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REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO.10221 OF 2014 @ (SPECIAL LEAVE PETITION (C) NO.5249 OF 2014)

GHANSHYAM SARDA      … APPELLANT

Versus

M/S SHIV SHANKAR  TRADING CO. & ORS.      ….RESPONDENTS

WITH

CIVIL APPEAL NO.10222 OF 2014 @ (SPECIAL LEAVE PETITION (C) NO.5897 OF 2014)

GHANSHYAM SARDA      … APPELLANT

Versus

M/S SHIV SHANKAR  TRADING CO. & ORS. … RESPONDENTS

CIVIL APPEAL NO.10223 OF 2014 @ (SPECIAL LEAVE PETITION (CIVIL) NO.8610 OF 2014)

JK JUTE MILL MAZDOOR  EKTA UNION      … APPELLANT

Versus

M/S SHIV SHANKAR

Page 2

TRADING CO. & ORS. … RESPONDENTS

CIVIL APPEAL NOS.10224-10225 OF 2014 @ (SPECIAL LEAVE PETITION (C) NOS.8611-8612 OF 2014)

JK JUTE MILL MAZDOOR  EKTA UNION     … APPELLANT

Versus

M/S SHIV SHANKAR  TRADING CO. & ORS   … RESPONDENTS

CIVIL APPEAL NO.10226 OF 2014 @ (SPECIAL LEAVE PETITION (CIVIL) NO.6412 OF 2014)

GHANSHYAM SARDA     … APPELLANT

Versus

M/S JK JUTE MILLS  CO. LTD. & ANR.           … RESPONDENTS

CONTEMPT PET. (C) NO.338 OF 2014 IN (SPECIAL LEAVE PETITION (CIVIL) NO.5249 OF 2014)

GHANSHYAM SARDA      …PETITIONER/   APPLICANT

Versus

SASHIKANT JHA, DIRECTOR M/S JK JUTE MILLS CO. LTD. & ORS.           … RESPONDENTS

AND

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CONTEMPT PET. (C) NO.375 OF 2014 IN @ (SPECIAL LEAVE PETITION (CIVIL) NO.8610 OF 2014)

JK JUTE MILLS MAZDOOR  …. PETITIONER/     EKTA UNION           APPLICANT

Versus

SASHIKANT JHA, DIRECTOR M/S JK JUTE MILLS CO. LTD. & ORS.          … RESPONDENTS

J U D G M E N T

UDAY UMESH LALIT, J.

1. Permission  to  file  SLP  granted  in  SLP(C)  Nos.8611-

12/2014. Leave to appeal granted in all Special Leave Petitions.

2. All these Special Leave Petitions arise out of a common  

judgment and order dt. 06.01.2014 passed by the High Court of  

Gauhati in FAO No. 10 of 2013 and Writ Petition Nos. 4303 of  

2013 and 6286 of 2013 and are being disposed by this common  

judgment  and  order.  These  petitions  raise  questions  regarding  

scope  and  ambit  of  Sections  22(1),  26  and  32(1)  of  the  Sick  

Industrial Companies (Special Provisions) Act 1985, hereinafter  

referred to as the Act.

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3. A  company  named  J.K.  Jute  Mill  Company  Ltd.  

(hereinafter referred to as ‘the company’) having its  registered  

office at Kanpur, Uttar Pradesh filed Reference No. 149 of 1994  

before  the  Board  for  Industrial  and  Financial  Reconstruction  

(“BIFR” for short) under the provisions of the Act.  Though the  

scheme  was  initially  sanctioned  for  reconstruction,  the  BIFR  

subsequently  held  the  scheme  to  have  failed  and  directed  the  

company  to  be  wound  up.   These  orders  were  stayed  by  the  

Appellate Authority for Industrial and Financial Reconstruction  

(“AAIFR” for  short)  and further  proceedings  before the  BIFR  

continued.   While the matter was thus pending, “Sarda Group”  

took over the Company through Rainey Park Suppliers Private  

Ltd.  (RPSPL)  in  2007.   BIFR  by  its  order  dated  17.12.2008  

approved such take over of the management.   The management  

of  the  company  was  handed  over  to  Shri  Govind  Sarda.   It  

appears that in 2009, Shri Govind Sarda assigned the debt held  

by RPSPL in favour of an entity named Libra Retailer Pvt. Ltd.  

(LRPL) and he is stated to have handed over Jute  Mill  of the  

company to a third party. As he failed to revive the company,  

show cause notice for winding up was issued by the BIFR.  This  

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action was challenged by the Company by filing Appeal No. 186  

of 2009 before the AAIFR which appeal is still pending.

4. At this stage, Shri Ghanshyam Sarda, (hereinafter referred  

to as the present appellant) filed an application for impleading  

himself  in the proceedings  which application was accepted  by  

AAIFR.  Upon this order being challenged, the High Court of  

Delhi in W.P. No.2839 of 2010 held the present appellant to be  

entitled   to  present  his  point  of  view  in  the  form  of  

proposal/scheme,  which order was confirmed by this Court  by  

dismissing  Special  Leave  Petition  filed  at  the  instance  of  the  

Company.  In terms of the aforesaid orders the BIFR impleaded  

the  present  appellant  who  thereafter  submitted  a  proposal  for  

revival of the company and also filed MA No.162 of 2012 in the  

BIFR for restoration of shareholding pattern.  On 18.02.2013 the  

BIFR issued directions to the operating agency to consider the  

scheme of the present management and the scheme submitted by  

the present Appellant and thereafter submit a fully tied up Draft  

Revival Scheme (“DRS” for short).   The BIFR fixed the next  

date  for  hearing  of  MA  162  of  2012  on  04.04.2013.   In  the  

proceedings dated 27.02.2013, it  was decided that the DRS be  

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circulated  seeking  objections  and  suggestions  from  all  the  

concerned.   

5.  On  03.04.2013,  two  applications  were  filed  before  the  

BIFR by M/S Shyam Jute Supplier,  Chindwara M.P. and M/S  

Shiv Shankar Tranding Co. & Ors, Gauhati Assam (hereinafter  

referred to as ‘SSTC’) signed by the same person through same  

Counsel  stating that  they were unsecured creditors  and sought  

permission from the BIFR to institute Civil Suit for recovery of  

money  stated  to  be  recoverable  from  the  company.   On  

04.04.2013 the BIFR held a hearing to consider the change in the  

share  holding  pattern  of  the  company  without  due  permission  

from BIFR.  At that stage Counsel appearing for the Company  

submitted  that  Application  No.  162  of  2012  could  not  be  

considered as the BIFR no longer retained jurisdiction over the  

Company.  It was submitted that in the Audited Balance-Sheet  

for the period of nine months i.e. 01.04.2012 to 31.12.2012 the  

net worth of the Company having turned positive, the Company  

ought  to  be  discharged  from  the  BIFR.   Learned  counsel  

appearing  for  Shyam Jute  Supplier  and  SSTC supported  such  

submissions.  

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6. Paragraphs  (4.1,  4.3,  4.4,  4.8,  4.12  and  4.13)  of  the  

proceedings dated 04.04.2013 are quoted here under which are  

self eloquent.  

“4.1.  Today’s hearing (04.04.2013) was fixed for  consideration  of  MA  No.  162/BC/2012  filed  by  Shri Ghanshyam Sarda praying as under:

a) Declare  that  the  change  in  shareholding  pattern  to  the  extent  the  same  reduces  the  shareholding  of  RPSPL  from  86.23%  to  5.34%  without approval of BIFR as null and void;

b) Restore  the  management  and  the  shareholding pattern of JKJMCL as approved by  the learned BIFR vide its order dated 18.09.2008.

c) Initiate  action  under  section  33  read  with  section  34 against  the management  for  changing  the  shareholding  pattern  of  the  sick  company  without seeking permission from BIFR; and

d) Appoint a special director (BIFR Nominee)  in  the  Board  of  the  Company  to  look  into  and  monitor its affairs;

e) Pass  such  other  further  order(s)  as  this  Hon’ble BIFR may deem fit and proper in the facts  and circumstances of the case;

4.3. Shri Sudhansu Batra, Sr. Advocate appearing  on      behalf of the Sick Company intervened and  stated  the  MA  NO.  162/BC/2012  cannot  be  considered  today  since  BIFR  no  longer  retains  jurisdiction  over  the  company.   Shri  Batra,  Sr.  Advocate  stated  that  the  Balance  sheet  as  on  31.12.2012 has been audited which shows that the  networth of the company has turned positive and  the  company  has  to  be  discharged  from  BIFR.  Upon  a  query  from  the  Bench,  Shri  Sudhansu  

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Batra,  Sr.  Advocate  stated that  the company has  already  filed  a  letter  dated  25.03.2013  with  the  BIFR informing that the networth of the company  as  on  31.12.2012  has  turned  positive.  Upon  a  query  from the  Bench,  Shri  Sudhansu Batra,  Sr.  Advocate  stated  that  the  financial  period  of  the  company is normally for 12 months but this year  the  accounts  have  been  closed  by  auditing  the  balance sheet for 9 months period from 01.04.2012  to 31.12.2012.  The Ld. Senior Advocate prayed  that  in view of the networth turning positive the  company should be discharged from the BIFR. The  Ld.  Senior  advocate  argued  that  there  are  no  provision  under  SICA  for  deregistration  of  a  reference when the net worth becomes positive and  the Sick Company is not required to make a formal  application  to  the  BIFR  for  discharge  when  the  company’s  net  worth  becomes  positive.  The Ld.  Advocate  further  stated  that  the  sickness  of  the  company is to be decided ex facie on the basis of  the  audited  Balance  Sheet  and  as  the  Audited  Balance Sheet as at 31.12.2012 is showing positive  Networth,  BIFR ceases  to  have  any jurisdiction.  The  Ld.  Senior  Advocate  to  support  of  this  submissions  referred  to  and  relied  upon  the  judgment passed by Hon’ble Delhi High Court in  the case of: Cahtolic Syrian Bank V/s BIFR & Ors.  On  a  query  from  the  bench  that  assuming  the  networth has turned positive whether BIFR would  automatically lose its jurisdiction or BIFR still has  the powers to examine the audited balance sheet  and  formally  pass  an  order  of  discharge,  Shri  Sudhansu  Batra  Sr.  Advocate  agreed  and  in  fairness  conceded  that  before  discharging  the  company,  the  BIFR  can  examine  the  audited  balance sheet as on 31.12.2012 by all means and  methods and satisfy itself. Shri Sudhansu Batra, Sr.  Advocate stated that his clients is not required to  file an application seeking discharge and BIFR on  

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its  own may examine the audited Balance  Sheet  and discharge the company from BIFR.

4.4.  Shri Ashish Mohan, Advocate appearing for  an unsecured creditor stated that his clients have  filed application seeking impleadment as  well  as  permission  under  section  22(1)  of  SICA  to  file  recovery proceedings against  the management  of  the company; but in view of the networth of the  company  turning  positive  the  company  may  be  discharged from BIFR so that his clients may file  recovery  suit  against  the  company.  The  learned  Advocate stated that since the networth of the Sick  Company  has  turned  positive,  he  would  not  be  pressing any of his application (s) and would take  legal recourse against the company in court of law.

4.8  The representatives of IDBI (OA) stated that  they are  not  in  a  position  to  comment  upon the  Audited Balance Sheet as on 31.12. 2012 without  examining the same. The OA further stated that the  ASC is  going ahead as  per  its  schedule  and the  next  meeting  of  the  ASC is  on 16.04.2013.  The  Bench observed that the ASC may go ahead with  its schedule and that ASC should do nothing more  at present except opening and evaluating the bids  and  submit  its  report  on  such  evaluation  to  the  BIFR and that BIFR shall take a final view upon  the  bids  and  the  sale  of  assets  at  the  time  of  approval of DRS. The bench further observed that  DRS  has  already  been  circulated  on  26.02.2013  and  the  objections  &  suggestions  shall  be  considered on 20.05.2013. Till such time either the  Bench  considers  the  DRS  or  discharge  the  company  from SICA;  the  Bench  shall  safeguard  the assets of the company and retain its jurisdiction  over the company/its assets.

4.12.  The Bench stated that  they would consider  the  arguments  of  the  parties  including  the  

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arguments  of  Mr.  Aggarwal  on  the  next  date  of  hearing. The Bench also observed that as per the  Company’s  ABS as  on 31.03.2012,  (12  months)  the networth of the company is Rs. 5.71 crores and  the accumulated losses are Rs. 36.23 crores and it  would like to satisfy itself about the Balance Sheet  as at 31.12.2012 to which Mr. Batra agreed that the  BIFR could undertake such an exercise. Since the  issue  of  lack of  jurisdiction has been raised;  the  Bench would decide the said issue alongwith MA  No. 162/BC/2012.

4.13.  Having considered the submissions made in  the hearing, materials on record, the Bench issued  the following directions: (i)The  company  to  submit  certified  copy  of  its  ABS  as  on  31.12.2012  along  with  all  relevant  papers  &  documents  in  support  of  its  networth  within one week from today with copy to the IDBI  (OA)  and  all  concerned  parties  alongwith  documentary evidence; (ii) The ASC would go-ahead as per its schedule  and  confirmation  of  sell,  if  any  will  take  place  upon  approval  of  DRS  on  20.05.2013,  with  the  consent of Bench. (iii) The Bench fixed the next date of hearing on  26.04.2013  at  11.30  AM  for  considering  the  submission of the Company that its networth has  turned positive as on 31.12.2012 and also hear the  MA No. 162/BC/2012 on the said date.”

7. At  this  stage  some  of  the  other  proceedings  need  a  

mention.  J.K. Jute Mazdoor Sabha filed Writ Petition No. 22897  

of  2013  before  the  Allahabad  High  Court  on  25.04.2013  

challenging  the  BIFR’s  order  dated  04.04.2013.   Said  Writ  

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Petition having been dismissed by a Single Judge, in an appeal  

therefrom  the  Division  Bench  in  its  order  dated  01.05.2013  

observed that the BIFR would be in a better position to assess the  

net worth position of the company.   In the meantime, Shyam  

Jute Suppliers approached the High Court of Madhya Pradesh by  

filing Writ Petition No.7534 of 2013 questioning the order dated  

04.04.2013 of the BIFR.  The petition was dismissed by a Single  

Judge on the ground of lack of territorial jurisdiction which order  

was approved in appeal by the Division Bench of the High Court.  

8.  On 22.04.2013, SSTC filed Title Suit No. 166 of 2013 in  

Civil  Court  at  Kamroop, Gauhati  against  the Company adding  

BIFR as proforma defendant.  It was inter alia averred  

“…. Now it appears from the balance sheet of the  defendant  company  filed  before  the  proforma  defendant that its net worth had become positive.  In view of the said admission on the part of the  defendant No. 2 it is no longer a sick establishment  under  the  Sick  Industrial  Companies  (Special  Provisions)  Act,  1985  and  consequently  the  proforma  defendant  No.  2  has  ceased  to  have  jurisdiction over the defendant No. 1 and as such  the defendant  No.  1  is  no longer entitled to  any  benefit  under  the  Sick  Industrial  Companies  (Special Provisions) Act, 1985. Thus the defendant  No. 1 under the aforesaid facts and circumstances  has become liable to be sued in a Civil Court of  competent  jurisdiction  with  effect  from the  date  

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the 2012 balance sheet  as submitted by it  before  the  proforma defendant  No.  2  and the  proforma  defendant  ceased  to  have  any  jurisdiction  whatsoever.”

The  plaintiff  prayed  for  declaration,  inter  alia,  that  the  

company was no longer a sick company within the meaning of  

the Act and that the BIFR ceased to have jurisdiction over the  

company and all the proceedings in BIFR after filing of positive  

balance-sheet be declared without jurisdiction. The Civil Court  

by  its  order  dated  23.04.2014  while  issuing  notices  to  the  

defendants directed that status-quo be maintained in respect of  

the BIFR case till the next date of hearing.

9. The company filed its  written objections on 13.05.2013.  

Though the claim of the plaintiff and its entitlement to recover  

the sum stated to be due was denied, the company accepted that it  

was no longer a sick company.  The relevant averments were to  

the following effect.  

“……. That the answering opposite party humbly  states  that  the  statements  made  in  paragraph  number 1 of Misc. (J) Case No. 254/13 are to the  extent that the opposite party is no longer a sick  establishment is not denied.”

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“ …. That the answering opposite party admits the  statement made in paragraph number 10 and admit  that on and from the financial year 2012-2013 it is  no  longer  a  sick  company.  The  balance  sheet  is  also  admitted.  The  rest  of  the  statements  regard  jurisdiction  is  a  matter  of  fact  and  law  and  the  opposite party has no comment to offer.”

10. The matter came up before the Civil Court on 13.05.2013.  

It noted the aforementioned stand and in view of such admitted  

position held that the BIFR ceased to have any jurisdiction over  

the defendant company. It was observed:-

“….  But  a  question  that  is  still  required  to  be  answered  at  this  juncture  is  as  to  whether  this  Court  has  the  jurisdiction  to  grant  the  relief  of  temporary injunction as sought for  in the instant  case. Section 26 of the SICA, which provides inter   alia that  no  injunction  shall  be  granted  by  any  court  or  other  authority  in  respect  of  any action  taken or  to  be taken in  pursuance  of  any power  conferred  by  or  under  this  Act,  shall  not  be  applicable to the opposite party no. 1 company any  more as it  is  no more a sick industrial  company  admittedly and the provisions of the SICA are not  applicable to it anymore, and, therefore, the civil  court  will  definitely  have  jurisdiction  over  it.  Hence,  this  Court  has  jurisdiction  to  grant  the  relief as sought for in the instant case….”

In the premises, the Civil Court restrained the defendants  

including the BIFR from proceeding with BIFR case no. 149 of  

1994.  Neither the Plaintiff nor the Company at any stage placed  

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on  record  before  the  Civil  Court  the  proceedings  dated  

04.04.2013 of the BIFR nor was the Civil Court appraised of the  

fact that the Plaintiff had sought leave under Section 22 (1) of the  

Act from the BIFR to file the Civil Suit.

11. In  the  meantime  while  dealing  with  appeals  preferred  

against the orders of the BIFR including one dated 27.02.2013,  

the AAIFR was appraised that the issue of Net worth was under  

consideration  of  the  BIFR,  so  vide  its  order  dt.16.05.2013  it  

preferred to await such decision. In  the  subsequent  

proceedings of the same day i.e. 16.05.2013 the aforesaid order  

of the Civil Court was placed before the BIFR which observed  

that it had not given any permission under Section 22 (1) of the  

Act to SSTC to file any recovery suit against the company and  

the  matter  was  adjourned  in  the  presence  of  the  counsel  

concerned for considering the submission of the parties on the  

issue of net worth as on 31.12.2012.   It was further observed that  

in the absence of permission under Section 22 (1) the suit filed by  

SSTC was not competent and that, the company had not yet been  

de-registered from BIFR and a filing of Civil Suit without taking  

permission was violative of the Act.  Taking note of the order of  

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the AAIFR dated 16.05.2013 and the order passed by the High  

Court of Allahabad dated 01.05.2013, it was observed that it had  

to decide the issue whether the net worth of the company had  

turned positive or not.  The BIFR thus directed the parties to file  

their  written submission on the aspect  of  the net  worth of  the  

company as on 31.12.2012.   

12.  On 30.05.2013, the present appellant filed an application  

for impleadment as defendant in the aforesaid Suit.  Adverting to  

the orders passed by the BIFR and AAIFR impleading him in the  

proceedings before the BIFR and the subsequent orders passed  

by the Division Bench of the High Court of Delhi and this Court  

on his impleadment and the fact that he had submitted a proposal  

for revival, the present appellant prayed that he be impleaded in  

said suit as a defendant.  The present appellant thereafter filed  

FAO No.10 of 2013 before Gauhati High Court challenging the  

Civil  Court’s order dated 13.05.2013.  A learned Single Judge  

after preliminary hearing  by his order dated 14.06.2013 admitted  

the appeal for hearing and also passed interim order to the effect  

that  no  third  party  rights  in  respect  of  the  property  of  the  

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respondents/defendants  be  created  during  the  pendency  of  the  

appeal.

13.   In the meantime, the matter appeared before the BIFR on  

01.07.2013.   It  prima facie  was  of  the  view that  the  Audited  

Balance-Sheet as on 31.12.2012 of the company did not reflect  

true and fair view and that the matter required examination as to  

how  the  net  worth  of  the  company,  all  of  a  sudden,  turned  

positive.   It  was  observed  that  SSTC  was  not  granted  any  

permission by the BIFR under Section 22 (1) of the Act and the  

suit of SSTC was not competent, that SSTC had suppressed the  

fact from the Civil Court and that the order passed by the Civil  

Court being without jurisdiction was a nullity in the eyes of law  

and not binding upon the BIFR.  It was further observed that the  

BIFR  had  to  satisfy  itself  whether  the  net  worth  had  turned  

positive due to some positive development  and not merely by  

manipulation  of  the  accounts.   In  the  premises  it  directed  the  

State Bank of India to appoint independent auditor for Special  

Investigative Audit and to file its report about net worth position  

of the company as on 31.12.2012.

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14.  SSTC who was the original plaintiff in the aforesaid Suit  

filed  Writ  Petition  No.  4303  of  2013  in  Gauhati  High  Court  

challenging the orders dated 16.05.2013 and 01.07.2013 of the  

BIFR.  Said Writ Petition came up before the Single Judge who  

by his order dated 01.08.2013 impleaded the present appellant as  

Respondent No. 3 in the Writ Petition and further directed that  

till the next date of hearing further proceedings in BIFR case No.  

149  of  2014  shall  remain  stayed.   Subsequently,  the  matter  

appeared  before  the  Single  Judge  again  who,  on  14.08.2013  

directed  that  the  matter  be  placed  before  Hon’ble  the  Chief  

Justice for directions whether the Writ Petition could be heard  

along with FAO No.10 of 2013.

15.  On 04.09.2013,  State  Bank of  India  as  directed  by the  

BIFR submitted  the  Report  of  the  Special  Investigative  Audit  

pointing out the manipulation in the balance-sheet submitted by  

the  company  and  that  the  net  worth  of  the  company  as  on  

31.12.2012 was in fact on the negative side by Rs.36 crores in  

nine  months.   In  the  proceedings  before  the  BIFR  dated  

05.09.2013,  the  aforesaid  Report  was  taken  on  record  and  

comments from the parties were invited.  

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16.   Immediately the company filed Writ Petition No.4286 of  

2013  before  Gauhati  High  Court  questioning  the  order  dated  

05.09.2013 of the BIFR.  The matter came up before a Single  

Judge on 30.09.2013 who issued rule in the Writ Petition and by  

way of interim order directed that further proceedings in BIFR  

case No.194 of 1994 shall remain stayed.  This order was vacated  

by Division Bench of the High Court in Writ Appeals vide its  

order dated 14.11.2013.  These three matters namely FAO No.10  

of  2013  and  Writ  Petition  Nos.4303  and  6286  of  2013  were  

thereafter  clubbed  and  posted  before  the  Single  Judge  on  

21.11.2013,  who  adjourned  the  matters  to  04.12.2013  and  

observed that since the Court was in seisin of the matter it was  

expected that the BIFR may not proceed further with the case till  

conclusion of the hearing before the learned Single Judge.   In  

deference  to  the  aforesaid  order  dated  21.11.2013,  the  BIFR  

adjourned the case.

17.  These three matters then came up before the High Court  

which observed that FAO No.10 of 2013 was filed by the present  

appellant who was not yet a party before the Civil Court and that  

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said FAO which was filed without seeking appropriate leave of  

the Appellate Court was not maintainable and as such it was not  

necessary  to  enter  upon deliberations  on merits  of  the  matter.  

The High Court was of the view that since the application for  

impleadment  was  still  pending before  the  Civil  Court,  as  and  

when the present  appellant  was impleaded as defendant in the  

suit,  it  would then be open to him to file such application for  

variation or setting aside of the order of injunction.   It was held  

that in the absence of any challenge, the order of injunction was  

still in operation and that until and unless such order was vacated  

and recalled by appropriate judicial forum, the same had to be  

respected and given effect to.  The High Court also disposed of  

Writ Petitions on the ground that since all the proceedings before  

BIFR stood stayed, further proceeding in BIFR would be of no  

legal  consequence.   It  was  further  observed  that  one  of  the  

members of BIFR having recused himself from hearing the case  

on the earlier occasions as noted in the order dated 31.01.2013, of  

the  BIFR,  said  member  ought  not  to  have  participated in  any  

further proceedings.  

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18.  This common order passed by the High Court has given  

rise  to  six  Special  Leave Petitions,  three  by  present  appellant  

namely SLP No. 5249, 5897 and 6412 challenging the order of  

the High Court in respect of FAO No.10 of 2013, Writ Petition  

No.4303 of 2013 and Writ Petition No.6286 of 2013 respectively.  

The  other  three  petitions  are  by  J.K.  Jute  Mill  Mazdur  Ekta  

Unions being Special Leave Petition Nos. 8610, 8611 and 8612  

of  2014  against  the  aforesaid  order  in  respect  of  three  

proceedings  as  stated  above  respectively.  This  Court  issued  

notice in the matter on 24.03.2014 on which date the company  

had  appeared  on  caveat.  By  order  dated  08.05.2014,  it  was  

directed that till further orders the capital assets of the Company  

shall not be disposed of without taking permission of this court.  

Soon thereafter Civil Contempt Petition Nos.338 and 375 of 2014  

were filed by the present appellant and J.K. Jute Mills Mazdoor  

Union  contending  inter  alia that  in  violation  of  order  dated  

08.05.2014,  the  contemnors  in  the  petition  had  caused  certain  

properties  of  the  Company  to  be  transferred.   During  the  

pendency  of  these  matters  SSTC  assigned  in  favour  of  M/s  

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Goodlife Merchants Pvt. Ltd. all the rights in respect of the debt  

of the Company.

19. All the aforesaid matters were taken up for hearing together  

by this Court.   Appearing for the present  appellant,  Mr. Kapil  

Sibal,  learned  Senior  Counsel  submitted  that  the  Act  is  a  

complete code in itself and given the true scope and purport of  

Sections 22 , 26 and 32 of the Act, the jurisdiction of the BIFR  

over  any  company  in  question  would  continue  till  its  formal  

discharge  by BIFR either  after  the  net  worth  of  the  company  

turned positive by successful implementation of the scheme or by  

the order of winding up passed in respect of such company.  It  

was further submitted that the BIFR alone will have competence  

and jurisdiction  to  declare  a  company which was  once  a  sick  

company, to be no longer sick and discharge it from the purview  

of the Act and that the Civil Court will not have jurisdiction or  

competence to decide these questions. It was further submitted  

that  the  Civil  Court  is  not  the  appropriate  forum  and  lacks  

jurisdiction to examine the correctness of the annual accounts and  

conclude  whether  the  company  in  question  was  no  longer  

amenable  to  be  dealt  with  under  the  Act.   In  support  of  his  

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submissions, reliance was placed on the decisions of this Court in  

Managing Director Bhoruka Textiles Limited Vs.  Kashmiri  

Rice  Industries1 and  Raheja  Universal  Limited  Vs.  NRC  

Limited & Ors.2  Appearing  for  J.K.  Jute  Mill  Mazdur  Ekta  

Union,  Shri  Krishnan Venugopal  and Shri  R.P.  Bhatt,  learned  

Senior  Counsel  adopted  the  submissions  of  Shri  Sibal.   Shri  

Venugopal, learned Senior Counsel also invited the attention of  

this Court to the report of the State Bank of India to show how  

the net worth of the company was still on the negative side.  Shri  

Kapil Sibal and Shri Sanjeev Sen, learned Senior counsel  also  

invited the attention of the Court and submitted that the alleged  

contemnors in aforementioned Contempt Petitions had flagrantly  

violated orders of this Court.  

20.   Shri  Guru  Krishna  Kumar,  learned  Senior  Counsel  

appearing  for  SSTC  original  plaintiff  and  the  transfree  M/s  

Goodlife Merchants  Pvt.  Ltd.  in all  the matters  submitted that  

since the audited balance-sheet as on 31.12.2012 showed the net  

worth of the company on positive side, the company was out of  

the purview of the provisions of the Act and it was competent for  1 2009(7) SCC 521 2 2012 (2) SCC 148

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the  company  to  claim itself  to  be  no  longer  amenable  to  the  

jurisdiction of the BIFR.  It was submitted that it was open to  

assert, upon the net worth being positive, that the company ipso  

facto was no longer amenable to the jurisdiction of the BIFR.  In  

support,  reliance  was  placed  on  the  view  taken  by  the  High  

Courts of Calcutta3, Madras4 and Delhi5.  Dr. A.M. Singhvi and  

Shri  Harin  Rawal,  learned  Senior  Counsel  appearing  for  the  

company  submitted  inter  alia that  while  the  matters  were  

pending  before  this  Court,  the  Trial  Court  by  its  order  dated  

29.08.2014 had allowed the application for impleadment filed by  

present  appellant in Title Suit No.166 of 2013 and that it  was  

now open to the present appellant to go before the Trial Court  

and ask for variation and modification of the order of injunction  

passed by it.  It was submitted that BIFR which is a Tribunal with  

limited  jurisdiction  could not  have  disobeyed the  order  of  the  

Civil Court.  Relying on the views taken by the High Courts of  

Calcutta,  Madras  and  Delhi  in  the  aforestated  cases  it  was  

submitted that  there was no provision in the Act under which  

33. Dated 08.08.1995 in Zuari Agro Chemicals Ltd. & Anr Vs. The Industrial Credit and  Investment Corporation of India & Ors. in Matter No.362 of 1995 (OS). 44. Dated 19.12.2007 in Dunlop India Ltd. Vs. Container Corporation of India Ltd. & Anr.  in Writ Petition No.24422 of 2006. 55. Dated 21.10.2009 in Catholic Syrian Bank Vs. BIFR & Ors. in W.P. (C) No.8361 of  2008.

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BIFR could pass an order discharging a company under the Act  

and as such the matter could lie in the domain of the Civil Court.  

Shri  C.U.  Singh, learned Senior  Counsel  appearing for  LRPL,  

one of the secured creditors, adopted the submissions and further  

submitted  that  various  proceedings  before  the  BIFR  actually  

showed that the members of the BIFR were biased against the  

Company.

21. Before we deal with the legal issues involved in the matter  

certain  factual  facets  of  the  matter  need  clarification  and  

assessment.  During the course of submissions, it was submitted  

that  the Counsel  appearing for  the company had never agreed  

before the BIFR on 04.04.2013 that the BIFR could examine the  

audited balance sheet itself to satisfy whether the net worth of the  

company had turned positive or  not.   In support,  reliance was  

placed on letter dated 18.04.2013 stated to have been written on  

behalf of the company to the Secretary Bench 3, BIFR, copy of  

which letter was also placed on record.  Said letter purportedly  

stated that the recording of such submission was wrong and that  

the learned counsel had never submitted that before discharging  

the company the BIFR could examine the audited balance sheet  

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and satisfy itself.  Be it noted that the letter was not written by  

the learned counsel nor any affidavit was sworn by the learned  

counsel  denying  such  factum.   Furthermore,  in  none  of  the  

subsequent proceedings after 04.04.2013, as per the record of the  

BIFR,  any  argument  disputing  or  denying  such  submission  

appears  to  have  been made,  nor  is  there  any reference  in  the  

subsequent  proceedings  to  the letter  dated 18.04.2013.   In  the  

circumstances we deem it appropriate to proceed on the basis that  

the submission was in fact made by the learned counsel and it  

was  so  rightly recorded by the  BIFR in its  proceedings  dated  

04.04.2013.

Secondly,  it  has  been  accepted  by  the  company  that  

property at Saif Ganj, Katihar belonging to the company has in  

fact been sold.  At this stage, it may be useful to quote from the  

written  submissions  filed  on  behalf  of  the  company  and  the  

relevant portion reads as under:

“A  sale  deed  of  the  Kathihar  property  was  executed on 2.4.2013 for Rs.3.55 crores in favour  of  Thapar  Herbs  &  spices  Ltd.  and  the  sale  consideration  was  received  on  4.4.2013.    On  16.4.2013, the constructive possession was handed  over and registration fee of Rs.35.00 lacs was paid  by the Purchaser.  As per the Revenue Department,  the  stamp duty  was  higher  than  affixed  and  the  

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matter  was  pending  adjudication  and  thereafter,  final registration was done on 16.4.2014.  Under  the Bihar local stamp laws, since over a year had  lapsed,  a  fresh  sale  deed  was  presented.   The  difference  of  registration  fee  was  paid  by  the  purchaser  on  16.6.2014.   On  2.7.2014,  the  sale  deed was presented which act of presentation was  only ministerial.”

This would mean that even before the hearing of the matter  

before  the  BIFR  on  04.04.2013  the  property  was  sold.   The  

record does not indicate anywhere that the factum of such sale  

was  ever  brought  to the notice of  the BIFR on 04.04.2013 or  

thereafter  nor  was  it  disclosed  that  the  Rs.3.55  crores  were  

received by way of consideration.  Furthermore, when this Court  

issued notice on 24.03.2014 when the company had appeared on  

caveat  and  subsequently  passed  interim  order  on  08.05.2014,  

nothing was disclosed to this Court that the property had been  

sold.    

22. We may also at this stage deal with submission regarding  

effect of order dated 29.08.2014 of the Civil Court impleading  

the  present  appellant  as  defendant.   Confining  itself  to  the  

question of competence of the present appellant to file the appeal  

without  leave of the court, the High Court had not dealt with  

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legal issues, namely what shall be the effect of sections 22, 26  

and 32 of the Act insofar as the present controversy is concerned.  

It was therefore submitted on behalf of the company that since  

the  appellant  now  stands  impleaded,  he  be  left  to  pursue  

appropriate  remedies  before  the  Trial  Court.   We  are  not  

persuaded to agree with this submission to relegate the matter to  

the  Trial  Court  and  we  proceed  to  deal  with  the  legal  issues  

involved in the matter inasmuch as the matter raises basic issues  

concerning  jurisdiction  of  the  Civil  Court  itself.   The  learned  

Counsel  appearing  for  the  Original  Plaintiff  as  well  as  the  

company have also advanced submissions on the legal issues in  

question and we therefore deem it appropriate to deal with such  

issues.

23. At this juncture the question regarding maintainability of  

the appeal before the High Court needs to be dealt with.  As the  

facts indicate, FAO was admitted after hearing the respondents.  

Neither at that stage nor at any subsequent stage anything was  

filed by way of formal opposition to the filing of such appeal  

without the leave of the Court.  Further the status of the present  

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appellant to present his point of view in the form of proposal or  

scheme before the BIFR was accepted right up to this Court and  

he  had  thereafter  been  represented  before  the  BIFR.   The  

proceedings dated 04.04.2013 also indicate that the BIFR was in  

seisin of MA NO.162 of 2012 preferred by him.  He was also  

impleaded as respondent in the writ petitions which were dealt  

with along with the said FAO.  The present appellant was thus  

not  a stranger to the controversy.    There is  nothing in Order  

XLIII Rule 1 of the Code of Civil Procedure that leave to appeal  

has  to  be  applied  for  in  any  particular  format.   In  the  

circumstances, the High Court was not justified in dismissing the  

appeal on a technical ground and it ought to have considered the  

merits of the matter.  We hold the appeal preferred by the present  

appellant to be maintainable and proceed to consider the basic  

issues involved in the matter.

24. Sections  22(1),  26  and  32(1)  of  the  Act,  the  ambit  and  

scope of which fall for our consideration are quoted hereunder:

22. Suspension of legal proceedings, contracts,  etc.— 1)     Where in respect of an industrial company,  

an inquiry under Section 16 is pending or any  scheme referred  to  under  section  17 is  under  

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preparation  or  consideration  or  a  sanctioned  scheme  is  under  implementation  or  where  an  appeal under section 25 relating to an industrial  company  is  pending,  then,  notwithstanding  anything contained in the Companies Act, 1956  (1  of  1956),  or  any  other  law  or  the  memorandum and articles of association of the  industrial  company  or  nay  other  instrument  having effect under the said Act or other law,  no  proceedings  for  the  winding  up  of  the  industrial company or for execution, distress or  the  like  against  any  of  the  properties  of  the  industrial company or for the appointment of a  receiver in respect thereof and no suit  for the  recovery of  money or  for  the enforcement  of  any security against the industrial company or  of  any  guarantee  in  respect  of  any  loans  or  advance granted to the industrial company shall  lie or be proceeded with further, except with the  consent of the Board or, as the case may be, the  Appellate Authority.

 26. Bar of  Jurisdiction—No order passed or  proposal  made  under  this  Act  shall  be  appealable  except  as  provided therein  and  no  civil court shall have jurisdiction in respect of  any matter which the Appellate Authority or the  Board is empowered by, or under, this Act to  determine and no injunction shall be granted by  any court or other authority in respect of any  action taken or to be taken in pursuance of any  power conferred by or under this Act.

32.Effect of the Act on other laws.—(1) The  provisions  of  this  Act  and  of  any  rules  or  schemes  made  thereunder  shall  have  effect  notwithstanding anything inconsistent therewith  contained in any other law except the provisons  of the Foregin Exchange Regulation Act, 1973  (46 of 1973) and the Urban Land (Ceiling and  

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Regulation ) Act, 1976 (33of 1976) for the time  being  in  force  or  in  the  Memorandum  or  Articles  of  Association  of  an  industrial  company  or  in  any  other  instrument  having  effect by virtue of any law other than this Act.

25. Chapter III of the Act details out various stages at which  

inquiry into the working and status of sick industrial companies  

and the scheme for revival is undertaken.  Upon a reference to the  

Board  or  upon  information  received  with  respect  to  financial  

conditions of any industrial company, the Board is empowered  

under Section 16 to conduct such inquiry as it may deem fit for  

determining whether such company has become a sick industrial  

company.  After being so satisfied, the measures which could be  

taken up to enable the company to make its net worth exceed the  

accumulated  losses  that  is  to  say  to  make  it  positive  are  

postulated in Section 17.  Under Section 17(1) the Board may by  

order in writing allow an industrial company to revive itself, if it  

is practicable so to do within a reasonable time.  If it is not so  

practicable,  it  may  direct  any  operating  agency  to  prepare  a  

scheme for the revival of such company.  In other words, once  

the reference is registered, it is the BIFR which supervises the  

aspects  leading  to  the  revival  of  such  company.   Subsequent  

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sections  deal  with the preparation  and sanction  of  scheme for  

revival  of  such  company  and  empower  the  Board  to  have  

dominion  over  such  company  to  enable  the  revival  of  that  

Company  and  in  cases  where  such  revival  is  not  possible,  to  

recommend the winding up of such company.  It is clear that after  

a  reference  is  registered  by  the  Board,   all  throughout  the  

subsequent  stages,  the  BIFR has  complete  supervisory  control  

over the affairs of such company till it is revived or the decision  

to wind up such company is taken.  In our view, the ambit and  

extent of such control means and includes determination of such  

measures to achieve revival of the sick company and to check  

whether by such measures the revival is being achieved or not.  

This must cover the power to decide at any stage subsequent to  

the  registration  of  reference  under  Section  16  whether  such  

company has ceased to be sick company or not.  Cessation of the  

status as a sick company can be under Section 17(1) or as a result  

of scheme for revival being implemented and determination of  

such issue, in our view, is in the exclusive domain of the BIFR.

26.   In  Raheja Universal Limited Vs. NRC Limited2, it was  

observed in para 48 thus:

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“Chapter  III,  in  fact,  is  the  soul  and essence  of  SICA 1985 and it  provides for  the  methodology  that is to be adopted for the purpose of detecting,  reviving  or  even  winding  up  a  sick  industrial  company.   Provisions  under  SICA  1985  also  provide for an appeal against the orders of BIFR  before another specialized body i.e.  AAIFR.  To  put  it  simply,  this  is  a  self-contained  code  and  because of the non obstnace provisions, contained  therein,it  has  an overriding effect  over  the  other  laws.  As per Section 32 of SICA 1985, the Act is  required to be enforced with all its vigour and in  precedence to other laws.”

The Act is a self-contained Code and has conferred upon  

the  BIFR  complete  supervisory  control  over  a  sick  industrial  

company to adopt such methodology as provided in Chapter III  

for detecting, reviving or winding up such sick company.  The  

authority  to  determine  the  existence  and extent  of  sickness  of  

such company and to adopt methodology for its revival are, in the  

exclusive domain of the BIFR and by virtue of Section 26 there is  

an express exclusion of the jurisdiction of the Civil Court in that  

behalf.

27. As laid down by this Court the Act is a complete Code in  

itself.  The Act gives complete supervisory control to the BIFR  

over the affairs of a sick Industrial Company from the stage of  

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registration  of  reference  and  questions  concerning  status  of  

sickness  of  such company  are  in  the  exclusive  domain  of  the  

BIFR.   Any  submission  or  assertion  by  anyone  including  the  

Company that by certain developments the Company has revived  

itself  and/or  that  its  net  worth  since  the  stage  of  registration  

having become positive no such scheme for revival needs to be  

undertaken,  must  be and can only be dealt  with by the BIFR.  

Any such assertion or claim has to be made before the BIFR and  

only upon the satisfaction of the BIFR that a sick company is no  

longer sick, that such company could be said to have ceased to be  

amenable to its supervisory control under the Act.  The aspects of  

revival of such company being completely within its exclusive  

domain,  it  is  the  BIFR  alone,  which  can  determine  the  issue  

whether  such  company  now  stands  revived  or  not.  The  

jurisdiction of the civil court in respect of these matters stands  

completely excluded.

28. Unlike cases where the existence of jurisdictional fact or  

facts,  on  the  basis  of  which  alone  a  Tribunal  can  invoke and  

exercise  jurisdiction,  is  or  are  doubted,  stand  on  a  different  

footing  from  the  one  where  invocation  and  exercise  of  

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jurisdiction  at  the  initial  stage  is  not  disputed  but  what  is  

projected is that by subsequent or supervening circumstances the  

concerned Tribunal has lost jurisdiction.  In the present case the  

fact that the company was registered as a sick company is not  

doubted nor has it been contended that the BIFR had wrongly  

assumed initial jurisdiction.  But what is projected is that the net  

worth having become positive the BIFR has now lost jurisdiction  

over  the  company.   In  our  view,  the  BIFR  having  correctly  

assumed jurisdiction and when all  the financial  affairs of such  

company  were  directly  under  the  supervisory  control  of  the  

BIFR,  the  power  to  decide  whether  it  has  since  then  lost  the  

jurisdiction or not, is also in the exclusive domain of the BIFR.  

The BIFR alone is empowered to determine whether net worth  

has become positive as a result of which it would cease to have  

such  jurisdiction.   Any  inquiry  into  such  issue  regarding  net  

worth by anyone outside the Act including civil court, would be  

against  the  express  intent  of  the  Act  and  would  lead  to  

incongruous and undesired results.  The suit as framed seeking  

declaration  that  the  company  was  no  longer  a  sick  company  

within the meaning of the Act, was therefore not competent and  

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maintainable.   The  Civil  Court  was  not  right  and  justified  in  

issuing injunction as it  did.   The counsel  who represented the  

company  before  the  BIFR on  04.04.2013,  correctly  submitted  

that before discharging the company the BIFR can examine the  

audited balance sheet and satisfy itself whether the net worth had  

turned positive.  

29. Insofar as the recovery of money is concerned, the matter  

is completely covered by Section 22(1) of the Act.  The language  

employed in Section 22(1) of the Act refers to the entirety of the  

period  beginning  from  the  inquiry  under  Section  16  till  the  

implementation of sanctioned scheme for revival.  Section 22(1)  

bars any suit for recovery of money or for the enforcement of any  

security  against  the  industrial  company  without  the  express  

consent  of  the  Board.   Reference  in  Section  22(1)  is  to  “an  

Industrial Company” and not to “the sick Industrial Company” as  

found in later sub-sections of the same Section.  This also throws  

light  that  the  bar  is  during  the  period  contemplated  in  said  

Section 22(1). Such bar is period specific and sub-section (5) of  

Section  22  entitles  exclusion  of  such  period  while  computing  

limitation.   During  the  entirety  of  that  period  the  Act  grants  

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protection to the company and leaves it to the discretion of the  

BIFR whether to permit filing and maintaining of suit or other  

proceedings.  In the present case the BIFR was considering Draft  

Rehabilitation Scheme which is a stage under Section 18(3) and  

is completely covered by the period under Section 22 of the Act.  

The suit in the instant case as framed for recovery of money filed  

without  the  consent  of  the  BIFR  was  not  competent  and  

maintainable.   We  may  at  this  stage  refer  to  the  decisions  

rendered by this Court with regard to Section 22(1) of the Act.  In  

Managing  Director,  Bhoruka  Textiles  Limited Vs.  Kashmiri   

Rice Industries1, after quoting sub-section (1) of Section 22 of  

the Act, it was observed:-

“A plain reading of the aforementioned provision  would clearly go to show that a suit is barred when  an enquiry under Section 16 is pending.  It is also  not in dispute that prior to institution of the suit,  the respondent did not obtain consent of the Board.

9. the provision of the Act and, in particular,  Chapter III thereof, provides for a complete code.  The  Board  has  a  wide  power  in  terms  of  the  provisions of the Act,  although it  is  not  a court.  Sub-section (4) of Section 20 as also Section 32 of  the  Act  provides  for  non  obstante  caluses.   It  envisages  speedy  disposal  of  the  enquiry  and  preferably  within  the  time  framed  provided  for  thereafter.  Section 17 empowers the court to make  suitable  orders  on  the  completion  of  enquiry.  

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Preparation  and  sanction  of  the  scheme  is  also  contemplated under the Act.”

In  para  12  of  the  said  decision,  it  was  further  

stated:

“If  the  civil  court’s  jurisdiction  was  ousted  in  terms of the provisions of Section 22 of the Act,  any judgment rendered by it would be coram non  judice.   It is a well settled principle of law that a  judgment and decree passed by a court or tribunal  lacking inherent jurisdiction would be a nullity.”

Similarly,  in  Raheja  Universal  Limited  Vs.  NRC  

Limited2 it was observed as under:  

“49. BIFR has been vested with wide powers and,  being an expert body, is required to perform duties  and functions of wide-ranged nature. If one looks  into  the  legislative  intent  in  relation  to  a  sick  industrial company, it is obvious that BIFR has to  first  make an effort to provide an opportunity to  the sick industrial company to make its net worth  exceed the accumulated losses within a reasonable  time,  failing  which  BIFR  has  to  formulate  a  scheme  for  revival  of  the  company,  even  by  providing  financial  assistance  in  cases  wherein  BIFR in its wisdom deems it necessary and finally  only when both these options fail and the public  interest  so  requires,  BIFR  may  recommend  winding up of the sick industrial company. So long  as the scheme is under consideration before BIFR  or it is being implemented after being sanctioned  and is made operational from a given date, it is the  legislative intent that such scheme should not be  interjected  by  any  other  judicial  process  or  frustrated  by  the  impediments  created  by  third  parties  and even by the management  of  the sick  

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industrial company, in relation to the assets of the  company.”

The suit in the instant case, insofar as it relates to the claim  

for recovery of money, could lie or be proceeded with only after  

express consent of the BIFR.

30. We now deal  with  the  decisions  of  the  High Courts  of  

Calcutta, Madras and Delhi.  All these decisions were rendered  

while  considering  writ  petitions  under  Article  226  of  the  

Constitution of India.  In the first of these three cases the  High  

Court took the view that there is no express provision in the Act  

which indicates when the BIFR loses its jurisdiction with regard  

to a company which was once sick and proceeded to declare the  

company in question not amenable to the jurisdiction of the BIFR  

from and with effect from the date the Balance Sheet showed the  

Net Worth to be positive.  In the second case the High Court was  

of  the  view  that  sickness  of  an  industrial  company  is  to  be  

decided ex-facie on the basis of the audited balance sheet and  

when the Net Worth becomes positive the BIFR ceases to have  

any jurisdiction.  The last case arose from the same BIFR matter  

and Delhi High Court followed the view taken by Madras High  

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Court. Said decisions must now be read in the light of the above  

discussion and view that we have taken.

31. In the circumstances, we allow the present appeals and set  

aside the order dated 06.01.2014 passed by the High Court  of  

Gauhati in FAO No.10 of 2013 and Writ Petition Nos.4303 of  

2013 and 6286 of 2013.  It is held that the Title Suit No.166 of  

2013 pending on the file of the learned Civil Court at Kamroop,  

Gauhati is not maintainable insofar as it seeks declaration that the  

company was no longer a sick company within the meaning of  

the Act and that the BIFR ceased to have jurisdiction over the  

company and that all the proceedings in the BIFR after filing of  

the  positive  balance-sheet  were  without  jurisdiction.  

Consequently the order of injunction passed by the Civil Court is  

set  aside.   Insofar  as  the  said  Suit  pertains  to  the  claim  for  

recovery of money from the Company, the Suit could lie and be  

proceeded  with  only  after  express  consent  of  the  BIFR  is  

received by the plaintiff.  We direct that the company i.e., J.K.  

Jute Mills Company Ltd. having its registered office at Kanpur  

U.P.  continues  to  be under  the jurisdiction  of  the  BIFR.   We  

leave  it  to  the  BIFR to satisfy  itself  and determine  the  issues  

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whether the net worth of the company has turned positive or not.  

If the BIFR is so satisfied, it shall de-register the company and  

upon such declaration the company will be out of the supervisory  

jurisdiction of the BIFR under the Act.  Needless to say that if the  

BIFR  is  not  satisfied  that  the  net  worth  of  the  company  has  

turned positive,  it  shall  go ahead and consider the scheme for  

revival of the company.  We direct the BIFR to complete this  

exercise within two months from date of receipt of this order.  

We have refrained from dealing with the matter concerning the  

merits or  de-merits  of  the claim that  the net  worth has turned  

positive  nor  have  we dealt  with  the  report  made by the  State  

Bank of India in its Special Investigative Audit.  We leave these  

issues to be considered by the BIFR at an appropriate stage.  We  

have  also  not  dealt  with  the  submissions  alleging  bias  as  the  

matters in that behalf are still pending consideration before the  

authorities  and  we  leave  these  issues  to  be  dealt  with  at  an  

appropriate stage.

32. Since  in  our  view  the  company  continues  to  be  a  sick  

company and it was not competent for anyone except the BIFR to  

determine  whether  the  net  worth  of  the  company  had  turned  

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positive,  we hold the sale  of  Katihar  property effected by the  

company without express leave or permission of the BIFR to be  

questionable.  However, since the transferee of that property is  

not  before  this  Court  we  relegate  this  matter  for  appropriate  

assessment by the BIFR after issuing due notice to the transferee.  

We also leave it to the BIFR to consider and assess whether there  

was any necessity or expediency to sell the property in question.  

If in its opinion such expediency and necessity are established,  

the BIFR may also consider whether the value that the property  

has fetched is adequate or not.  If the value is adequate it may  

confirm the  sale  in  favour  of  the  transferee.   However,  if  the  

value in its opinion is inadequate, it shall give offer and adequate  

time to the transferee to make good the deficit.  In any case if the  

sale is held to be bad or if the transferee is not willing to make  

good the deficit,  the entire consideration for the transaction be  

returned  to  the  transferee.   In  such  eventuality  whatever  the  

transferee has paid in excess of the consideration money towards  

stamp duty and registration shall be recovered from the Directors  

and persons responsible for effecting such sale on behalf of the  

company.

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33. Now we turn to the filing of the civil suit in the instant  

case and its conduct.  The original plaintiff had sought consent of  

the  BIFR under  Section  22(1)  of  the  Act  and  was  before  the  

BIFR on 04.04.2013.  However, he did not disclose either the  

factum that he had so sought such consent or that the BIFR was  

in seisin of the matter and considering whether the net worth of  

the company had turned positive.  Non-disclosure of these two  

essential  facts,  in  our  view,  was  not  accidental.  We therefore  

impose costs of Rs.5 lacs on the original plaintiff which shall be  

deposited within three months from the date of this order, failing  

which action in contempt shall be initiated against the original  

plaintiff.   The  costs  shall  be  deposited  to  the  account  of  the  

Supreme Court Legal Services Authority.  Though the conduct of  

the company as defendant before the Civil Court was of the same  

order, since it is a sick company we refrain from imposing any  

costs on the company. No other order as to costs.

34. The  appeals  are  allowed  in  the  aforesaid  terms.   FAO  

No.10 of 2013 thus stands allowed and Writ Petition Nos.4303 of  

2013 and 6286 of  2013 are  dismissed.   As  regards  Contempt  

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Petition Nos.338 and 375 of 2014, since this Court had not issued  

any notice to the alleged contemnors, we have not dealt with said  

petitions.  By a separate order we issue appropriate notice to the  

alleged contemnors.  

……………………….J. (Anil R. Dave)

………………………J. (Uday Umesh Lalit)

New Delhi, November 13,   2014

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