C.W.P. No. 17185 of 2010 1 IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH C.W.P. No. 17185 of 2010 Date of Decision: 06.12.2011 Punjab State Industrial Development Corporation Limited ...Petitioner Versus Appellate Authority for Industrial and Financial Reconstruction and others ...Respondents CORAM: HON'BLE MR. JUSTICE HEMANT GUPTA HON'BLE MR. JUSTICE G. S. SANDHAWALIA Present: Mr. B.S. Walia, Advocate, for the petitioner. Mr. Gautam Dutt, Advocate, for Mr. Hemant Saini, Advocate, for respondent No.3. Mr. Aalok Jagga, Advocate, for respondents No.4 & 5. Mr. Vikas Suri, Advocate, for respondent No.6. Mr. Rajesh Hooda, Advocate, for Mr. Kamal Sehgal, Advocate, for respondent No. 7. Mr. Dinkar Singh, Advocate, for respondent No.8. HEMANT GUPTA, J. Challenge in the present petition is to the interim orders dated 21.4.2010 and 21.10.2010 passed by Board for Industrial and Financial Reconstruction (for short BIFR) constituted under Sick Industrial Companies (Special Provisions) Act, 1985 (for short the Act) whereby the petitioner was directed to accept one time settlement. C.W.P. No. 17185 of 2010 2 M/s Esstex Woolen Mills Pvt. Ltd., a company registered under the Companies Act, 1956 (for short the Company) availed financial assistance from the petitioner including the term loan and bridge loan. The company could not make payment of the due instalments. The Company claimed that its net worth has been eroded on account of accumulated losses and invoked the jurisdiction of BIFR under the Act. During the pendency of the proceedings before BIFR, one time settlement proposal of the Company was considered by the petitioner. It was communicated to the Company on 27.1.2010 (Annexure P-20) that it is ready to accept a sum of Rs.1,26,69,813/- with cut-off date 15.5.2009. Such offer was subject to the condition that the company is not a willful defaulter in terms of RBI circular dated 1.7.2008. After the said offer was communicated to the Company, the BIFR passed an order dated 21.4.2010 issuing the following directions:- i) The company shall supply copies of ABS to PSIDC which had been enclosed with the Form-A at the time of submission of Form-A with the Board. ii)PSIDC shall not revoke its OTS entered with the company till the final decision is taken by the Corporation. iii)The company shall make payment of the OTS amount within 30 days after the decision is communicated by PSIDC to the company. iv)The company shall file DRS thereafter within further one month. v) The company shall pay Rs.1 lakh as OA fee to Punjab & Sind Bank along with applicable service tax. 50% OA fee shall be paid within two weeks and the balance fee shall be paid at the time of submission of DRS to the Board. vi)The Bench fixed the next date of hearing on 21.07.2010. Subsequently, on 21.7.2010, the BIFR again issued the C.W.P. No. 17185 of 2010 3 following directions :- i) PSIDC shall issue OTS acceptance offer as agreed earlier to the company immediately allowing 45 days time to remit the balance payment in NLA with the PSB(OA). ii)Company shall file fully tied up DRS within two weeks after depositing the balance amount in NLA with PSB. iii)PSB(OA) shall examine the DRS submitted by the company and submit the same to the Board alongwith their comments/observations within further two weeks. iv)The Bench fixed the next date of hearing on 06.10.2010. The petitioner has also produced the subsequent order passed by BIFR on 15.11.2010 observing as under:- 12.The representative of the company submitted that the allegations made by the PSIDC against the company are false. The company is not a willful defaulter. The representative submitted that they have not received the copies of the written submissions filed by PSIDC, and they will file the rejoinder after receipt of the same. The representative also stated that PSIDC failed to comply with the directions issued in the hearing held on 21.04.2010. They further submitted that that company has already filed updated ABS and other documents to PSIDC. The company offered OTS proposal of Rs.126 lakh, which was not acceptable to PSIDC. The representative also stated that PSIDC has not carried out the inspection, and they will extend full co-operation and assistance for the same. They will also filed written submissions to the Board shortly. 13.After considering the material on record and the submissions made, the Bench issued the following directions:- i).PSIDC to inspect the factory and carry out inspection on mutually agreeable date and file their report within 30 days. ii).The company shall co-operate with PSIDC and extend C.W.P. No. 17185 of 2010 4 their fully support and assistance for carrying out the inspection. iii).The Bench fixed the next date of hearing on 07.02.2011. The challenge in the petition is to the orders dated 21.4.2010 (Annexures P-3) and 21.7.2010 (Annexure P-4) for the reason that the petitioner is to consider the one time settlement proposal only if Company is not willful defaulter in terms of its one time settlement scheme. Such right of the petitioner is jeopardised by the interim orders passed by the Tribunal. It is also pointed out that though the BIFR has noticed that the Company will extend full co-operation and assistance, but inspite of such directions, the Company or its representative have not allowed the petitioner to carry out inspection of the premises . Keeping in view the said stand of the petitioner, this Court on 7.11.2010 directed the petitioner to inspect the premises of company on 14.11.2011. The Company was directed to make arrangements for deputing the responsible officers for the purpose of inspection of the premises and records. The liberty was given to respondent No.8 to join respondent No.3. It was also clarified that in the event of non deputing of responsible officer or non-cooperation of any kind for the purpose of inspection, the inferences as are permissible under the law shall be drawn against respondent No. 3. On 28.11.2011, when the matter was taken up, a request was made by counsel for respondent No. 3 seeking time to file reply. The case was adjourned for today with liberty to the Company to file reply on or before 2.12.2011. Today, Mr. Saini has not put in appearance but request is made for adjournment on his behalf by Mr. Gautam Dutt, Advocate. C.W.P. No. 17185 of 2010 5 Mr. Dinkar Singh, learned counsel for respondent No.8 has argued that Rs.19 lacs was deposited by the said respondent on behalf of the company towards one time proposal submitted by the Company. It is contended that in the event said proposal is not accepted by the petitioner, the said amount should be returned to respondent No.8. At this stage, we do not wish to examine the question; whether the BIFR can pass an order, which has the effect of modification of the settlement approved by the petitioner. Suffice it to say at this stage that the respondent-Company has not permitted the Corporation to inspect the factory and has not cooperated with the petitioner for carrying out the inspection. Therefore, it is for the petitioner to draw such inferences, as are available in law against the Company in respect of one time settlement scheme. We find that the request for adjournment on behalf of Mr. Saini is an attempt to delay the proceedings. The representatives of the Company have failed to co-operate in terms of the directions of BIFR and by this Court. The company has defaulted not only in inspection of its assets, but also has not controverted stand of the petitioner. We do not find any merit in the argument raised by Mr. Dinkar Singh. Respondent No.8 has entered into a private arrangement with the company without the consent of the secured creditors such as petitioner. The said arrangement will not effect the rights of the secured creditor. Any deposit made by respondent No. 8 is for and on behalf of the Company, therefore, any payment made by respondent No. 8 can not be refunded to it, if the proposal for one time settlement is not accepted by the petitioner as such payment is by a debtor to its creditor. C.W.P. No. 17185 of 2010 6 Therefore, we permit the petitioner to take final decision on the one time settlement proposal under consideration submitted by respondent No.3 in terms of its one time settlement. The petitioner is given liberty to approach the BIFR for final orders as the BIFR may consider after such decision is brought to the notice of BIFR in accordance with law expeditiously preferably within three months. With the said directions, the writ petition stands disposed of. (HEMANT GUPTA) JUDGE (G.S. SANDHAWALIA) 06.12.2011 JUDGE reena/vimal