Appellate Authority has power to direct sale of the properties of sick units.

R. JAYASIMHA BABU, J.:

1. The workmen, about 1500 in number, employed by third respondent, Dhanalakshmi Mills Limited, which owned two units, ‘A’ and ‘B’, ‘A’ mill being a spinning mill and ‘B’ mill being a weaving mill, have not been able to get any relief so far despite the order made by the Appellate Authority for Industrial and Financial Reconstruction on 3.4.1998, directing sale of the lands owned by the sick company, the lands being valuable lands whose value based on the average of the estimated market value and guideline value is Rs.2 crores per acres with a further direction that the money realised from such sale be applied to pay the wages and statutory dues as also the secured creditors. The closure of the ‘B’ Mill was permitted by an order of the Special Industrial Tribunal way back in the year 1994 with a further direction that the employees who were working in that mill be given employment in the ‘A’ Mill.

1A. The effective denial of relief till date to the workmen for the last five years is on account of the legal proceedings initiated by a person who was neither a creditor nor a shareholder nor connected with the company in any way, and had only made an offer when an advertisement was issued by the Board for Industrial and Financial Reconstruction (BIFR) inviting proposals for the rehabilitation of this sick industrial undertaking.

2. Dhanalakshmi Mill was incorporated in the year 1932. It established initially a spinning mill and later on, in the year 1960 added a weaving mill. The mills are located in the city of Thirupur, the flourishing hosiery capital where land values are as high as those in the metros. Thirupur is also close to the city of Coimbatore. The company by the year 1993 had accumulated losses of several crores of rupees, which resulted in its applying to the concerned authorities for permission to close down the ‘B’ Mill. That permission having been initially declined, the matter was taken to the Special Industrial Tribunal, which by an order of 28.11.1994 permitted such closure with a further direction that the workmen who had been employed in the ‘B’ Mill be provided employment in the ‘A’ Mill. While making that order, the Tribunal held that there was no alternative to closure.

3. On 22.2.1994 the Board for Industrial and Financial Reconstruction, before whom an application had been filed by the Company, declared the Mill as a sick industrial undertaking. Thereafter, on 22.12.1994, the BIFR appointed an operating agency to formulate a scheme and to value the assets of the mill. That order was carried in appeal to the Appellate Authority for Industrial and Financial Reconstruction (AAIFR) on the ground that the appellant herein who had made the offer was entitled to have his offer accepted in preference to the one that the existing management had made and whose offer had been based on support by a group called Rajarathinam Group. The AAIFR made an order on 14.7.1995 remanding the matter to the BIFR with certain directions. That order came to be challenged by the appellant herein who filed W.P.No.12073 of 1995.

4. When that writ petition was heard, the existing management which had made an offer before the BIFR admitted the fact that the person whose support it was depending upon was not in a position to provide financial support and agreed for the matter being sent back to the BIFR, which could invite fresh proposals and thereafter proceed with the matter.

5. After the matter went back to the BIFR, fresh advertisement calling for proposals was issued in response to which only the existing management and the appellant herein responded. There was no expression of interest by any other party. The BIFR considered the two proposals and, without the assistance of anyone or hearing the parties, formed the view that the proposal given by the appellant was the better one and directed the operating agency to proceed on the basis of that proposal. That order having been challenged by the exis