D. P. WADHWA ( 1 ) THIS petition under Article 226 of the Constitution is directed against the scheme sanctioned by the Board for Industrial and Financial Reconstruction (for short the Board ) under the provisions of the Sick Industrial Companies (Special Provisions) Act, 1985 (for short the Act ) by its order dated 27 January 1994. The scheme envisaged amalgamation/merger of M/s. Flowmore Polyester Ltd. ( f. P. L. for short), a sick industrial company, with M/s. S. R. F. Limited (for short s. R. F. ). The petitioner is also challenging the order dated 28 January 1994 of the Appellate Authority for Industrial and Financial Reconstruction ( appellate Authority for short) holding that the impugned scheme was in the positive interest of the sick industrial company F. P. L. ( 2 ) THE petition was originally filed in the Bombay High Court (Aurangabad Bench) and the respondents were five in number; namely, the Appellate Authority, the Board, S. R. F. Ltd, F. P. L. , and the Industrial Finance Corporation of India ( i. F. C. I. for short ). Two more respondents were added by order of the court dated 14 February 1994, and these were the Central Board of Direct Taxes (C. B. D. T.) and the Union of India through the Secretary, Ministry of Finance, Department of Revenue. This petition thereafter came to be transferred to this Court by an order dated 9 March 1994 of the Supreme Court on an appeal filed by S. R. F. challenging the order dated 14 February 1994 passed by the Bombay High Court (Aurangabad Bench) staying the impugned orders of the Board and the Appellate Authority, and also on the ground that Bombay High Court had no territorial jurisdiction to entertain the writ petition. The Supreme Court did not wish to go into the merits of the order dated 14 February 1994 of the Bombay High Court which it said was interim order, but transferred the petition to this Court. The Supreme Court recorded that the counsel for the parties were agreeable to that course. That is how the matter has come before us ( 3 ) BEFORE we go into the various facets of the dispute it may be advantageous to set out the relevant provisions of the Act. The Supreme Court recorded that the counsel for the parties were agreeable to that course. That is how the matter has come before us ( 3 ) BEFORE we go into the various facets of the dispute it may be advantageous to set out the relevant provisions of the Act. We may, however, note that it has not been disputed that F. P. L. was a sick industrial company within the meaning of clause (o) of section 3 of the Act and had to be rehabilitated. The Preamble would give the object of the Act to an extent, and it is as under :- "an Act to make in 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. ""operating Agency" under clause (i) of section 3 means 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. Under section 15 of the Act, reference is to be made to the Board where an industrial company has become a sick industrial company for determination of the measures which shall be adopted with respect to the company. Section 16 provides for an inquiry into working of sick industrial companies. Under section 17, the Board has powers to make suitable orders on the completion of the enquiry, and this section, in relevant part, is as under :- "17. Powers of Board to make suitable order on the completion of inquiry. XX XX XX 1462 ? Section 16 provides for an inquiry into working of sick industrial companies. Under section 17, the Board has powers to make suitable orders on the completion of the enquiry, and this section, in relevant part, is as under :- "17. Powers of Board to make suitable order on the completion of inquiry. XX XX XX 1462 ? 1994 m AD (DELHI) (3) If the Board decides under sub-section (1) that it is not practicable for a sick Industrial company to make its networth 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 guidance as may be specified in the order, a scheme providing for such measures in relation to such company. : XX XX XX (4) The Board may - (a ). . . . . . . . (b) if the operating agency specified in an order made under sub-section (3) makes a submission in that behalf, review such order and modify the order in such manner as it may deem appropriate. "section 18 contains provisions for preparation and sanction of the schemes. Sub-section (2) of section 18 provides for various things to be incorporated in the scheme referred to in sub-section (1) above, and then under sub-section (3) the scheme prepared by the operating agency is to be examined by the Board. It is only thereafter that the scheme shall be sanctioned by the Board and it shall come into force on such date as the Board may specify in that behalf. This is sub-section (4) of section 18. Under section 19, where the scheme relates to preventive, ameliorative, remedial and other measures. It may provide for financial assistance by way of loans, advances or guarantees or reliefs or concessions or sacrifices from the Cental Government, a State Government, any scheduled bank or other bank, a public financial institution or State level institution or any institution or other authority, to the sick industrial company. It may provide for financial assistance by way of loans, advances or guarantees or reliefs or concessions or sacrifices from the Cental Government, a State Government, any scheduled bank or other bank, a public financial institution or State level institution or any institution or other authority, to the sick industrial company. When such an occasion arises every scheme is to be circulated to every person required by the scheme to provide financial assistance for his consent within a certain period, and in case no consent is received within such period, it shall be deemed to have been given. Under section 25, an appeal can be taken to Appellate Authority by any person aggrieved by an order of the Board made under the Act. Other provisions of the Act and of the Income-tax Act, 1961 (for short i. T. Act ) we shall refer to as we discuss the various aspects of the case. The Board has also framed regulations prescribing the procedure to be adopted by it in the cases before it and these are called the Board for Industrial and Financial Reconstruction Regulations, 1987 ( regulations for short ). ( 4 ) IT will be, thus, seen that there are basically five stages for the Board to devise a scheme for rehabilitation of a sick industrial company. and these being: (1) Ordering Inquiry for determining whether a company has become a sick industrial company (section 16 and Regulations 21 to 25]; (2) Recording of finding whether a company has become a sick industrial company (section 17 (1) and Regulation 26]; (3) The Board is to decide if it is practicable for a sick industrial company to make its networth exceed the accumulated losses [sub-section (1) of section 17], and if the Board decides it is not so practicable for the sick industrial company to do so, and that is necessary or expedient in the public interest to adopt all or any of the measures specified in section 18, to 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 such company (sub-section (3) of section 17]. The Board may review or modify such order if the operating agency makes a submission in that behalf (clause (b) of sub-section (4) of section 171; (4) Submission of the scheme prepared by the operating agency and examination thereof by the Board [sub-section (3) of section 18 and regulations 27 to 31]; (5) Directing sanctioning of the scheme by the Board and specifying the date when the sanctioned scheme shall come into force (sub-section (4) of section 18]. We may also note that after sanctioning the scheme, the Board does not become function officio and provisions exist in various sub-sections of section ,18 for the Board to oversee the working of the scheme and to pass such orders as circumstances might require. We may also note that regulatiors 34 and 35 provide for procedure where in a scheme under sub-section (1) of section 19 there is provision for assistance to the sick industrial company by way of loans, advances or guarantees or reliefs or concessions or sacrifices from the Central Government, a State Government, any bank or other financial institutions. These shall be sanctioned by the Board with the consent of the Government, bank. institutions or other authorities called upon to provides loans, advances, guarantees, reliefs, concessions or sacrifices. The Board is required to circulate the scheme to every such person. Where a consent under sub- ction (2) of section 19 is not given by any such person, the Board may adopt such other measures including winding up of the industrial company as it may deem fit. With this background of the provisions of the Act we may examine the proceedings before the Board which culminated in the sanctioning of the scheme which is impugned before us. ( 5 ) IN its meeting on 6 December 1991 the Board considered the reference under section 15 (1) of the Act. In this meeting we find S. R. F. was represented by its Managing Director and other officers. The Board recorded the submission of the representative of the S. P. F. that S. R. F. was "confident of turning around the company within a reasonable time on their own", and that they (S. R. F.) were hopeful of evolving an agreed package. The Board recorded the submission of the representative of the S. P. F. that S. R. F. was "confident of turning around the company within a reasonable time on their own", and that they (S. R. F.) were hopeful of evolving an agreed package. To a query by the Board, the representative of the S. R. F. submitted that they would "submit a revival package within 10 days to the financial institutions and the Banks for their approval. " The Board after considering the whole aspect of the matter came to the conclusion that F. P. L. had become a sick unit within the meaning of section 3 ( 1 no) of the Act. A direction was issued to S. R. F. to furnish a revival package to the banks/financial institutions by a certain date and submit an agreed package to the Board a month thereafter. Further orders were reserved by the Board until then. ( 6 ) IN its meeting on 9 March 1992, the Board recorded that neither S. R. F. nor the existing promoters of the company nor the IFCI, the lead institution, or the other participating banks and institutions had by then submitted the agreed package, and there was also no further request seeking extension of time. The Board held that it was not practicable for the existing promoters of the F. P. L. as well as S. R. F. evincing interest in the take over of the F. P. L. to make the networth of the F. P. L. positive on their own within a reasonable time, and that considering all relevant factors it was expedient in the public interest to adopt measures as specified in section 18 of the Act. The Board, therefore, proceeded under section 17 (3) of the Act and appointed IFCI as the Operating Agency (for short "o. A. ") for determining the measures for the revival of the F. P. L. and to submit a report thereon to the Board. The Board also laid guidelines for the O. A. to follow which were in addition to those mentioned in section 18 of the Act. F. P. L. was directed to furnish its rehabilitation plans, if any, for revival of the company to the IFCI, the Operating Agency, by 31 March 1992 positively. The Board also laid guidelines for the O. A. to follow which were in addition to those mentioned in section 18 of the Act. F. P. L. was directed to furnish its rehabilitation plans, if any, for revival of the company to the IFCI, the Operating Agency, by 31 March 1992 positively. A copy of the minutes dated 9 March 1992 was also endorsed to S. R. F ( 7 ) PURSUANT to these directions M/s Garware Polyesters and Plastics Limited ("garware" for short), petitioner; SRF and M/s. Assam Asbestoes Limited ("a. A. L. " for short) submitted revival plans to the O. A. It is submitted that S. R. F. filed revival plans based on merger of the unit with S. R. F. In its meeting held on 5 October 1992 the Board considered the report of the O. A. which had been appointed by order dated 9 March 1992. The minutes recorded that representative of the O. A. had stated among other things that consensus at the joint meeting of the banks and the institutions was that only the proposal of S. R. F. based on merger of the unit with S. R. F. was acceptable. The Board recorded the submissions of S. R. F. and A. A. L. , and examined their proposal so. A. A. L. complained that O. A. had not complied with the directions of the Board and that its proposal was rejected summarily on the ground that it envisaged reliefs and concessions beyond the R. B. I. guidelines, and that had adequate opportunity been granted to it. It would have modified its proposal within the R. B. I. guidelines. The Board also recorded that expansion of the unit as proposed by Garware was not an Integral part of rehabilitation of the unit. The Board granted further time to A. A. L. to submit its proposal for rehabilitation of the F. P. L. The Board directed the O. A. to also consider whether indigenous technology as developed by Garware could be utilised for revival of the sick company. The Board directed that cut off date for preparation of the report would be 30 September 1992 as already ordered in the earlier minutes, and that the reliefs and concessions would be in accordance with the latest R. B. I. guidelines. The Board directed that cut off date for preparation of the report would be 30 September 1992 as already ordered in the earlier minutes, and that the reliefs and concessions would be in accordance with the latest R. B. I. guidelines. Then the Board directed as under: - "if all the proposals for revival of the unit are found unviable, the OA may explore the possibility of change of management. The banks and the institutions should 1456 satisfy themselves about the background and the financial capability of AAL. The OA should also appoint an independent firm of Chartered Accounts for valuation of the shares of the company and determining share exchange ratio in case amalgamation of the unit is proposed. The OA should give cogent reasons for rejecting any revival proposal. " In this meeting nobody appears to have been present on behalf of Garware. The next meeting of the Board was held on 11 December 1992, and again Garware was not represented. The Board recorded that the O. A. submitted its two evaluation reports dated 30 November 1992 and 8 December 1992 on revival proposal submitted by S. R. F. and A. A. L. The representative of the O. A submitted that A. A. L. had not indicated satisfactory arrangements for financing the cost of the scheme, and that it had proposed that an American Company, ATCO Rubber Products Inc. (ATCO) would bring in certain funds. The representative of ATCO was also present in this meeting of the Board and answered various queries raised by the Board. The representative of the ATCO drew attention of the Board to its letter dated 1 December 1992 wherein ATCO had stated that it would be able to bring in funds of the order of US $ 2. 5 million instead of US $1. 5 million committed by it earlier. The Board observed that assuming the banks and the institutions satisfied themselves about the claim of ATCO and AAL for financing the cost of the scheme, their managerial capability and all other parameters being anual, the revival proposal of AAL needed reconsideration in view of lesser sacrifices proposed by AAL vis-a-vis SRF and invaluable foreign exchange accruing to the country. The Board observed that assuming the banks and the institutions satisfied themselves about the claim of ATCO and AAL for financing the cost of the scheme, their managerial capability and all other parameters being anual, the revival proposal of AAL needed reconsideration in view of lesser sacrifices proposed by AAL vis-a-vis SRF and invaluable foreign exchange accruing to the country. The Board also noted a letter dated 3 December 1992 written by Garware to A. A. L. where Garware had agreed to supply necessary technical know-how to AAL for revival of the unit under certain conditions. The Board also noted another offer by ATCO that besides bringing the foreign exchange it was also prepared to buy-back the entire production of the unit in case the need arose and further that that the technology proposed to be supplied by Garware would be adequate to manufacture the proposed products on the machinery installed in the unit. SRF referred to the provisions of section 72a of the Income-tax Act and stated that if the conditions mentioned in that section were satisfied and the specified authority declared amalgamation to be in the public interest, the benefit under section 72a could not be restricted. It is not necessary for us to refer to various aspects which were considered by the Board in its meeting. The Board directed the ATCO to deposit an amount of US $ 1 million in a "no Lien Account" with the lead bank, the State Bank of Saurashtra. Thereafter, AAL along with ATCO was asked to submit to the O. A. their revised revival proposal besides any other information required by O. A. after adopting the cut off- date of 30 September 1992 in the light of the discussions held on that date, and In accordance with the guidelines laid down by the Board in its earlier meetings as also keeping in view the latest R. B. I. guidelines. The Board also gave offer to S. R. F. to submit to O. A. its modified revival proposal, if any, within the period prescribed. ( 8 ) THE letter dated 3 December 1992 of Garware, which had been referred to by the Board in its meeting of 11 December 1992, was in reply to a Fax message dated 16 November 1992 received from A. A. L. seeking technology/help for the revival of F. P. L. with supply of know how. ( 8 ) THE letter dated 3 December 1992 of Garware, which had been referred to by the Board in its meeting of 11 December 1992, was in reply to a Fax message dated 16 November 1992 received from A. A. L. seeking technology/help for the revival of F. P. L. with supply of know how. Garware stipulated certain conditions under which it was prepared to offer its assistance to A. A. L. The next sitting of the Board was held on 18 March 1993 and again no representative of the Garware was present. The representative of the O. A. pointed out that the revival scheme submitted by S. R. F. envisaged merger of F. P. L. with S. R. F. The Board asked the representative of S. R. F. whether it would like to merge the sick company without the benefits under section 72-A of the Income-tax Act. He said that after the merger the net worth of the sick company would become positive and in case of a stand alone revival of F. P. L. , S. R. F. would not get the benefits under section 72-A, and in addition would pay the income-tax on Its (S. R. F. s) profits, and further that without section 72-A benefits the shareholders of S. R. F. would be adversely affected. The representative of S. R. F. submitted that S. R. F. would leave the final merger of F. P. L. with S. R. F. to the Board. Representative of O. A. , with reference to the Joint proposal of A. A. L. and ATCO, said that financial institutions were not confident of the financial, technical, commercial and managerial capabilities of the AAL/atco s Joint bind. The Board also noted that ATCO had not deposited US $ 1 million in "no lien" account with State Bank of Saurashtra, but deposit of US $ 1 million had been made in a personal account. Again the Board considered various aspects of the matter, heard the parties and reserved the orders. Though In all these meetings of the Board, Garware was not represented but copies of the minutes were invariably being sent to Garware. Again the Board considered various aspects of the matter, heard the parties and reserved the orders. Though In all these meetings of the Board, Garware was not represented but copies of the minutes were invariably being sent to Garware. ( 9 ) THE Board announced its orders on 23 April 1993, but before that S. R. F. wrote a letter dated 22 March 1993 to the Board, and another letter dated 16april 1993 to the O. A. with copy to the Board. Endorsement on these two letters show that these were not addressed to any other parties who had been appearing before the Board or to Garware. In these letters S. R. F. gave the merits and demerits of its own scheme and that of AAL/atco. In its letter to the O. A. , S. R. F. said that it was "willing to accept the scheme of revival without any 72a benefits. " ( 10 ) IN the order dated 23 April 1993 the Board referred to arguments advanced by two parties, namely, AAL/atco and S. R. F. , in support of their proposals and it found that both the proposals had their merits as well as deficiencies. After examining the proposal the Board said it would go for revival of the company and not for merger. The operative order reads as under :- "in the light of the foregoing, we are inclined to take the view that given the facts and circumstances of this case, the revival of the company can be equally achieved through change in management in favour of a party financially and managerially capable of doing so. We, therefore, direct that a rehabilitation package for FPL be given upon on the basis of change in managment in favour of SRF by the Operating Agency, after ascertaining from the latter their willingness to undertake the rehabilitation of the company on the basis as the financial institutions and the banks have reposed requisite confidence in SRF Ltd. SRF may be given three weeks time to present their proposal, if any, to the Operating Agency. On receipt of such a proposal, the OA may examine it, with reference to the Orders of the Bench dated 9. 3. 1992 (copy enclosed) and consider the same at a joint meeting of all concerned, for submission to us by 11. 2. 1993. On receipt of such a proposal, the OA may examine it, with reference to the Orders of the Bench dated 9. 3. 1992 (copy enclosed) and consider the same at a joint meeting of all concerned, for submission to us by 11. 2. 1993. " ( 11 ) S. R. F. then wrote a letter dated 4 May 1993 to the Board pointing out certain errors in its order dated 23 April 1993. It sought rectification of the errors which, it alleged, had crept in the said order. It said that the Board had directed it to submit a revised proposal within three weeks, but that "in the light of the errors pointed out above and the effect of rectification thereof, filing of any revised proposal is academic, unnecessary and will only result in needless delay in revival of the unit. " S. R. F. then said that since the Board had directed it to file a revised proposal in terms of its order "it was imperative that the rectification be made prior to that date to avoid any necessity to comply with this requirement, which, as submitted earlier is only an academic exercise. " Again we find copy of this letter was not sent to any other party. Then order dated 23 April 1993 of the Board. ( 12 ) IN one of the grounds of appeal before the Appellate Authority, the S. R. F. stated that in holding that the scheme of merger envisaged a huge tax shield of Rs. 10. 17 crores, the Board failed to consider the letters dated 22 March 1993 both of which had been filed well before the Impugned order dated 23 April 1993 In which the plea for relief of Rs. 10. 17 crores under section 72-A had been withdrawn by S. R. F. It was also urged that representative of S. R. F. in the meeting of the Board on 18 March 1993 had pointed out that S. R. F. would be willing to abide by the decision of the Board in the matter of extending relief under section 72-A of the I. T. Act. S. R. F. , therefore, complained thatreference to a sacrifice through the aforesaid "tax shield" was clearly a mistake apparent on the face of the record. S. R. F. , therefore, complained thatreference to a sacrifice through the aforesaid "tax shield" was clearly a mistake apparent on the face of the record. S. R. F. said that It was incumbent on the Board to have taken into account its letter dated 22 March 1993 wherein S. R. F. had withdrawn its claim for relief under section 72-A of. the I. T. Act. Other grounds were taken in appeal and the S. R. F. had prayed for modification of the order dated 23 April 1993 of the Board to approve the merger scheme as proposed by S. R. F, and that direction of the Board In the Impugned order be stayed in so far as it required a fresh rehabilitation package without merger to be submitted to O. A. and any matters consequent thereto. ( 13 ) BY order dated 19 May 1993, the-Appellate Authority dismissed the appeal of S. R. F. The Appellate Authority noted the argument of. S. R. F. that the Impugned order dated 23 April 1993 by the Board was passed without looking into various letters written by S. R. F. and yet S. R. F. had been directed to file its package for taking over the sick Industry and that it was alleged that this had shut up the way for S. R. F. to file a scheme for merger. The Appellate Authority observed that upon perusal of the impugned order dated 23 April 1993 along with order dated 9 March 1992 on the lines of which the O. A. was directed to examine the package filed by S. R. F. to undertake the rehabilitation of the sick company, it did not find any error in the impugned order. The Appellate Authority observed that S. R. F, instead of complying with the directions given in the operating portion of the impugned order, i. e. , filing the package with the O. A. , had come up before it for seeking interference in that order. The Appellate Authority held that the impugned order was interim order and it did not find anything erroneous in tliat order to call for any interference. It said if the S. R. F had any grievance it should have done so after complying with the order, and that it might even now comply with the direction in the impugned order. The Appellate Authority held that the impugned order was interim order and it did not find anything erroneous in tliat order to call for any interference. It said if the S. R. F had any grievance it should have done so after complying with the order, and that it might even now comply with the direction in the impugned order. We do not think the Appellate Authority was quite right in its observation that the impugned order dated 23 April 1993 of the Board was an interim order as the expression is normally understood. It was a third stage in the process of revival of the sick industrial company. In a subsequent appeal by Garware the Appellate Authority itself gave finality to this interim order. We think the term interim order was used in the context that scheme had yet to be sanctioned. The appeal filed by the ATCO was dismissed by order dated 27 September 1993. Representative of the S. R. F. was also heard in this appeal by the ATCO. It is not necessary for us to give details of the order dismissing the appeal of ATCO except to note that it recorded the statement of the representative of the ATCO that "in view of the facts and circumstances and the discussions, the company is not willing to invest any money in this company. " The appeal of ATCO was, therefore, dismissed. ( 14 ) THEN comes the order dated 19 November 1993 of the Board which is now Impugned before us. The Board referred to its earlier order and the appeals filed by S. R. F. and ATCO, and also writ petition filed by ATCO in the Allahabad High Court which was later dismissed. The Board then proceeded to record as under :- "the SRP Ltd. have now petitioned the Bench that as they are the only party left for revival of the company, a merger scheme may be sanctioned in their favour. They have further petitioned that they unequivocally give up their claim for 72-A benefits and would rehabilitate Flowmore Polyesters Ltd. through merger with SRF Ltd. without any costs to the central exchequer or inflow of funds from Financial Institutions and banks. They have further petitioned that they unequivocally give up their claim for 72-A benefits and would rehabilitate Flowmore Polyesters Ltd. through merger with SRF Ltd. without any costs to the central exchequer or inflow of funds from Financial Institutions and banks. We have considered the petitions of the SRF Ltd. Keeping in view the order of the AAIFR and the fact that the only other party interested in the revival of the company has finally withdrawn, and merger without 72- A benefits provides a safe and in-expensive route for rehabilitation, we are inclined to accept the petition of SRF Ltd. We accordingly order that the enclosed draft rehabilitation-cum-merger/amalgamation scheme be circulated for consent to all concerned parties as required under Section 19 (2) read with section 19 (1) of Sick Industrial Companies (Special Provisions) Act, 1985. It is directed that short particulars of the draft scheme should be published in two local dailies calling for objections/ suggestions from the creditors, employees, shareholders etc. of the sick company as well as the transferee company viz. M/s. SRF Ltd. We will hear objections/suggestions to the scheme at the hearing to be held at 10. 15 A. M. on 27. 1. 1994. " ( 15 ) GARWARE felt aggrieved by this order principally on the ground that whole basis of revival scheme of sick unit was changed from stand alone to merger without any notice, and it filed an appeal before the Appellate Authority. Again S. R. F. was also represented. The appeal was heard on 21 January 1994 and the order of the Appellate Authority was announced on 28 January 1994 dismissing the appeal. Meanwhile, Garware moved the Bombay High Court (Aurangabad Bench) on 24 January 1994 praying for a writ of certiorari striking down the order of the Board dated 19 November 1993 and also seeking a writ of mandamus or any other appropriate writ, order or direction ordering the Board to offer same opportunity to all the bidders to submit revised and improved scheme for rehabilitation of F. P. L. and then to select the best scheme in accordance with law. In pursuance to order dated 19 November 1993 the Board sanctioned the scheme on 27 January 1994 and as per the scheme the amalgamation/merger of the entire undertaking of F. P. L. was transferred to S. R. F. The scheme so sactioned was without the benefit available under section 72-A of the I. T. Act. A copy of the scheme so sanctioned was also sent to Garware. The writ petition filed in the Bombay High Court (Aurangabad Bench) thereafter was amended by Garware on 28 January 1994 now bringing the order dated 27 January 1994 of the Board sanctioning the scheme under challenge. The court on 28 January 1994 passed ex parte interim order restraining the respondents from acting in pursuance to the order dated 27 January 1994 of the Board. Again Garware moved an application seeking amendment of the writ petition now seeking to challenge the order of the Appellate Authority dated 28 January 1994 dismissing its appeal. The court allowed the amendment and issued rule and at the same time confirmed the ex parte order dated 28 January 1994. ( 16 ) IN the order dated 28 January 1994 of the Appellate Authority reference has been made to earlier proceedings before the Board and the appeals of the SRF and ATCO. The Appellate Authority had observed that in this respect the order of theBoard dated 23 April 1993 confirmed by the Appellate Authority in both the appeals had become final in respect of those two parties, and further observed that Garware who had 1462 been a party before the Board in the earlier proceedings had not challenged the order of the Board dated 23 April 1993, and was, thus, bound by the directions given in that order. The Appellate Authority noted that the main contention of Garware was that earlier the Board had directed the SRF to put forward a rehabilitation scheme on "stand alone" basis and that in the order dated 19 November 1993 without giving notice to Garware, who was an interested party, the basis of the rehabilitation of the sick company was changed to amalgamation-cum- merger, and that though the benefits under section 72-A of the I. T. Act were not being given to S. R. F. directly, yet by fixing the transfer date as 1 April 1992 the same benefits were being given indirectly, and that, according to Garware, this could result in a loss of Rs. 11. 25 crores to the Central exchequer and a gain to S. R. F. The Appellate Authority observed that the order of the Board dated 23 April 1993 had become final in respect of all the three parties, namely, A. A. L. , S. R. F. and Garware. The Appellate Authority also referred to letter dated 3 December 1992 of Garware addressed to A. A. L. offering them assistance in connection with a scheme to be put forward by A. A. L, for revival and rehabilitation of the sick company. The Appellate Authority said that this letter made it abundantly clear that at that point of time Garware had withdrawn itself from directly being engaged in the revival and rehabilitation of the sick industrial company but was prepared to give technical assistant to A. A. L. to assist the latter for rehabilitating the sick industrial company. The Appellate Authority was, therefore, of the view that, in such a circumstance, it was now not open to Garware to say that the Board had since changed the character of the rehabilitation scheme from a "stand alone" basis to a "merger-cum-amalgamation basis", and that Garware was "totally a third party at this stage of the matter". The Appellate Authority was also of the view that "by their own inaction subsequent to 19 October 1992, they are thus effectively barred from entering the rehabilitation process and scenario before the BIFR (Board)" and then went on to hold : " In these circumstances, the conclusion of the BIFR that the SRF is the only party left for revival of the sick company is both eminently reasonable and fully justified. More particularly, as the benefits under section 72a of the Income-tax Act, 1961 are not available to SRF Ltd. for the proposed merger/amalgamation scheme as now approved by the BIFR, which is also in the public interest, the order of the BIFR does not require to be interfered with in any manner. " ( 17 ) MR. Desal, learned counsel for Garware, threw two challenges to the impugned orders dated 19 November 1993, 27 January 1994 of the Board and 28 January 1994 of the Appellate Authority : (1) the Board could not go back from its original order dated 23 April 1993 without notice to Garware, an interested party, and without following the procedure as prescribed by the Act, and without giving opportunity to Garware as well to submit a scheme on the basis of amalgamation-cum- merger, or otherwise examining better stand alone scheme submitted by Garware on 22 January 1994; and (2) since the proposed scheme of amalgamation-cum-merger provided for concessions and sacrifices from the Central Government, it could not have been sanctioned without notice to the Central Government and a largess was bestowed upon S. R. F. in violation of the law. ( 18 ) MR. Desal said that in spite of S. R. F. having undertaken not to claim benefits under section 72-A of the I. T. Act there was no stopping it from claiming the benefits before the assessing authority under various other provisions in the I. T. Act. He said that in spite of section 72-A of the I. T. Act, benefits by way of tax concessions under the I. T. Act could be availed of by S. R. F. on account of the scheme sanctioned by the Board. He referred to the Special Leave Petition filed by S. R. F. in the Supreme Court against the order of the Bombay High Court (Aurangabad Bench) staying the operation of the sanctioned scheme wherein S. R. F. on its own had shown tax benefits of Rs. 1. 69 crores under section 43b of the I. T. Act if the sanctioned scheme goes through. Mr. Desal said it was also wrong for either the Board or the Appellate Authority to hold that Garware was out of reckoning. 1. 69 crores under section 43b of the I. T. Act if the sanctioned scheme goes through. Mr. Desal said it was also wrong for either the Board or the Appellate Authority to hold that Garware was out of reckoning. He said if that was so, there was no occasion for the Board to send to Garware the minutes of the meetings, whether in those meeting Garware was represented or not. He said even the orders passed by the Board were being sent to Garware. Mr. Desal said it was wrong to rely on the letter dated 3 December 1992 of Garware to A. A. L. offering its know how for a certain amount of consideration to hold that Garware had withdrawn its scheme of revival of the sick company on stand alone basis. Mr. Desai further said that Garware did not participate in various proceedings before the Board inasmuch as the scheme given by A. A. L. Jointly with ATCO was a better scheme and Garware thought it had no chance of its revival scheme of stand alone basis being sanctioned. Mr. Desal also criticised the impugned order of the Appellate Authority. ( 19 ) WHEN S. R. F. filed the appeal against the order dated 23 April 1993 which order was passed by the Board under section 17 (3) of the Act, the Appellate Authority said it was an interim order, and yet in the order dated 28 January 1994 the Appellate Authority said that this very order dated 23 April 1993 had become final. Mr. Desal also relied on the decision of the Supreme Court in Ramana Dayaram Shetty v. The International Airport Authority of India and others (AIR 1979 Supreme Court 1628) and said that since on the basis of scheme of merger -cum-amalgamation, S. R. F. on its own showing had reaped a tax benefit of over Rs. 1. 69 crores, Garware was also entitled to same treatment and should have been put to notice for it to have an opportunity to submit a scheme on merger-cum-amalgamation basis, or the scheme submitted by it on 22 January 1994 on stand alone basis could have been tested before sanctioning the impugned scheme. ( 20 ) MR. 1. 69 crores, Garware was also entitled to same treatment and should have been put to notice for it to have an opportunity to submit a scheme on merger-cum-amalgamation basis, or the scheme submitted by it on 22 January 1994 on stand alone basis could have been tested before sanctioning the impugned scheme. ( 20 ) MR. Ahuja, learned counsel for the revenue, said that the Central Government was not averse to any scheme of rehabilitation of a sick company, but when Central Government is called upon to sacrifice or give concessions in the shape of tax benefits, a notice should have been given to the Central Government before finally sanctioning or approving a scheme. Mr. Ahuja drew attention to a circular issued by the C. B. D. T. dated 30 December 1993 wherein the C. B. D. T. referred to its two earlier circulars (Circular No. 523 dated 5 October 1988 and Circular No. 576 dated 31 August 1990) in connection with procedure to be followed in respect of grant of "consent" by the Central Government in cases involving financial assistance tobe given under Direct Tax Laws for rehabilitating sick industries under the Act. The C. B. D. T. withdrew these two earlier circulars and gave the following directions :- "3. While issuing the two circulars, the provisions of section 19 (2) of SICA were not considered. According to S. 19 (2) all parties concerned with giving financial assistance for the rehabilitation scheme should give their consent . It has, therefore, been decided to withdraw the above circulars with immediate effect. Each case of fiscal concession or financial assistance under the Direct Tax Laws will now be considered in each individual case on merits for the purpose of consent as contemplated in section 19 (2) of SICA, 1985 and consent or denial of consent will be conveyed to BIFR by the Central Government. The nodal agency for co-ordination between the BIFR and Central Board of Direct Taxes and Appellate Authority for Industrial and Financial Reconstruction (AAIFR) and Central Board of Direct Taxes will be the Director General (Admn.) " It was, however, also mentioned that the cases already decided in accordance with earlier two circulars need not be reopened. In the present case this circular will apply inasmuch as the impugned scheme was sanctioned on 27 January 1994. Mr. In the present case this circular will apply inasmuch as the impugned scheme was sanctioned on 27 January 1994. Mr. Ahuja also referred to the provisions of sections 43-B, 70, 71 and 72 of the I. T. Act under which S. R. F. would be able to get tax benefits under the impugned scheme. It is not necessary for us to go into this question as to what amount of tax benefits S. R. F. would get or under what provision of the I. T. Act since there is certainly no dispute, and on its own showing S. R. F. would get tax benefits of over Rs. 1. 5 crores under the impugned scheme. The question before us is, was not it obligatory on the Board to send a notice to the Central Government. ( 21 ) MR. Salve, learned counsel for S. R. F. , countered the submissions aforementioned. He said that the Board was Central Government and that under section 32 of the Act the Board could grant benefits and/or sacrifices under the provisions of the I. T. Act. This section 32 is as under:- "32. Effect of the Act on other laws.- (I) The provisions of this Act and of any rules or scheme made thereunder shall have effect notwithstanding anything inconsistent therewith contained in any other law except the provisions of the Foreign Exchange Regulation Act, 1973 (46 of 1973) and the Urban Land (Celling and Regualtion) Act, 1976 (33 of 1976) for the time being in force or in the Memorandum or Articles of Association of an industrial company or in any other instrument having effect by virtue of any law other than this Act. (2) Where there has been under any scheme under this Act an amalgamation of a sick Industrial company with another company, the provisions under section 72a of the Income-tax Act, 1961 (43 of 1961), shall, subject to the modifications that the power of the Central Government under that section may be exercised by the Board without any recommendation by the specified authority referred to in that section, apply in relation to such amalgamation as they apply in relation to the amalgamation of a company owning an industrial undertaking with another company. ( 22 ) MR. ( 22 ) MR. Salve said that conduct of Garware showed that its grievance was not bonafide and this petition has been filed to delay the implementation of the scheme much to the harassment, inconvenience to workmen of the sick company and loss to the financial institutions including the banks with interest mounting every month. He said that the Act required expeditious disposal of the cases and rehabilitation of the sick company, and that it was in that context that the Board had sanctioned the scheme. Mr. Salve said that the scheme submitted by Garware was beyond the R. B. I. norms and the fact that no representative of Garware appeared before the Board showed its disinterestedness in the revival of the sick company whether on stand alone or any other basis. He said that after submitting its scheme on 15 July 1992 its communication with the Board stopped altogether except when it submitted another stand alone scheme for revival on 22 January 1994. Mr. Salve said that letter dated 3 December 1992 of Garware to A. A. L. offering technical expertise made it abundantly clear that Garware itself was not interested in any revival scheme. Mr. Salve also criticised the subsequent conduct of Garware of its filing an appeal before the Appellate Authority on 14 January 1994 and then filing a scheme of stand alone basis on 22 January 1994, again making the same grievance. He said grievance of Garware that it was denied to file a scheme on merger basis was incorrect inasmuch it did not file such a scheme before the Board even after the order dated 19 November 1993. The appeal before the Appellate Authority was filed on 14 January 1994, and the writ petition was filed in the High Court even before the Appellate Authority, pronounced its order, and in the writ petition challenge was to the same order of the Board which was under challenge in appeal before the Appellate Authority. Mr. Salve said delay in the rehabilitation of the sick company suits Garware inasmuch as it manufactured the same product which would be made by F. P. L. after its revival. Mr. Mr. Salve said delay in the rehabilitation of the sick company suits Garware inasmuch as it manufactured the same product which would be made by F. P. L. after its revival. Mr. Salve also criticised the stand of Garware that it was on account of A. A. L. and ATCO s scheme that it did not participate in the proceedings before the Board any further, or that it was always under the impression that only stand alone scheme was under consideration in view of order dated 23 April 1993. Mr. Salve said that admitted facts belie this contention of Garware. Mr. Salve said that the procedure adopted by the Board was fair and Garware could not have any grievance, and that there was no 1467 procedural unfairness, and that Garware never evinced any interest in the whole affair. He supported tlie impuned orders of the Board and of the Appellate Authority. Mr. Salve said that the Operating Agency and other institutions always supported S. R. F. s scheme of merger in view of the inherent advantages of a scheme of merger. He said it was on an erroneous impression that the Board asked S. R. F. to try and formulate a scheme on a stand alone basis. Mr. Salve said that the order dated 23 April 1993 of the Board calling upon S. R. F. to give a scheme on the basis of change of management was an order based on anerroneous assumption that S. R. F. s merger scheme involved benefits undersection 72-A of the I. T- Act which he said was set right in the order dated 19 November 1993, and that it was not for the first time that the question of merger arose when the order dated 19 November 1993 was made. He said that the scheme of merger-cum-amalgamation was always in the view with the Boara and Garware. could not say that the Board committed any illegality in changing its stand from stand alone to merger basis for revival of the F. P. L. , the sick company. Mr. Salve said that Ramana. Dayaram Shetty s case was not applicable and it was a case where the State was giving any largess to any party. He said it was a question of rehabilitation of a sick company under the Act. Mr. Salve said that Ramana. Dayaram Shetty s case was not applicable and it was a case where the State was giving any largess to any party. He said it was a question of rehabilitation of a sick company under the Act. He referred to the Preamble of the Act and said sick company was not a Government property put up for sale. ( 23 ) MR. Mukul Mudgal, learned counsel appearing for the workmen, supported the sanctioned scheme and said it was in the interest of the workmen of the sick company. He also said that immediate rehabilitation of the sick company, whether it was on stand alone or merger-cum- amalgamation basis, was of utmost importance for the workmen. ( 24 ) WE have seen above that the Act and the Regulations do provide for notice to the Central Government where the scheme calls for reliefs, concessions or sacrifices from the Central Government. Clause (2) of regulation 34 requires that the Board shall cause the scheme to be circulated to the Central Government for giving its consent or otherwise. If a consent is not received within a certain period, it shall be deemed to have been given. Under regulation 35, if no such consent is forthcoming, the Boad may adopt such other measures including winding up of the industrial company as it may deem fit. Nevertheless, under section 32 of the Act, the Board can frame a scheme which shall have effect notwithstanding anything inconsistent therewith contained in any other law except the provisions of the Foreign Exchange Regulation Act, 1973, and theurban Land (Ceiling and Regulation) Act, 1976, for the 1468 time being in force. We do not think this provision as contained in section 32 helps S. R. F. , and no argument can be advanced that it was not necessary to issue any notice to the Central Government. The Board is not a Central Government nor is it a department of the Central Government. It is a body constituted under the Act and is governed by its provisions. Central Board of Direct Taxes (C. B. D. T.) has been constituted under the Central Board of Revenue Act, 1963. The Board is not a Central Government nor is it a department of the Central Government. It is a body constituted under the Act and is governed by its provisions. Central Board of Direct Taxes (C. B. D. T.) has been constituted under the Central Board of Revenue Act, 1963. The functions relating to matters connected with direct taxes as denned in that Act are to be discharged by C. B. D. T. The functions which relate to any other matter are to be discharged by the Central Board of Excise and Customs. Under clause (c) of section 2 of the Central Board of Revenue Act, 1963, "direct tax" means any duty leviable or tax chargeable under various sections mentioned therein which include I. T. Act, 1961. The Central Government is empowered to declare any other duty or tax which, having regard to its nature or incidence, to be a direct tax. C. B. D. T. , subject to the control of Central Government, exercises such powers and performs such duties as may be entrusted to it by the Central Government by or under any law. The powers of administrative supervision and control of the C. B. D. T. extend over whole of the income- tax department and it has power to make rules and to issue orders, instructions and directions to all officers and persons employed in the execution of the I. T. Act with certain exceptions with which we are not concerned. Thus, we find that when a scheme proposed by the Board envisages a tax concession or benefit or sacrifices under the I. T. Act, a notice is a must to C. B. D. T. for it to give its consent or otherwise. It is C. B. D. T. who can explain to the Board as to the implication of the proposed scheme with reference to the provisions of the direct tax laws. It is a different matter if the Board sanctions a scheme having the effect which is not inconsistent with the provisions of the direct tax laws. Of course, the provision of giving notice will also apply when a relief is sought relating to the central excise duty or customs duty, and in that case notice would have to be given to the Central Board of Excise and Customs. Of course, the provision of giving notice will also apply when a relief is sought relating to the central excise duty or customs duty, and in that case notice would have to be given to the Central Board of Excise and Customs. In the circular dated 30 December 1993 referred to above the nodel agency for coordination between the Board, C. B. D. T. and the Appellate Authority has been specified as the Director, General (Administration ). The scheme could not have been sanctioned without notice to the Director General (Administration ). It is invalid on that account. ( 25 ) THERE has been a contest between the parties as to whether the law laid down by the Supreme Court in Ramana Dayaram Shetty s case. would be applicable or not. We are, however, of the view that giving a tax concession or benefit is also a form of largess and on that account too we feel opportunity should have been granted to Garware to submit a scheme of merger-cum-a malgamation basis if the Board came to the conclusion that scheme of stand alone basis was not feasible for any reason. ( 26 ) WE are of the view that once having passed an order under section 17 (3) of the Act that the revival or rehabilitation of the F. P. L. was to be on "stand alone" basis and which order stood confirmed by the Appellate Authority, the Board could not change the basis altogether without further referring the matter to the Operating Agency for its view. The scheme is not sanctioned on the mere fact as to how many parties have responded to or there is only one party without looking in to other factors, or giving go-bye to the factors which led the Board to decide that stand alone scheme would be in the best interest of the rehabilitation and revival of the sick company. By accepting the plea of S. R. F the Board made the order dated 23 April 1993 of the Appellate Authority passed in appeal under section 25 of the Act as non est. Once the Board thought of changing the very basis of the rehabilitation and revival of the sick company, it was incumbent upon it to issue notice to the interested or concerned parties, and Garware was one of such parties. Once the Board thought of changing the very basis of the rehabilitation and revival of the sick company, it was incumbent upon it to issue notice to the interested or concerned parties, and Garware was one of such parties. It might be down earlier in reckoning, but it was not out. If Garware was not interested or concerned party, we see no reason as to why the minutes of all the proceedings and orders passed by the Board were being sent to it. No advantage can be gained by the S. R. F. out of the letter dated 3 December 1992 of Garware to A. A. L. offering technical know how. " That would not mean that Garware itself was not interested in the revival of the sick company. No company which seeks merger or revival on stand alone basis does so with any philanthropist view, or to help the poor labour, but only for its own benefit which it believes would accrue to it in the long run. It could well bethat when Garware thought that stand alone scheme was not acceptable, it tried to join hands with A. A. L. by selling to it its know how. This letter, therefore, could not be made use of by the Appellate Authority to hold that Garware was a reluctant party, or that it was out of reckoning altogether. No malafides can be attributed to Garware merely because it approached the High Court against the order dated 19 November 1993 when at the same time it had filed an appeal before the Appellate Authority. The Appellate Authority had not granted any stay when the matter was before the Board and was fixed for 27 January 1994 for sanctioning the scheme. There is no force in the argument of S. R. F. that even after 19 November 1993 Garware did not come up with any merger scheme. Garware did 1470 give another scheme on stand alone basis as it was challenging order dated 19 November 1993 of the Board changing the basis of the scheme from stand alone to merger . In view of the stand taken by Garware it could not have submitted any scheme for merger before the Board without the Board granting opportunity to it for the purpose. In view of the stand taken by Garware it could not have submitted any scheme for merger before the Board without the Board granting opportunity to it for the purpose. Garware could still submit a scheme based on stand alone basis to show that it was still a better one compared to merger-cum-amalgamation scheme of S. R. F. We find S. R. F. was before the Board even before any notice was issued to it and before even the Board had come to the conclusion that F. P. L. was a sick company. We feel the Board fell in error in accepting the merger-cum-amalgamation scheme of S. R. F. simply because it was the only party left in the field, its earlier conclusion in the order dated 23 April 1993 notwithstanding. It is not correct for S. R. F. to allege that when order dated 23 April 1993 was made by the Board it did not take into account its offer that it would not claim the benefit of section 72-AI. T. Act. This offer was very much before the Board and was even made a ground of appeal before the Appellate Authority. The impugned order of the Board dated 13 November 1993 could not be justified on this ground. ( 27 ) WHEN it was pointed out that various tax benefits would accrue to S. R. F. if the transfer date was 1 April 1992, Mr. Salve offered that he was prepared to agree to the transfer date as 1 April 1994. We are afraid it is not for this Court to accept any such offer, and the matter will have to go back to the Board to decide the same. Mr. Salve submitted that looking at the Preamble of the Act a sick company had to be rehabilitated within the time frame prescribed by the Act and with utmost urgency. Mr. Desai said if this Court decides to send back the matter to the Board, it could fix the time under which the Board should decide the matter. We do not think we should be adopting any such course. Urgency of the matter alright, but there has not to be any excessive alarm and the whole matter has to be considered with a calm mind and then reach to a right conclusion. A panic performance leads to hasty decisions which may turn out to be incorrect. We do not think we should be adopting any such course. Urgency of the matter alright, but there has not to be any excessive alarm and the whole matter has to be considered with a calm mind and then reach to a right conclusion. A panic performance leads to hasty decisions which may turn out to be incorrect. We hope that the Board will decide the matter with the urgency it deserves, keeping in view the provisions of the Act. ( 28 ) WE, therefore, set aside the orders dated 19 November 1993 and 27 January 1994 of the Board (B. I. F. R.) as also the order dated 28 January 1994 of the Appellate Authority (A. A. I. F. R), and would send back the matter to the Board for Industrial and Financial Reconstruction for decision in accordance with law and in the light of the principles laid down above. In the circumstances, there will be no order as to costs. Rule is made absolute. --- *** --- .