Case: International Finance Corpn &amp; Another Vs. Bihar State Industrial Developmetn Corpn &amp; Others

BSIDC in the Company. The operative portion of the order of BIFR did not in any way affect BSIDC at all. Nevertheless, about four months after the filing of the writ petition the interim order which has been impugned before us was passed by the High Court of Patna for no ostensible reason except that anything done in haste may create more problems and that it would be in the interest of all concerned if the advertisements as directed by BIFR were stayed. 12. We have heard the matter at length. We are of the view that repeated interference in the proceedings of BIFR has benefited nobody except the persons who continue in the management of the Company. The secured creditors have certainly been deprived of their normal rights to recover their dues by reason of the provisions of the Sick Industrial Companies (Special Provisions) Act, 1985 (hereinafter referred to as "the Act"). While they are hamstrung by the rigors of those provisions, the present management of the Company continued to enjoy the protection of the umbrella provided by S.22 of the Act. In the circumstances it is of utmost importance that the courts do not lengthen the proceedings before BIFR unless such interference is absolutely imperative for well defined reasons in the interest of the creditors as a whole and in the interest of the workers and the sick industry itself, but not in the interest of a particular management. It must be kept in mind that BIFR has been statutorily conferred with special powers to adjudicate upon the question of the revival of a company and it has the necessary expertise at its command for doing so. If the Board has taken steps in accordance with commercially advisable and legally sustainable principles after considering the view of the parties likely to be affected and in a manner which may not be said to be irrational or perverse, the Court should not interfere in the process. That was why this Court had, as far back as in 2001 directed BIFR to dispose of the matter expeditiously before it. Clearly BIFR, despite that mandate by this Court has not been able to comply and the only reason was the repeated litigation.13. The appellants in this appeal have filed petitions for transfer of the third and fourth writ petitions filed by the respondent Company and BSIDC respectively. Since all the parties are before us and since we have to consider the merits of the order dated 17-2-2003 of BIFR, we allow the transfer petitions and transfer both writ petitions to this Court as the same issue appears to be the subject matter of scrutiny before the two High Courts.14. The reasoning of BIFR in the order dated 17-2-2003 cannot be faulted. Sufficient opportunities appear to have been given at every stage to the private promoters and the Government of Jharkhand to invest the amounts as proposed in the Scheme of IFCI. The order for advertisement may give a better deal to the secured creditors and a better chance for survival of the industry. But in order to give a last chance to the private promoters and the Government of Jharkhand to take advantage of the Scheme framed by IFCI instead of allowing the appeal right away, we direct that:(1) The private promoters shall deposit an amount of Rs 32.50 crores with IFCI by 12-7-2004. It is admitted by IFCI that pursuant to an interim order passed by the High Court at Patna an amount of Rs 12.6 crores has already been deposited with IFCI. The requirement to pay the sum of Rs 32.50 crores as indicated by us will, therefore, be less by the amount already deposited.(2) The matter will be listed before the Vacation Bench on 28-5-2004. The State of Jharkhand has affirmed an affidavit to the effect that although an "in-principle" decision had been taken by the State to rehabilitate the Company, and although the assistance of Rs 32.50 crores had been recommended by a committee constituted specially for the purpose, nevertheless, the State Government has not yet taken a decision whether it was willing to put in the necessary finance without imposing any conditions at least before BIFR irrespective of any agreement that may be arrived at between the promoters and the State. The States offer to give Rs 32.50 crores under the IFCI Scheme is also hedged in by several conditions, namely, that the assistance would be given under the provisions of the Jharkhand Industries Rehabilitation Scheme, 2003; the assistance would be considered only when BIFR approves the proposal after taking consent of the financial institutions and the State Government and only if the security would be given to the State in terms of the guidelines prescribed by Reserve Bank of India and nationalised banks.We are not prepared to impose any such conditions as far as the States participation in the Scheme is concerned. The issue of security in respect of the loan must be worked out between the State and the promoters, if it so desires. It is being made clear that the States securities, if any, in the Companys assets can only be subject to the claims of the secured creditors who are already before BIFR. Given the conditional nature of the offer in the affidavit filed by the State Government, we direct the State Government to expressly state to this Court on 28-5-2004 whether it is willing to give a soft loan of Rs 32.50 crores on such conditions which will not impinge on and be subject to the security of the secured creditors of the Company. In such event, the State Government must also put in the necessary funds i.e. Rs 32.50 crores with IFCI by 12-7-2004. (3) In the event, the State Government is not willing to give the financial assistance in terms of the preceding paragraphs, it will be open to the private promoters to arrange for an alternative source and deposit the said amount with IFCI within the aforesaid period.

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

Explanation:
1[ds]We are of the view that repeated interference in the proceedings of BIFR has benefited nobody except the persons who continue in the management of the Company. The secured creditors have certainly been deprived of their normal rights to recover their dues by reason of the provisions of the Sick Industrial Companies (Special Provisions) Act, 1985 (hereinafter referred to as "the Act"). While they are hamstrung by the rigors of those provisions, the present management of the Company continued to enjoy the protection of the umbrella provided by S.22 of the Act. In the circumstances it is of utmost importance that the courts do not lengthen the proceedings before BIFR unless such interference is absolutely imperative for well defined reasons in the interest of the creditors as a whole and in the interest of the workers and the sick industry itself, but not in the interest of a particular management. It must be kept in mind that BIFR has been statutorily conferred with special powers to adjudicate upon the question of the revival of a company and it has the necessary expertise at its command for doing so. If the Board has taken steps in accordance with commercially advisable and legally sustainable principles after considering the view of the parties likely to be affected and in a manner which may not be said to be irrational or perverse, the Court should not interfere in the process. That was why this Court had, as far back as in 2001 directed BIFR to dispose of the matter expeditiously before it. Clearly BIFR, despite that mandate by this Court has not been able to comply and the only reason was the repeated litigation.13. The appellants in this appeal have filed petitions for transfer of the third and fourth writ petitions filed by the respondent Company and BSIDC respectively. Since all the parties are before us and since we have to consider the merits of the order datedof BIFR, we allow the transfer petitions and transfer both writ petitions to this Court as the same issue appears to be the subject matter of scrutiny before the two High Courts.14. The reasoning of BIFR in the order datedcannot be faulted. Sufficient opportunities appear to have been given at every stage to the private promoters and the Government of Jharkhand to invest the amounts as proposed in the Scheme of IFCI. The order for advertisement may give a better deal to the secured creditors and a better chance for survival of the industry. But in order to give a last chance to the private promoters and the Government of Jharkhand to take advantage of the Scheme framed by IFCI instead of allowing the appeal right away, we direct that:(1) The private promoters shall deposit an amount of Rs 32.50 crores with IFCI byIt is admitted by IFCI that pursuant to an interim order passed by the High Court at Patna an amount of Rs 12.6 crores has already been deposited with IFCI. The requirement to pay the sum of Rs 32.50 crores as indicated by us will, therefore, be less by the amount already deposited.(2) The matter will be listed before the Vacation Bench onThe State of Jharkhand has affirmed an affidavit to the effect that although andecision had been taken by the State to rehabilitate the Company, and although the assistance of Rs 32.50 crores had been recommended by a committee constituted specially for the purpose, nevertheless, the State Government has not yet taken a decision whether it was willing to put in the necessary finance without imposing any conditions at least before BIFR irrespective of any agreement that may be arrived at between the promoters and the State. The States offer to give Rs 32.50 crores under the IFCI Scheme is also hedged in by several conditions, namely, that the assistance would be given under the provisions of the Jharkhand Industries Rehabilitation Scheme, 2003; the assistance would be considered only when BIFR approves the proposal after taking consent of the financial institutions and the State Government and only if the security would be given to the State in terms of the guidelines prescribed by Reserve Bank of India and nationalised banks.We are not prepared to impose any such conditions as far as the States participation in the Scheme is concerned. The issue of security in respect of the loan must be worked out between the State and the promoters, if it so desires. It is being made clear that the States securities, if any, in the Companys assets can only be subject to the claims of the secured creditors who are already before BIFR. Given the conditional nature of the offer in the affidavit filed by the State Government, we direct the State Government to expressly state to this Court onwhether it is willing to give a soft loan of Rs 32.50 crores on such conditions which will not impinge on and be subject to the security of the secured creditors of the Company.