- 1 - wpl.779 IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION WRIT PETITION (Lodging) NO.779 of 2011 Kotak Mahindra Bank Limited .. Petitioner vs Pharmaceutical Products of India Ltd .. Respondents Mr.S.U.Kamdar, Sr.Advocate with Mr.Cyrus Adreshi,Ms.Pooja, Ms.Sushmita Gandhi,Mr.AmolVerma i.b Paras Kuhad & Associates for Petitioner Mr.Janak Dwarkadas Sr.Advocate with Ms.Ankita Singhania, Mr.P.Dhande, Mr.Kuldeep Singh i.b D.H.Law Associates for Respondents CORAM: D.K.DESHMUKH & ANOOP V.MOHTA, JJ DATE: 25th April, 2011 ORAL JUDGMENT (Per D.K.Deshmukh,J Rule. Rule Returnable forthwith. Heard finally by consent of the parties. 1. By this Petition, the Petitioners challenge the order passed by the B.I.F.R. In Misc.Application No.3361/DC/3011 dated 25.1.2011. The relevant facts are as under : - 2 - wpl.779 2. The respondent no.1 company- Pharmaceuticals Products of India Limited is a company registered under the Indian Companies Act. It had taken loan from the Tata Finance Limited. Ultimately, there was an award passed in favour of the company and against respondent no.1. There were other secured and unsecured creditors of the company. According to the present Petitioners, Tata Finance Limited which was the Creditor had provided interest free loan in favour of Tata Motors Limited and Tata Motors Limited have transferred their interest in favour of the present Petitioners. The respondent no.1 was unable to pay its debts. Therefore, an Application was moved by the respondent no.1 under Sick Industrial Companies (Special Provisions) Act,1985 before the B.I.F.R. The B.I.F.R. recommended winding up of the respondent no. 1 company. When an Appeal was filed before - 3 - wpl.779 the A.I.F.R. there were two schemes accepted by A.A.I.F.R. Those schemes contemplated merger of the respondent no.1 company with the respondent no.2 company Wanbury Limited. The proceedings were taken up in this court for merger of these two companies. This Court made an order for merger of the two companies. Orders passed by this Court for merger so also order passed by the A.I.F.R. Was challenged before the Supreme Court in Civil Appeal No.3640 of 2008. That Appeal was decided by the Supreme Court by its order dated 16th May,2008 reported 2000 (4) Bombay C.R.707 (TATA MOTORS LTD vs. PHARMACEUTICAL PRODUCTS OF INDIA LTD) Paragraph nos.31 and 32 of the judgment of the Supreme Court of India are relevant for our purpose. - 4 - wpl.779 31. We are, therefore of the opinion that not only the judgment of the High Court but also the orders of the BIFR as also the AAIFR should be set aside and the matter should be remitted to the BIFR so also to enable it to proceed in accordance with the provisions of SICA afresh. 32. The appeal is allowed with the aforementioned observations and directions. In the facts and circumstances of the case, there shall be no order as to costs. 3. Thus, the Supreme Court of India set aside the order passed by the B.I.F.R. and A.A.I.F.R.under Sick Companies Act sanctioning the schemes. The Court also set aside the order of this Court approving the merger of the two companies. As a result of the order of the Supreme Court, proceedings started before the BIFR. However, it is pertinent to note that neither the respondent no.1 nor respondent no.2 took any steps under the Companies Act for implementing the order of the Supreme Court - 5 - wpl.779 which contemplated de-merger and separate existence of the two companies. In this situation, the Petitioner who is the creditor filed an Application before the B.I.F.R. for rejection of the reference. Case of the petitioner was that the Reference has been filed in the year 1998 by the respondent no.1-Company. It was pointed out that as a consequence of the order of the Supreme Court, order of the B.I.F.R. stands set aside including the order declaring the respondent no.1 as a sick company. It was submitted that all the assets of the respondent no.1 company are till date vesting in the respondent no.2. The respondent no.2 has not done anything to implement the orders of the Supreme Court. It was stated that thus the respondent no.1 is not really in existence. It was pointed out that the share capital of the respondent no.1 was canceled pursuant to the order of - 6 - wpl.779 merger by B.I.F.R. and share holders of the respondent no.1 have been allotted shares of respondent no.2. None of these has been reversed as per directions of the Supreme Court of India. It was submitted that thus the respondent no.1 is practically not existing. Therefore, a reference at its instance is not maintainable. This Application was decided by the B.I.F.R. The only reasons that have been given by B.I.F.R.for rejecting the same are found as under : Having considered the materials on record and the submissions made during the hearing the Bench observed that after Supreme Courts order the Bench took several hearings and proceeded in accordance with the order of Supreme Court. After pondering over all the factors relating to revival of the company the BIFR has now come at the stage to consider company for its circulation. Thus the MA of the KMBL has no merit and is mere an attempt to derail the whole process of revival of the company. In view aforesaid observation the Bench dismissed the MA. - 7 - wpl.779 4. Perusal of paragraph 3 shows that the B.I.F.R.while rejecting the application has neither considered the judgment of the Supreme Court of India nor considered the averments made in the Application. The B.I.F.R.has also not taken into consideration what is stated in the Balance Sheet by the respondent no.2. It was admittedly pointed out to the B.I.F.R. that the stand of the respondent no.2 in its Balance sheet was that the order of the Supreme Court is not to be implemented and status-quo ante is to be maintained about that order. We find that in the Balance Sheet the respondent no.2 has stated thus in relation to the merger and de-merger: The Pharmaceutical Products of India Limited (PPIL) was merged with the company pursuant to the Order dated 24th April, 2007 - 8 - wpl.779 passed by the Hon ble Board for industrial and Financial Reconstruction (BIFR). The Hon ble Supreme Court vide its order dated 16th May, 2008 has set aside the above referred BIFR order and remitted the matter back to BIFR for considering afresh as per the provisions of SICA, in response to a suit filed by one of the unsecured creditors of PPIL. The Hon ble Board for Industrial and Financial Reconstruction is considering afresh, the Rehabilitation and Revival cum Merger of PIIL with the Company pursuant to the order of Hon ble Supreme Court of India dated 16th May, 2008. In the meanwhile, the company has sought legal opinion and the company has been advised to maintain status quo ante with respect to the merger under the said Scheme and that it should take further steps only on the basis of the fresh BIFR Order. (Emphasis supplied) In view of the above, the Company has maintained a status quo. However, all actions taken by the company pursuant to the sanctioned scheme shall remain subject to and without prejudice to the orders that may be passed by the BIFR while considering the case afresh pursuant to the directions of the Hon ble Supreme Court in its order dated 16th May, 2008. (Emphasis supplied) - 9 - wpl.779 5. In our opinion, while deciding the Application of the Petitioner for dismissal of the Reference, it was necessary for the B.I.F.R. to apply its mind to the entire material produced. It prima facie appears that in view of the order of the Supreme Court, the respondent no.2 was under a duty to take steps under the Companies Act to give effect to the judgment of the Supreme Court of India. What is the effect in law of the respondent no.2 refusing to implement the judgment of the Supreme Court should have been considered. The B.I.F.R. Should have considered whether in the absence of the steps being taken by respondent no.2 to revive the respondent no.l in law, it could proceed further with the Reference that was registered at the instance of the respondent no.1. Learned counsel appearing for the respondent no.2 submitted that what has been considered by the B.I.F.R. is a scheme - 10 - wpl.779 submitted by the implementing agency. In our opinion, the submission has no substance because the scheme has been submitted by the implementing agency in the Application or Reference and that Reference is filed by the respondent no.1. If that Reference is incompetent on the ground that respondent no.1 is not in existence then there is no question of the B.I.F.R. having any power to consider the scheme submitted by I.D.B.I. The B.I.F.R. will get the jurisdiction to consider any scheme only if there a Reference validly made before it and pending. If the Reference is itself not validly filed or does not continue to be validly filed, in our opinion, it would not have the jurisdiction to entertain the scheme filed in that Reference. In any case, it is clear from the order of the B.I.F.R. that it has not considered the relevant material and has not given reasons for - 11 - wpl.779 rejecting the Application filed by the Petitioner. In our opinion therefore, in these circumstances, following order would meet the ends of justice : ORDER The order impugned in the Appeal passed by B.I.F.R. is set aside. The proceedings are remitted back to the B.I.F.R. It is directed to re-consider the Application filed by the Petitioner on 6th January, 2011 and dispose it of in accordance with law. With above observations, Rule made absolute accordingly. Anoop V.Mohta, J D.K.Deshmukh,J - 12 - wpl.779