The main legal point established in the judgment is that the consent of an equity shareholder, who has not provided financial assistance, is not necessary for the approval of a rehabilitation scheme for a sick industrial company under the Sick Industrial Companies (Special Provisions) Act, 1985.

By consent the writ petition itself was taken up for final disposal.

2. Prayer in the writ petition is to quash the order of the first respondent (BIFR) made in BIFR Case No. 327 of 2000 dated 27.7.2005, confirmed by the second respondent (AIFR) in appeal No. 107 of 2005, dated 12.10.2006 and for consequential directions.

3. The facts necessary for disposal of the writ petition are as follows:

(a) The petitioner is a State Level Institution, fully owned by the Government of Tamil Nadu, incorporated on 21.5.1965 as a Company, under the Companies Act, 1956, with a purpose of development and growth of the Industrial Undertakings in Tamil Nadu (hereinafter called as ‘TIDCO‘).

(b) Petitioner on 31.12.1992, entered with an agreement to the promoter viz., K. Jagadeesh Reddy, for setting up 100% export oriented unit for the manufacture of 40.50 lakh metres per annum of Coarse Cotton gray fabric at Mugalapalli village, Hosur Taluk, as a result, the third respondent herein was incorporated in March, 1993, which commenced its operations in April, 1995.

(c) In June, 1996, the third respondent Company undertook an expansion of its weaving capacity to 80.25 lakh metres per annum to manufacture gray heavy fabric like bull denim at an estimated cost of Rs. 760 lakhs. The said project was completed in December, 1997, and it suffered a set back due to the recessionary trend in the overseas market and low sales realisation. By 31.3.2000, the worth of the third respondent Company was eroded by accumulated losses of Rs. 1,537.00 lakh and it was referred to the BIFR, the first respondent herein.

(d) Under Section 15(1) of the Sick Industrial Companies (Special Provisions) Act, 1985 (Act 1 of 1986), the first respondent on 17.1.2001, declared that the third respondent is a sick industrial company in terms of Section 3(1)(o) of the Act 1 of 1986 and the Industrial Development Bank of India (IDBI) was appointed as the ‘Operating Agency‘ under Section 17(3) of the Act.

(e) The Operating Agency was directed to examine the viability for rehabilitation of the third respondent Company and the cut-off date for rehabilitation was fixed as 30.6.2001. The third respondent/Promoters were directed to submit rehabilitation proposal. In the meeting held on 11.2.2004, the BIFR observed that there was no rehabilitation proposal submitted in spite of sufficient opportunity having been afforded and issued a show cause notice on 15.3.2004 for winding up of the third respondent Company.

(f) On 21.5.2004, the third respondent submitted a proposal envisaging the taking over of the management by the 4th respondent and for one time settlement of the dues of the IDBI and the Industrial Financial Corporation of India Limited (IFCI). Thereafter, BIFR kept the show cause notice dated 15.3.2004 in abeyance during the meeting held on 26.5.2004 and granted 45 days time to the third respondent and the secured creditors to finalise the one time settlement proposal and other pending issues.

(g) The Operating Agency submitted a report with the scheme for rehabilitation by letter dated 23.11.2004. BIFR, taking the cut-off date as 31.3.2004, framed a draft revival scheme and directed the circulation of the scheme for information seeking suggestions and objections of the shareholders including the petitioner, which according to the petitioner is under Section 19(2) read with 19(1) of the Act. All the parties were directed to submit their objection/suggestions in writing within 60 days.

(h) In the draft rehabilitation scheme, the following suggestions were made insofar as the equity share holders:

“(i) To agree to the proposed change of management in favour of M/s.Satidham Syntex Limited as also terms of OTS offered to institutions for revival of the company.

(ii) To agree to write down the present equity shareholding in the company by 99%. The face value of each equity share would be brought down from existing Rs. 10/- per share to Re. 0.10/- per share.

(iii)To agree for conversion of f