Case: Raheja Universal Limited Vs. Nrc Limited

issue a direction or make a declaration in relation to the agreement in question in exercise of the powers vested in it under Section 22(3) of the Act of 1985 and, if answer to the above is in the affirmative, whether the order dated 16th July, 2009 of the BIFR and that of the High Court dated 29th July, 2011 are unsustainable on facts? The BIFR vide its order dated 16th July, 2009, after declaring the Respondent-Company as a sick company and appointing the Punjab National Bank as the Operating Agency, had fixed the cut off date as 30th July, 2007, as indicated in the CDR Scheme. The CDR scheme had been approved, after taking into consideration the agreement to sell and the sale proceeds likely to be received therefrom. The BIFR had passed certain directions/declarations in the order passed under Section 17(3) of the Act of 1985 requiring the company to state clearly the details of the land to be sold including survey numbers as well as the remaining land with the company and confirming if the remaining land was adequate for functioning and viability of the company on long term basis. The BIFR raised the query whether all the secured creditors who had charge over the land, had approved the sale of 350 acres of land belonging to the respondent-company at Kalyan, Thane for a sum of Rs.166.40 crore and for entering into memorandum of understanding with the appellant company in that behalf. Besides issuing a directive that assets including investments will require prior approval of the BIFR as the company was under the purview of SICA, it also issued a clear prohibitory order requiring the secured creditors not to take any coercive steps against the company without prior permission of the BIFR. This order of the BIFR was therefore passed clearly at the stage of the consideration of the revival scheme which had been approved by the CDR Group as well as the secured creditors. The scheme for revival of the company on long term basis, thus, was primarily dependent upon the sale proceeds of the land in question on the one hand and the utility of the remaining land for revival of the company on the other. To put it simply, the land was the paramount asset of the company for its revival and successful implementation of the scheme in accordance with law. The asset was duly taken into consideration in formulation of the scheme as contemplated under Sections 17 and 18 of the Act of 1985 and appropriate directions, prohibitory orders were issued within the ambit and scope of Sections 22(1), 22(3) and 22A of the Act of 1985. In view of the clear statement of law, as afore-recorded, and facts of the present case, we are unable to find any merit in the submission of the Respondent-Company that the BIFR had no jurisdiction to pass such directives. 50. AAIFR had disturbed the above order and held that the contract between the parties could not be suspended under Section 22(3) and it was not in the interest of the Respondent-Company. In other words, it had permitted the sale to be completed without any restriction. This order was set aside and the order of the BIFR was restored by the High Court. We find no jurisdictional or other error in the order of the High Court in restoring the order of the BIFR. The land being the primary asset of the Respondent-Company, could not be permitted to be dissolved by sale or otherwise without the consent and approval of the BIFR. The BIFR is the authority proprio vigore and required to oversee the entire affairs of a sick industrial company and to ensure that the same are within the framework of the scheme formulated and approved by the Board for revival of the company in accordance with the provisions of the Act of 1985. On facts as well, neither the BIFR nor the High Court had exceeded its jurisdiction in passing the impugned orders. It is not that the Respondent-Company has been divested of its right by the BIFR. All that has been done is to suspend the final transfer of the property in its favour in accordance with the provisions of the Act and the limitations imposed therein. Once the scheme is implemented or the period specified under the provisions of Sections 22(3) and 22(4) expires, the declaration would cease to exist and the appellant would be entitled to enforce its rights in accordance with law as if no such declaration or restriction ever existed. 51. The principle of law that emerges from the afore-referred discussion, which consistently has judicial benediction, is that a scheme for rehabilitation or restructuring of a sick industrial company undertaken by a specialized body like the BIFR/AAIFR should, as far as legally permissible, remain obstruction free and the events should take place as pre-ordained, during consideration and successful implementation of the formulated scheme. Wide jurisdiction is vested in BIFR/AAIFR to issue directives, declarations and prohibitory orders within the rationalized scope and limitations prescribed under Section 22(1), 22(3) and 22A of the Act of 1985. 52. An objection to the maintainability of a composite petition, taken before the High Court, has been reiterated before this Court, of course, half-heartedly. Argument is that Article 227 vests the High Court with supervisory powers while Article 226 is the reservoir of extra-ordinary jurisdiction of the High Courts to issue prerogative writs and orders and, as such, a joint petition under both these Articles could not be maintainable. 53. Reliance has been placed in this regard to the case of Shalini Shyam Shetty & Anr. v. Rajendra Shankar Patil [(2010) 8 SCC 329] . This objection was neither pressed before us during the course of arguments nor do we consider it necessary to decide this issue in view of the facts and circumstances of the present case and the fact that we have decided the entire matter on merits. 54. For the reasons afore-recorded, the

Decision (1 = appeal accepted, 0 = rejected): 0

Explanation:
0[ds]The BIFR vide its order dated 16th July, 2009, after declaring the Respondent-Company as a sick company and appointing the Punjab National Bank as the Operating Agency, had fixed the cut off date as 30th July, 2007, as indicated in the CDR Scheme. The CDR scheme had been approved, after taking into consideration the agreement to sell and the sale proceeds likely to be received therefrom. The BIFR had passed certain directions/declarations in the order passed under Section 17(3) of the Act of 1985 requiring the company to state clearly the details of the land to be sold including survey numbers as well as the remaining land with the company and confirming if the remaining land was adequate for functioning and viability of the company on long term basis. The BIFR raised the query whether all the secured creditors who had charge over the land, had approved the sale of 350 acres of land belonging to the respondent-company at Kalyan, Thane for a sum of Rs.166.40 crore and for entering into memorandum of understanding with the appellant company in that behalf. Besides issuing a directive that assets including investments will require prior approval of the BIFR as the company was under the purview of SICA, it also issued a clear prohibitory order requiring the secured creditors not to take any coercive steps against the company without prior permission of the BIFR. This order of the BIFR was therefore passed clearly at the stage of the consideration of the revival scheme which had been approved by the CDR Group as well as the secured creditors. The scheme for revival of the company on long term basis, thus, was primarily dependent upon the sale proceeds of the land in question on the one hand and the utility of the remaining land for revival of the company on the other. To put it simply, the land was the paramount asset of the company for its revival and successful implementation of the scheme in accordance with law. The asset was duly taken into consideration in formulation of the scheme as contemplated under Sections 17 and 18 of the Act of 1985 and appropriate directions, prohibitory orders were issued within the ambit and scope of Sections 22(1), 22(3) and 22A of the Act of 1985. In view of the clear statement of law, as afore-recorded, and facts of the present case, we are unable to find any merit in the submission of the Respondent-Company that the BIFR had no jurisdiction to pass such directives50. AAIFR had disturbed the above order and held that the contract between the parties could not be suspended under Section 22(3) and it was not in the interest of the Respondent-Company. In other words, it had permitted the sale to be completed without any restriction. This order was set aside and the order of the BIFR was restored by the High Court. We find no jurisdictional or other error in the order of the High Court in restoring the order of the BIFR. The land being the primary asset of the Respondent-Company, could not be permitted to be dissolved by sale or otherwise without the consent and approval of the BIFR. The BIFR is the authority proprio vigore and required to oversee the entire affairs of a sick industrial company and to ensure that the same are within the framework of the scheme formulated and approved by the Board for revival of the company in accordance with the provisions of the Act of 1985. On facts as well, neither the BIFR nor the High Court had exceeded its jurisdiction in passing the impugned orders. It is not that the Respondent-Company has been divested of its right by the BIFR. All that has been done is to suspend the final transfer of the property in its favour in accordance with the provisions of the Act and the limitations imposed therein. Once the scheme is implemented or the period specified under the provisions of Sections 22(3) and 22(4) expires, the declaration would cease to exist and the appellant would be entitled to enforce its rights in accordance with law as if no such declaration or restriction ever existed51. The principle of law that emerges from the afore-referred discussion, which consistently has judicial benediction, is that a scheme for rehabilitation or restructuring of a sick industrial company undertaken by a specialized body like the BIFR/AAIFR should, as far as legally permissible, remain obstruction free and the events should take place as pre-ordained, during consideration and successful implementation of the formulated scheme. Wide jurisdiction is vested in BIFR/AAIFR to issue directives, declarations and prohibitory orders within the rationalized scope and limitations prescribed under Section 22(1), 22(3) and 22A of the Act of 198552. An objection to the maintainability of a composite petition, taken before the High Court, has been reiterated before this Court, of course, half-heartedly. Argument is that Article 227 vests the High Court with supervisory powers while Article 226 is the reservoir of extra-ordinary jurisdiction of the High Courts to issue prerogative writs and orders and, as such, a joint petition under both these Articles could not be maintainable