAR REDDY Counsel for the Respondent No.: MR.V.V.PRABHAKARA RAO The Court made the following : THE HON’BLE SMT. JUSTICE T.MEENA KUMARI AND THE HON’BLE SRI JUSTICE RAMESH RANGANATHAN WRIT APPEAL No.673 OF 2008 JUDGMENT: (Per Hon’ble Sri Justice Ramesh Ranganathan) Would location at Hyderabad of two divisions, and the assets therein, of a Sick Industrial Company registered in the State of Kerala, and the petitioner having submitted their bid for its take-over, based on which the Board of Industrial and Financial Reconstruction, (for short ‘the B.I.F.R’), had sanctioned a separate scheme, constitute “cause of action in part”, for invoking the jurisdiction of the High Court of Andhra Pradesh in a Writ Petition ﬁled challenging the order of the Appellate Authority, (for short “the A.A.I.F.R”), under the Sick Industrial Companies (Special Provisions) Act, 1985 (for short ‘SICA’), dated 06.02.2007 setting aside the order of the B.I.F.R. dated 26.07.2005? An ancillary question which falls for consideration is whether, in the absence of any plea that the “cause of action”, even in part, had arisen within its territorial limits, this Court would be justiﬁed in placing reliance on the list of dates and events annexed thereto, and the material documents ﬁled therewith, to determine whether or not “cause of action” in part has arisen within its territorial limits? The 5th respondent herein is a company registered under the Companies Act, 1956 with its registered oﬃce, and some of its divisions, situated in the State of Kerala. Three of its divisions i.e. Machinery division, Conductor division and Material Handling division are at Hyderabad. It also has a Conductor division at Hirakud in the State of Orissa. Since its net-worth had eroded, the 5th respondent made a reference, under Section 15 of SICA, to the 4th respondent. The reference was registered as Case No.93 of 1987. The 5th respondent was declared a sick company, by the B.I.F.R. on 20.10.1987, in terms of Section 3 (1)(o) of S.I.C.A. The B.I.F.R. had hitherto sanctioned a scheme of revival of the 5th respondent, in the year 1989, which had resulted in the 1st respondent taking over the management of the 5th respondent. In the year 1994 the B.I.F.R. had declared the said scheme of revival to have failed. The 2nd respondent-writ petitioner submitted their bid for Rs.27 crores, (later revised to Rs.42.5 crores), to take over the machinery and conductor divisions of the 5th respondent at Hyderabad. The B.I.F.R. was of the view that three separate schemes should be formulated and, accordingly, the drawn up draft rehabilitation scheme was circulated on 21.08.2005. The 1st respondent herein, in their capacity as a major shareholder of the 5th respondent, submitted their objections to the scheme. The B.I.F.R, in its order dated 26.07.2005, observed that, since bids were invited through advertisement as per their directions at the hearings held on 27.06.2002 and 19.12.2002, as none of the new bidders, i.e. G.V.K. Group, Ambience Properties, Clean Foods Ltd., Chitrahar Agencies etc, had responded to the advertisement issued by the B.I.F.R through the O.A, and these new oﬀers had been received after ﬁnalization of the whole process, reopening the ﬁnalized process would be detrimental to the revival process of the unit. The B.I.F.R, in exercise of its powers under Section 18 (4) read with 19 (3) of S.I.C.A, sanctioned all the three draft rehabilitation schemes by its order dated 26.07.2005, and directed that the machinery and conductor divisions located at Hyderabad be spun oﬀ into a separate company and its assets and liabilities be segregated. Aggrieved by the order of the B.I.F.R, the 1 st respondent preferred Appeal No.98 of 2005, under Section 25 of SICA, before the A.A.I.F.R. Likewise, the 7 th respondent also preferred an appeal. Among the contentions raised before the A.A.I.F.R. was that the sanction of three independent schemes for transfer of viable units, instead of approving a comprehensive scheme, was violative of the provisions of S.I.C.A. The A.A.I.F.R, in its order dated 06.02.2007, observed that the employees and creditors were the employees/creditors of the company and not of a particular unit, that diverting the assets and resources of the company for the beneﬁt of some creditors and workmen was highly questionable, that, by adopting a piecemeal approach, some creditors were given preference vis-a-vis others and that the assets of the company were being diverted to other legal entities, thus leaving no recourse to the remaining creditors of the company for recovery of their dues. While observing that it would be well within the powers of the B.I.F.R., while framing a rehabilitation scheme, to direct sale of one or more unviable divisions of a sick industrial company, if such divisions were held to be unviable, the A.A.I.F.R. was of the view that it was more appropriate to take into account all prevalent facts while formulating a scheme under Section 18 of S.I.C.A. It held that the approach of the B.I.F.R, that no revivable scheme for rehabilitation of all the divisions of the 5th respondent was feasible and that it was not possible to work out a comprehensive scheme for reviving of all the divisions, was erroneous, that viable units should be revived and unviable units could be sold but this should be done under the umbrella of one scheme which would also take into account the concerns of all stake holders, that the net eﬀect of the procedure adopted by the B.I.F.R. was that all the assets of the company would stand transferred to third parties and a major portion of the liabilities, mainly statutory dues, labour dues and dues of unsecured creditors would be left behind in a shell company with virtually no assets, resulting in payment of certain creditors in a preferential manner while the dues of others would be rendered irrecoverable. The A.A.I.F.R. further observed that it was a matter of public knowledge that there was considerable increase in the price of land particularly in cities like Hyderabad and there was no reason why the value of the 5th respondent’s assets should be brought down as projected before the B.I.F.R. The A.A.I.F.R. also noted that while the B.I.F.R, by its order dated 27.06.2002, had directed the operating agency to issue a fresh advertisement, and though no fresh advertisement was in fact issued, the 2nd respondent had submitted its oﬀer vide letters dated 17.05.2002 and 22.08.2008. It held that there was repeated non-compliance by the operating agency of the directives of the B.I.F.R, particularly in pursuance of its order dated 19.12.2002, that while advertisements were issued for the units in Kerala, no advertisement was issued by the operating agency for the Hyderabad units. The A.A.I.F.R. issued several directives including for a change in the composition of the Board of Directors of the 5th respondent, appointment of auditors, that within four weeks the existing promoters of the 5th respondent should submit a comprehensive rehabilitation scheme and, in the event they failed to do so, the B.I.F.R. should explore other avenues for reviving the 5th respondent including the option of a change in management. It is this order of the A.A.I.F.R. which was under challenge in the Writ Petition ﬁled by the 2 nd respondent before this Court. Aggrieved by the order of the A.A.I.F.R a bidder, who had submitted proposals for taking over the relays division of the ﬁfth respondent at Thiruvananthapuram, ﬁled W.P.No.6625 of 2007 before the High Court of Kerala. The learned Single Judge of the Kerala High Court, while ﬁnding force in the petitioner’s contention that the promoters had not evinced interest in reviving the sick company over the years as expected of them, that the scheme of revival sanctioned by the B.I.F.R in the year 1989 did not yield the desired results and that the conduct of the promoters before the B.I.F.R. was also not very positive or satisfactory, however, held that the order of the B.I.F.R in respect of the relays division as well as the sanctioned scheme for its rehabilitation could not be sustained. The learned Single Judge observed that the phenomenal rise in the land value was a determinative factor in the process of revival, that disintegration of the company may not be to the beneﬁt or advantage of many barring a few and that there was no harm in giving one more chance to resurrect the company especially since the Government of Kerala, the ﬁnancial institutions, the employees’ organization and the operating agency had expressed their willingness to give one more try for revival. The learned Single Judge of the Kerala High Court observed that the A.A.I.F.R was justiﬁed in deeming it ﬁt to aﬀord a further opportunity to the promoters to prepare a comprehensive rehabilitation/revival scheme for the Sick company and that the B.I.F.R would have to play a pro-active role and ensure that the promoters did not fail in their duty to put the company back on its rails. The learned Single Judge forwarded a copy of the scheme of rehabilitation prepared by the promoters in June, 2007 to the B.I.F.R. holding that the order of the A.A.I.F.R need not be disturbed at this juncture. The writ petition was dismissed. While an appeal was preferred, against the order of the learned Single Judge, to the Division Bench of the Kerala High Court, no interim orders were passed in the appeal and the order of the learned Single Judge is said to be still in force. In the order dated 10.06.2008, which is under challenge before us, the learned Single Judge noted that, in the order passed earlier on 01.02.2008, it was observed that the objection to the maintainability of the writ petition, for lack of territorial jurisdiction, did not have substance, that, thereafter, W.P.M.P.No.3076 of 2008 was ﬁled to decide the question of territorial jurisdiction as a preliminary issue and that the Division Bench, by its order dated 29.02.2008, had held that reasons should be given by the learned Single Judge for coming to the conclusion that this Court had jurisdiction to entertain the writ petition and then only the writ petition should be heard on merits. The learned Single Judge passed an elaborate order holding that the proceedings before the B.I.F.R. and the A.A.I.F.R. were only for revival and rehabilitation of the viable units of the 5th respondent, for protection of employment therein through utilization of productive industrial assets, that each and every step taken under the provisions of S.I.C.A, for revival and rehabilitation of the viable units at Hyderabad should be construed as material facts forming part of the “cause of action” and, since these proceedings were aimed at revival of the viable units of the 5th respondent, which would have a direct impact on the employment and productive industrial assets located at Hyderabad, a major part of the “cause of action” had arisen at Hyderabad also in so far as the scheme relating to these two units were concerned. The learned Single Judge further observed that, since the entire question raised in the writ petition related to the validity of the scheme sanctioned by the B.I.F.R. in respect of the said units at Hyderabad, all proceedings under S.I.C.A, which ultimately resulted in the impugned order, should be treated as material and integral facts having a direct nexus with the lis involved, that all facts pleaded in the aﬃdavit related to the scheme sanctioned by the B.I.F.R. under which the petitioner acquired a legal right to revive the viable units at Hyderabad, and had a direct nexus with the issue involved in the writ petition constituting “cause of action” for the writ petition. While observing that the expression “cause of action” may not have been repeatedly used in the aﬃdavit, the learned Single Judge held that, on a meaningful reading of all the averments, it was clear that a part of the “cause of action” had also arisen within the territorial jurisdiction of this Court. The learned Single Judge concluded by holding that, notwithstanding the fact that the situs of the oﬃce of all the respondents was beyond the territorial jurisdiction of this Court, the writ petition was maintainable since a major part of the cause of action had arisen at Hyderabad where the viable units in respect of which the rehabilitation scheme was sanctioned by the B.I.F.R, under the provisions of S.I.C.A, were located. Aggrieved thereby, the All India Workers Congress has preferred this Appeal, after obtaining leave to do so. Sri Mehmood Ali, Learned Counsel for the appellant, would take this Court through the writ aﬃdavit in support of his contention that it is completely silent on the aspect of the “cause of action” and that the averments therein do not reﬂect any part of the “cause of action” having arisen within the territorial limits of this Court. Learned counsel would contend that not every fact pleaded, but only such material facts which have a nexus to the lis, would constitute “cause of action”, that S.I.C.A. provided for the revival and rehabilitation of the sick industrial company as a whole and not merely of some of its units, that a “unit” of a sick industrial company is merely one of its assets, and location at Hyderabad of the assets, owned by a sick industrial company registered in the State of Kerala, would not constitute “cause of action”, even in part, when the order of the A.A.I.F.R., setting aside the order of the B.I.F.R. in preparing three separate schemes for revival of the sick company, is under challenge in the writ petition. Learned Counsel would submit that the order of the A.A.I.F.R. can only be assailed in its entirety, and not piecemeal, and that the petitioner’s claim with regards the Hyderabad units cannot be examined in isolation. Learned Counsel would place reliance on Union of India and others v. Adani Exports Ltd. and another [1] and Kusum Ingots & Alloys Ltd. v. Union of India[2]. Sri Arshad Hidayatullah, learned Senior Counsel appearing on behalf of the 5th respondent, would emphasize on the complete absence of pleadings in the aﬃdavit with regards “cause of action” and submit that none of the facts stated therein constitute “cause of action”, even in part, having arisen within the territorial jurisdiction of this Court. He would submit that, while deciding the question of territorial jurisdiction, no protracted enquiry is permissible, it is only the pleadings in the aﬃdavit which can be examined and that only such facts which constitute a material, essential and integral part of the “cause of action”, and which have a nexus to the lis, would confer territorial jurisdiction on this Court. Learned Senior Counsel would point out that the prayer in the writ petition is to set aside the order of the A.A.I.F.R and that not even a consequential direction has been sought for implementation of the orders of the B.I.F.R. He would contend that the order of the B.I.F.R. cannot even be looked into to determine whether a part of the “cause of action” had arisen within the territorial limits of this Court as it is only the order of the A.A.I.F.R which is under challenge in the writ petition. Learned Senior Counsel would rely on Alchemist Limited and Another v. State Bank of Sikkim[3] and Sarabjit Kaur v. Union of India[4]. Both the learned Advocate General and Sri S.Ravi, learned Counsel appearing on behalf of some of the other respondents, would adopt the arguments of Sri Arshad Hidayatullah, the learned Senior Counsel. Sri K.Ramamoorthy, learned Senior Counsel appearing on behalf of the 2nd respondent, would submit that location of the “units” at Hyderabad was suﬃcient to constitute “cause of action in part”, that, while the words “cause of action” may not have been used in the aﬃdavit, the facts as stated in the list of dates and events, and the documents ﬁled along with the writ petition, must also be examined in determining whether or not “cause of action in part” had arisen within the territorial limits of this Court. Learned Senior Counsel would submit that, while both the B.I.F.R. and the A.A.I.F.R. were situated at New Delhi, their orders had consequences all over the country. According to the Learned Senior Counsel, the mere fact that a few others had invoked the jurisdiction of the High Court of Kerala against the order of the A.A.I.F.R. would not necessitate the 2nd respondent having to implead itself in the said writ petition and the mere fact that a part of the “cause of action” may also have arisen within the territorial limits of either the Delhi High Court or the High Court of Kerala would not preclude the 2nd respondent from invoking the jurisdiction of this Court since a part of the cause of action had also arisen within its territorial limits, that the choice of the High Court, whose jurisdiction should be invoked, is for the 2nd respondent- petitioner to decide, that it is for this Court to determine, on the facts and circumstances of the case on hand, whether or not “cause of action”, in part, had arisen within its territorial limits and, while several tests have been laid down by the Supreme Court and diﬀerent High Courts, the facts of one case were seldom identical to another. According to the learned Senior Counsel, the material facts which give rise to the cause of action in part within the territorial jurisdiction of this court are: (1) location of two of the divisions at Hyderabad, (2) scope of revival of the sick industrial company had to be examined also with reference to the divisions at Hyderabad; (3) the value of the assets and the turnover of the Hyderabad units were also relevant facts required to be taken into consideration for revival of the sick industrial company; (4) the interest of the employees of the Hyderabad unit was also required to be safeguarded; and (5) it was obligatory for bidders, such as the 2nd respondent- petitioner, to keep the Hyderabad unit going and ensure payment of salaries to the employees and workmen employed in the said units. Learned Senior Counsel would submit that all the aforementioned material facts had arisen within the territorial limits of this Court. He would rely on State of Rajasthan v. M/s.Swaika Properties[5], Ambica Industries v. Commissioner of Central Excise[6], Kusum Ingots & Alloys Ltd.2, Sri Nasiruddin v. State Transport Appellate Tribunal[7], M/s.Canon Steels P Ltd v. Commissioner of Customs[8], National Textile Corpn. Ltd. v. Haribox Swalram [9], Everest Coal Co. Pvt. Ltd. v. Coal Controller [10], M/s.Balaji Vegetable Products (P) Ltd. Bangalore v. The Union of India [11], Mustafa Hussain v. Union of India [12], Union of India v. Hindustan Aluminium Corporation Limited [13], Read v. Brown [14], The State of Madras v. C.P.Agencies[15], Om Prakash Srivastava v. Union of India[16], Oil and Natural Gas Commission v. Utpal Kumar Basu[17], Navinchandra N.Majithia v. State of Maharastra[18], M/s.D.R.M.Steel Industries Private Ltd., v. Board for Industrial and Financial Reconstruction[19], Eastern Coalﬁelds Ltd. v. Kalyan Banerjee[20]. While the scope and purport of the expression “cause of action” has been explained in a catena of Judgments of the Supreme Court and several High Courts, it, nonetheless, continues to remain the subject matter of immense debate and is in issue in this writ petition also. It is, therefore, necessary to note how the expression “cause of action” has been construed by the Supreme Court and High Courts and explained in authoritative texts. “Cause of action” is every fact which it would be necessary for the plaintiﬀ to prove, if traversed, in order to support his right to the judgment of the court. It does not comprise every piece of evidence which is necessary to prove each fact, but every fact which is necessary to be proved. (Read14, C.P.Agencies15). In other words, a bundle of facts which taken with the law applicable to them gives the plaintiﬀ a right to relief against the defendant. (Swaika Properties5; Bloom Dekor Ltd. v. Subhash Himatlal Desai[21]; Om Prakash Srivastava16) . It must include some act done by the defendant since, in the absence of such an act, no cause of action would possibly accrue or would arise. [South East Asia Shipping Co. Ltd. v. Nav Bharat Enterprises (P) Ltd.[22]; Om Prakash Srivastava16). In a generic and wide sense, (as in Section 20 of the Civil Procedure Code, 1908), “cause of action” means every fact, which it is necessary to establish to support a right to obtain a judgment, (Sadanandan Bhadran v. Madhavan Sunil Kumar[23]; Om Prakash Srivastava16) , the necessary conditions for the maintenance of the suit, including not only the infraction of the right, but also the infraction coupled with the right itself. (Rajasthan High Court Advocates’ Assn. v. Union of India [24]; Om Prakash Srivastava16). These are all those essential facts without the proof of which the plaintiﬀ must fail in his suit. (Gurdit Singh v. Munsha Singh[25]; Om Prakash Srivastava16). It refers entirely to the grounds set forth in the plaint as the cause of action, or, in other words, to the media upon which the plaintiﬀ asks the court to arrive at a conclusion in his favour. (Mst. Chand Kour v. Partab Singh[26]; C.P.Agencies15). The expression “cause of action” is generally understood to mean a situation or state of facts that entitles a party to maintain an action in a court or a tribunal; a group of operative facts giving