Case: Nrc Limited &amp; Another Vs. Appellate Authority For Industrial &amp; Financial Reconstruction &amp; Others

the petitioner company and respondent no.13. However, that by itself would not lead to a conclusion that the Board has no further powers in respect of a property which has been agreed to be sold by registration of an agreement for sale. Every case has to be considered by the Board in the peculiar facts and circumstances of that case with the sole intention to bring back the company out of its losses and make it a viable venture while protecting the public interest as well as the interest of all other constituents of the company. In the instant case the recovery of the Banks due from the company is in excess of Rs.240 Crores and they are all nationalised banks. The remaining land i.e. land beyond the agreements between the petitioner company and respondent no.13 is about 100 acres. It is not known as to the exact acreage available by way of surplus to dispose off from this 100 acres so as to raise additional finance. The petitioner was to receive Rs.120.64 Cr (or Rs.124 Crores) by way of balance consideration from Respondent no.13. As per the company the payment due to the ex-employees and to the employees who opted for ERS works out to Rs.55 crores. Admittedly the employees on the rolls have yet to receive their legal dues either as per the settlement which is under challenge before this Court or otherwise and it is the claim of the employees that the recovery of the employees dues may be around Rs.80 crores.During the course of hearing we were also informed that if the company has to become viable, its employees strength has to be less than 2000 which means at least another 900 to 1000 employees will have to opt for ERS or for settlement of their legal dues on separation by any other mode legally recognised. We are informed by Mr. Talsania, learned Senior Counsel for the company that it requires Rs.25 crores for revamping and Rs.30 crores by way of working capital thus making a total of Rs.55 crores and this figure is on the basis that the company was to receive Rs.124 crores from respondent no.13. When we asked as to what would be the realistic amount to make the company viable, we were informed that it needs a total of about Rs.120 crores. If all these amounts are taken into consideration the petitioner - company requires more than Rs.200 crores for being available at its disposal so as to venture into making it viable and make it operational. These are the figures which could not be disputed on the face of the record placed before us and if that be so, the amount of Rs.124 crores which was expected to be received from respondent no.13 may not take the company anywhere in its efforts for rehabilitation or restructuring. The company requires more funds and to be generated from its existing assets.25. Before the Board as well as the Appellate Authority, it was submitted by the unions of employees that the consideration of Rs.166 crores for the land under sale transaction was an underestimate and it was not a realistic market price for a total land of 344/350 crores, even if the land proposed to be reserved and admeasuring 18 acres for housing colony of employees, is deducted. Our attention was invited to the estimates received and placed before the Board as well. One estimate gives the market price of the said land at Rs.220 crores whereas the other estimate gave the market price beyond Rs.500 crores. The MOU for the transaction was in the year 2006 and the first public notice was issued by respondent no.13 in April 2008 inviting the objections. By the time the Board was considering this application for restructuring filed under Section 15 of SICA a period of more than 3 years had already gone by. The Board in its efforts to make the company viable is required to consider all the financial resources and keep in mind the possibility of no financial institution coming forward to provide for additional funds, so as to explore the internal resources like the assets and in that process we do not find any impediment in the powers of the Board to call upon the parties to vary the terms of the existing agreements between the petitioner company and respondent no.13. In Section 22(3) of SICA, the Parliament has specifically used the words, "or shall be enforceable with such adaptations and in such manner as may be specified by the Board." The language of Section 22(3), therefore, aims at empowering the Board to modify the terms of existing agreements in respect of the assets of the company and, therefore, it would be permissible for the Board to take all such steps to ensure that the consideration of the land under sale is revised upwards. Ultimately the aim of the Board would be to make the company operations viable and in that regard the powers under Section 22(3) of SICA cannot be read in a restricted language.26. We were informed that out of the total consideration, an amount of Rs.76.26 crores has been received by the company and the balance consideration is Rs.92 crores. The company and respondent no.13 claim that they have signed one more agreement on 17th August 2010 and pursuant to the same, respondent no.13 has taken over possession of a total of 270 acres out of the land covered by the agreements. The order passed by the Board or the impugned order did not envisage any such step of signing the supplementary agreement so as to hand over possession of the land and in our view this development will have no bearing when the Board considers the scheme for restructuring and as would be framed by the operating agency, while exercising its power under Section 22(3) of SICA and the entire land covered by the two earlier agreements i.e. 344/350 acres continues to be an existing asset of the company27.

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

Explanation:
1[ds]As per the Appellate Authority the provisions of Section 22A will not apply to the agreement for sale already entered into, registered and acted upon in the process of transaction and had it been the intention of the legislature to cover the past transactions within the ambit of Section 22A, the provision for suspension of existing contracts etc. would not have been provided undersubsection (3) of Section 22of SICA. Readiness and willingness of the parties to the sale agreement to honour the contract is also a paramount consideration, as per the Appellate Authority.20.We are not impressed by the reasoning set out by the Appellate Authority so as to interfere with the order passed by the Board. Section 22A of the SICA empowers the Board to issue appropriate directions that may be necessary in the interest of the sick industrial company, its creditors, shareholders, in public interest, not to dispose off, except with the consent of the Board, any of its assets and this term "any of its assets" will have to mean, "any of its existing assets", as on the date the reference is made and the BIFR passes the order.In the instant case, both the agreement for sale dated 1/3/2007 and the supplementary agreement for sale dated 29/9/2007 were on record before the Board as well as the Appellate Authority. We have gone through the terms and conditions of the said agreements. Undoubtedly, these are the agreements for sale and they are not sale deeds. We have also noted that the transactions are of conditional sale and it cannot be held that it is a concluded sale transaction passing on the title of the subject land to respondent no.13 either on part payment or on full payment of the consideration.It is thus clear that the company itself accepted in no uncertain words that the land under the agreements for sale continued to be its property / asset as on the day the reference application under Section 15(1) of SICA was submitted. Just because all the banks had given NOC for release of its charge on the subject land, it cannot be said that the Board was not empowered to bring the land within the ambit of SectionSo long as it continued to be the asset of the company the Board has unfettered powers under Section 22A and all that it has to examine is the public interest, interest of the company, its shareholders and employees etc. The Board is a body of experts as is clear from the preamble of the Act and the scheme of Section 22 and Section 22A empowers the Board to take all such measures which, in the opinion of the Board, are necessary to bring the company out of its sickness and make it viable on implementation of the scheme framed by the operating agency. The Appellate Authority fell in gross errors in holding that the agreements were concluded / finalised by the registered documents and, therefore the Board could not have exercised the powers under SectionIf the body of experts on the material available before it has exercised a discretion in respect of an existing property, in our opinion, the Appellate Authority ought to be slow in interfering with such discretion unless it was satisfied that the exercise of such discretion was against public interest or the interest of the company or the interest of the employees or the creditors or the shareholders or any other constituents of the company.Even otherwise also we have gone through the terms of both the agreements for sale i.e. the first agreement dated 1/3/2007 and the supplementary agreement for sale dated 29/9/2007. There is no condition in any of these agreements to hand over the possession of the land or part of it on receiving the part payments or full payments of consideration. The agreements do envisage that the ownership of the land would stand transferred to respondent no.13 only on completion of all formalities and clearance by the competent authorities. In our considered opinion, therefore, the Board was fully justified in putting restrictions on the subject land as well and bringing it within the ambit of Sectionof SICA. We, therefore, confirm the view taken by the Board and consequently the view taken by the Appellate Authority is unsustainable, and it is an overindulgence by the Appellatethe instant case the recovery of the Banks due from the company is in excess of Rs.240 Crores and they are all nationalised banks. The remaining land i.e. land beyond the agreements between the petitioner company and respondent no.13 is about 100 acres. It is not known as to the exact acreage available by way of surplus to dispose off from this 100 acres so as to raise additional finance. The petitioner was to receive Rs.120.64 Cr (or Rs.124 Crores) by way of balance consideration from Respondent no.13. As per the company the payment due to theand to the employees who opted for ERS works out to Rs.55 crores. Admittedly the employees on the rolls have yet to receive their legal dues either as per the settlement which is under challenge before this Court or otherwise and it is the claim of the employees that the recovery of the employees dues may be around Rs.80order passed by the Board or the impugned order did not envisage any such step of signing the supplementary agreement so as to hand over possession of the land and in our view this development will have no bearing when the Board considers the scheme for restructuring and as would be framed by the operating agency, while exercising its power under Section 22(3) of SICA and the entire land covered by the two earlier agreements i.e. 344/350 acres continues to be an existing asset of the company