JUDGMENT M.C. Agarwal, J.
1. By this petition under Article 226 or the Constitution of India, the petitioners challenge an order dated February 14, 1994, passed by the Board for Industrial and Financial Reconstruction under Section 20 of the Sick Industrial Companies (Special Provisions) Act, 1985 (hereinafter referred to as "the Act"), recording an opinion that the company, petitioner No. 1, cannot be revived and should be wound up and an order dated August 10, 1994, passed by the Appellate Authority for Industrial and Financial Reconstruction dismissing an appeal against the first mentioned order.
2. Counter and rejoinder affidavits have been exchanged.
3. I have heard Sri K. L. Grover, advocate, for the petitioner, and Sri R. P. Agarwal, advocate, for respondents Nos. 3, 5 and 6, and Sri Ashok Srivas-tava for respondent No. 8. No other respondent appeared and contested the petition.
4. Petitioner No. 1, Raza Textiles Limited, is a company registered under the Companies Act. In the petition, it has wrongly been described as a private limited company. Petitioners Nos. 2 and 3, namely, Rampur Finance Corporation Private Limited and ]. P. Srivastava and Sons (Rampur) Private Limited, are stated to be its promoters and shareholders having 43.7 per cent. shares. Petitioner No. 1 claimed to suffer losses and, therefore, it itself made a reference to the aforesaid Board under Section 15 of the Act to be declared to be a sick company. The reference was accepted and the Industrial Development Bank of India (hereinafter referred to as "the IDBI") was appointed as an operating agency to suggest a scheme for the revival of the company, For this purpose, an order dated January 4, 1993, was passed by the Board, which has been reproduced in paragraph 9 of the writ petition, as under ;
"Since already some background exists in the shape of a proposal which is in the pipeline with financial institutions/banks, it is deemed appropriate before charting out any further course of action to establish whether a basis exists for revival of the company. Accordingly, the IDBI after detailed examination of the company's latest proposal should hold joint consultations with the concerned parties and submit a report by February 7, 1993. In any calculation, the promoters' contribution, as indicated earlier, should not be less than 30 per cent. of the cost of the scheme, including the monetary value of sacrifices. The cost of scheme should also inter alia provide for VRS payments, payments to sundry creditors, adequate margin for working capital, besides other normal features of revival. The promoters' source(s) of funds should also be clearly indicated, as also the credibility of their personal guarantees."
5. It is claimed that petitioner No. 1 had proposed a scheme to the IDBI, a copy of which is annexure "I" to the writ petition. In the said proposal, the following suggestions were made :
"(1) the mosquito netting section was to be leased out ;
(2) the surplus land of about 57 acres is sold out ;
(3) the surplus and unproductive machines and buildings to be disposed of ;
And the entire sale receipts including the security deposit (on lease of netting division) be raised to Rs. 70 lakhs by induction of additional equity to be taken to the promoters' contribution ;
(4) the financial institutions and State Bank of India to waive 50 per cent. outstanding interest."
6. At the second hearing of the case on August 30, 1993, petitioner No. 1 is claimed to have placed annexure "I" before the BIFR and pressed for a reduction in the promoters' contribution, as the direction of 30 per cent. contribution was too onerous. The BIFR, however, turned down the request of the promoters. In the hearing dated August 30, 1993, the Board directed the operating agency IDBI to examine the proposal regarding promotion of a co-operative society to run the company and to advertise for bids to entrust the company to a new management. On the next hearing on November 18, 1993, the IDBI informed that it had not received any proposal for sale or for the formation of a workers' cooperative society or to take over the management of the company and, ultimately, by the impugned order dated February 14, 1994, the Board recorded an opinion that the company should be wound up.
7. Petitioners Nos. 2 and 3 then preferred an appeal under Section 25 of the Act to the Appellate Authority, which was dismissed, It is claimed that the Appellate Authority did not go into the question of viability of the reconstruction of the company and without going into the merits of the rehabilitation scheme, dismissed the appeal on the ground that the promoters were not parties to the proceedings before the BIFR. The Appellate Authority also held that no scheme was submitted before the BIFR, and that the scheme dated November 14, 1992, a copy of which is annexure "I" to the writ petition, was given to the IDBI subsequent to the passing of the impugned order dated February 14, 1994. It is claimed that the Appellate Authority failed to apply its mind to the real question about the viability of the revival of the sick company and dismissed the appeal on mere technicalities. The writ petition is opposed by the aforesaid respondents.
8. Learned counsel for the petitioners laid stress on the objects of the Act which are stated as under :
"An Act to make, in the public interest, special provisions with a view to securing the timely detection of sick and potentially sick companies owning industrial undertakings, the speedy determination by a Board of experts of the preventive, ameliorative, remedial and other measures which need to be taken with respect to such companies and the expeditious enforcement of the measures so determined and for matters connected therewith or incidental thereto."
9. It was contended that the object of the Act is to revive sick industrial companies so that the employment opportunities and industrial production are not reduced and the Board as well as the Appellate Authority were, therefore, bound to objectively decide whether the company could be revived or whether the scheme proposed by the management/promoters was viable.
10. Sri R. P. Agarwal and Sri Ashok Srivastava, learned counsel for the contesting respondents, on the other hand, contended that the Act constitutes a special body of persons to examine the facts and circumstances relating to each company and to decide whether the company can be revived and, if so, what should be the scheme for revival, Reference was made to Sub-section (3) of Section 4 of the Act which says that the chairman and other members of the Board shall be persons who are or have been or are qualified to be High Court judges, or persons of ability, integrity and standing who have special knowledge of, and professional experience of not less than fifteen years in science, technology, economics, banking industry, law, labour matters, industrial finance, industrial management, industrial reconstruction, administration, investment, accountancy, marketing or any other matter, the special knowledge of, or professional experience in which, would in the opinion of the Central Government be useful to the Board.
11. Section 5(2) of the Act says that the chairman shall be a person who is or has been a judge of the Supreme Court or who is or has been a judge of a High Court for not less than five years.
12. A member of the Appellate Authority has to be a person who is or has been a judge of a High Court or who is or has been an officer not below the rank of a secretary to the Government of India or who is or has been a member of the Board for not less than three years.
13. Once a reference has been made to the Board under Section 15 of the Act, the Board by virtue of Section 16 is required to make an enquiry whether an industrial company has become a sick industrial company which means an industrial company which has at the end of any financial year accumulated losses equal to or exceeding its entire net worth. "Net worth" has been defined to mean the sum total of the paid-up capital and free reserves.
14. For the purposes of an enquiry and for exploring the possibility of revival, the Board can appoint an operating agency which has been defined to mean any public financial institution, State level institution, scheduled bank or any other person as may be specified by general or special order as its agency by the Board. In the present case, the IDBI was appointed as the operating agency.
15. Under Section 17 of the Act, after making an enquiry under Section 16, the Board has to decide whether it is practicable for. the company to make its net worth exceed the accumulated losses within a reasonable time. Where the Board, after making the enquiry under Section 16 and after consideration of 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 Eo exceed the net losses within a reasonable time, while meeting all its financial obligations and that the company as a resull thereof is not likely to become viable in future and that it is just and equitable that the company should be wound up, it may record and forward its opinion to the concerned High Court. This is so provided in Sub-section (1) of Section 20 of the Act, Sub-section (2) whereof provides that the High Court shall, on the basis of the opiniqn of the Board, order winding up of the sick industrial company and may proceed and cause to proceed with the winding up of the sick industrial company in accordance with the provisions of the Companies Act, 1956. Thus, the Act has made detailed provisions in the matter and created expert bodies to deal with them.
16. Admittedly, in the present case, the company itself approached the Board projecting itself to be a sick company. The Board after hearing the parties proposed that the IDBI may prepare a scheme for the revival of the company in which the promoters should contribute 30 per cent. of the required funds. This direction was contained in its order dated January 4, 1993, as referred to above. The order passed by the Board shows that it required the operating agency, that is, the 1DBI, to explore the possibility of reviving the industrial undertaking by its sale or lease or by handing it over to a co-operative society formed by its workmen, but no one was willing to adopt this industrial undertaking that was probably terminally ill.
17. The main contention of the petitioners is that the Board and the Appellate Authority did not consider the proposal, as contained in annex-ure "I" to the writ petition. Annexure "I" is a letter from the company to the IDBI and is dated December 14, 1992. Till that date, the IDBI was not appointed as the operating agency and it was so appointed only on January 4, 1993. The petitioners or either of them are not shown to have made any concrete proposal either to the Board or to the IDBI after the order dated January 4, 1993. No shareholder joined the company in the proposal contained in annexure "I" and not a single shell was proposed to be brought in by the shareholders and promoters of the company towards the revival. The order passed by the Board shows that various alternatives were attempted to be explored for the revival of the company, but none could be worked out. The Board's minutes of its meeting, as contained in annexure "2" to the writ petition, mention that the promoters were not in a position to rehabilitate the company. The Appellate Authority has mentioned in its order that during the proceedings before the Board, no scheme was submitted before the B1FR or at the instance of the BIFR to the operating agency in which the appellants (petitioners Nos. 2 and 3) might have expressed their inclination or interest in the revival of the company. Some scheme is said to have been given after the Board had already recorded its opinion for winding up. No such scheme has been placed on the record of the writ petition by the petitioners and there is absolutely nothing before me to show that petitioners Nos. 2 and 3, who claimed to be the major shareholders of the com-pany, were really interested in the revival of the company and to make any financial contribution towards that. The Board in its opinion had thought it fit to require the promoters and shareholders to contribute 30 per cent. of the estimated cost of revival and there is nothing to show that this requirement envisaged by the Board was unjustified.
18. Petitioners Nos. 2 and 3 did not appear before the Board during the proceedings under Sections 15 and 16 of the Act and came forward only when the opinion about winding up had already been recorded and their entire purpose seems to have been to delay the winding up to serve their own ends, as is the allegation of respondents Nos. 12 and 13, who have filed affidavits to contend that the management is surreptitiously removing the assets of the company by falsely claiming that the goods have been stolen.
19. In the present writ petition also, the petitioners have not given any details about the financial affairs of the company. No copy of the balance-sheet has been filed nor has it been mentioned what are its losses, what are the debts due from which of the financial institutions and other creditors like the Employees' State Insurance Corporation and the U. P. State Electricity Board. A copy of the report submitted by the IDBI to the Board recommending the winding up of the company has also not been annexed. The court has not been apprised of the amount of finances required for the revival of the company and how the petitioners proposed the same to be provided for. Merely asserting that the company's surplus assets, namely, the land, be sold, was not enough. It is not even stated whether the land is free or is already mortgaged to the financial institutions and if sold, what would be the receipts and to what extent, that would help in the revival of the company. The whole purpose of approaching the Board might have been to seek remission of the existing dues and to require the financial institutions to pump in further funds without any hope of return of their investment. The facts of the case show that none of the petitioners proposed any viable scheme before the Board or before the Appellate Authority and, therefore, the bald allegation, that the Appellate Authority did not consider the proposal of the petitioners is merely a pretext. The Appellate Authority has affirmed the opinion of the Board and in an order of affirmance, it was not required to deal with the matter in the same detail, as was done by the Board.
20. In view of the ABOVE discussions, I do not find any illegalily in the opinion recorded by the Board that the company should be wound up or in the order passed by the Appellate Authority in affirming that opinion. The writ petition, therefore, lacks merit and has to be dismissed. The writ petition is dismissed. Petitioners Nos. 2 and 3 will pay costs to respondents Nos. 3, 5, 6 and 8, that I assess at Rs. 2,500 each.