JUDGMENT A.K. Banerji, J.
1. The Board for Industrial and Financial Reconstruction (BIFR in short) had vide its order dated February 14, 1995, recommended the winding up of the company Tannery and Footwear Corporation of India Limited ("TAFCO" in short) under Section 20 of the Sick Industrial Companies (Special Provisions) Act, 1985 ("SICA" in short), and forwarded the aforesaid opinion to this court for action in accordance with law. The said opinion has been registered in this court as Miscellaneous Company Application No. 4 of 1995. Before the matter could proceed however appearance was put before this court by the TAFCO Officers' Association and, it was stated by learned counsel that an appeal has been preferred before the Appellate Authority (AAIFR) against the recommendation made by the BIFR and the same was pending. Subsequently, it was brought to the notice of the court that the said appeal had also been dismissed vide order dated April 19, 1995, passed by the Appellate Authority and against the said order a writ petition has also been filed before the Delhi High Court which was pending. In the meantime, appearance has been put before this court by the TAFCO Janta Mazdoor Union, Kanpur, Tannery Employees Union and the TAFCO and Tannery Mazdoor Sabha. Objections supported by an affidavit have been filed against the recommendation made by the BIFR and the appellate order by the TAFCO Officers' Association and the aforesaid three workers' unions. Appearance has also been put by the Union of India, Ministry of Industries, Department of Heavy Industries, New Delhi, who have supported the recommendation made by the BIFR and prayed for appropriate orders by this court.
2. I have heard Shri Vinay Khare and Somesh Khare, learned counsel for the TAFCO Officers' Association, Shri S. C. Budhwar, learned senior counsel assisted by Shri Yashwant Varma on behalf of three unions of the workmen, Shri Narendra Mohan is also appearing on behalf of the TAFCO Janta Mazdoor Union and Shri Sandeep Saxena for the Union of India, Department of Heavy Industries. I have carefully perused the affidavits exchanged between the parties and the record of the case including the revival proposals which are on the record.
3. Before proceeding to consider the respective submissions made by learned counsel for the parties, it would be proper to state in brief the relevant facts and the background of the case which resulted in the matter culminating before this court. Tannery and Footwear Corporation of India Limited (TAFCO) was incorporated in the year 1969, by taking over the two sick units of the British India Corporation Limited (BIC), namely, Cooper Allen and North West Tannery, as the private owners of the same were unable to run them due to the losses suffered. The promoter of TAFCO was the Government of India. The TAFCO was mostly producing boots and shoes and over 60 per cent. of the production was being taken by the Defence Department. The company, however, continued to suffer heavy losses and, ultimately, it was resolved that it had become a sick industrial concern and the matter was referred to the BIFR which registered the case and appointed the IFCI as the operating agency. Before the BIFR a number of hearings took place in which the management of the TAFCO Officers' Association, Prominent Workers' Unions including the Janta Mazdoor Union participated. The representatives of the operating agency, State Bank of India as well as the Government of India, Department of Heavy Industries, also appeared before the BIFR and submitted their views and proposals. Having considered all the aspects of the matter including the proposal submitted and the views of the operating agency as well as the different parties who had made their submissions, the BIFR ultimately was of the opinion that the sick industrial company was not likely to make its net worth exceed the accumulated losses within a reasonable time while meeting all its financial obligations, therefore, it was not likely to become viable in future. Consequently, it was just and equitable that it should be wound up under Section 20(1) of the Act and forwarded the opinion to this court for necessary action. Aggrieved, the TAFCO Officers' Association preferred an appeal before the Appellate Authority for Industrial and Financial Reconstruction (AAIFR) wherein, the order passed by the BIFR was challenged on the ground that the scheme submitted before the said authority had not been properly considered and the opinion cannot be justified in the facts and the circumstances of the case. The Appellate Authority considered the submissions of the appellant who were supported by the workers' union and, after considering the submission concurred with the opinion of the BIFR and, consequently, dismissed the appeal vide order dated April 19, 1995. It appears that a writ petition was filed against the said orders before the Delhi High Court, which has also been dismissed and as the order was not filed before this court, it is not very clear whether the writ petition was dismissed on the merits or was dismissed as withdrawn.
4. Shri S. C. Budhwar, learned senior counsel appearing for the three aforesaid unions of the workmen has submitted firstly, that arbitration proceedings are pending between the State Bank of India and the management of TAFCO which relates to the title deeds pertaining to the properties which are in the possession of the TAFCO and that is a significant fact on which the revival of the company will depend. The property consists of extensive land and building in the heart of the city of Kanpur which if sold or utilised for the purpose of obtaining loan from the financial institutions will be sufficient to wipe out the loss suffered by the company in question. Secondly, it has been contended that the BIFR has decided this matter without due application of mind or detailed enquiry as was required of a quasi-judicial authority. Thirdly, it has been contended that the operating agency has also failed to do its part or to draw up a rehabilitation package as the necessary finance was not provided to it by the promoters of the company, namely, the Government of India. Fourthly, it has been contended that the appeal preferred by the TAFCO Officers' Association supported by the workers' union was summarily dismissed without due application of mind and without taking into consideration the plight of about 1,800 workmen who were dependent on the said company for their livelihood. It has been contended that this court was not bound by the opinion expressed by the BIFR as confirmed by the Appellate Authority and taking into consideration the submissions made by the respective parties before this court, it would be proper as well as in the interest of justice to get the matter examined again by some reputed chartered accountant or techno-economic consultant before passing the winding up order. Learned counsel appearing for the TAFCO management and the TAFCO Officers' Association have supported the submissions of Shri Budhwar. On the other hand, Shri Sandeep Saxena, learned counsel appearing for the Union of India, Department of Heavy Industries, has submitted that despite the best efforts by the Government of India, who had taken over the two sick units of the BIC for the purpose of running the same, to help the workmen employed in the said industry it was unable to run on account of the fact of the obsolete machinery and the heavy overhead expenditure on account of which the price of the manufactured products was not competitive with the other industries catering to produce the same products. Consequently, there was continuous and heavy loss suffered by the company and even the interest which was payable to the Government of India ran up to a staggering figure of about Rs. 200 crores. It has also been submitted that ever since the opinion of the BIFR, the Government of India has already incurred about Rs. 19 crores in payment of the wages and the salaries of the workmen. He has submitted that the BIFR has considered the proposals and the question of rehabilitation from all angles and after giving several opportunities to all the parties to submit their proposals and thereafter has passed a reasoned order. It was denied that there was non-application of mind on the part of the BIFR so far as the proposals were not considered properly in the right perspective. The allegations against the operating agency have also been denied. It has further been contended that the arbitration pertains to the cash credit account of Rs. 150 lakhs due to the State Bank of India against the company and this had nothing to do with the title deeds or the sale of the assets of the company as alleged. In fact, according to learned counsel, various allegations and factors have been introduced in the present case before this court only for delaying and dragging the matter as it was in the interest of the officers and the workmen of the company to prolong the proceedings, as their wages were being paid by the Government of India without there being any work. Consequently, this court should decide this matter on the basis of the record available and there was no need to refer the matter again to any other committee.
5. So far as the first submission made by Shri Budhwar is concerned, learned counsel has placed reliance upon the supplementary affidavit (A35) filed by Shri V.K. Tripathi, President of the TAFCO Officers' Association in which it has been stated that as per the office memorandum issued by the Department of Permanent Enterprises, Permanent Machinery of Arbitration, a dispute pertaining to the State Bank of India and TAFCO has been referred for arbitration and the arbitrator has already issued notice to TAFCO and the State Bank of India to file the statement of facts and the counter statements within one month. Learned counsel has contended that an agreement was entered into between the BIC and the company regarding the transfer of certain properties. Though no sale deed was executed, yet the possession of the said landed property was handed over to TAFCO. Despite demand BIC did not hand over the title deeds to the company instead it equitably mortgaged the said property with the State Bank of India and obtained loan against the same. The State Bank of India despite demand and despite the matter being agitated before the BIFR have not handed over the title deeds to the company and this dispute was also before the arbitration as evident from the statement of facts and the counter statement filed. Consequently, the award should be awaited. In the counter-affidavit (A37) filed on behalf of the Ministry of Industries, by Shri V. K. Sharma, Desk Officer, this allegation has been denied as false and misleading. It has been stated that the arbitration matter which is pending is an entirely different case relating to the non-payment of the dues by the TAFCO to the State Bank of India on account of cash credit facility amounting to Rs. 170 lakhs extended by the bank. In support of his argument Shri Saxena has referred to the letter of the State Bank of India dated April 3, 1996, addressed to the Department of Public Enterprises by which a request was made for arbitration regarding their dispute. Learned counsel has also referred to the letter of the TAFCO dated April 9, 1997, which has been annexed as annexure 2 to substantiate his submission that the dispute did not pertain to the title deeds. He has also referred to the arbitration agreement dated September 18, 1997, entered into between the parties for settlement of the dispute. I have carefully considered the submission and have perused the letters and the agreement annexed to the said counter-affidavit and I find force in the submission made by Shri Saxena. In the letter dated April 3, 1996, addressed by the State Bank of India to the Department of Public Enterprises, Arbitrating Committee, it has been mentioned that a cash credit limit of Rs. 150 lakhs was given on April 5, 1989 to TAFCO on the terms and conditions contained in the agreement of which the Government of India, Ministry of Heavy Industries, was the guarantor. The borrower and the guarantor had agreed to pay interest at 16.5 per cent. per annum with quarterly rests. As collateral security; TAFCO had executed a demand promissory note of Rs. 170 lakhs on April 5, 1989, which was endorsed in favour of the bank by the Ministry of Industries. The TAFCO have failed to adhere to the financial discipline and also failed to keep the required margin, hence, an amount of Rs. 1,54, 17, 174.22 was outstanding against them besides interest. This amount had not been paid either by the borrower or by the guarantor despite demand, therefore, a dispute has arisen between the parties. As the bank and the borrower are public enterprises and the matter involved is public money, under the Government order all such disputes are to be referred to the arbitration committee, hence, the bank approaches the said committee for settlement of the disputes or to adjudicate their claim against the Government of India and the TAFCO. Annexed as annexure 3 to the counter affidavit is an agreement between the State Bank of India and TAFCO from which it is evident that the dispute which has been recited in the opening part of the agreement pertaining to the cash credit limit of Rs. 150 lakhs. After citing the said fact, it has been mentioned that both the parties have agreed that all the disputes and differences between them including payment of the amount covered under the Government of India guarantee such disputes or differences are mentioned in the letter of the State Bank of India dated September 2, 1995, and April 3, 1996, and TAFCO's letter dated April 9, 1997, shall be referred to arbitration. A copy of the aforesaid agreement was sent by the State Bank of India to the Government of India, Department of Public Enterprises, with a copy to TAFCO in which again it has been clearly mentioned that they were enclosing a copy of the agreement consenting for arbitration by the permanent machinery of arbitration "in the matter of dispute arisen because of non-payment of bank's dues, by TAFCO for further action at your end". It is clear, therefore, that what has been referred to arbitration is the matter regarding the cash credit limit of Rs. 150 lakhs. Shri Budhwar has however referred to the letter dated April 9, 1997, written by the managing director of TAFCO to the Joint Secretary (Finance), Department of Public Enterprises, and has invited the attention of the court to Clause (j) at internal page 3 of the said letter in which a reference has been made regarding the release of title deeds. On that basis, learned counsel has contended that this matter was also disputed and, therefore, was before the arbitrator. I am unable to agree. Learned counsel has tried to extract a part of the letter out of context to suit his case. On the other hand, the opening part of the letter written by the managing director itself discloses that the dispute was pertaining to Rs. 170 lakhs. For ready reference, the relevant portion of the first sentence of the letter is reproduced below :
"This is in reference to letter of State Bank of India, Main Branch, Kanpur, wherein, they have requested for appointment of an arbitrator to resolve the dispute between the bank and TAFCO for clearance of cash credit facilities amounting to Rs. 170 lakhs."
6. The next sentence is also equally significant, wherein, it has been stated that "no doubt the accounts of the Corporation with the bank became irregular but the reasons why it became so irregular have not been stated by the bank". Thereafter, the main reason for the said irregularity has been mentioned under Clauses (a) to (n). Clause (j) on which reliance has been placed by Shri Budhwar is one of the reasons according to the managing director by which the accounts became irregular. In Clause (j) it has been mentioned that the State Bank of India, Lalimli branch declined to release the title deeds on the ground that either Central Government guarantee should be furnished for the amount equal to the properties being released or payment of the assessed present value of the properties of Rs. 5,262.01 lakhs or payment of this amount in the account of BIC. It has been stated in this paragraph by the managing director that the BIC had no business to avail of loans against the properties which belong to the company and the bank had also no business to allow further loans. Reading the entire letter dated April 9, 1997, it is very evident that this was not a dispute which was referred but the managing director felt aggrieved on account of the allegations made by the State Bank of India against the company regarding non-keeping of its financial discipline and tried to give reasons for the same. Learned counsel for the TAFCO Officers' Association and the Workmen's Union is consequently not right when it has been stated that the question about the return of the title deeds to the company has also been referred to the arbitrator. Learned counsel for the workmen has also referred to a decision of the Punjab and Haryana High Court in the case of Goetze India Ltd. v. Pure Drinks (New Delhi) Ltd. [1994] 80 Comp Cas 340 and has contended that the proceedings for winding up should remain stayed. Having perused the said decision, I am of the view that the same does not support the contention of learned counsel and neither does it apply in the facts of the present case when it has been already held that the dispute referred did not pertain to the question of title deeds but only a dispute between the State Bank of India and the company pertaining to the cash credit limit. This would have no effect on the winding up proceeding pending before the court. That apart, in this decision it has been clearly held that when a winding up petition has been filed on account of inability of the company to pay its debts or on the "just and equitable" clause, the jurisdiction of the company court is not ousted by existence of the arbitration agreement and each case has to be decided on its own facts. Consequently, I do not find any force in the first submission made by learned counsel.
7. So far as the second submission is concerned, I am unable to agree with learned counsel that the order passed by the BIFR has been passed without due application of mind or any detailed enquiry as required. Copies of various orders passed by the BIFR of September 22, 1992, November 25, 1992, July 6, 1993, December 21, 1993, April 4, 1994, August 18, 1994, and the ultimate order dated February 14, 1995, are on the record. It is apparent from a perusal of the said orders that the matter was pending before the BIFR for almost three years and full opportunity was given to the TAFCO management, officers' association, workmen's union, operating agency and the Government of India to present their views and proposals. All the aspects were considered in detail. Ultimately, the BIFR after considering all the proposals including that of the operating agency observed that despite ample opportunity given to the company, no meaningful proposal for revival has emerged or neither has any viable alternate proposal from any other party been received for rehabilitation of the company. It is noteworthy that the accumulated losses of the company are over Rs. 240 crores till the year 1995-96. The interest accrued to the Central Government up to March 31, 1994, aggregated to Rs. 101.19 crores. The Government of India was not prepared to pump in more funds or to give any loans. It has come on record that the machinery of the company was outdated, the administration was too heavy and the overhead expenses were also very heavy, on account of which the company was running in losses. Almost the entire amount received in running the company was exhausted in payment of wages to the officers and workmen. Consequently, the losses accumulated each month. The Government of India had at one stage made a statement before the BIFR that it could think of waiving interest in case an outside promoter was prepared to take over and gave a viable rehabilitation scheme. The Super House Group which had appeared before the BIFR was asked to deposit a sum of Rs. 5 crores with the State Bank of India for consideration of its proposal, failed to do so and neither was any viable proposal submitted by it. What was proposed was that the work force was to be reduced by 50 per cent. and the existing loan was to be set off against accumulated losses and permission should be given for disposal of the unproductive assets. The proposals were neither viable nor could be considered as the said party did not deposit the amount of Rs. 5 crores. The operating agency had also after examining the question of viability of the unit recorded its opinion in view of the figures and facts before it that the unit would remain non-viable despite heavy sacrifices and induction of substantial interest free funds from the Government of India. The operating agency was also of the opinion that the revival scheme involved a total cost of Rs. 1,830.22 lakhs comprising capital expenditure, additional margin money and cash losses. The opinion of the operating agency has been discussed in the order dated February 14, 1995, passed by the BIFR. Having perused all the orders passed by the BIFR from time to time which have been mentioned above, I am of the view that the BIFR has examined the matter thoroughly and has given valid reasons for its opinion that the company cannot be revived in the near future. It is not correct to submit that there was non-application of mind by the BIFR. Needless to say the matter was examined by the Appellate Authority and they have also not found any infirmity in the order of the BIFR. This court has also after examining the orders passed by the BIFR and the Appellate Authority and on perusing the record available before this court, is also of the same view. This submission also, therefore, cannot be accepted.
8. So far as the third submission is concerned, it was contended that the operating agency had failed to do its part or to draw up a rehabilitation package since the Government of India did not provide the necessary finance to it. The said submission is contrary to the record, hence, cannot be accepted. From the order of the BIFR dated February 14, 1995, it would be evident that the representative of the operating agency appeared before the BIFR and had contended that the viability of the unit was examined on the assumption of two scenarios of financial restructuring. Under the first scenario, the proposal was that the Central Government would waive the entire interest accrued up to March 31, 1994, aggregating to Rs. 101.19 crores and set it off against the accumulated losses and to convert the principal amount of Rs. 89.14 crores into zero rate debentures. Under scenario two, the proposal was that the Central Government was to waive the entire principal and interest due and accrued up to March 31, 1994, aggregating to Rs. 170. 33 crores and set it off against the accumulated losses. It was pointed out by the operating agency that the requirement of funds in both the scenarios worked out to Rs. 18.30 crores and the monetary value of sacrifices worked out to Rs. 154.72 crores under scenario 1 and Rs. 174.08 crores under the scenario 2. Under both the scenarios, the operating agency calculated the accumulated losses at the end of the tenth year and observed that under the first scenario, the accumulated losses would be Rs. 87.38 crores against the share capital of Rs. 15.72 crores and under scenario 2, the accumulated losses at the end of the tenth year would be Rs. 18.24 crores as against equity capital and reserves of Rs. 15.72 crores. It was, therefore, concluded that the unit would remain non-viable despite heavy sacrifices and induction of substantial interest free funds from the Government of India. The operating agency was also of the view that the proposed revival scheme involved a total cost of Rs. 1,830.22 lakhs comprising capital expenditure, additional margin money, cash loss, etc. It had noted that the Government of India had already indicated that it could not induct any funds into TAFCO for its revival. Taking the overall picture into consideration, the operating agency had submitted before the BIFR that it had no credible scheme for revival of the company. In view of the above, it cannot be said that the operating agency had not applied its mind or failed to draw up a rehabilitation package as necessary finance was not provided to it. Consequently, this submission also cannot be accepted.
9. It was next submitted that the appeal preferred by the TAFCO Officers' Association was summarily dismissed by the AAIFR without taking into consideration the plight of the 1,800 workmen who were dependent upon the said company. The workers' union had also supported the officers' association. However, the Appellate Authority failed to take the said aspect into consideration. So far as this submission is concerned, from the order of the Appellate Authority, it would be evident that the Appellate Authority had gone into the question whether there was any viable scheme formulated for the purpose of rehabilitation of the company in question. It has observed that neither the appellant nor the workers' union could formulate any proposal or scheme which was viable and which could be taken into consideration. There was no reasonable proposal before the Appellate Authority to show that funds were available or to be generated for the rehabilitation of the sick unit. The huge losses which the company had incurred could not revive by sale of the obsolete machinery or even the surplus land. Despite the advertisements and inviting offers, no private party was prepared or interested to take over the management of the company. The Government of India which was the promoter of the company in question, was not prepared to invest any more money, though it indicated that they could consider the waiver of Rs. 173.33 crores provided a viable rehabilitation scheme could be formulated with induction of a private promoter. As already noticed above, no private promoter despite advertisement showed any interest in the matter or responded to the offer. In this view of the matter, when there was no viable scheme or proposal for rehabilitation of the company, losses suffered by the company were of a staggering figure and there being no prospect of any finance being available, merely because the livelihood of 1,800 workers was at stake, the company could not be made to run. It may not be out of place to mention here that a supplementary affidavit (A-41) has been filed on January 19, 1998, that on reconciliation of account it has been found that the interest only calculated on the Government loan up to March, 1997, was likely to increase from Rs. 156 crores to Rs. 204 crores. This gives an indication of the financial condition of the company and there being no viable proposal to wipe out the losses and no party being prepared to invest money in the said company, it cannot be said that the order passed by the Appellate Authority was due to non-application of mind.
10. Lastly, it was contended that this court could get the matter examined by some reputed chartered accountant or techno-economic consultant. Before this court also nothing has been shown which would go to suggest that the amount of losses indicated were either incorrect or exaggerated. It is also not denied that the company is running in losses continuously from the day it was promoted. The company does not have any viable assets worth the name. Reference has been made with regard to the land and real assets in the city of Kanpur for which the company does not have the title deeds and the same are equitably mortgaged with the State Bank of India. The said bank is not prepared to hand over the title deeds to the respondent-company unless its dues are cleared. In view of the said financial scenario of the company, this court is of the view, that no useful purpose will be served in getting the matter referred again before any techno-economic consultant. The BIFR had gone into this matter and examined the prospects from various angles. The Government of India had also appointed a committee to indicate whether the company could be revived and the prospect has not been found viable. Consequently, this court is not inclined to refer the matter again for being examined afresh.
11. In view of the aforesaid discussions, this court is unable to agree with the submissions made by learned counsel appearing for the workmen's union and the TAFCO Officers' Association. Having carefully examined the different orders passed by the BIFR and the Appellate Authority and after giving anxious consideration to the matter, this court agrees with the recommendation made by the BIFR and hereby orders that the company Tannery and Footwear Corporation of India Limited (TAFCO in short) be wound up. The official liquidator attached to this court is appointed the liquidator and is directed to proceed in the matter in accordance with law. The Registry is directed to comply with the rules.
12. I order accordingly.