CWP No.17714 of 2010.doc - 1 – HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH **** CWP No.17714 of 2010 Date of Decision: 30.09.2010 **** M/s. Thapar Ispat Ltd. . . . . Petitioner VS. AAIFR and others . . . . . Respondents **** CORAM : HON’BLE MR.JUSTICE SURYA KANT **** 1. Whether Reporters of local papers may be allowed to see the judgment? 2. To be referred to the Reporters or not? 3. Whether the judgment should be reported in the Digest? **** Present: Mr. SC Nagpal, Advocates for the petitioner ***** SURYA KANT J. (1). The petitioner-Company seeks quashing of the order dated 14.06.2007 and 09.11.2009 (Annexure P3 and P5, respectively) whereby the Board for Industrial and Financial Reconstruction (BIFR) has declined to treat it as a ‘sick company’ and the said order has been further upheld by the Appellate Authority for Industrial and Financial Reconstruction (AAIFR). (2). The petitioner-Company is running two Industrial Units named as Steel Furnace (Unit No.I & II), Focal Point, Ludhiana and OPT Steel Rolling Mills at Dhandri Khurd, Ludhiana. The company submitted the Reference in Form ‘A’ through its Executive CWP No.17714 of 2010.doc - 2 – Director before the BIFR – respondent No.2 for its registration and to declare it as a ‘Sick’ industrial Company. It was averred in the Reference Application that the Company was registered for more than 5 years and its ‘accumulated losses’ at the end of the Financial Year were exceeding its ‘entire Networth’. The BIFR got carried out a Special Investigation Audit and pursuant to the report dated 28.04.2007 submitted by the Chartered Accountants (Annexure P2) and on consideration of the Objections raised by the Punjab State Industrial Development Corporation to the effect that previously two similar References as on 30.06.2001 and 30.06.2002 had already been dismissed, the BIFR turned down the petitioner’s subject Reference after holding that the explanation furnished by the petitioner to the objections raised by the Secured Creditors were not supported by valid contemporaneous documentary evidence though it still issued certain directions to regulate and support the financial management of the petitioner. (3). The petitioner went in appeal which has also been turned down by the Appellate Authority after observing as follows:- CWP No.17714 of 2010.doc - 3 – After hearing the ld. Counsels for the parties, we have perused the impugned order as well as the memo of appeal. It is true that in the ground mentioned in the appeal, nothing has been mentioned that on what ground the impugned order is liable to be set aside. The appellant-Company was part of the joint meeting held on 09.05.2007 and when the report was submitted before the BIFR, the Company never asked for the same on the day when the hearing took place and the order was passed whereas Shri Sharma himself took place and the order was passed whereas Shri Sharma himself was present on the date of hearing. Nothing has been mentioned why the premises were leased out to a third party and what is the justification for charging the low rent and whey the same has not been deposited with the secured creditors or OA. From the perusal of the order, it appears that the order of the BIFR is based on the report of the SIA Auditor and the Banks disallowing expenses aggregating Rs.68.97 crores charged to the company’s profit and loss account during the financial years 1998- 99 to 2002-03. The Company has also failed to file any satisfactory documents to prove the fire incident at the factory. The copy of the FIR was not place on record. The insurance papers and fire claim papers have also not been produced claiming that the entire records were destroyed in a fire at the company’s premises. Therefore, it is clear that in view of the aforesaid factual matrix on record, the BIFR has taken a reasonable view in the matter. In such circumstances, it cannot be held that the company has filed a reference with ‘clean hands’. It also appears that the company has not taken any serious interest either at the time of conducting SIA or at the time of submitting the documents to the SIA or before the BIFR who was conducting an inquiry under Section 16(2) of SICA about the sickness of the Company.” (4). I have heard learned counsel for the petitioner and perused the impugned order(s). No meaningful CWP No.17714 of 2010.doc - 4 – argument could be advanced to dislodge the findings returned by the BIFR that the petitioner-Company was indulging in siphoning of its funds in order to dupe and deprive the Secured Creditors of their legitimate dues. It appears that the Management of the petitioner-Company wanted to take shelter behind Section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985 in order to frustrate the claim of its Secured Creditors and meanwhile siphon the funds and the entire exercise was sought to be undertaken apparently with an ulterior motive. (5). For the reasons afore-stated and keeping in view the fact that the authorities below have concurred for justifiable reasons which do not warrant any interference by this Court in exercise of its writ jurisdiction, I do not find any merit in this writ petition, which is accordingly dismissed. 30.09.2010 vishal shonkar (SURYA KANT) JUDGE