Tata Motors Ltd vs Pharmaceutical Products Of India Ltd

3. First respondent is a company registered and incorporated under the 1956 Act. It took loan from Tata Finance Ltd, predecessor-in-interest of the appellant on interest @ 18% per annum. Disputes and differences arose between the parties, which were referred to arbitral tribunal. An award was passed on 30th July, 2002 in the Arbitration proceedings for a sum of Rs.1,51,36,795/- together with interest @ 18% per annum till payment and/or realization. It is stated that the total amount due to the appellant from the respondent would be near about 5.7 crores of rupees. There were other secured and unsecured creditors also. Proceedings under SICA 2

4. Respondent being unable to pay the dues made a reference in terms of Section 15 of SICA before the Board for Industrial and Financial Reconstruction (BIFR). The BIFR appointed Industrial Development Bank of India (IDBI) as an operating agency. It purported to have considered various schemes. However, as Unit Trust of India (UTI) raised an objection for giving up any of its dues and there were six secured creditors and large number of unsecured creditors, BIFR on or about 27th October, 2004 passed an order recommending winding up of the respondent. An appeal was preferred thereagainst before the Appellate Authority for Industrial and Financial Reconstruction (AAIFR).

5. The AAIFR granted stay of operation of the order of BIFR dated 27th October, 2004 by an order dated 13th September, 2005. Before the AAIFR two separate Schemes were framed, one of them related to an arrangement between the respondent and M/s. Wanbury Ltd. It agreed to settle the outstanding dues of the creditors of PPIL. But before doing so, it thought it fit to settle all the large creditors being Financial Institutions and Banks. The scheme envisaged payment to a class of creditors. 3 It was also envisaged:

Appellant was kept outside the said Scheme. The scheme involved some selective secured creditors and some selective unsecured creditors. Company Court Proceedings

8. The said contentions of the appellant, however, were rejected by a learned Single Judge of the High Court by his order dated 13th April, 2006 and the Scheme was approved.

11. We may also take note of some subsequent events. In view of the order of AAIFR dated 1st June, 2006, BIFR issued notice on 1st February, 2007 to consider the Scheme-cum-merger with M/s. Wanbury Ltd. propounded by the respondent company returnable on 29th March, 2007. On the said date, all the interested parties including the appellant were heard. By an order dated 1st May, 2007, BIFR is said to have sanctioned the Scheme-cum-merger of M/s. Wanbury Ltd. with the respondent.

fourths in value of the creditors, or class of creditors, or members, or class of members as the case may be, present and voting either in person or, where proxies are allowed under the rules made under section 643, by proxy, at the meeting, agree to any compromise or arrangement, the compromise or arrangement shall, if sanctioned by the Tribunal, be binding on all the creditors, all the creditors of the class, all the members, or all the members of the class, as the case may be, and also on the company, or, in the case of a company which is being wound up, on the liquidator and contributories of the company:

(5) If default is made in complying with sub- section (4), the company, and every officer of the company who is in default, shall be punishable with fine which may extend to one hundred rupees for each copy in respect of which default is made. (6) The Tribunal may, at any time after an application has been made to it under this section stay the commencement or continuation of any suit or proceeding against the company on such terms as the Tribunal thinks fit, until the application is finally disposed of."

We are, therefore, of the opinion that the judgment of the High Court cannot be sustained. We may furthermore notice that the decision of the learned single judge has been overruled by a Division Bench of the Bombay High Court in Ashok Organics Industries Ltd. v. Dena Bank (Company Petition No. 108 of 2006, disposed of on 25.1.2008).

For the views we have taken, it is not necessary to consider the other contentions raised at the bar.

27. The question, however, is what relief should be granted in view of the subsequent events. Various intervention applications have been filed. We 31 do not intend to make any observation in regard thereto. We are, however, of the opinion that it is a fit case where we should exercise our jurisdiction under Section 142 of the Constitution of India to meet the object for which the Act has been enacted.

30. The order of BIFR is not an outcome of any pre-application of mind. There is no finding that it has taken into consideration all the relevant facts. There is nothing to show that such an order is fair or reasonable or meets the requirements of law.

31. We are, therefore, of the opinion that not only the judgment of the High Court but also the orders of BIFR as also the AAIFR should be set 33 aside and the matter should be remitted to the BIFR so as to enable it to proceed in accordance with the provisions of SICA afresh.

32. The appeal is allowed with the aforementioned observations and directions. In the facts and circumstances of the case, there shall be no order as to costs.

May 16, 2008 34