SCA/6827/2003 1/32 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD SPECIAL CIVIL APPLICATION No. 6827 of 2003 HONOURABLE MR.JUSTICE KS JHAVERI =========================================================== 1 Whether Reporters of Local Papers may be allowed to see the judgment ? 2 To be referred to the Reporter or not ? 3 Whether their Lordships wish to see the fair copy of the judgment ? 4 Whether this case involves a substantial question of law as to the interpretation of the constitution of India, 1950 or any order made thereunder ? 5 Whether it is to be circulated to the civil judge ? =========================================================== STATE OF GUJARAT - Petitioner(s) Versus APPELLATE AUTHORITY FOR INDUSTRIAL AND FINANCIAL RECONST. & 13 - Respondent(s) =========================================================== Appearance : Mr. S.N. SHELAT, Advocate General with MRS MANISHA LAVKUMAR SHAH, AGP for Petitioner SERVED BY RPAD - (N) for Respondent(s) :3,6 - 8, 12, 14, Mr. L. NAGESHWARA RAO & Mr. N.D. NANAVATI, Senior Counsel with MR GL RAVAL & MRS KALPANA K RAVAL for Respondent No.2 NOTICE SERVED for Respondent(s) : 4 - 5. MR PV NANAVATI for Respondent(s) : 6, MR PRANAV G DESAI for Respondent(s) : 9, 13, MR BHARAT JANI for Respondent(s) : 10, NOTICE UNSERVED for Respondent(s) : 11, =========================================================== CORAM : HONOURABLE MR.JUSTICE KS JHAVERI Date : 01/12/2005 SCA/6827/2003 2/32 JUDGMENT CAV JUDGMENT 1.0 By way of this petition, the petitioner-State of Gujarat, has challenged the order dated 21st November 2002 passed by the Appellate Authority for Industrial and Financial Reconstruction (AAIFR) in Appeal No.367 of 2001 presented by Gujarat Sidhee Cement Limited (hereinafter referred to as GSCL), the respondent no.2 herein whereby the AAIFR allowed the said appeal, quashed and set aside the order dated 29th November 2001 passed by the Board for Industrial and Financial Reconstruction (BIFR), and directed the State Bank of India (SBI) to continue as Monitoring Agency (Operating Agency) and to submit half-yearly progress reports to the BIFR. 2.0 The short facts as they emerge from the record can be summarized as under: 2.1 The GSCL was established and registered under the provisions of the Indian Companies Act, 1956. GSCL has its registered office at Sidheegram, Junagadh District of Gujarat. Due to market recession GSCL suffered losses and ultimately registered with BIFR under the provisions of Sick Industrial Companies (Special Provisions) Act, 1985 (hereinafter referred to as SICA) in July 1990. A rehabilitation scheme was presented in the year 1990 and the GSCL was registered under section 3(1)(o) of SICA. Initially the scheme was SCA/6827/2003 3/32 JUDGMENT sanctioned on 26th October 1993 and State Bank of India was appointed as the Operating (Monitoring) Agency. On 30th May 2001 BIFR granted last extension for submitting modified scheme, but the same could not be presented, as a result of which the BIFR passed an order on 29th November 2001 for winding up of GSCL. 2.2 Feeling aggrieved by the order passed by BIFR, GSCL preferred Appeal No.367 of 2001 before AAIFR. The Company submitted their scheme on 12.2.2002. 2.3 By their letter dated 15th February 2002 the State Government informed AAIFR that rehabilitation plan of the company depends critically on reliefs and concessions envisaged from the State Government, and as reliefs and concessions are not within the policy guidelines of the Government, the matter is required to be considered at higher level of the Government. It was further stated that due to the unavoidable situation and the by-election in the State the proposal of the Company could not be considered. 2.4 On 19th February 2002 AAIFR issued notice under section 19(2) of the Act inviting objections from all the parties pursuant to the presentation of the revival scheme of GSCL. SCA/6827/2003 4/32 JUDGMENT 2.5 The State Government-present petitioner sent their suggestions on 29th April 2002 wherein they had suggested that there should be parity of sacrifice between Financial Institutions/ Banks/Promoters and State Government and therefore the Draft Rehabilitation Scheme should be re-worked with higher contribution from promoters. The petitioner reiterated their stand before AAIFR which was taken by them in their letter dated 29th April 2002. 2.6 On behalf of GSCL it was pointed out that the sacrifice of FIs/Banks is over 65% of their total outstanding dues of about 66.35 crores, which is above the sacrifice by the Government of Gujarat at about 55% of its total outstanding dues of Rs.218.82 crores. According to GSCL, the promoters of GSCL had met the Government of Gujarat at high level and pursuant to those discussions, the promoters have agreed to mobilize and bring in additional contribution of Rs.13.24 crores. 2.7 When the matter came up for hearing on 27th May 2002, AAIFR found that the Government of Gujarat has neither withheld nor given its consent but has only urged that there should be parity in the sacrifices by FIs/Banks on one hand and the Government of Gujarat on the other, and that the promoters should bring in higher contribution. AAIFR was of the opinion that as the outstanding dues of FIs/Banks and the Government of Gujarat are different, the principle of parity can be observed in terms of percentage and SCA/6827/2003 5/32 JUDGMENT not in terms of absolute amounts, and as the promoters have already agreed to mobilize and induct funds of Rs.13.24 crores in addition to Rs.15 crores envisaged in the Scheme, the points raised by the Government of Gujarat have been substantially met. In the order dated 27th May 2002 the AAIFR directed as under: “21. IDBI shall communicate the result of their meeting regarding FIs participation in term loan to GSCL and SBI within a week. GSCL shall supply all the required information for preparation of revised projections by SBI. SBI shall prepare the revised version of DRS after incorporating the modifications pursuant to the decisions recorded above and the information to be received from IDBI about participating FIs in term loan, along with revised statements of projections and submit copies thereof at least five days before the next date of hearing with copies to all concerned.” 2.8 The matter was thereafter adjourned to 4th July 2002 for further orders. In the meantime the petitioner addressed a communication dated 25th June 2002 pointing out that the State Government is not in a position to accept the concessions envisaged from the Government of Gujarat, as the equitable and matching principle is not satisfied. It was further stated that it has been the policy of the State Government since last 11 years that unless equitable and matching principle is satisfied there is no question of the Government of Gujarat participating in any such rehabilitation scheme. Again vide communication dated 16th August .2002 the petitioner informed AAIFR the details of the sacrifices required to be made by the State Government as SCA/6827/2003 6/32 JUDGMENT against those of Banks/FIs. It was pointed out that vide order dated 27.5.2002, the AAIFR had made a mistake in recording that the principle of parity was maintained in terms of percentage though not on quantum basis in terms of absolute amounts. 2.9 After considering the facts and circumstances of the case, AAIFR passed order on 21st November 2002 sanctioning the Draft Rehabilitation Scheme and rejecting the request of the petitioner regarding issuing clarification of order dated 27th May 2002 on the ground that the authority cannot review its own order. It is the aforesaid order dated 21st November 2002, which is under challenge in this petition. 3.0 Mr. S.N. Shelat, learned Advocate General appearing for the petitioner- State Government submitted that AAIFR has committed an error in sanctioning the scheme. According to him, the State Government has not given consent, AAIFR erroneously sanctioned the scheme on the basis that the State Government has given their consent. He submitted that consent of the State Government is a pre-condition under sub-section (2) of section 19. The said subsection (2) of section 19 reads as under: “19(2) Every scheme referred to in sub-section (1) shall be circulated to every person required by the scheme to provide financial assistance for his consent within a period of sixty days from the date of such circulation or within such further period, SCA/6827/2003 7/32 JUDGMENT not exceeding sixty days, as may be allowed by the Board, and if no consent is received within such period or further period, it shall be deemed that consent has been given.” 3.1 Mr. Shelat has also relied upon sub-section (4) of section 19 which reads as under: “(4) where in respect of any scheme consent under sub- section (2) is not given by any person required by the scheme to provide financial assistance, the Board may adopt such other measures, including the winding up of the sick industrial company, as it may deem fit.” 3.2 Mr. Shelat therefore submitted that AAIFR could not have sanctioned the scheme in question. 3.3 Mr. Shelat submitted that AAIFR has not considered the previous sacrifice on the part of the petitioner and has adopted a different criterion for financial institutions of the State Government. According to him, if the entire sacrifice right from 1990 is taken into consideration, then the sacrifice of the State Government is on higher side. According to him the letter dated 29 th April 2002 was very clear that the proposed scheme on which the objections were invited, was objected by the petitioner and it has not given consent for implementation of the scheme. SCA/6827/2003 8/32 JUDGMENT 3.4 According to Mr. Shelat, AAIFR has committed an error in holding that the equitable and matching principle is required to be satisfied in terms of percentage and not in terms of absolute amounts and thus by way of an interim order, during the course of hearing on 27th May 2002 observed that the principle stands satisfied. 3.5 Mr. Shelat submitted that GSCL has paid Rs.318 crores to Banks and Financial Institutions at the cost of Government of Gujarat by way of relief of deferment of Government taxes and therefore GSCL is trying to escape from tax liability by seeking benefit under one scheme or the other Government Resolution while continuing to make payment to banks and financial institutions. 3.6 According to Mr. Shelat, the finding of AAIFR with regard to deemed consent is not tenable inasmuch as the order dated 27th May 2002 was not a final order sanctioning the scheme. He pointed out that the matter was adjourned to 24th October 2002 and thereafter till it was finally decided on 21st November 2002. He submitted that the government sacrifices are given from the public fund and cannot be used arbitrarily. 3.7 Mr. Shelat further contended that AAIFR has erroneously extended the moratorium period upto 31st March 2004 without giving any opportunity to the SCA/6827/2003 9/32 JUDGMENT petitioner to meet with the suggestions made by AAIFR. 3.8 Mr. Shelat also contended that the reliefs sought for by GSCL far exceeds and are beyond the guidelines adopted by Government of Gujarat and as such are against the provisions of Tax Laws of the State. According to him as per the State guidelines only five years deferment can be granted, which the Company has already availed of. 3.9 Mr. Shelat has also pointed out the meaning of “Consent” as contained in P. Ramanatha Aiyar's Advanced Law Lexicon, Volume 1, A-C, 2005, which reads as under: “”CONSENT” is an act of reason, accompanied with deliberation, the mind weighing, as in a balance, the good and evil on each side” (Story, S.222). “Where a consent is given substantially, the Court does not look very minutely into the form in which it is given” (per STIRLING, J. Re Smith, 59 LJ Ch 284).” 3.10 In support of his submissions Mr. Shelat has relied upon decision of the Apex Court in the case of P. John Chandy and Company (P) Ltd. Vs. John P. Thomas, reported in AIR 2002 SC 2057 (=2002(5) SCC 90 = JT 2002(4) SC 444). Paragraphs 10 and 11 of the said decision read as under: “10. We may now turn to the question of implied consent in the background of the relevant provision. Section 11(4)(i) of the Kerala Buildings (Lease and Rent Control) Act, SCA/6827/2003 10/32 JUDGMENT 1965 reads as under: 11(4)(i). A landlord may apply to the rent control court for an order directing the tenant to put the landlord in possession of the building, (i) if the tenant after the commencement of this Act, without the consent of the landlord, transfers his right under the lease or sub-lets the entire building or any portion thereof if the lease does not confer on him any right to do so; Provided ....” A perusal of the relevant provision as quoted above clearly indicates that the landlord can claim possession of the building from the tenant in case of sub-letting by the tenant without the consent of the landlord, in case the lease does not confer on the tenant a right to sub-let. The provision provides for “conferment” of right on the tenant to sub-let the accommodation. That is to say so as to be entitled to sub-let, the tenant must be granted that right to do so, by the landlord. The expression “confer” is pointer to something done overtly and explicitly. The meaning of the word “confer” as indicated in the Law Lexicon by P. Ramanatha Aiyar 2nd Ed. Reprint 2000 at page 381 means “go give”. “Conferring is an act of authority – men in power confer”. It is therefore clear that the conferring indicates some positive action in giving something, may be some right or privilege to another person. It is in this background that the word “consent” as occurring in clause (1) of sub-section (4) of section 11 of the Kerala Buildings (Lease and Rent Control) Act, 1965 is to be seen. According to the said provision if the lease does not “confer” a right on the tenant to sub-let, he cannot do so without the consent of the landlord. If he does so after coming into force of the Act, he would be liable to be evicted and the possession be given to the landlord. On reading of the whole provision proposition of implied consent, in such cases, would not be readily acceptable. The consent of the landlord should be in a positive way, clear cut and without ambiguity since otherwise right to sub-let is only to be conferred on the tenant by the landlord in the lease itself. It can reasonably be expected that a right which is otherwise to be conferred by having such a condition in the lease itself, consent, in absence thereof, preferably be in writing and in case it is not so, it is to be clear cut without any ambiguity or shadow of doubt. The conduct of the landlord which has been mainly taken into account on the point of implied consent, is his inaction for a long time despite the knowledge of the fact of sub-letting by the tenant to other persons. The period of 32 SCA/6827/2003 11/32 JUDGMENT years as indicated by the appellate authority is incorrect as discussed earlier. Nonetheless it can be said that there has been inaction on the part of the landlord for some years if not 32 years. But inaction in every case does not necessarily lead to an inference of implied consent or acquiescence. In this connection we may refer to Words and Phrases Legally Defined Vol. 1 Third Ed. Page 27 where we may first see what has been said about acquiescence. It is as follows: “Mere inactivity on the part of a defendant is not to be construed as acquiescence in delay by the plaintiff. “sleeping dogs, in the form of sleeping plaintiffs, need not be aroused by defendants from their slumbers” (per Roskill LJ in Compagnie Francaise de Television V. Thorn Consumer Electronics Ltd. [[1978] RCP 735 at 739]]; Bremer Vulkan Schiffbau and Maschinenfabrik V. South India Shipping Corporation [1979] 3All ER 194 at 198, per Donaldson, J.”. It may also answer the observation of the appellate court that the landlord by inaction is to be taken to have waived his right to take any action against the tenant. 11. A distinction has also been drawn between `acquiesence' and `consent'. It is in relation to a dispute between a landlord and a tenant and we again refer to Words and Phrases Legally Defined Vol. 1 Third Ed. Page 314. “[The Landlord and Tenant Act, 1954, section 23(4) is concerned with a situation where an immediate landlord or his predecessor in title has `consented' to a breach of covenant, or the immediate landlord has acquiesced in it'. “I agree ..... that in the context of section 3(4) of the Act, whatever consent or acquiescence may mean in different contexts, in that context `consent' is put in plain antithesis to `acquiescence', and that, therefore, if something falls within the description of `acquiescence', it is not consent. The difference which is pointed out between the two in this context is that `consent' involves some affirmative acceptance, not merely a standing by and absence of objection. The affirmative acceptance may be in writing, which is the clearest obviously; it may be oral; it may conceivably even be by conduct, such as nodding the head in a specific way in response to an express request for consent. But it must be something more than merely standing by and not objecting. `Bell V Alfred Franks & Bartlett Co. Ltd. [1980] 1 All ER 356 at 362. C.A.per Megaw LJ.” SCA/6827/2003 12/32 JUDGMENT The above observations though no doubt made in reference to particular provision, yet they throw some light on the question of implied consent that there has to be something more than mere inaction or lack of initiative on the part of the landlord. In context with the above, we find our view reinforced on the meaning and import of the word `consent' as used in clause (i), subsection (4) of section 11 of the Act when read in the background of the word `confer' in the latter part it will only mean that consent has to be with some positive action on the part of the landlord so that the tenant can be said to have had the authority to sub-lease his lease rights. Mere silence may not be enough.” 3.11 Mr. Shelat has next relied upon a decision in the case of Sukhrani V. Hari Shanker, reported in AIR 1979 SC 1436 (= 1979(3)SCR 671 = 1979(2) SCC 463). Para 5 of the said decision reads as under: “5. It is true that at an earlier stage of the suit, in the proceeding to set aside the award, the High Court recorded a finding that the plaintiff was not entitled to seek reopening of the partition on the ground of unfairness when there was neither fraud nor misrepresentation. It is true that the plaintiff did not further pursue the matter at that stage by taking it in appeal to the Supreme Court but preferred to proceed to the trial of his suit. It is also true that a decision given at an earlier stage of a suit will bind the parties at later stages of the same suit. But it is equally well settled that because a matter has been decided at an earlier stage by an interlocutory order and no appeal has been taken therefrom or no appeal did lie, a higher Court is not precluded from considering the matter again at a later stage of the same litigation (Vide Satyadhan Ghosal V. Smt. Deorajin Debi (1960) 3 SCR 590: (AIR 1960 SC 941). So, it has been held that the correctness of an order of remand passed by the high Court which was not questioned at that time by filing an appeal in the Supreme Court could nevertheless be challenged later in the supreme Court in the appeal arising out of the final judgement pronounced in the action (vide Jasraj Indu Singh V. Hem Raj Multan Chand (AIR 1977 SC 1011) and Margaret Lalita Samuel V. Indo Commercial Bank Ltd., AIR 1979 SC 102). In SCA/6827/2003 13/32 JUDGMENT Arjun Singh V. Mohindra Kumar (1964) 5 SCR 946 at p.960: (AIR 1964 SC 993 at p. 1000) it was held that where an application under Order IX, Rule 7 was dismissed and an appeal was filed against the decree in the suit in which the application was made, the propriety of the order rejecting the reopening of the proceeding might without doubt, be canvassed in the appeal and dealt with by the appellate Court. In our view the same principle applies in the present case and the parties can challenge in this Court in the appeal against the final judgement in the suit any finding given by the High Court at the earlier stage in the suit when the award made by the arbitrators was set aside and the suit thrown open for trial.” 3.12 Mr. Shelat has also relied upon a decision in the case of Amar Chand Butail Vs. Union of India, reported in AIR 1964 SC 1658. Paragraph 9 of the said decision reads as under: “(9) It appears that at the stage of trial, a document purporting to be an affidavit was filed making a claim for privilege on behalf of respondent no.2. This document was signed by Padam Dev who was the Home Minister in Himachal Pradesh. It is clear that on the point of the privilege the appellant cannot be met by the plea of res judicata in this court, because whatever may have been the position in regard to the effect of the interlocutory orders passed by the Judicial Commissioner on this point. Now that the matter has come to this court in the form of an appeal by the appellant against the final decree passed in the suit, it is perfectly open to him to contend that the courts below were in error in upholding the plea of privilege. This position is not and cannot be disputed. Therefore, the question which arises for our decision is whether the claim for privilege was justified.” 4.0 Mr. Nageshwara Rao, learned senior counsel appearing for GSCL, the respondent no.2 herein, has supported the order passed by the AAIFR. At first he submitted that when all the financial institutions have accepted the scheme, it will not be appropriate to disturb the same, which has already been SCA/6827/2003 14/32 JUDGMENT implemented for three years. 4.1 Referring to the communication dated 29th April 2002, Mr. Rao submitted that it clearly indicates consent if sacrifices is equal and/or the promoters increase their contribution. According to him, that was the only stipulation which the promoters have accepted and implemented. He, therefore, submitted that there was conditional consent by the petitioner which has been accepted by the GSCL, it was not open for the petitioner to change those conditions after statutory period is over. 4.2 Mr. Rao submitted that the petitioner has challenged only the order dated 21st November 2002, which according to AAIFR, is an order seeking review and according to the petitioner an order of modification/clarification of the earlier order dated 27th May 2002. The final order dated 27th May 2002 has not been challenged by the petitioner and therefore the present petition is not maintainable. In this connection Mr. Rao has relied upon a decision in the case of S.K.Saldi Vs. U.P. State Sugar Corporation Ltd., reported in 1997 (9) SCC page 661 (1997(2) JT 567 = 1997(2) Scale 188). Para 3 of the said decision reads as under: “3. Shri Pramod Swarup, learned counsel for the appellant, contends that when the appellant was initially appointed in the Meerut Sraw Board Mills and was transferred to the Mill on deputation, he was entitled to be repatriated when the Mill was SCA/6827/2003 15/32 JUDGMENT not inclined to retain his services and, therefore, the direction issued by the Civil Court is valid in law and the High Court was not justified in reversing that order. As stated earlier, the appellant had to cross several insurmountable hurdles, namely, in the suit the appellant