Case: President/Secretary, J.K. Synthetics Mazdoor Union and Ors Vs. Arfat Petrochemicals Pvt. Ltd. and Ors

of no notice being issued for the earlier meeting dated 05.05.2008. The First Respondent informed the BIFR that it is not a sick company and no directions can therefore be issued to it. The BIFR held that the First Respondent was not right in contending that it does not fall within the purview of the Sick Industrial Companies (Special Provisions) Act, 1985 (hereinafter referred to as ?the Act??) and need not implement the orders issued by the Board. The BIFR directed the IDBI to carry out an inspection of the Kota units and to submit a report. There was a direction to maintain status quo in respect of the material/assets at the factory site of the Kota Units till further orders. There was also a stay on transfer/alienation of land or assets of the company without the permission of the Board. The orders dated 05.05.2008 and 30.06.2008 of the BIFR were assailed by the First and Second Respondents before the AAIFR. The AAIFR by its order dated 11.12.2008 dismissed the Appeals filed by the First Respondent and directed the BIFR to re-examine the exact position relating to the payment of dues to the workmen. The BIFR was also directed to continue the monitoring of the Scheme and review the efforts made by the First Respondent towards revival of the Kota units. The contention of the First Respondent that the BIFR has no jurisdiction over a company which is not a sick company was rejected. It is relevant to refer to the findings of the AAIFR in favour of the Second Respondent in paragraphs 38, 39 and 40 of the said order. In the said paragraphs the AAIFR held that it is only the First Respondent who would be responsible for the payment of the dues to the workmen. While holding that the Second Respondent is not liable to make any payment, the AAIFR allowed the Appeal of the Second Respondent by setting aside the directions issued by the BIFR to the Second Respondent.8. Aggrieved by the order dated 11.12.2008 of the AAIFR, the First Respondent filed a Writ Petition in the Rajasthan High Court. The High Court allowed the Writ Petition by holding that the BIFR and the AAIFR do not have jurisdiction to issue directions to a company which is not a sick industrial company under Section 22 A of the Act. Being aggrieved by the said judgment of the High Court, the Labour Unions filed Civil Appeal No. 8597 and 8598 of 2010. Civil Appeal No. 8599 of 2010 is filed by JK Synthetics Limited aggrieved by the judgment in so far as it set aside the findings in its favour which were not challenged in the Writ Petition. 9. The only point that falls for consideration in these Appeals is regarding the scope of Section 22 A of the Act. Section 22 A is as follows: ?22 A. Direction not to dispose of assets: -The Board may, if it is of opinion that any direction is necessary in the interest of the sick industrial company or creditors or shareholders or in the public interest, by order in writing direct the sick industrial company not to dispose of, except with the consent of the Board, any of its assets—(a) during the period of preparation or consideration of the scheme under section 18; and(b) during the period beginning with the recording of opinion by the Board for winding up of the company under sub-section (1) of section 20 and up to commencement of the proceedings relating to the winding up before the concerned High Court.? 10. ?Sick industrial company? is defined in Section 3 (1) (o) which is as under: ?(o) "sick industrial company" means an industrial company (being a company registered for not less than five years) which has at the end of any financial year accumulated losses equal to or exceeding its entire net worth.Explanation: - For the removal of doubts, it is hereby declared that an industrial company existing immediately before the commencement of the Sick Industrial Companies (Special Provisions) Amendment Act, 1993, registered for not less than five years and having at the end of any financial year accumulated losses equal to or exceeding its entire net worth, shall be deemed to be a sick industrial company;? 11. It is clear from a plain reading of Section 22 A of the Act that the Board can issue a direction not to dispose of assets only to a sick industrial company. There is no dispute that the First Respondent is not a sick industrial company and that it purchased the assets from a sick industrial company in accordance with the Sanctioned Scheme. The BIFR was not correct in passing an order of status quo and directing the First Respondent not to alienate/transfer the assets by its orders dated 05.05.2008 and 30.06.2008. We agree with the findings of the High Court in the impugned judgment that the BIFR does not have competence to issue directions to a company which is not a sick industrial company under Section 22 A of the Act. We are fortified in this view by a judgment of this Court in U.P . State Sugar Corporation Ltd. v. U.P. State Sugar Corporation Karamchari Association and Anr. reported in (1995) 4 SCC 276 wherein it was held as follows: ?It runs counter to the express terms of Section 22 A of the Act which confers a limited power on the Board to pass an order prohibiting a sick industrial company from disposing of its assets only during the period specified in Clause (a) and (b).? 12. Several contentions have been raised by both sides during the course of hearing of these Appeals which we have not adverted to as they are not relevant for adjudication of the dispute in these appeals. We express no opinion on the jurisdiction of BIFR under other provisions of the Act. It is open to the BIFR to review the implementation of the Sanctioned Scheme and pass suitable directions.

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

Explanation:
0[ds]11. It is clear from a plain reading of Section 22 A of the Act that the Board can issue a direction not to dispose of assets only to a sick industrial company. There is no dispute that the First Respondent is not a sick industrial company and that it purchased the assets from a sick industrial company in accordance with the Sanctioned Scheme. The BIFR was not correct in passing an order of status quo and directing the First Respondent not to alienate/transfer the assets by its orders dated 05.05.2008 and 30.06.2008. We agree with the findings of the High Court in the impugned judgment that the BIFR does not have competence to issue directions to a company which is not a sick industrial company under Section 22 A of the Act. We are fortified in this view by a judgment of this Court in U.P . State Sugar Corporation Ltd. v. U.P. State Sugar Corporation Karamchari Association and Anr. reported in (1995) 4 SCC 276 wherein it was held asruns counter to the express terms of Section 22 A of the Act which confers a limited power on the Board to pass an order prohibiting a sick industrial company from disposing of its assets only during the period specified in Clause (a) and (b).Several contentions have been raised by both sides during the course of hearing of these Appeals which we have not adverted to as they are not relevant for adjudication of the dispute in these appeals. We express no opinion on the jurisdiction of BIFR under other provisions of the Act. It is open to the BIFR to review the implementation of the Sanctioned Scheme and pass suitable directions.