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Madhya Pradesh High Court · body

2000 DIGILAW 326 (MP)

Moira Wires Ltd. v. M. P. Financial Corporation

2000-03-29

N.K.JAIN

body2000
JUDGMENT N.K. Jain, J. 1. This petition under Article 226 of the Constitution of India is directed against the notice dated February 25, 2000 (annexure P-5)and the consequent taking over of the unit under Section 29 of the State Financial Corporations Act, 1951, by the respondent--the M. P. Financial Corporation, Indore. 2. The facts as unfolded by the pleadings and the documents filed by the parties and which are material for the purpose of this petition are these : 3. The petitioner-company on January 19, 2000, has made a reference (annexure P-2), under Section 15 of the Sick Industrial Companies (Special Provisions) Act, 1985 (for short, "the SICA"), to the BIFR claiming that it has become a sick industrial company. The Registrar of the Board has by its letter dated February 7, 2000 (annexure P-3) informed the petitioner-company that its reference has been registered. By the same letter some additional information is also asked for from the petitioner-company. On February 25, 2000, the respondent-Corporation served a telegraphic notice (annexure P-5) on the petitioner-company demanding payment of Rs. 1,31,79,000 within seven days. A reply to this notice was sent by the petitioner-company on February 28, 2000, claiming the protection of Section 22 of the Sick Industrial Companies (Special Provisions) Act. However, the respondent-Corporation proceeded to take over the company under Section 29 of the Act of 1951 and took over possession of the petitioner's unit on February 29, 2000. It is this action of the respondent-Corporation, which is called in question by the petitioner and it is contended that since the enquiry, as contemplated under Section 16 of the Sick Industrial Companies (Special Provisions) Act had commenced even before issuance of the notice dated February 25, 2000, the action of the respondent-Corporation is contrary to the mandate of Section 22. 4. The respondent-Corporation has defended its action and it was contended that no enquiry as such has commenced under Section 16 inasmuch as the mere making of a reference or registration thereof was not sufficient to attract the rigour of the provisions of Section 22. 5. The only question, therefore, requiring determination in this petition is as to when the enquiry, as envisaged under Section 16(1), shall be deemed to have commenced so as to attract the operation of Section 22. 5. The only question, therefore, requiring determination in this petition is as to when the enquiry, as envisaged under Section 16(1), shall be deemed to have commenced so as to attract the operation of Section 22. The answer, I may submit with respect, is found in a Supreme Court decision in Real Value Appliances Ltd. v. Canara Bank [1998] 93 Comp Cas 26 ; AIR 1998 SC 2064 , wherein it is held (page 40 of Comp Cas) : "There can, therefore, be no difficulty in holding that after the amendment to regulation 19 with effect from March 24, 1994, once the reference is registered and when once it is mandatory simultaneously to call for information/documents from the informant and such a direction is given, then inquiry under Section 16(1) must--for the purposes of Section 22--be deemed to have commenced. Section 22 and the prohibitions contained in it shall immediately come into play." 6. In the instant case, it is clear from the letter dated February 7, 2000, of the Registrar of the BIFR (annexure P-5) that not only the reference has been registered but the action, as contemplated by the second part of regulation 19(5), has also been taken on or before February 7, 2000. Section 22 of the Sick Industrial Companies (Special Provisions) Act, therefore, came into play and it was not open for the respondent-Corporation to initiate any action for recovery of its dues against the petitioner-unit without the consent of the Board. 7. It was, however, contended strenuously by learned counsel for the respondent that in fact the petitioner-company is not a sick company and the reference made by the petitioner is fake so as to frustrate the legal action taken by the respondent-Corporation under the provisions of the Act of 1951. My attention in this regard has been drawn towards certain documents wherein the petitioner-company is shown to have earned huge profits in the preceding years 1997-98 and 1998-99. I am, however, not persuaded by the arguments and I am afraid that it is not open for this court to go into the question of sickness or otherwise of the petitioner-company. Needless to say, this question has to be decided by the Board under the provisions of the Sick Industrial Companies (Special Provisions) Act. I am, however, not persuaded by the arguments and I am afraid that it is not open for this court to go into the question of sickness or otherwise of the petitioner-company. Needless to say, this question has to be decided by the Board under the provisions of the Sick Industrial Companies (Special Provisions) Act. This court has to see only whether the action of the respondent-Corporation was hit by Section 22 of the Sick Industrial Companies (Special Provisions) Act. From what is said above, it is clear that the action of the respondent-Corporation was contrary to the mandatory provisions of Section 29 and the same is, therefore, liable to be quashed. 8. Accordingly this petition succeeds and is allowed. The notice, annexure P-5 as also the action of taking over by respondent-Corporation under Section 29 of the State Financial Corporations Act, 1951, are quashed. The respondent-Corporation is directed to hand over the possession of the unit to the petitioner. The respondent-Corporation shall, however, be free to approach the BIFR for such action as it may deem fit in the matter. 9. There shall be no order as to costs of this petition.