Important point
The jurisdiction of the Company Court would arise only when BIFR has exercised its jurisdiction under Section 20 of the Sick Industrial Companies Act recommending winding up of the Company upon arriving at a finding that there does not exist any chance of revival of the Company.

Headnote:Companies Act, 1956—Sections 433, 441, 443, 444, 446, 451, 457 and 536—Companies (Court) Rules, 1959—Rules 6, 9 and 99—Sick Industrial Companies (Special Provisions) Act, 1985—Sections 20(1),(2) and (4), 22A, 32(1)—Sick Company—Jurisdiction of Company Court—Inherent powers—Appellant Company was a joint venture of the Government of Karnataka—Company had become sick whereupon a reference was made to the Board—Company with the permission of BIFR and its secured creditors has been selling some of its surplus lands for the purpose of paying wages to the workers and refund of loans to the financial institutions etc.—State of Karnataka took a decision to make disinvestment of its shares in the said Company—BIFR decided to recommend winding up of the company—Company Petition—Respondent filed an application before Company Judge praying for a direction upon the Company to execute a deed of sale in its favour in respect of 40-45 acres of land—Application allowed—Appeals—Whether impugned judgment of the High Court can be sustained—(No).
Held : BIFR had admittedly power to sell the assets of the Company but the High Court until a winding up order is issued does not have the same. BIFR in its order dated 02.08.2002 might have made an observation to the effect that the Company may approach the High Court in case it intended to dispose of its property by private negotiation but the same would not mean that BIFR could delegate its power in favour of the High Court. BIFR being a statutory authority in absence of any provision empowering it to delegate its power in favour of any other authority had no jurisdiction to do so. ‘Delegatus non potest delegare’ is a well-known maxim which means unless expressly authorized a delegatee cannot sub-delegate its power. Moreover, the said observations of BIFR would only mean that the Company Court could exercise its power in accordance with law and not de’hors it. If the Company Court had no jurisdiction to pass the impugned order, it could not derive any jurisdiction only because BIFR said so. In any view of the matter, BIFR had permitted only the Company to approach the High Court in case any occasion arises therefor. BIFR did not permit any other person to do so. The Company did not file such an application. It opposed the prayer of the First Respondent The Company, as noticed hereinbefore, had preferred an appeal before the Division Bench of the High Court questioning the correctness of the order passed by the learned Company Judge. The Company has since been directed to be wound up and is now being represented by the Official Liquidator who also questions the correctness of the order. Before us an application has been filed by the Government of Karnataka for impleading it as a party being I.A. Nos. 2-4 of 2005 in Civil Appeal No. 5199-5201 of 2004 wherein also, the validity of the impugned order is in question. In this view of the matter, we are of the opinion that the impugned judgment of the High Court cannot be sustained. It is set aside accordingly. (Paras 68 to 70)

Judgment

S.B. Sinha, J.—These appeals are directed against a common judgment and order dated 5.1.2004 passed by a Division Bench of the Karnataka High Court in O.S.A. Nos. 67, 68 and 70 of 2003 whereby and whereunder a judgment and order dated 8.10.2003 passed by a learned Company Judge in CA No. 771 of 2003 was affirmed.

Background fact :

2. NGEF Ltd., (for short, ‘the Company’) herein, was a joint venture on the Government of Karnataka, holding 90.18 shares and EHG Electro-holding GMBH holding 9.72 shares therein. The Company became sick, whereupon a reference was made to the Board for Industrial and Financial Reconstruction (for short, ‘BIFR’) in terms of the provisions of the Sick Industrial Companies (Special Provisions) Act, 1985 (for short, ‘SICA’). It is not in dispute that virtually all its assets had been placed either under mortgage and/or offered as collateral security to various financial institutions amongst which the State Bank of Mysore was the lead bank.

3. It is furthermore not in dispute that from time to time the Company with the permission of BIFR and its secured creditors has been selling some of its surplus lands, inter alia, for the purpose of paying wages to the workers and refund of loans to the financial institutions etc. It had sold 29.225 acres of land to the Nuclear Power Corporation for a sum of Rs.63.65 crores; 1.65 acres of land to CDAC for about Rs. 4.29 cores and 0.625 acres of land to Indian Oil Corporation for Rs. 1.63 crores. All the vendees were public sector undertakings.

4. It is also not in dispute that the State of Karnataka took a decision to make disinvestment of its shares in the said Company pursuant whereto or in furtherance whereof global tenders were invited by it in terms of an advertisement dated 15.9.2001. The First Respondent herein, Chandra Developers Pvt. Ltd. (for short, ‘Chandra Developers’) submitted its bid for purchase of 40.45 acres of land offering the price of Rs. 125/- per sq. ft. which was later enhanced to Rs. 278 per sq. ft. Allegedly, valuation of lands had been done by Tata Economic Consultancy Services and Ernst & Young Pvt. Ltd. The offer of the First Respondent was said to have been accepted by the Board of Directors in its meeting dated 25.2.2002. The Company, it appears, has also submitted an application to BIFR as regard progress made by it in its attempt to privatize the Company, and praying for a direction to the financial institutions to release their charge over the assets of the Company so as to enable it to sell its surplus lands. BIFR, however, upon considering the matter in some details by its order dated 19.4.2002 opined that the Company cannot be revived.

5. Before BIFR some of the parties pleaded that the Company should not be wound up but BIFR decided to recommend winding up of the company and sent the same to the High Court. As regard request of the Company for sale of its assets, an observation was made by BIFR in its order dated 24.08.2002 that the Company would have to seek an appropriate direction from the concerned High Court.

Proceedings before the High Court :

6. Upon receipt of the said recommendations, the High Court of Karnataka registered the same as Company Petition No. 154 of 2002. The Respondent herein filed an application before the learned Company Judge of the High Court purported to be under Rules 6 & 9 of the Companies (Court) Rules praying for a direction upon the Company to execute a deed of sale in its favour in respect of the said 40.45 acres of land relying on or on the basis of the said purported resolution dated 25.02.2002, alleging that the same constituted a concluded contract between the parties. Objections to the said application were filed by the Appellants herein.

7. By reason of an order dated 8.10.2003, the said application was allowed on the premise that the agreement between the Chandra Developers and the Company constituted a concluded contract in relation to sale of 40.45 acres of land. A Review Application wa

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2005 Supreme(SC) 1265

Important pointThe jurisdiction of the Company Court would arise only when BIFR has exercised its jurisdiction under Section 20 of the Sick Industrial Companies Act recommending winding up of the Company upon arriving at a finding that there does not exist any chance of revival of the Company.

Cases Referred (11)

Important point
The jurisdiction of the Company Court would arise only when BIFR has exercised its jurisdiction under Section 20 of the Sick Industrial Companies Act recommending winding up of the Company upon arriving at a finding that there does not exist any chance of revival of the Company.