JUDGMENT Sudhir Narain, J.
1. The petitioners seek a writ of certiorari quashing the order of the Board for Industrial and Financial Reconstruction (hereinafter referred to as "the Board") recommending to this court for winding up of U. P. State Cement Corporation Ltd. (hereinafter referred to as "the Corporation"), by its order dated July 2, 1997, and the orders of the Appellate Authority dated February 19, 1998, dismissing the appeal against the said order. The petitioners have further sought mandamus against the State of Uttar Pradesh to contribute the required funds for the revival of the Corporation and make payment of all the dues to the employees of the Corporation and to provide alternative employment to them in case the recommendation of the Board is accepted by this court.
2. The facts, in brief, are that the Corporation was originally functioning as an undertaking of the U. P. Government. It was converted into a public limited company in the year 1972. It is manufacturing cement. It has three units. The first unit was set up in the year 1954, at Churk. In 1972, another unit was set up at Dalla with an installed capacity of 4 lakhs t.p.a. Both these units manufacture cement under wet processing technology. In the year 1974, the IDBI along with other financial institutions and banks sanctioned financial assistance to the Corporation to set up a dry process cement plant with clinkerisation unit at Dalla of capacity of 8 lakhs t.p.a. and cement grinding unit at Chunar for manufacture of Portland Blast Furnace Slag Cement of 16.8 lakhs t.p.a.
3. The Corporation went on accumulating losses. In September 1991, the loss amounted to Rs. 180,13 crores while its paid up capital was Rs. 68.28 crores. On March 31, 1994, the loss was Rs. 319.81 crores and share capital and reserves were Rs. 68.29 crores. On March 31, 1998, the loss further increased to Rs. 548.85 crores.
4. The board of directors of the Corporation found that the accumulated losses were exceeding the entire net worth of the Corporation and it has become a sick industrial company. They, after finalisation of the duly audited accounts of the company for the financial year, made a reference to the Board on March 28, 1992, under Section 15(1) of the Sick Industrial Companies (Special Provisions) Act, 1985 (in short "the Act"), for determination of the measures which shall be adopted with respect to the sick company.
5. The Board on receiving the reference submitted by the board of direc tors of the Corporation considered it in its first meeting held on October 7, 1992, in which it declared the Corporation as a "sick industrial company" and appointed the Industrial Development Bank of India (in "short IDBI") as the operating agency as provided under Section 16 of the Act. The operating agency was directed to prepare and present a suitable scheme within 90 days with a further direction that it shall identify the surplus assets and arrange for their disposal. The Board held ten meetings to explore the possibility of revival of the company. In short the summary to the meetings is given as under :
7-10-1992--The Board declared the company as a sick industrial company. The Industrial Development Bank of India (IDBI) was directed to prepare and present a suitable scheme within 90 days. It was further directed to identify the surplus assets and arrange for their disposal for generating interest free funds. The promoters were also directed to submit their proposal to the operating agency.
24-12-1993.--The operating agency did not submit any scheme. It again directed the operating agency to present a scheme within the extended period of three months. The Board further asked the State Government to indicate its policy regarding rehabilitation.
5-12-1994.--The Board further allowed another six weeks time to present the scheme. The workers representative submitted that they were not ready to run the company through workers co-operative as they have no funds for the purpose.
28-12-1994--The operating agency presented a scheme involving expenditure of Rs. 122.23 crores to be met by the State Government. It was based on techno viability report of Cemtech India. As on March 31, 1994, the accumulated losses of the Corporation were Rs. 319.81 crores whereas the share capital and reserve were Rs. 68.29 crores. The Board directed the Corporation to submit an alternative proposal. In the meantime the operating agency was again directed to examine the possibility of mobilising resources by sale of surplus assets and was further advised to advertise inviting offers from private parties for rehabilitation of the Corporation.
18-5-1995.--The operating agency reported to the Board that in response to the advertisement made by it, four proposals were received-two from workers and two from outsiders. The State Government informed the Board that it was not possible by it to invest any funds and privatisation or joint sector was the only solution. The operating agency was asked to examine the four proposals received.
18-10-1995.--The operating agency informed the Board that the two outsiders who had submitted offers were not interested. Workers proposals were also not found acceptable. The Board gave a last opportunity to the State Government to locate some party to take over the Corporation. The operating agency was asked to make fresh advertisement for the purpose.
4-1-1996.--The operating agency reported to the Board that no concrete proposals were received by it in response to the fresh advertisement. The State Government (promoter) did not show any interest and no one attended the meeting. The Board gave further time to earlier two bidders to submit comprehensive proposals. It directed the Corporation to submit comprehensive proposals to one of the two outsiders (HBG was also directed to submit comprehensive proposal). The Board made it clear that if no proposal was received, a show-cause notice for winding up would be issued.
26-9-1996.--The Corporation submitted two alternative proposals--one involving1 investment of Rs. 444 crores (of which the State Government, the promoter was to contribute Rs. 101 crores) and the other involving investment of Rs. 228 crores (of which the promoter to contribute Rs. 189 crores). The State Government informed that in view of elections it does not have any brief regarding infusion of funds. The Board asked the State Government to convey its final views about the proposal submitted by the Corporation within six weeks.
18-11-1996.--The Board issued a show-cause notice why the Corporation be not wound up as the State Government did not express its opinion with regard to investment of funds for revival of the Corporation.
6-2-1997.--The Board gave a last opportunity to the Corporation, workers and the State Government to submit proposals with the means of finance fully tied up within two months.
2-7-1997.--The Corporation submitted fresh proposals but there was no response from the State Government. The Board came to the conclusion that it was not possible to revive the Corporation and, therefore, it should be wound up and accordingly submitted its opinion to this court for winding up of the Corporation.
6. Against the opinion of the Board three appeals were filed. Appeal No. 168 of 1997 was filed by the petitioners, Appeal No. 169 of 1997 by the Corporation and Appeal No. 8 of 1998, by the State Government. The appeal filed by the State of Uttar Pradesh was dismissed in default on February 17, 1998. The appeals filed by the petitioners and the Corporation were dismissed by a common order by the Appellate Authority on February 19, 1998.
7. It has to be examined as to whether the Board performed its duty under the provisions of the Act in making efforts to revive the Corporation which was declared as sick company. The object of the Act is to detect the sick companies and thereafter to provide measures by a body of experts to revive such companies. It is to help the sick industrial companies to revive them. The Statement of Objects and Reasons of the Act is as under (page 303 of 58 Comp Cas (St.)):
"The ill effects of sickness in industrial companies such as loss of production, loss of employment, loss of revenue to the Central and State Governments and locking up of investable funds of banks and financial institutions are of serious concern to the Government and the society at large. The concern of the Government is accentuated by the alarming increase in the incidence of sickness in industrial companies. It has been recognised that in order to fully utilise the productive industrial assets, afford maximum protection of employment and optimise the use of the funds of the banks and financial institutions, it would be imperative to revive and rehabilitate the potentially viable sick industrial companies as quickly as possible. It would also be equally imperative to salvage the productive assets and realise the amounts due to the banks and financial institutions, to the extent possible, from the non-viable sick industrial companies through liquidation of those companies.
It has been the experience that the existing institutional arrangements and procedures for revival and rehabilitation of potentially viable sick industrial companies are both inadequate and time-consuming. A multiplicity of laws and agencies makes the adoption of a co-ordinated approach for dealing with sick industrial companies difficult. A need has, therefore, been felt to enact in public interest a legislation to provide for timely detection of sickness in industrial companies and for expeditious determination by a body of experts of the preventive, ameliorative, remedial and other measures that would need to be adopted with respect to such companies and for enforcement of the measures considered appropriate with utmost practicable despatch."
8. The Board has been entrusted with various duties under the various provisions under Chapter III of the Act. Section 15 casts a duty upon the board of directors of the sick industrial companies to make reference to the Board for determination of the measures which shall be adopted with respect to the company within 60 days from the date of finalisation of the duly audited accounts of the company for the financial year. The Board is to make inquiry under Section 16 of the Act determining whether any industrial company has become sick industrial company and may require an operating agency to enquire into and make a report with respect to such matters as may be specified in the order by the Board. The Board can make suitable orders on completion of the inquiry under Section 16 of the Act and shall decide whether it is practicable for the company to make its net worth exceed the accumulated losses within a reasonable time. Under Sub-section (3) of Section 17 of the Act, it may direct any operating agency to prepare, having regard to such guidelines as may be specified in the order, a scheme providing for such measures in relation to a sick company for its revival. On preparation of the scheme it may sanction such scheme under Section 18(4) of the Act. Where the Board, after making inquiry under Section 16 and after considering all the relevant facts and circumstances and after giving an opportunity of being heard to all concerned parties, is of the opinion that the sick industrial company is not likely to make its net worth exceed the accumulated losses within a reasonable time while meeting all its financial obligations and that the company as a result thereof is not likely to become viable in future and that it is just and equitable that the company should be wound up, the Board may record and forward its opinion to the concerned High Court under Section 20(1) of the Act.
9. The Board appointed Industrial Bank of India (IDBI) as the operating agency. It gave directions to it in its various meetings held on several dates to take measures for revival of the Corporation. The operating agency issued advertisement inviting proposals for revival of the sick company. It presented a scheme on the basis of the report of Cemtech India involving an expenditure of Rs. 122.23 crores to be met by the State Government. The State Government in the meeting of the Board held on May 18, 1995, informed that it was not possible for the State Government to invest any funds. There were other four proposals which were also considered by the Board.
(1) Gujarat Ambuja Cements Ltd. : After submitting proposals it informed that it is not interested to take over.
(2) Dalmia Industries Ltd. : It sought one month's time for submitting a detailed proposal but finally it did not submit any proposal.
(3) Khandelwal Cement Ltd. (KCL) : They sought waiver of entire interest on term loans of financial institutions and banks which were not acceptable to them. It did not submit any further proposal.
(4) H. B. Group : It submitted a proposal after depositing Rs. 5 crores which was not a detailed proposal. The representative of H. B. Group submitted that in case no term loan is available from IDBI they were not interested in rehabilitation of the company. The proposal was thereafter dropped.
10. On behalf of the workers union, Dalla Shramik Sangathan and U. P. State Cement Corporation Workers Industrial Co-operative Society a proposal was submitted envisaging a total cost of Rs. 984 crores over a period of 12 years to be met by internal generation of Rs. 900 crores and untied loans of Rs. 84 crores. The operating agency examined both these proposals and they were not found viable. One Hari Sankar Roy representing Rajkiya Cement Mazdoor Sabha submitted before the Board in its meeting held on September 26, 1996, that they have not submitted any rehabilitation proposal but have indicated some modifications that need to be made in the proposal of the Corporation.
11. The Board asked the Corporation to submit its proposal to the operating agency. The operating agency submitted a report dated September 11, 1996, intimating that the Corporation had submitted a proposal on May 31, 1996, envisaging total expenditure of Rs. 144 crores in one scheme and Rs. 228 crores in the other alternative scheme. The cost of the scheme was proposed to be met, besides other sources, by promoters' contribution of Rs. 101 crores in the first scheme and Rs. 189 crores in the second alternative. The State Government (promoter) never committed to infuse its funds in the Corporation for its revival, the rehabilitation proposal could not be given effect to.
12. 'S. P. Gupta, learned senior advocate appearing for the petitioners vehemently urged that the Board failed to consider various aspects for revival of the Corporation and this has vitiated its opinion while recommending to this court for its winding up.
13. It is submitted that the State Government having not expressed any opinion in regard to the scheme submitted by the Corporation, it will be deemed that the consent was given as provided under Section 19(2) of the Act. Sub-section (2) of Section 19 provides that every scheme referred to in Sub-section (1) shall be circulated to every person required by the scheme to provide financial assistance for his consent within a period of 60 days from the date of such circulation or within such further period not exceeding 60 days as may be allowed by the Board, and if no consent is received within such period, it shall be deemed that the consent has been given. Sub-section (2) must be read with Sub-section (1) which provides for a scheme. It reads as under :
"19. Rehabilitation by giving financial assistance.--(1) Where the scheme relates to preventive, ameliorative, remedial and other measures with respect to any sick industrial company, the scheme may provide for financial assistance by way of loans, advances or guarantees or reliefs or concessions or sacrifices from the Central Government, a State Government, any scheduled bank or other bank, a public financial institution or State level institution or any institution or other authority (any Government, bank, institution or other authority required by a scheme to provide for such financial assistance being hereafter in this section referred to as the person required by the scheme to provide financial assistance) to the sick industrial company.
(2) Every scheme referred to in Sub-section (1) shall be circulated to every person required by the scheme to provide financial assistance for his consent within a period of sixty days from the date of such circulation (or within such further period, not exceeding sixty days, as may be allowed by the Board, and if no consent is received within such period or further period, it shall be deemed that consent has been given.)"
14. Sub-section (2) of Section 19 of the Act is a deeming clause. In Consolidated Coffee Ltd. v. Coffee Board, AIR 1980 SC 1468 ; 46 STC 164 (SC) while considering the deeming provisions in Section 5(3) of the Central Sales Tax Act, the Supreme Court held that in modern legislation the word "deemed" is used in different senses and it is not that a deeming provision is every time made for the purpose of creating a fiction. It was observed (page 1479):
"Secondly, the word 'deemed' is used a great deal in modern legislation in different senses and it is not that a deeming provision is every time made for the purpose of creating a fiction. A deeming provision might be made to include what is obvious or what is uncertain or to impose for the purpose of a statute an artificial construction of a word or phrase that would not otherwise prevail, but in each case it would be a question as to with what object the Legislature has made such a deeming provision. In St. Aubyn v. Attorney-General [1952] AC 15 at page 53 Lord Radcliffe observed thus :
The word "deemed" is used a great deal in modern legislation. Sometimes it is used to impose for the purposes of a statute an artificial construction of a word or phrase that would not otherwise prevail. Sometimes it is used to put beyond doubt a particular construction that might otherwise be uncertain. Sometimes it is used to give a comprehensive description that includes what is obvious, what is uncertain and what is, in the ordinary sense, impossible.' "
15. The observation of Lord Radcliffe in St. Aubyn v. Attorney-General [1952] AC 15 was quoted to find out as to for what purpose the legislation introduced the deeming clause. The different meanings of the word "deemed" have to be applied in the context of the legislative purpose and on the facts of each case.
16. Legal fiction has been created under Section 19(2) of the Act in regard to financial assistance by the person concerned to give an authority to the Board to proceed with the proposed rehabilitation scheme expeditiously. This legal fiction, however, will no longer survive, if an intention can be ascertained from the conduct of the parties against whom fiction has been created that he does not consent to the proposed scheme. The Board is not precluded from examining the reality after the veil of legal fiction is removed. It is necessary to examine the facts in this light. The operating agency on the basis of the report of Cemtech India presented a scheme on December 28, 1994, before the Board involving expenditure of Rs. 122.23 crores to be met by the State Government. The Board in its meeting held on May 18, 1995, observed as follows :
"The Bench further noted that a communication has been received from the State Government stating that keeping in view the magnitude of funds required for rehabilitation of the company as assessed by Cemtech and IDBI as operating agency, privatization including outright sale of the company switch over to the joint sector is the only feasible option for rehabilitating the company ; and that the State Government would not invest any money on its rehabilitation.
The State Government has clearly stated that they will not be able to induct any funds for the rehabilitation of the company and is in favour of the privatization. The long term liabilities of the company as on March 31, 1994, were Rs. 209 crores, comprising term loans from the institutions/ banks Rs. 142 crores, debentures Rs. 17 crores and unsecured loans from the State Government Rs. 40.04 crores."
17. It is in this meeting dated May 18, 1995, the Board gave certain directions to the State Government, Corporation and the operating agency. The offers made by other companies and also the worker unions were considered and were not found feasible.
18. The Corporation submitted two proposals before BIFR in its meeting held on September 26, 1996, One proposal envisaged total expenditure of Rs. 144 crores and another Rs. 222 crores under two different alternative schemes. The cost of the scheme envisaged contribution of Rs. 101 crores in the first alternative and Rs. 189 crores in the second alternative by the State Government. As the means of the finance were not fully tied up, the opinion of the State Government was sought. But it was noted that there was no response from the Government of Uttar Pradesh in this regard. The Corporation submitted another scheme in March, 1997, wherein the project cost was shown at Rs. 54.25 crores. The State Government again did not show its inclination to infuse the funds.
19. Once the State Government had earlier made it clear that it is not going to infuse any funds in the rehabilitation scheme and there was no material on the record to show that the State Government had changed its opinion, the deeming clause contained in Section 19(2) of the Act will not create a fiction. There were two aspects in relation to revival of the Corporation--one to make up the losses already incurred and, secondly, to invest the amount for modernisation of machinery, etc. The Corporation was suffering heavy losses year after year and as on March 31, 1994, the loss was Rs. 319 crores whereas the share capital and reserves were Rs. 68.29 crores. This loss further increased to Rs. 548.85 crores as on March 31, 1998. The units at Churk and Dalla were by wet process. It was an old process while according to modern technology the dry process was to be adopted and to some extent it was done in the year 1975. The State Government had earlier taken the stand that it will not infuse funds in the proposed scheme. In the context of these circumstances it is difficult to hold that the State Government shall be deemed to have consented to infusion of its funds for revival of the Corporation.
20. The second submission of learned counsel for the petitioner is that there were surplus assets of the Corporation and if surplus assets had been identified and sold by the operating agency, no additional fund was required to give effect to the rehabilitation scheme for revival of the Corporation. The words "surplus assets" have not been defined in the Act. In Strand's Judicial Dictionary, fifth edition, page 2570, the meaning of "surplus assets" has been given as under :
"(c) Surplus assets.--In the memorandum and articles of a company, 'surplus assets' means all the assets of the company remaining after creditors have been paid and the costs of winding up have been paid or provided for, but before any payment to members as such has been made or provided for. 'Any further surplus assets' means that part of the 'surplus assets' remaining after paying or providing for the members (Dimbula Valley (Ceylon) Tea Co. Ltd, v. Laurie [1961] 31 Comp Cas 655 ; [1961] 1 Ch. 353).
(d) Surplus assets.--In the memorandum of association of a company, was held to mean what was left after the payment of debts and the repayment of the whole of the preference and ordinary capital (Dunstable Portland Cement Co., In re 48 TLR 223)."
21. Here in the context of the Corporation which has been declared as sick company means the assets which are extra and can be disposed of without affecting the functioning of the Corporation in manufacturing cement and other functions which it carries on.
22. The Board directed the operating agency to identify the surplus assets and arrange for their disposal. It had issued other directions to the operating agency and these directions were as follows :
(a) Establishment of technical, economic and financial viability of the unit on a long term basis ;
(b) Generation of interest free funds ;
(c) Long term agreement with the workers.
23. The Board in its meeting dated December 24, 1993, observed "whether the assets would be surplus can be decided only when the viability of each individual unit per se is evaluated".
24. The petitioners before the Board did not point out any surplus assets of the Corporation. However, the surplus assets were shown in the report of Cemtech India, the Corporation and Workers' Scheme. The figures as given are as follows :
(Rs. in crores)
(i) Report by Cemtech India 7.07
(ii) The scheme submitted by the Corporation in March, 1997 22
(iii) Workers' Scheme 35
25. In the writ petition the petitioners took the stand that the surplus assets were not identified by the operating agency and the Board having not taken this aspect into consideration, its order was vitiated. This court on May 5, 1998, while issuing notice to the respondents permitted the petitioners to file a supplementary affidavit disclosing therein the list of surplus assets of the Corporation, if any. In pursuance of this order the petitioner submitted a report of S.N. Singh and Company, Chartered Accountants, dated July 21, 1998, along with a supplementary affidavit. In this report the value of surplus assets has been estimated at Rs. 151 crores on the basis of the sale of the entire colony at Churk and Dalla. The relevant part of the report reads as under :
Churk :
In the rehabilitation package submitted by the union representatives it has been considered that the entire colony of Churk and Ghurma will be handed over to the State Government on the basis of market price.
This includes land, buildings, electrification, water supply, sewerage and sanitation, telephone facilities, etc., it has been proposed that the land pertaining to factory premises should be retained by the Corporation. It has also been covered under the rehabilitation package that the existing employees will be provided residential facilities by the district administration on rental basis.
Dalla :
Dalla having surplus land of approx. 100 acres which has been valued on the market price. The assets of schools and colleges will be transferred to State Government based on the market price. The shops and some other items will be disposed of at the market value.
Chunar :
The hilly land available at Chunar is surplus and may be disposed of at the market price. The assets of schools and colleges will be transferred to State Government at the market price.
The summary of the revaluation of surplus assets of U.P. State Cement Corporation Ltd, along with the relevant annexures is being enclosed herewith.
It may be seen that the surplus assets of the corporation are for Rs. 151 crores.
26. A counter-affidavit was filed by K.L. Meena wherein it has been specifically stated that the surplus assets of the Corporation are not free from encumbrances and all of its assets are mortgaged with the financial institutions and banks including the Industrial Bank of India against the loan taken by the Corporation in question. S. N. Singh and Company should have taken note of this fact. Further the report discloses that the entire colony of Churk and Ghurma will be handed over to the State Government on the basis of the market price which shows that even those alleged surplus assets have been based on complete financing by the State Government.
27. Singh, chartered accountant, further submitted the value of the school buildings in respect of Dalla, Chunar and Churk as surplus assets and took the view that the State Government may take over such building and provide funds to the extent of valuation of the school building. It has further valued the residential buildings at Churk and has taken the figures from the report of the share valuation of October, 1995, of A. F. Ferguson and Company, New Delhi, but has not taken into consideration the life factor nor has valued the correct replacement cost after depreciation which has been considered by A. F. Ferguson and Company. The valuation has to be made taking into account (i) estimated total useful life of the building, (ii) balance useful life on the basis of present condition of the building and (iii) depreciation/adjustment for past uses but they have not been taken into account. It is not denied that the property of the Corporation taken as surplus assets for the purpose of sale either belong to the State Government or it is hypothecated with the financial institutions and keeping in view this fact such surplus assets will hardly be sufficient for revival of the company taking into account the total cost of the scheme submitted by the Corporation.
28. The Corporation had a submitted scheme in March, 1997, wherein the value of the surplus assets was shown as Rs. 25 crores. The workers union had submitted the representation to the Industries Minister, a copy of which has been annexed as annexure 20 to the writ petition and while submitting the scheme in paragraph 7 it was stated that Rs. 35 crores can be generated from internal sources. The petitioners never indicated that the surplus assets were worth Rs. 150 crores. Cemtech India had submitted a report and Corporation had also submitted a scheme in March, 1997, wherein the estimate of the surplus assets was given. From the entire facts, discussed above, it has not been shown that the surplus assets are such which can generate the amount for rehabilitation of the sick Corporation.
29. The third ground of attack against the opinion of the Board is that it failed to publish the scheme submitted by the operating agency under Section 18(3)(a) of the Act which provides that the scheme prepared by the operating agency shall be examined by the Board and a copy of the scheme with modification, if any, made by the Board, shall be sent, in draft, to the sick industrial company and the operating agency and in the case of amalgamation also, to any other company concerned, and the Board shall publish or cause to be published the draft scheme in brief in such daily newspaper as the Board may consider necessary for suggestions and objections, if any, within such period as the Board may specify.
30. Admittedly, the Board appointed the Industrial Bank of India as operating agency and directed it to prepare and present a suitable scheme. The operating agency presented a scheme involving expenditure of Rs. 122.23 crores to be met by the State Government. In its meetings held on December 28, 1994, the Board directed the Corporation to submit an alternative proposal for its revival. The workers were also permitted to submit their rehabilitation proposal. The operating agency was directed on receipt of the proposal to examine it to find out whether such schemes were viable with the means of finance tied up. In the next meeting held on May 18, 1995, the State Government informed the Board that it was not possible to invest any funds in the rehabilitation scheme. The operating agency reported that in response to the advertisement released by it four proposals were received--two from the workers and two from outsiders. These proposals were also not found acceptable for the reasons that the funds were not available for rehabilitation of scheme. The Board went on exploring the possibility to find out a revival scheme with the means of finance fully tied up. The scheme submitted by the operating agency was in these circumstances, never published.
31. The contention of the Corporation and the State Government is that unless the proposals submitted by the operating agency with means of finance fully tied up, it could not be taken as a draft scheme so as to compel the Board to get it published in the daily newspaper as provided under Section 18(3)(a) of 1985 Act. It is contended that if a scheme is submitted by the operating agency, it has to be first examined by the Board and only thereafter the Board shall publish or cause to be published and if in the examination of the scheme it finds that such scheme is not with the means fully tied up, it cannot prepare a draft scheme so as to send it for publication.
32. The draft scheme is to be published only as provided under regulation 28 of the Board for Industrial and Financial Reconstruction Regulations, 1987, which reads as under :
"28. The Board, after considering the scheme prepared by the operating agency and report thereon, if any, of the secretary, submitted in pursuance of an order made by the Board, on the point as to whether the scheme has been prepared in accordance with the guidelines specified in the order of the Board made under Sub-section (3) of Section 17, shall prepare a draft scheme and cause a copy of the same to be sent to the sick industrial company and the operating agency :
Provided that in case the said scheme envisages amalgamation of the sick industrial company with another industrial company or vice-versa a copy thereof shall also be sent to the transferee-company and any other company concerned in the amalgamation for suggestions and objections if any. The suggestions and objections, if any, shall be furnished to the Board within such time as may be specified by the Board :
Provided that the Board may, at the request of the concerned party and on sufficient cause being shown, suitably extend the time for submission of suggestions and objections."
33. There is nothing to show that the draft scheme was prepared by the Board and in the absence of such draft scheme, there was nothing to be published as envisaged under regulation 28 of the Regulations.
34. Where the Board fails to prepare the draft scheme and get such scheme published in the daily newspaper as contemplated under Section 18(3)(a) of the Act, it is still to be examined that such failure has affected the prospect of the revival of the sick company. In this context a reference may be made to Clause (b) of Section 18(3) of the Act which provides that the Board may make such modifications, if any, in the draft scheme as it may consider necessary in the light of suggestions and objections received from the sick industrial company and the operating agency and also from the transferee industrial company and any other company concerned in the amalgamation and any shareholder or any creditors or employees of such companies. Regulation 29 provides that the Board shall publish or cause to be published short particulars concerning the draft scheme, by way of notification, in such daily newspaper and periodicals as it may consider necessary, inviting suggestion and objections regarding the draft scheme, within such time as may be mentioned in the notification, from the shareholders, creditors and employees of the sick industrial company the transferee-company as well as any other company concerned in the amalgamation.
35. The scheme is published with a view to invite objections from the (!) sick industrial company (2) operating agency (3) the transferee-company concerned in case of amalgamation and (4) from any shareholders, creditors or employees of the sick industrial company. The Board had given full opportunity to the Corporation, its workers and the operating agency. It is not their case that they have been deprived of their right to file objections to the scheme submitted by the operating agency. The workers were fully aware of the scheme and they were given opportunity to submit alternative proposal. Similarly, the Corporation was also given opportunity to submit alternative proposal. The scheme submitted by the operating agency envisaged investment of funds by the State Government. On behalf of the operating agency, V.M. Tawade, the General Manager of IDBI has filed a counter-affidavit. It has been stated that after submission of the scheme several objections were received from employees of the Corporation and the bank also and in those circumstances, by invoking the provisions of Section 18(3)(b), the Board issued certain directions. Those directions, inter alia, included the participation of petitioners, banks, and the Corporation in formulating the scheme for the long-term revival of the Corporation. The rehabilitation proposal when submitted was to be considered by the operating agency for preparing a fresh scheme. In view of the fact that ample opportunity was given to all concerned, the petitioners were not prejudiced by non-publication of the scheme submitted by the operating agency.
36. Fourthly, the petitioners have found fault in the steps taken by the Board in not passing a specific order as required under Section 17(1) of the Act which provides that if after making inquiry under Section 16, the Board is satisfied that a company has become a sick industrial company, the Board shall, after considering the relevant facts and circumstances of the case, decide as soon as may be, by order in writing, whether it is practicable for the company to make its net worth exceed the accumulated losses within a reasonable time. Sub-section (1) is to be read with Sub-sections (2) and (3) of the Act as on the basis of the order passed under Sub-section (1) the Board has to take further steps. The relevant provisions of Section 17(1), (2) and (3) read as under :
"17. Powers of Board to make suitable order on the completion of inquiry.--(1) If after making an inquiry under Section 16, the Board is satisfied that a company has become a sick industrial company, the Board shall, after considering all the relevant facts and circumstances of the case, decide, as soon as may be by order in writing, whether it is practicable for the company to make its net worth exceed the accumulated losses within a reasonable time.
(2) If the Board decides under Sub-section (1) that it is practicable for a sick industrial company to make its net worth exceed the accumulated losses within a reasonable time, the Board, shall, by order in writing and subject to such restrictions or conditions as may be specified in the order, give such time to the company as it may deem fit to make its net worth positive.
(3) If the Board decides under Sub-section (1) that it is not practicable for a sick industrial company to make its net worth exceed the accumulated losses within a reasonable time and that it is necessary or expedient in the public interest to adopt all or any of the measures specified in Section 18 in relation to the said company it may, as soon as may be, by order in writing, direct any operating agency specified in the order to prepare, having regard to such guidelines as may be specified in the order, a scheme providing for such measures in relation to such company."
37. On a reference being made to the Board under Section 15 by an industrial company for determination of the measures which shall be adopted with reference to the company, the Board shall make an inquiry under Sub-section (1) of Section 16 of the Act, whether such industrial company has become a sick industrial company. It is only after it is satisfied that such company has become a sick industrial company, that it shall decide by an order in writing whether it is practicable for the company to make its net worth exceed its accumulated losses within a reasonable time. If it is practicable for the sick industrial company to make its net worth exceed its accumulated losses within a reasonable time, the Board shall give such company time to make its net worth exceed its accumulated losses and if it is not practicable for a sick industrial company to make its net worth exceed its accumulated losses within a reasonable time, it shall adopt the measures as provided under Section 18 of the Act. The order in writing is to be passed under Sub-section (1) of Section 17 of the Act only for the purpose to adopt either of the two courses for making the net worth exceed the accumulated losses. The Board can pass an order in writing regarding the capability of the sick industrial company to make its net worth exceed its accumulated losses only when such company places material before the Board and in the absence of any such material it has to pass an order as provided under Sub-section (3) of Section 17 of the Act.
38. In the first meeting held on October 7, 1992, the Board noted the statement of Usmani, the Executive Director of the Corporation as under :
"Usmani submitted that the unit had required potential and it could be revived with the required assistance from the bank and the financial institutions. Usmani added that at present, he had no scheme to submit for rehabilitation of the company. The company, had, however, gone for appointment of a technical consultant in consultation with IDBI for study of technical feasibility of the unit and would confirm his appointment to the Bench within 15 days. In view of the company's incurring a cash loss of Rs. 2.4 crores approximately daily Usmani requested the Bench for taking the measures as it deems fit for rehabilitation of the company."
39. The Board made further observation :
"The Bench further observed that the company was not in a position of rehabilitation with its own efforts. The Bench, therefore, appointed IDBI as operating agency in exercise of the powers under Section 17(3) of the Sick Industrial Companies (Special Provisions) Act. The operating agency was directed to submit a draft rehabilitation scheme keeping in view the provisions of Sections 18 and 19 of the Act."
40. The Board having come to the conclusion that the Corporation cannot be revived unless measures are taken for its rehabilitation, the mere fact that a specific order in writing under Section 17(1) of the Act was not passed before the measures were taken by the Board under Section 17(3) of the Act, the opinion submitted by it for winding up is not liable to be set aside on this ground.
41. The fifth submission of learned counsel for the petitioner is that the Corporation or the State Government could not be permitted to approbate and reprobate at the same time. It is contended that the Corporation as well as the State Government both had challenged the order of the Board before the Appellate Authority on many grounds which had been taken by the petitioners and now they cannot justify the order of the Board. A party to a proceeding may challenge an order but if the order is not challenged subsequently, it cannot be said that they are estopped from supporting the order. The State Government admittedly did not pursue the appeal filed by it and it was dismissed in default. As regards the appeal filed by the Corporation, it has been decided by a common order by the Appellate Authority in respect of the appeal filed by the Corporation and the petitioners.
42. A person cannot approbate and reprobate at the same time to the detriment of his opponent. In Bhau Ram v. Bay Nath Singh, AIR 1961 SC 1327, where a vendee who had filed an appeal by special leave to the Supreme Court against a pre-emption decree passed against him, it was held that he was not precluded from proceeding with the appeal, merely because he has withdrawn the pre-emption price. It was observed (headnote) :
"Upon this principle a person who takes benefit under an order de hors the claim on the merits cannot repudiate that part of the order which is detrimental to him because the order is to take effect in its entirety."
43. Learned counsel for the petitioner has placed reliance upon the decision in Official Receiver, Kurnool v. Vale Pedda Mounamma, AIR 1968 AP 336, wherein it was held that a party litigant cannot be permitted to assume inconsistent positions in court, to play fast and loose, to blow hot and cold, to approbate and reprobate, to the detriment of his opponent. In P. Saraswathi Ammal v. Lakshmi Ammal alias Lakshmi Kantam, AIR 1978 Mad 361, it was observed that a party cannot approbate and reprobate and compel the court to accept the case after an open exhibition of inconsistency. These principles can be applicable only when it is shown firstly, that there is an inconsistency and secondly, that the party has taken benefit while approbating or reprobating. The rehabilitation scheme could be enforced only when the State Government or the financial institutions infuse their funds in the scheme. The State Government never agreed to provide financial assistance in revival of the scheme. The mere fact that the appeal was filed taking a certain ground did not oblige the State Government to infuse the fund in carrying out the scheme submitted by the operating agency or the Corporation and support the version of the petitioners.
44. On behalf of the respondents it has been urged that the workers and other employees of the Corporation have no right to object to the proceeding before the Board nor can they raise technical objections before the High Court. In Navnit R. Kamani v. R.R. Kamani [1989] 66 Comp Cas 132 ; AIR 1989 SC 9, it has been held that the workers have a right to submit a rehabilitation scheme in the form of the co-operative societies and in case the scheme submitted by the workers is found to be viable by the Board, the same can be sanctioned. The workmen and the trade union representing their interest are entitled to be heard and to submit that the company can be revived. The workmen having devoted many years in the service of the company shall be thrown out of the employment if the company is not revived. They have put their toil for years in running the company. The trade unions, representing their interest, can submit their point of view in the interest of the workmen and while submitting the scheme for revival of the company they do not represent the interest of a single workman but of all the workers. The Act itself recognises the right of all concerned parties to submit objections and Section 25 permits "any person aggrieved" to file appeal. The apex court has upheld the right of workers in National Textile Workers' Union v. P.R. Ramakrishnan [1983] 53 Comp Cas 184 ; AIR 1983 SC 75, wherein it has been held that the workers of the company are entitled to appear at the hearing of the winding up petition whether to support or to oppose it so long as no winding up order is made by the court. It was observed as under (page 198) :
"... it is not only the shareholders who have supplied capital who are interested in the enterprise which is being run by a company but the workers who supplied labour are also equally, if not, more interested because what is produced by the enterprise is the result of labour as well as capital. In fact, the owners of capital bear only limited financial risk and otherwise' contribute nothing to production while labour contributes a major share of the product. While the former invest only a part of their moneys, the latter invest their sweat and toil, in fact their life itself. The workers, therefore, have a special place, in a socialistic pattern of society. They are not mere vendors of toil, they are not a marketable commodity to be purchased by owners of capital."
45. The workers can submit their own proposal. The workers were, however, given opportunity but they could not present any viable scheme and they were not interested in submitting any scheme run by the workers' co-operative society. In this petition the petitioners have not submitted that workers have their own viable scheme which was not considered by the Board. Their only contention is that the State Government could have infused funds or the Corporation could be revived by investment of the funds after sale of its surplus assets. As discussed above, it has not been found that there were any such surplus assets after sale of which the Corporation could be revived and its net worth could exceed heavy losses incurred by it. Secondly, mere sale of surplus assets was itself not sufficient for reviving the sick company as it has further to be examined that it will make its net worth exceed the accumulated losses within a reasonable time.
46. Great emphasis has been laid on the fact that it is not just and equitable that the Corporation should be wound up. It may be noted that the Corporation was declared a sick company by the Board on October 7, 1992, and for about five years it laboured hard to find a viable scheme so that the sick company could be revived and its net worth exceed the accumulated losses, (c)n September 30, 1991, the loss was Rs. 180.13 crores while share capital and reserves were Rs. 68 crores. On March 30, 1994, the loss was Rs. 319 crores and on March 31, 1998, it rose to Rs. 548.85 crores while the reserves remained the same. The running of an industry is based not only on investment of capital but the management and other factors are also responsible for the same. In the counter-affidavit filed by Satya Narain Singh on behalf of the State Government in paragraph 13 it has been stated that the major reasons for the sickness of the sick company were financial, productive, technical and raw material, managerial and marketing problems. The difficulties have been in erection/commissioning of the plants at Dalla, high cost of handling and transport of clinkers to Chunar, complex limestone deposit at marginal to below marginal quality, out-dated technology, high operating cost, high power consumption because of hard limestone, much work force, imbalances in plant machinery and inadequate maintenance also contributed to the loss and sickness of the sick company.
47. The financial institutions had given loan and the interest payable to them are heavy. The Board examined all the aspects. The court in this petition cannot substitute its own opinion. After examining the entire material in relation to the functioning of the sick company the BIFR has submitted its opinion that it is just and equitable to wind up the company. I do not find that the opinion submitted by the Board is perverse or there is any justifiable ground not to accept the same.
48. In the last, learned counsel for the petitioner submitted that the workmen had been working in the sick unit. They are entitled to wages till the winding up order is passed. This submission was also raised before the Board and it noted the submission in its meetings held on September 26, 1996, and observed as follows :
"In case the State Government decide to wind up the Corporation they should do so and pay all the dues of the labour. The present Government has different policy regarding sick P.S.Us, as compared to the previous Government and the workers are hopeful that a favourable view will be taken in this case."
49. There is no reason why the workers be not paid their salary. In view of the above discussion the writ petition is dismissed against the recommendation of the Board dated February 6, 1997, and the order of the Appellate Authority dated February 19, 1998. The writ petition, in so far as the direction in the nature of mandamus commanding respondent No. 4 to make payment of all dues to the workmen for the period till today, is allowed. In case respondent No. 4 is not able to pay the amount, on winding up of the Corporation, the payment shall be made to the workers prior to making any payment to any person in accordance with Section 529A of the Companies Act, 1956. The writ petition, as against the other reliefs claimed in the writ petition, is hereby dismissed.
50. The parties shall bear their own costs.