Kanoria Jute and Industries Ltd. Sangrami Shramik Union and Another vs Appellate Authority for Industrial and Financial Reconstruction and Others

Jayanta Kumar Biswas, J.—In these writ petitions two orders one dated December 31, 2002, made by the Board for Industrial and Financial Reconstruction (in short "the BIFR") established under the provisions of the Sick Industrial Companies (Special Provisions) Act, 1985, and the other dated July 20, 2005, made by the Appellate Authority for Industrial and Financial Reconstruction (in short "the AAIFR") constituted also under the provisions of the same Act have been questioned.

On receipt of a reference made by Kanoria Jute and Industries Ltd., 2 u/s 15 of the Act, the BIFR registered the requisite proceedings on September 15, 1987. From time to time it made orders with a view to exploring the possibility of revival of the company. Ultimately, it came to the conclusion that no useful purpose would be served by keeping the matter pending. It noticed that the promoters who were before it were dragging the proceedings. Under the circumstances, by the order dated December 31, 2002, it confirmed its prima facie opinion that it would be just and equitable to direct winding up of the company. Feeling aggrieved, one Joydeb Mondal, on behalf of Kanoria Jute Industries Ltd. Sangrami Shramik Union, lodged an appeal with the AAIFR, in terms of the provisions of Section 25 of the Act. The appellate authority also explored the possibility of revival of the company. But ultimately it came to the conclusion that since no one capable of infusing considerable fund was available, there was no scope for framing and approving a revival scheme. It affirmed the order of the BIFR and dismissed the appeal by order dated July 28, 2005 and feeling aggrieved by these two orders, these two writ petitions were filed before this court.

The first writ petition dated March 27, 2006, has been filed by Kanoria 3 Jute and Industries Ltd. Sangrami Shramik Union and its general secretary, Jiban Chandra Pramanik. As a matter of fact, this writ petition has been filed by the appellant who lodged the appeal with the AAIFR. The other writ petition dated April 11, 2007, has been filed by four unions of the workers and the employees of the company, and the respective secretaries of the four unions. The parties who were before the BIFR and AAIFR have been named as party to these cases.

The position of appearance of the respondents before me, and their 4 respective stands are these: The AAIFR and the BIFR are formal parties, and they have rightly not entered appearance. IIBI, a respondent in both the cases, has not entered appearance, though it was duly noticed more than once. The Bank of India, a party to both the cases, it is submitted, entered appearance and filed an affidavit, but it has never appeared before me, after the matter was assigned to me, though I ordered service of notice on it more than once. FCI, once again a party to both the cases, has also chosen to stay away from the proceedings, though more than one notice was served on it. The company and one Shiv Shankar Pasari, respondents in both the cases, have entered appearance and filed an affidavit clearly stating that they want a detailed consideration of the fresh revival proposals by the BIFR. Kanoria Jute and Industries Ltd. Sangrami Shramik Union is a petitioner in the first case and the respondent in the second case, and it also has categorically stated that it wants a reconsideration of the whole matter by the BIFR. The State of West Bengal, a party to both the cases, has filed an affidavit clearly stating that the whole matter should be remitted to the BIFR for a fresh detailed inquiry and examination of the revival proposals. Union of India, a party to both the cases, has chosen not to enter appearance. The Employees'' State Insurance Corporation and the Regional Provident Fund Commissioner, two parties to the second case, have filed their respective affidavits staring that the whole matter should be remanded to the BIFR for examining the revival proposals once again and the question of payment to their respective dues. Bajaj Jute Machinery P. Ltd. and Purushottam Kumar Bajaj, a director of Bajaj Jute Machinery P. Ltd., are the two respondents in the second case, contacting whom the petitioners in the second case decided to take out their writ petition stating that these two persons had come forward with a fresh revival proposal. Kanoria Jute Mills Workers'' Industrial Co-operative Society Ltd., a party to both the cases, has entered appearance and filed an affidavit stating that it has no objection if the whole matter is sent back to the BIFR for consideration of the fresh revival proposals. The Indian Bank, a party to both the cases, has entered appearance and contested the cases all along saying that, in the facts and circumstances, there is absolutely no reason to make a remand order either to the AAIFR or to the BIFR. There are a few more parties to the first case, and they have not entered appearance, though, I am told, notice of the case was given to them more than once. 5 By order dated January 10, 2008, my lord the Chief Justice assigned both the cases to me. Thereupon, I heard the cases on January 14, 2008, January 21, 2008, January 29, 2008, February 19, 2008, February 29, 2008, March 3, 2008, April 2, 2008, April 3, 2008 and today. In the course of hearing of the cases, I made several orders in view of the suggestion given by counsel for all the parries who have entered appearance, except the Indian Bank for which Mr. Mantha has been appearing. While all the other parties suggested that the two orders in question should be set aside so that the whole matter might be remitted to the BIFR for consideration of the fresh revival proposals, and that such a course should be adopted keeping in view the interests of more than three thousand employees and workers of the company, Mr. Mantha submitted that the promoters brought by the petitioners in the second case failed to show their worth that could be, if at all, considered a warrant for setting aside the orders of the AAIFR and the BIFR, especially when the proceedings before those authorities continued for many years.

According to Mr. Mantha, the material produced by the petitioners in the second case and the promoters brought by them, including the affidavits the promoters filed in compliance with the orders made by me, taken together do not constitute a reasonable basis for forming an opinion that there is a real chance of submitting any fresh revival proposal, and a real need to consider them once again either by the AAIFR or by the BIFR. He further submits that when there is no dispute that interests of the workers and employees of the company are to be taken care of, there is no reason to say that his client, one of the secured creditors, should be deprived of the opportunity to recover its dues, by delaying the winding up proceedings recommended by the BIFR and affirmed by the AAIFR. According to him, there is absolutely no real chance of a remand order yielding any positive result, and hence the writ petitions should be dismissed. He has said that if his contentions are not accepted and this court is inclined to remit the matter, then not only a specific line should be fixed for giving final decision by the forum concerned, but condition should also be put that if the final decision in terms of order of this court is not given in the proceedings, then his client would be free to initiate appropriate recovery proceedings or to proceed with the pending proceedings. His further submission is that while the Division Bench decision of this court dated June 16, 1995 in Angus Co. Ltd. v. Bengal Chatkal Mazdoor Union, as will appear from the judgment itself, was given on the peculiar facts of that particular case, and hence should not be considered a precedent, the single bench decision dated December 3, 2003, in W.P. No. 10551 (W) of 1997 (Bengal Chatkal Mazdoor Union v. Board for Industrial and Financial Reconstruction), cannot be treated as an authority, since, not only it cannot be read in harmony with the provisions of the Act, but it also seems to be inconsistent with the various apex court decisions.

It is also noted that the two authorities have been cited to me by 7 Mr. Sen, counsel for the petitioners in the second case. Besides making detailed submissions with respect to merits of the case, Mr. Sen has submitted that the petitioners in the second case, as a matter of fact, though were before the BIFR and the AAIFR, were never given any opportunity, in the true sense of the expression, to make any endeavour for revival of the company. His submission is that when a large number of employees were being represented by the four unions, keeping in view the objects and purposes of the Act, the BIFR and the AAIFR, of their own accord, should have made a reasonable inquiry for ascertaining whether these unions were in a position to make any effective arrangements for revival of the company. His further submission is that these unions are keen to see a revival of the company leading to protection of bread and butter of the large number of employees they represent, will be apparent from the steps they took by contacting the promoters, the fourteenth and fifteenth respondents in their case. His argument is that when the workers of the company through their respective unions have come forward with able promoters, it is absolutely unreasonable to say that no further attempt should be made for revival of the company and the recommendations for its winding up should be implemented at once. By taking me through the Division Bench and the single bench decisions he has relied on, he has commented that the writ court has always considered such a situation as this is a sufficient warrant for making fresh attempts for exploring the possibility of revival of a sick company.

Mr. Mitra, counsel for the fourteenth and fifteenth respondents in the second case, has said that in compliance with the directions given in the case the promoters have filed affidavits and documents to show their worth and keenness to revive the company. Counsel for the other parties who have filed affidavits have clearly stated that they have no objection to Mr. Sen''s suggestion that in the interest of justice the matter should be remitted to the BIFR for reconsideration of the question of revival of the company. Counsel for the petitioners in the first case has pointed out that no effective opportunity to his clients was given by the BIFR and the AAIFR after 1994 for submitting revival proposals. He has said that the petitioners in the first case are in a position to assist the BIFR effectively in the matter of reconsideration of the question of revival. Mr. Bose, counsel for the sixth and seventh respondents in the second case, has said that now his clients are in a position to tell the BIFR what effective revival proposal they can place for its consideration.

The Division Bench decision cited to me by Mr. Sen, in my opinion, is of great assistance in the case. The single bench decision he has given is of no less assistance, since in that case his Lordship had examined the objects of the Act. I am unable to agree with Mr. Mantha that the Division Bench decision cannot be considered as a precedent. He has not specified why the single bench decision should be held to be inconsistent with any provision of the Act or decision of the apex court.

In Angus the Division Bench made the order against the following backdrop of facts. By order dated May 28, 1990, the BIFR recommended winding up of the company, and by order dated August 10, 1993, the AAIFR confirmed that order. Questioning the orders, the writ petition was filed in this court in October, 1993. Against the interim order made by the single bench and refusal of interim orders as prayed for, the appeals were filed by the company and a secured creditor. At the hearing of interlocutory applications all the parties invited prayed their Lordships of the appeal court to send the entire matter back either to the AAIFR or to the BIFR for reconsideration of the order recommending winding up of the company. Accordingly, their Lordship held:

We are of the view that instead of directing the company to be wound up, as recommended both by the BIFR and the AAIFR, it would be to the interest of both the company and the large number of workers, if the question of revival of the company was considered afresh in the light of the scheme said to have been submitted by Shri Bagla and such other schemes as may be submitted by others equally interested in reviving the company. In our view, the creditors of the company will also stand to benefit if the company is revived, but securing their dues must be left to the AAIFR for inclusion in any scheme that may ultimately be approved by it.

There can be no doubt that the principle on the basis whereof their Lordships of the Division Bench made the order remitting the whole matter to the AAIFR is just binding on me, and I find no reason why I should not follow the ratio.

I agree with Mr. Sen that in the proceedings initiated under the provisions of the Sick Industrial Companies (Special Provisions) Act, 1985, the effort should always be to achieve the goal of revival of the sick company concerned. Even if an approved revival scheme is likely to take quite a long time to ensure a real turnaround in the company concerned, it should not be considered as a negative aspect, although in the process, of course, the creditors may at times have to accept a longer time for recovery of their dues. In a social welfare State that we are, it is the collective duty and responsibility of all the concerned to ensure social and economic protection for the weaker Section, and there can perhaps be no dispute that the lower echelons of the working class in private sector industries, such as a jute mill, belong to the class. An order of remand as suggested by all the parties in the cases, with the only exception of the Indian Bank, Mr. Mantha''s client, if made, there can be no doubt, will greatly serve the cause of the workers and employees of the company, though it may not serve the cause of creditors to the extent of their respective expectations. The question is in the situation what course the writ court should adopt.

The question that has troubled me throughout the hearing is whether a remand order should be made even when the orders questioned in the writ petitions do not seem to be vitiated by any apparent illegality or jurisdictional error. My considered view is that in cases such as these, arising out of the orders of statutory forums exercising inquisitorial nature of powers, as opposed to powers exercised for undertaking adversarial adjudication processes, the writ court should not only act for correcting a jurisdictional error for setting the wrong right, but as a constitutional court entrusted with the duty to ensure protection, preservation and enforcement of fundamental rights, and promotion of the directive principles of State policy, if necessary, it should make appropriate order for sub serving the cause of justice. I confess that I have not found any irregularity or illegality or error that may call for an interference with the impugned orders in exercise of power of judicial review. But then, I think my order dismissing the writ petitions on this ground, ignoring the united plea, punctuated by a lone dissenting voice, for a remand to make a last attempt to revive the company, will definitely cause a serious miscarriage of justice. I accordingly hold that it will be appropriate to remit the matter to the BIFR for a fresh consideration of the question of revival of the company.

For these reasons, I dispose of the writ petitions ordering as follows. The orders of the AAIFR dated July 20, 2005 and the BIFR dated December 31, 2002, are hereby set aside. The BIFR is directed to reconsider the question of revival of the company. For the purpose it shall give all parties reasonable opportunities to submit their proposals and schemes, and after making a detailed inquiry it shall explore the possibility of approving a scheme for revival of the company. During the pendency of the proceedings, it will be free to make necessary orders imposing conditions on any party and seeking securities from anyone submitting the revival scheme or proposal before it. It will also be free to consider prayers and requests that may be made by the creditors including Mr. Mantha''s client for any order or direction of any nature. The whole inquiry process shall be concluded and final order shall be made by the BIFR within six months from the date of communication of this order to it. By way of clarification, I say that all the questions connected with the claims and counter claims made by the parties in the petitions and affidavits filed in these cases shall remain open, and that the BIFR will be free to decide any or all of them, if occasion arises. There shall be no order as to costs.

Urgent certified xerox copy of this order, if applied for, shall be supplied to the parties within three days from the date of receipt of the file by the Section concerned.