IMPORTANT POINTS
CPC does not prescribe any particular format for applying for leave of the court. Grant thereof can be inferred from the facts of the case.
After registration of a company as sick BIFR has complete supervisory control over it.
BIFR alone has jurisdiction to determine whether a sick company has revived. Suit for declaration as such before civil court is not maintainable
Section 26 expressly excludes jurisdiction of civil courts.
Suit for recovery of money from sick company can be filed only after implementation of sanctioned scheme for revival.

Headnote:(a) Code of Civil Procedure, 1908 – Order XLIII Rule 1 – No particular format for application for leave of court – It can be inferred from facts of the case – FAO admitted after hearing respondents and there being no objection from them – Even subsequently no objection raised on lack of formal leave of the court to appeal – Present appellant’s application to present his point of view in the form of proposal or scheme before the BIFR was accepted right up to Supreme Court – Indication enough of grant of leave of court – High Court not justified in dismissing appeal on technical ground – Ought to have considered merits of the matter. (Para 23)
       (b) Sick Industrial Companies (Special Provisions) Act 1985 – Section 16 and 17 – Registration as sick company u/s 16 – Thereafter BIFR has complete supervisory control – Determination of whether a company ceased to be sick is in exclusive domain of BIFR. (Para 25)
       Sick Industrial Companies (Special Provisions) Act 1985 – Section 26 and 32 – Chapter III is complete code – Section 32 gives it overriding effect – Section 26 expressly excludes jurisdiction of civil courts. (Para 26, 27)
       (2012) 2 SCC 148 – Relied upon
       (c) Sick Industrial Companies (Special Provisions) Act 1985 – Section 26 – BIFR alone has jurisdiction to determine whether a sick company has revived – Suit for declaration as such before civil court was not maintainable – BIFR is competent to examine audited balance sheet to satisfy itself about revival of the company. (Para 28)
       (d) Sick Industrial Companies (Special Provisions) Act 1985 – Section 22(1) – Section 22 bars filing any suit for recovery of money during the period from the inquiry under Section 16 till the implementation of sanctioned scheme for revival – Instantly BIFR considering Draft Rehabilitation Scheme – Bar u/s 22 operative – Suit form recovery of money at this stage – Incompetent and not maintainable. (Para 29)
       (2009) 7 SCC 521; (2012) 2 SCC 148 – Relied upon
       Matter No.362 of 1995 (OS)(Calcutta); Writ Petition No.24422 of 2006 (Madras, Dated 19.12.2007); W.P. (C) No.8361 of 2008, Delhi, Dated 21.10.2009 – Referred

       Facts of the case:
       J.K. Jute Mill Company Ltd. (the company) having its registered office at Kanpur, Uttar Pradesh filed Reference No. 149 of 1994 before the Board for Industrial and Financial Reconstruction (“BIFR”) under the provisions of the Act. Though the scheme was initially sanctioned for reconstruction, the BIFR subsequently held the scheme to have failed and directed the company to be wound up. These orders were stayed by the Appellate Authority for Industrial and Financial Reconstruction (“AAIFR”) and further proceedings before the BIFR continued.
       “Sarda Group” took over the Company through Rainey Park Suppliers Private Ltd. (RPSPL) in 2007. BIFR by its order dated 17.12.2008 approved such take over of the management. The management of the company was handed over to Shri Govind Sarda.
       In 2009, Shri Govind Sarda assigned the debt held by RPSPL in favour of an entity named Libra Retailer Pvt. Ltd. (LRPL) and handed over Jute Mill of the company to a third party. As he failed to revive the company, show cause notice for winding up was issued by the BIFR. Appeal No. 186 of 2009 thereagainst before the AAIFR is still pending. Shri Ghanshyam Sarda, (the present appellant) filed an application for impleading himself in the proceedings which application was accepted by AAIFR.
       BIFR impleaded the present appellant who thereafter submitted a proposal for revival of the company and also filed MA in the BIFR for restoration of shareholding pattern.
       On 03.04.2013, two applications were filed before the BIFR by M/S Shyam Jute Supplier, Chindwara M.P. and M/S Shiv Shankar Tranding Co. & Ors, Gauhati Assam signed by the same person through same Counsel stating that they were unsecured creditors and sought permission from the BIFR to institute Civil Suit for recovery of money stated to be recoverable from the company. On 04.04.2013 the BIFR held a hearing to consider the change in the share holding pattern of the company without due permission from BIFR. At that stage Counsel appearing for the Company submitted that Application No. 162 of 2012 could not be considered as the BIFR no longer retained jurisdiction over the Company because in the Audited Balance-Sheet for the period of nine months i.e. 01.04.2012 to 31.12.2012 the net worth of the Company having turned positive. The Company ought to be discharged from the BIFR.
       The company filed its written objections on 13.05.2013. Though the claim of the plaintiff and its entitlement to recover the sum stated to be due was denied, the company accepted that it was no longer a sick company.
       Civil Court noted the aforementioned stand and held that the BIFR ceased to have any jurisdiction over the defendant company.
       The High Court which observed that FAO No.10 of 2013 was filed without seeking appropriate leave of the Appellate Court by the present appellant who was not yet a party before the Civil Court was not maintainable and as such it was not necessary to enter upon deliberations on merits of the matter. The High Court was of the view that since the application for impleadment was still pending before the Civil Court, as and when the present appellant was impleaded as defendant in the suit, it would then be open to him to file such application for variation or setting aside of the order of injunction. It was held that in the absence of any challenge, the order of injunction was still in operation and that until and unless such order was vacated and recalled by appropriate judicial forum, the same had to be respected and given effect to. The High Court also disposed of Writ Petitions on the ground that since all the proceedings before BIFR stood stayed, further proceeding in BIFR would be of no legal consequence. It was further observed that one of the members of BIFR having recused himself from hearing the case on the earlier occasions said member ought not to have participated in any further proceedings.
       This common order passed by the High Court has given rise to six Special Leave Petitions, three by present appellant namely SLP No. 5249, 5897 and 6412 challenging the order of the High Court in respect of FAO No.10 of 2013, Writ Petition No.4303 of 2013 and Writ Petition No.6286 of 2013 respectively. The other three petitions are by J.K. Jute Mill Mazdur Ekta Unions being Special Leave Petition Nos. 8610, 8611 and 8612 of 2014 against the aforesaid order in respect of three proceedings as stated above respectively.
       Finding of the Court:
       BIFR has jurisdiction to determine whether a sick company has revived.
       Result: Appeals allowed.

JUDGMENT

UDAY UMESH LALIT, J.

1. Permission to file SLP granted in SLP(C) Nos.8611-12/2014. Leave to appeal granted in all Special Leave Petitions.

2. All these Special Leave Petitions arise out of a common judgment and order dt. 06.01.2014 passed by the High Court of Gauhati in FAO No. 10 of 2013 and Writ Petition Nos. 4303 of 2013 and 6286 of 2013 and are being disposed by this common judgment and order. These petitions raise questions regarding scope and ambit of Sections 22(1), 26 and 32(1) of the Sick Industrial Companies (Special Provisions) Act 1985, hereinafter referred to as the Act.

3. A company named J.K. Jute Mill Company Ltd. (hereinafter referred to as ‘the company’) having its registered office at Kanpur, Uttar Pradesh filed Reference No. 149 of 1994 before the Board for Industrial and Financial Reconstruction (“BIFR” for short) under the provisions of the Act. Though the scheme was initially sanctioned for reconstruction, the BIFR subsequently held the scheme to have failed and directed the company to be wound up. These orders were stayed by the Appellate Authority for Industrial and Financial Reconstruction (“AAIFR” for short) and further proceedings before the BIFR continued. While the matter was thus pending, “Sarda Group” took over the Company through Rainey Park Suppliers Private Ltd. (RPSPL) in 2007. BIFR by its order dated 17.12.2008 approved such take over of the management. The management of the company was handed over to Shri Govind Sarda. It appears that in 2009, Shri Govind Sarda assigned the debt held by RPSPL in favour of an entity named Libra Retailer Pvt. Ltd. (LRPL) and he is stated to have handed over Jute Mill of the company to a third party. As he failed to revive the company, show cause notice for winding up was issued by the BIFR. This action was challenged by the Company by filing Appeal No. 186 of 2009 before the AAIFR which appeal is still pending.

4. At this stage, Shri Ghanshyam Sarda, (hereinafter referred to as the present appellant) filed an application for impleading himself in the proceedings which application was accepted by AAIFR. Upon this order being challenged, the High Court of Delhi in W.P. No.2839 of 2010 held the present appellant to be entitled to present his point of view in the form of proposal/scheme, which order was confirmed by this Court by dismissing Special Leave Petition filed at the instance of the Company. In terms of the aforesaid orders the BIFR impleaded the present appellant who thereafter submitted a proposal for revival of the company and also filed MA No.162 of 2012 in the BIFR for restoration of shareholding pattern. On 18.02.2013 the BIFR issued directions to the operating agency to consider the scheme of the present management and the scheme submitted by the present Appellant and thereafter submit a fully tied up Draft Revival Scheme (“DRS” for short). The BIFR fixed the next date for hearing of MA 162 of 2012 on 04.04.2013. In the proceedings dated 27.02.2013, it was decided that the DRS be circulated seeking objections and suggestions from all the concerned.

5. On 03.04.2013, two applications were filed before the BIFR by M/S Shyam Jute Supplier, Chindwara M.P. and M/S Shiv Shankar Tranding Co. & Ors, Gauhati Assam (hereinafter referred to as ‘SSTC’) signed by the same person through same Counsel stating that they were unsecured creditors and sought permission from the BIFR to institute Civil Suit for recovery of money stated to be recoverable from the company. On 04.04.2013 the BIFR held a hearing to consider the change in the share holding pattern of the company without due permission from BIFR. At that stage Counsel appearing for the Company submitted that Application No. 162 of 2012 could not be considered as the BIFR no longer retained jurisdiction over the Company. It was submitted that in the Audited Balance-Sheet for the period of nine months i.e. 01.04.2012 to 31.12.2012 the net worth of the Company having turned positive, the Company oug

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2014 Supreme(SC) 800

Cases Referred (1)