2004 (1) TMI 382 - HC - Companies Law

Summary

Issues:
- Interpretation of section 15(1) of the Sick Industrial Companies (Special Provisions) Act, 1985 regarding the period for making a reference to the Board of Industrial and Financial Reconstruction (BIFR).
- Jurisdiction of the High Court to entertain a petition challenging BIFR's decision.

Analysis:

Issue 1: Interpretation of section 15(1) of the SICA
The petitioner, a Public Limited Company, filed a reference to the BIFR beyond the 60-day period specified in section 15(1) of the SICA. The BIFR dismissed the reference as time-barred, leading to subsequent review and appeal. The petitioner argued that the 60-day period is not a strict limitation period but a requirement to initiate proceedings promptly. The petitioner contended that the aim of the Act is timely detection and rehabilitation of sick companies, and non-compliance should result in penal consequences, not automatic dismissal. Reference was made to a judgment emphasizing the obligation on the board of directors to refer a sick company to the BIFR within the specified timeframe. The court agreed with the petitioner, stating that the 60-day period is a directive to prompt action, not a strict limitation. Dismissing a reference solely based on exceeding this period would defeat the Act's purpose of timely rehabilitation. The court set aside the BIFR's dismissal and directed the BIFR to proceed with the restored reference.

Issue 2: Jurisdiction of the High Court
Respondent's counsel argued that the High Court lacked jurisdiction to entertain the petition challenging BIFR's decision, suggesting it should have been filed where the decisions were made. Citing a Supreme Court judgment regarding the impact of governmental actions, the respondent contended that the ultimate effect of the decisions would be felt in a different location. However, the court rejected this argument, stating that the cause of action leading to the original proceedings and the petition was the same - the sickness of the company. The court distinguished another judgment related to company law, emphasizing that the SICA does not create a prohibition but a duty on companies to act promptly. The court held that the High Court had jurisdiction to hear the petition challenging BIFR's decision and proceeded to set aside the dismissal and restore the reference for further proceedings.

In conclusion, the High Court interpreted section 15(1) of the SICA as a directive for prompt action rather than a strict limitation period. It asserted its jurisdiction to entertain the petition challenging BIFR's decision and directed the BIFR to proceed with the restored reference.