The court affirmed the BIFR's authority to sanction a rehabilitation scheme despite the Operating Agency's failure to propose one, in line with legislative intent.

1. M / s. - Shree Bajrang Jute Mills Ltd. a sick company under the Sick Industrial Companies (Special Provisions) Act, 1985 (for short 'the Act') first filed this petition under Art. 226 of the Constitution challenging the orders of the Board for Industrial and Financial Reconstruction ('BIFR' for short ). confirmed by the Appellate Authority both under the Act sanctioning a scheme for its rehabilitation under the provisions of the Act. Under the scheme the sick company has been taken over by the East India Commercial Co. Ltd. (EICC) which is respondent No. 5 in this petition. This petition was filed by the sick company through Shri Subhash Kumar Bhuwalka claiming to be the Director thereof. After, we had issued notice to show cause as to why rule nisi be not issued and which was limited to the question as to what was the effect of the Operating Agency not itself coming up with the scheme, an application (C.M. No. 8942 / 94) was filed on behalf of the sick company stating that the petition was incompetent inasmuch Subhash Kumar Bhuwalka was no longer a Director of the sick company. It was submitted in this application that the BIFR in the exercise of its powers under S. 18(g) of the Act had directed by order dt. 13 Sept., 1994 that the existing Directors of the sick company shall be deemed to have forthwith vacated their offices without any further act or deed and that the Board of Directors was reconstituted. In this view of the matter, an application (C.M. 8937/94) was filed by the sick company as well as by Subhash Kumar Bhuwalka and Murari Lal Bhuwalka that they all be impleaded as petitioners. Both Subhash Kumar Bhuwalka and Murari Lal Bhuwalka claim to be original promoters and erstwhile Directors of the sick company. Accordingly, we directed that both these persons shall be substituted as petitioners and that the sick company itself would be transposed as respondent. There are some other applications for intervention, but we do not think it is necessary for us to refer to those as we had issued the show cause notice on a limited question and heard the arguments on that of the substituted petitioners and EICC; Union Bank of India; IDBI - the operating agency, and the sick company.

2. There is no dispute that the company Shri Bajrang Jute Mills Ltd. was declared a sick company as per the provisions of S.15 and S.16 of the Act. It is also not disputed that BIFR found that it was not practicable for the sick company to make its net worth exceed the accumulated losses within a reasonable time, and so the stage under sub-sec.(3) of S. 17 of the Act was reached.

3. Reference to the BIFR under S. 15 of the Act was made on 18 Oct., 1989. 'During the hearing held on 6 Mar., 1991 Industrial Development Bank of India (IDBI) was appointed as the operating Agency to prepare a rehabilitation scheme if feasible after examining the technical viability of the sick company. Thereafter, proceedings of the BIFR were held on 7 Jan., 1992, 17 Sept., 1992, 1 Nov., 1993 and 21 Feb., 1994. The Operating Agency could not come up with any rehabilitation scheme. It, however, introduced EICC as the intending promoters. Schemes furnished by the petitioners being the existing promoters and that by EICC, the intending promoters, were not found to be acceptable. The BIFR came to a prima facie opinion that it was fair and just to wind up the sick company. The relevant portion of the minutes of the BIFR of its meeting dt.1 Nov.,1993 are as under: -

"On a consideration of the material on record and the submissions made, the Bench observed that so far there had been no viable scheme to run the unit. The proposal of the existing promoter