Case: Hindustan Antibiotics Limited Vs. Special Land Acquisition Officer (14) & Others

Oral Judgment: (Palshikar, J.) By this petition the petitioner which is a government of India undertaking-company established by Government of India under the companies Act, has challenged the proceedings for land acquisition taken up by the Special Land Acquisition Office (14), Pune in respect of lands owned on acquisition by the Company, the acquisition by the Company itself being done under the Land Acquisition Act, 1894. 2. The Petitioner-Company has been declared as sick industrial unit as per the provisions of the sick Industrial companies (Special Provisions) Act, 1985 hereinafter referred to as SICA on 31.3.97. 3. In May, 1998 Collector, Pune published in official gazette a notification under section 6 of the Land Acquisition act, hereinafter referred to as the Act for acquiring some of the lands of the petitioner- company. On 26.11.1998 a notification under section 9, sub-sections 3 and 4 was issued by the Special Land Acquisition Officer (14), Pune hereinafter referred to as SLAO . The petitioner-company pointed out to the SLAO that it is a sick industrial unit and the acquisition should not be proceeded with. Ultimately on 3.1.2000 notice under section 12(2) of the Act was forwarded to the petitioner with a copy of the Award made and its translation. When notice of delivery of possession was issued the present petition was filed challenging the entire proceedings for acquisition of lands taken up under the Act. 4. It is pertinent too note that the proceedings were commenced in the year 1998 and were completed in the year 2000 and throughout these two years though the petitioner had complete knowledge o the proceedings taken up under the Act no challenge of any kind was made before this Court or any other appropriate court. From the facts noted in the petition it appears that no objection in writing was taken before LAO. However a communication dated 8.12.1998 was written to the LAO pointed out the provisions of section 22 of SICA and therefore seeking that the proceedings cannot continue. BY this very letter the land was sought to be valued at Rs.4500/- per sq. mtr. And compensation was claimed at the rate of 5000 per sq. mtr. Subject to the LAO obtaining consent from Board for Industrial & Financial Reconstruction (BIFR) for acquisition of this land as required by section 22A of the SICA. It appears that this aspect was taken into consideration and award under section 12 of the Act was made. It was after making of the Award and receipt of copy thereof that the present petition has been filed contending that the entire proceedings for acquisition of land under the Act are void ab initio for want of consent from the BIFR was not obtained. 5. The respondent-State and LAO have strongly denied this contention that section 22 of SICA is applicable to proceedings for acquisition under the Act and therefore they defend the action claiming to be legal and valid. 6. The only question which arises for consideration in the circumstances is what is scope and extent of section 22 of SICA under which prior permission is required to be obtained from the BIFR for initiating any proceedings in respect of sick industry. There is no dispute that the petitioner is a sick industry. The only question therefore is whether on proper consideration of the provisions of section 22 of SICA the proceedings were void ab initio. 7. In order to consider this contention it would be necessary for us to note what exactly is provided by SICA. This Act was passed by the Indian Parliament keeping in mind certain aims and objects. It was legislated to consider the ill effects of sickness in industrial companies such as loss of production, loss of employment, loss of revenue to the Central and State Governments and locking up of investible funds of banks and financial institutions. IT was therefore considered imperative by Government to revive and revival and rehabilitate the potentially viable sick industrial companies as quickly as possible. It was also considered imperative to salvage productive assets and realize the amounts due to the banks and private institutions. It was therefore considered necessary to enact in public interest of legislation to provide for timely determination by body of experts of the preventive, ameliorative, remedial and other measures that would need to be adopted in respect of such companies and for enforcement of measures considered appropriate with utmost practicable dispatch. The Act provides for identification of sickness in an industrial company on the basis of guidelines spelt out and provides remedial measures for financial assistance and restructuring to avoid sickness or cure sickness. It provides for establishment of the Board for Industrial and Financial Reconstruction as also the appellate authority consisting of expert Judges. The Bill received the assent of the President of India on 8.1.1986 and became the Sick Industrial Companies (Special Provisions) Act, 1985. 8. The Act therefore was legislated with the sole purpose of securing timely detection of sick and potentially sick companies owing industrial undertakings, the speedy determination by a Board of experts to undertake preventive, ameliorative, remedial and other measures in respect of such cases. Thus the object of act was to take care of sick industries and take steps to remove the sickness. This being the object of the Act it is necessary to interpret all provisions contained therein in the light of these objects for the purposes of which the Act was established. 9. We have to see therefore the general scope and intent of the Act itself. The Act is divided into four chapters and has a schedule. The first chapter is preliminary. It gives definitions, amendments etc. Chapter II deals with establishment of Board for Industrial and Financial reconstruction. Powers of the Board constitution etc. is provided for by this chapter. Chapter III deals with reference, inquiries and schemes to be made by the Board. It defines the powers of the Board to prepare and sanction schemes and provide for rehabilitation by giving financial assistance etc. It also provides for winding up of sick industrial company. In this chapter is contained provision of section 22 which provides for suspension of legal proceedings, contracts etc. with which we are concerned now. Chapter Iv deals with proceedings in case of potentially sick industries, provision of appeal, powers of original and appellate authorities etc. It will thus be seen tat the entire Act is tailored to meet the problems of sick industries and to solve them to the betterment of all connected with that sick industry. We will now consider therefore the provisions of section 22 in the light of this arrangement made by the Act. Section 22 protection of which is claimed by the petitioner and violation of which is pleaded for striking down the entire acquisition proceedings as void ab initio reads a under: 22. Suspension of legal proceedings, contracts, etc. (1) where in respect of an industrial company, an inquiry under section 16 is pending or any scheme referred to under section 17 is under preparation or consideration or a sanctioned scheme is under implementation or where an appeal under section 25 relating to an industrial company is pending, then, notwithstanding anything contained in the Companies Act, 1956 (1 of 1956), or any other laws or the memorandum and articles of association of the industrial company or any other instrument having effect under the said Act ore other law, no proceedings for the winding up of the industrial company or for execution distress or the like against any of the properties of the industrial company or for the appointment of a receiver in respect thereof [and noon suit for the recovery of money or for the enforcement of any security against the industrial company or an any guarantee in respect of any loans or advance granted to the industrial company] shall lie or be proceeded with further, except with the consent of the Board or, as the case may be, the Appellate Authority. (2) xxxxx xxxxx xxxxx xxxxxx xxxxxx xxxxxxx (a) xxxxx xxxxx xxxxx xxxxxx (b) xxxxx xxxxx xxxxx xxxxxx (3) xxxxxxxxxxx xxxxxxx xxxxxxxx (4) xxxxxxxx xxxxxx xxxxxxxxx (a) xxxxxx xxxxxxx xxxxxxxx. (b) xxxxxx xxxxxxx xxxxxx xxxxxxxx. (i) xxxxxxx xxxxxxx xxxxxx. (ii) xxxxx xxxxx xxxxxx. (5) xxxxxx xxxxxx xxxxxxxx. It provides that no legal proceedings or contracts shall be undertaken in respect of industry declared to be sick under the provisions of the Act except with the consent of the Board or as the case may be, the Appellate Authority 10. The contention is that when section 6 notification was issued the petitioner was already declared as sick unit and therefore proceedings for acquisition of land belonging to the petitioner cannot be commenced except with the prior consent of the Board, that admittedly is not done and therefore the proceedings are liable to be quashed being void ab intio. We will have to consider therefore whether consent as contemplated by section 22 of SICA is necessary for proceedings under land Acquisition Act which in turn may require us to consider whether proceedings for acquisition of land under the Act are legal proceedings as contemplated by section 22 of SICA. 11. Let us therefore consider as to what are the legal proceedings contemplated by section 22. Section as quoted above speaks of a sick company in respect of which inquiry under section 16 of SICA is pending. Section 16 in turn contemplates an inquiry by the Board for determining whether any industrial company has become a sick industrial company. It then contemplates a company in respect of which any scheme as referred to in section 17 of the Act of SICA is under preparation or consideration either by the Board or in the Appellate Forum. Section 17 spells out the power of the Board to make suitable orders of completion of inquiry under section 16. Section 18 speaks of preparation and sanction of schemes in relation to an industry found to be sick under section 16. It is in relation to this sick industry therefore that section 22 provides that where either (i) inquiry under section 16 is pending; (ii) scheme under section 17 18 is under preparation or made; (iii) similar action occurring at the appellate stage. It is when either of the three above occurs that the Act provides notwithstanding anything contained in the Companies Act or any other law or the memorandum of Articles of Association of the Company or any other instrument having effect under the said Act or law no proceedings for the winding up of the company shall be taken up without prior consent of the Board. Therefore what is not to be considered or notwithstanding any law including the Companies Act, 1956 must meant law for the time being in force containing provisions analogous to the Companies Act or supplementary to the Companies Act in relation to that sick industry and then section proceeds to say which proceedings shall not be taken without prior consent of the Board. The proceedings contemplated by section 22 are: a. proceedings for winding up of industrial company; b. proceedings for execution of distress or the like against any of the properties of the Company; c. proceedings for appointment of Receiver in respect of properties of the Company; d. proceedings for recovery of moneys due from the company; e. proceedings for investment of any security against industrial Company; f. proceedings for recovery of any loans or advances given to the Company; g. proceedings of recovery or encashing or any guarantee given by the company in respect of loans or advances made to the Company. These are the proceedings which shall not be commenced without prior consent of the Board or the Appellate authority as the case may be. 12. In our opinion, proceedings analogous to those enumerated above, but not specifically covered by provisions of section 22 also may not be taken up without previous consent of the Board. But it is only such proceedings which are connected with the financial existence and proprietary rights of the Company which are prohibited. Such proceedings directly deal with the existence of the Company itself and where restructuring on reconstruction or financing is pending contemplation. All these proceedings as contemplated by section 22 therefore must relate to the sickness of the Company and no proceedings of the kind mentioned above and similar proceedings be taken without consent of the Board so that activities undertaken by the Board under the provisions of SICA are not hampered by such proceedings. In our opinion, proceedings contemplated by section 22 are obviously legal proceedings. Proceedings taken up by any authorities which are judicial or quasi judicial. What is contemplated in section 22 is therefore no proceedings of the kind referred to above be taken up except with the previous sanction of the Board. There is no prohibition. All that as stipulated by section 22 is taking up of these legal proceedings without prior consent of the Board. The Board may on being moved for grant of such consent take into consideration the nature of legal proceedings and grant or refusal of sanction. We must therefore keep in mind that initiation of any legal proceedings is not barred by the provisions of section 22. What is provided for by it is prior consent of the Board. 13. In our opinion, proceedings contemplated under section 22 which can be taken up with prior consent of the Board are therefore proceedings in financial nature or proceedings having financial implications and are connected with the sickness of the industry concerned. They must in all cases be legal proceedings before a judicial authority or quasi judicial authority. That in our opinion would necessarily take us to consider question as to whether proceedings commenced under the Act are legal proceedings as understood in common parlance and whether such proceedings under the Act can be said to have been covered by the provisions of section 22 requiring prior consent of the Board. 14. It is undisputed in the present case that the petitioner was a sick industry on the date when section 6 notification was issued. It is also noted that the objection regarding non commencement of proceedings by reason of section 22 was brought to the notice of the LAO and yet final award has been passed. We have therefore to see whether proceedings under the Act are legal proceedings as contemplated by section 22 and connected with sickness of the industry or its restructuring or financing. 15. In our opinion, no such consent is necessary because these proceedings under the Act are not such legal proceedings as are contemplated under section 22. We have enumerated above kind of proceedings contemplated by section 22. We repeat what in our opinion constitute legal proceedings as contemplated by section 22. By no stretch of imagination proceedings for acquisition of land can therefore be called legal proceedings as contemplated by section 22. Section 22 contemplates legal proceedings which have some bearing on the existence of the industrial company or its sickness or its refinancing or its restructuring or reconstruction. The entire lands which were earlier acquired for the petitioner-company are not being acquired again by the State for another purpose. It must be kept in mind that all lands belonging to the petitioner-company were acquired for the petitioner- company as power provisions of part 7 of the Act. It was acquired for the purposes of running of the Company or conducting its business. All that land acquired for the petitioners after its establishment is not sought to be acquired for the purposes of road widening or any other purposes as stated in section 6 notification. Only part of it is being acquired. The acquisition has nothing to do with any of things relating to sick industry. Even if it is assumed that land belonging to the Company can be sold for the purposes of revenue or for reconstruction of the Company this acquisition cannot affect the profits of the company in relation to its operation as a Company. There is therefore no question of proceedings under the Act in acquiring lands belonging to company are proceedings as contemplated by section 22. There is therefore no question of prior consent of the Board being taken for that purpose. 16. Reliance was placed by the learned counsel for the petitioner on a judgment reported in the case of Maharshtra Tubes Ltd. V/s State Industrial & Investment Corporation of Maharashtra Ltd. & Another, (1993) 2 SCC 144 in support of its contention that consent of the Board is necessary even for proceedings under the Land Acquisition Act. In that case the Supreme Court of India was dealing with the question as to whether financial corporation established under the State Financial Corporation Act could exercise the powers under section 29 of that Act while proceedings under section 15 to 19 of the SICA are pending. After considering provisions of SICA the Supreme Court of India came too the conclusion that commencement of such proceedings by Financial Corporation would in all necessity render the entire process contemplated by sections 15 to 19 nugatory. The Supreme Court then held that in such a situation the law (SICA) merely expect the Corporation (Financial Corporation) or for that matter any other creditor to obtain consent of the Board or the Appellate Authority as the case may be. The Supreme Court then observed that the law viz. SICA has not left such Corporation or any other creditor without a remedy. It then proceeds to observe that the express proceedings occurring in section 22 must be widely construed. The observations of the Supreme court of India in this case made in para 6 of its judgment are liable to be noted verbatim: 6. On the other hand, the 1985 Act was enacted as its preamble manifests, with a view to timely detection of sick or potentially sick companies owning industrial undertakings, the identification of the nature of sickness through experts in relevant fields with a view to devising suitable remedial measurers through appropriate schemes and their expeditious implementation. Here the emphasis is to prevent sickness and in cases of sick undertakings to prepare schemes for their rehabilitation by providing financial assistance by way of loans, advances or guarantees or by providing reliefs, concessions or sacrifices from Central or State Governments, scheduled banks, etc. The basic idea is to revive sick units, if necessary, by extending further financial assistance after a through examination of the units by exerts and only when the unit is found too be no more capable of rehabilitation, that the option of winding up may be resorted to. It is for that reason that section 22(1) provides that during the pendency of (i) an inquiry under section 16 or (ii) preparation or consideration of a scheme under section 17 or (iii) an appeal under section 25, no proceedings for winding up of the concerned industrial company or for execution, distress or the like shall lie or be proceeded with in relation to the properties of that concern unless BIFR/appellate authority has consented thereto. The underlying idea is that every such action should be frozen unless expressly permitted by the specified authority until the investigation for the revival of the industrial undertaking is finally determined. It is thus crystal clear that the main thrust of this special legislation is a revival or rehabilitation of the sick industrial undertaking and it is only when it is realised that the same is not feasible that the option of winding up of the unit can be resorted to. It will be seen from the above that the main thrust of this special legislation (SICA) is revival or rehabilitation of sick industrial undertaking. The provisions of section 22 in our opinion, therefore be interpreted or read in the light of this object of the Act. 17. The Supreme Court then proceeds to note certain judgments of the High Court and Supreme Court in this connection under the provisions of State Financial Corporations Act, 1951 and observed that these cases therefore support the view that expression proceedings under section 22(1) need not be limited to legal proceedings as understood in the narrow sense notwithstanding the marginal notes. Because the provisions have to be interpreted according to the Supreme Court of India to consider the proper aspects sought to be taken up and solved by provisions of SICA. In our opinion, the observations of the Supreme Court of India in the above referred case over all support the view that we have taken that proceedings contemplated by section 22 whether legal or otherwise must be such as are connected with financing or restructuring of the Company. 18. Reliance was placed on reported decision of the Supreme court of India in the case Maharashtra Tubes Ltd. V/s State Industrial & Investment Corporation of Maharashtra Ltd. & Another, (1993) 2 SCC 144. A careful consideration of the observations by the Supreme Court of India as a whole would in our opinion, reiterate concrete support to our opinion that proceedings contemplated by provisions of section 22 of SICA must be such as are analogous to proceedings mentioned therein and proceedings for acquisition of land are not such proceedings analogous to those mentioned in section 22. There is therefore no substance in the submission made by the learned counsel. 19. There is yet another aspect which we would like to note. Proceedings for acquisition of land commenced with the publication of section 6 notification. That was done in 1998. No preventive action like filing of petition of the kind we are dealing with was taken till award was made under section 12 and communicated to the Company under section 12(2). This delay on the part of company to avoid acquisition of a part of its property by reference to section 22 is unexplained. However nothing much turns on this as on merits we have held above that legal proceedings as contemplated by section 22 do not encompass proceedings under Land Acquisition Act of the kind impugned in this petition.

Decision reasoning: 0[ds]12. In our opinion, proceedings analogous to those enumerated above, but not specifically covered by provisions of section 22 also may not be taken up without previous consent of the Board. But it is only such proceedings which are connected with the financial existence and proprietary rights of the Company which are prohibited. Such proceedings directly deal with the existence of the Company itself and where restructuring on reconstruction or financing is pending contemplation. All these proceedings as contemplated by section 22 therefore must relate to the sickness of the Company and no proceedings of the kind mentioned above and similar proceedings be taken without consent of the Board so that activities undertaken by the Board under the provisions of SICA are not hampered by such proceedings. In our opinion, proceedings contemplated by section 22 are obviously legal proceedings. Proceedings taken up by any authorities which are judicial or quasi judicial. What is contemplated in section 22 is therefore no proceedings of the kind referred to above be taken up except with the previous sanction of the Board. There is no prohibition. All that as stipulated by section 22 is taking up of these legal proceedings without prior consent of the Board. The Board may on being moved for grant of such consent take into consideration the nature of legal proceedings and grant or refusal of sanction. We must therefore keep in mind that initiation of any legal proceedings is not barred by the provisions of section 22. What is provided for by it is prior consent of the Board13. In our opinion, proceedings contemplated under section 22 which can be taken up with prior consent of the Board are therefore proceedings in financial nature or proceedings having financial implications and are connected with the sickness of the industry concerned. They must in all cases be legal proceedings before a judicial authority or quasi judicial authority. That in our opinion would necessarily take us to consider question as to whether proceedings commenced under the Act are legal proceedings as understood in common parlance and whether such proceedings under the Act can be said to have been covered by the provisions of section 22 requiring prior consent of the Board15. In our opinion, no such consent is necessary because these proceedings under the Act are not such legal proceedings as are contemplated under section 22. We have enumerated above kind of proceedings contemplated by section 22. We repeat what in our opinion constitute legal proceedings as contemplated by section 22. By no stretch of imagination proceedings for acquisition of land can therefore be called legal proceedings as contemplated by section 22. Section 22 contemplates legal proceedings which have some bearing on the existence of the industrial company or its sickness or its refinancing or its restructuring or reconstruction. The entire lands which were earlier acquired for they are not being acquired again by the State for another purpose. It must be kept in mind that all lands belonging to they were acquired for the petitionercompany as power provisions of part 7 of the Act. It was acquired for the purposes of running of the Company or conducting its business. All that land acquired for the petitioners after its establishment is not sought to be acquired for the purposes of road widening or any other purposes as stated in section 6 notification. Only part of it is being acquired. The acquisition has nothing to do with any of things relating to sick industry. Even if it is assumed that land belonging to the Company can be sold for the purposes of revenue or for reconstruction of the Company this acquisition cannot affect the profits of the company in relation to its operation as a Company. There is therefore no question of proceedings under the Act in acquiring lands belonging to company are proceedings as contemplated by section 22. There is therefore no question of prior consent of the Board being taken for that purpose18. Reliance was placed on reported decision of the Supreme court of India in the case Maharashtra Tubes Ltd. V/s State Industrial & Investment Corporation of Maharashtra Ltd. & Another, (1993) 2 SCC 144.  A careful consideration of the observations by the Supreme Court of India as a whole would in our opinion, reiterate concrete support to our opinion that proceedings contemplated by provisions of section 22 of SICA must be such as are analogous to proceedings mentioned therein and proceedings for acquisition of land are not such proceedings analogous to those mentioned in section 22. There is therefore no substance in the submission made by the learned counsel19. There is yet another aspect which we would like to note. Proceedings for acquisition of land commenced with the publication of section 6 notification. That was done in 1998. No preventive action like filing of petition of the kind we are dealing with was taken till award was made under section 12 and communicated to the Company under section 12(2). This delay on the part of company to avoid acquisition of a part of its property by reference to section 22 is unexplained. However nothing much turns on this as on merits we have held above that legal proceedings as contemplated by section 22 do not encompass proceedings under Land Acquisition Act of the kind impugned in this petition.