Case: M/S. Esquire Polymers Limited Vs. The Appellate Authority For Industrial and Financial Reconstruction &amp; Others

2. The Petitioner is a Public Limited Company. It made a reference under Section 15(1) of the Sick Industrial Companies (Special Provisions) Act, 1985 (for short, the SICA ) on the basis of its Annual Statement of Accounts as on 31st March 2001. As against the net worth of the Company which is Rs.231.60 lacs, its losses have amounted to Rs.422.29 lacs. The Board of Directors of the Company passed a Resolution on 3rd September 2001 to approach the Board of Industrial and the Financial reconstruction ( BIFR in short). The accounts were settled and approved by the Board of Directors on 27th September 2001. The reference was filed and received by the BIFR on 13th November 2001. The BIFR, by its order dated 5th July 2002, took a view that the reference was beyond the limitation of 60 days as provided under Section 15(1) of the SICA. The BIFR counted the period of 60 days from 3rd September 2001. It, therefore, dismissed the reference. The Company applied for review of this order and also filed an Appeal. The review came to be rejected on 26th August 2002 and the Appeal came to be dismissed on 2nd January 2003. Being aggrieved by the appellate order, the present Petition has been filed.3. The only question which is required to be decided in the present Petition is as to whether the period of 60 days as provided in Section 15(1) of the SICA for making the reference is, in any way, a period of limitation and that if the reference is not made within this period, the proceedings should automatically be dismissed. Mr.Anturkar, learned Counsel appearing for the Petitioner, has drawn our attention to the provisions of Section 15, 16(1) and 33(1) of the SICA, which read asReference to Board.(1) When an industrial company has become a sick industrial company, the Board of Directors of the Company, shall, within sixty days from the date of finalisation of the duly audited accounts of the company for the financial year as at the end of which the company has become a sick industrial company, make a reference to the Board for determination of the measures which shall be adopted with respect to the company;Provided that if the Board of Directors had sufficient reasons even before such finalisation to form the opinion that the company had become a sick industrial company, the Board of Directors shall, within sixty days after it has formed such opinion, make a reference to the Board for the determination of the measures which shall be adopted with respect to the company;Provided further that no reference shall be made to the Board for Industrial and Financial Reconstruction after the commencement of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, where financial assets have been acquired by any securitisation company or reconstruction company under(1) of section 5 of that Act;Provided also that on or after the commencement of the Securitisation and Reconstruction and Financial Assets and Enforcement of security Interest Act, 2002, where a reference is pending before the Board for Industrial and Financial Reconstruction, such reference shall abate if the secured creditors, representing not less thanin value of the amount outstanding against financial assistance disbursed to the borrower of such secured creditors, have taken any measures to recover their secured debt under(4) of section 13 of that Act.(2) Without prejudice to the provisions of(1), the Central Government or the Reserve Bank or a State Government or a public financial institution or a State level institution or a scheduled bank may, if it has sufficient reasons to believe that any industrial company has become, for the purposes of this Act, a sick industrial company, make a reference in respect of such company to the Board for determination of the measures which may be adopted with respect to such company;Provided that a reference shall not be made under thisin respect of any industrial companythe Government of any State unless all or any of the industrial undertakings belonging to such company are situated in such States;(b) a public financial institution or a State level institution or a scheduled bank unless it has, by reason of any financial assistance or obligation rendered by it, or undertaken by it, with respect to, such company, an interest in such company.Inquiry into working of sick industrial companies.(1) The Board may make such inquiry as it may deem fit for determining whether any industrial company has become a sick industrialupon receipt of a reference with respect to such company under section 15;or(b) upon information received with respect to such company or upon its own knowledge as to the financial condition of the company.Penalty for certainWhoever violates the provisions of this Act or any scheme, or any order of the Board, or the Appellate Authority and whoever makes a false statement or gives false evidence to the Board or the Appellate Authority, shall be punishable with simple imprisonment for a term which may extend to three years and shall also be liable to fine.

Court's reasoning:
10. As noted above, under Section 16(1)(b) of the SICA, the BIFR itself is empowered to take cognizance of the problem and register reference on its own. There is no period of limitation therein. There is no period of limitation when it comes to the reference at the instance of Central Government, Reserve Bank, State Bank or Public Financial Institutions under Section 15(2) of the SICA. In this background, when we look at Section 15(1) of the SICA, the only inference, that can be drawn, will be that this is a requirement which puts the Companies on their toes and it expects them to file their reference within a period of sixty days. In the event, the reference is not filed, there will be a penal consequence under Section 33(1) of the SICA. However, to say that the reference would not be registered at the end of the period of sixty days, would be negating the objectives, for which the quasi Judicial Authority under the Act is created. The Authority cannot close its eyes to the problem brought to its notice merely because the reference is made beyond sixty days. It has power to hold an inquiry as required under Section 16(1) of the SICA and proceed to frame an appropriate scheme by way of rehabilitation and/or to pass appropriate orders, if it is of the opinion that no rehabilitation is possible. Reference must go to its logical conclusion and it cannot be scuttled by reading Section 15(1) as a period of limitation.