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TMI Blog2002 (1) TMI 1225X X X X Extracts X X X X X X X X Extracts X X X X ..... uilding and owning, buying, hiring, letting, maintaining and giving on tenancy or sub-tenancy buildings, tenements, blocks, flats, shops, godowns, dwelling houses, etc. The additional main object No. 1A which was included by amendment of May 2000 reads as follows : To carry on in India or elsewhere, either along or jointly or in association with one or more persons, Government, local or other bodies, the business to construct, build, alter acquire, convert, improve design, erect, establish, equip, develop, dismantle, pull down, turn to account, furnish, level, decorate, fabricate, install, finish, repair, maintain, search, survey, examine, test, inspect, locate, modify, own, operate, protect, promote, provide, participate, rebuild buildings, dams, factories, roads, bridges, structures and constructions of all kinds, undertake and contribute, assist and to act as civil engineer, interior decorator, consultant, advisor, broker, agent, supervisor, administrator, contractor, sub-contractor, turnkey contractor and manager of all types of constructions, infrastructure, developments such as roads, ways, culverts, dams, bridges, railway tramways, water tanks, reservoirs, canals, wharves, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and also agreed to pay the balance in instalments as mentioned in the consent terms. Consent terms also provided that if the Respondents committed default in payment of three consecutive instalments, the Company Petition (for winding up) shall stand admitted. It is common ground between the parties that the Respondent-Company has committed a default in payment of more than three consecutive instalments and, therefore, the Company Petition stands admitted as per the order of this Court dated 5-7-2000. As the default in payment was committed the petitioner filed an affidavit dated 5-11-2001, requesting that the matter be placed on board for 'directions'. Thereupon, the Respondent-Company filed an affidavit on 8-11-2001, stating that it has filed a reference to Board of Industrial and Financial Reconstruction ('BIFR') under Sick Industrial Companies (Special Provisions) Act, 1985 ('SICA') and, therefore, the petition should be adjourned sine die, in view of the Provisions of section 22 of the SICA. 5. Shri Janak V. Dwarkadas, the learned Senior Counsel Appearing on behalf of the Respondent-Company submitted that even if a petition is deemed to have been admitted by virtue of an orde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r any Body entitled and/or authorised by law to decide any issue affecting the rights of the parties must act within it's jurisdiction. If it exceeds it's jurisdiction or assumes jurisdiction which is not vested in it and passes an order, such an order is a nullity and a waste paper and can be ignored by any person whose rights are affected by such order. The person can set up the defence, that the order is a nullity and does not bind him, in any proceedings and at any stage, whenever and wherever such an order which is without jurisdiction is set up against him. 7. I am fortified in this view by a decision of the Full Bench of this Court rendered in Abdulla Miyan Abdul Rehman v. Government of Bombay AIR 1942 Bom. 257, wherein it was observed : "Those cases have established that where an authority which purports to pass an order, is acting without jurisdiction, the purported order is a mere nullity, as Sir Lawrence Jenkins puts it, it is mere waste paper; and it is not necessary for anybody who objects to that order to apply to set it aside. He can rely on it's invalidity when it is set up against him, although, he has not taken steps to set it aside". 8. This judgment of the fu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al is a nullity and it is not necessary for a party aggrieved to file an appeal against the order which is nullity and the party can set up the defence of a nullity of an order in any Court or Tribunal when the order is presented against him. I, therefore, hold that it is open to the petitioner to show and satisfy this Court that the order or action of BIFR of registration of the reference under section 16 is a nullity, being done without jurisdiction and should, therefore, be ignored. If the petitioner successfully established that BIFR lacked inherent jurisdiction to register a reference under section 16 then, this Court and any Court in which any suit or other proceedings is pending can ignore the said order and proceed with the winding up petition or the trial of the suit or execution of a decree as the case may be, without any bar of section 22. At the cost of repetition, I must however, mention that the order of registration of a reference under section 16 which is challenged must be shown to be not merely an erroneous order but, an order passed with inherent lack of jurisdiction. 12. I, therefore proceed to consider what would take away the inherent jurisdiction of the BIFR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ial undertaking, in relation to an Industry specified in the First Schedule of the IDR Act. The BIFR would not, therefore, have jurisdiction to decide whether a partnership firm which is not a Company as defined in the Companies Act has become sick. BIFR also would not have jurisdiction to declare as sick any Company which does not own any industrial undertaking carrying on a scheduled industry falling under First Schedule of the IDR Act. If BIFR passes an order in respect of a partnership firm that it is a Sick Industrial Company, the order would obviously be without jurisdiction. Similarly, if BIFR passes an order that a company which is not an industrial company has become a Sick Industrial Company. Such order would also be without jurisdiction. Even an act of registration of a reference in respect of a partnership firm or a company which is not an Industrial Company would be without jurisdiction. 14. Here, a distinction must be made between an inherent lack of jurisdiction and an erroneous decision within jurisdiction. If a Company which is an Industrial Company registered for more than 5 years and owns an industrial undertaking makes a reference to the BIFR that it has become ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dule of the IDR Act only after 5-12-2000 when the first licence under IDR Act was acquired. In paragraphs 1 and 2 above, I have already pointed out that amendment to the objects clause of the Memorandum of Association was made on 29-6-2000 as per the resolution passed on 26-5-2000. Thus, prior to 26-5-2000, the Company did not have as it's 'object manufacturing of building materials' which was added as clause No. (1A) in the Memorandum of Association. 18. Paragraph numbers 26 to 28 of the application (Form A) give the financial position of the Company for the years ending 31-3-1997, 31-3-1998, 31-3-1999, 31-3-2000 and 31-12-2000. Item No. (ix) of para 28 of the 'Form A' shows that the Company made a profit of Rs. 443.70 lakhs for the year ending 31-3-1997, a profit of Rs. 83.98 lakhs for the year ending 31-3-1998 and a profit of Rs. 18.08 laksh for the year ending 31-3-1999. The Respondent-Company suffered a loss of Rs. 1397.21 lakhs for the year ending 31-3-2000 and a further loss of Rs. 1040.05 lakhs for the year ending 31-12-2000. The Company was thus, making profit till the year ending 31-3-1999. It is for the first time that the Company made a loss, and that too a huge loss, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 'industrial' appearing before the word company would become otiose. SICA was enacted with a view to give protection to the Sick Industrial Companies. Care was also taken to see that fly by night operators do not misuse the provisions of SICA and, therefore, it was provided under section 2(o) that the industrial company must be registered for not less than five years. (Initially, the period of registration was seven years which was reduced to five years by an amendment.) This ensured that an uncanny promoter does not form an Industrial Company, immediately obtain a loan from banks and financial institutions, syphon off the funds and then prevent filing of any suit against the Industrial Company by filing a reference under SICA. To illustrate, let us take a case of a trading company which is in existence of more than five years. If such a Company incurs losses in a particular year, can the persons in management of such Company acquire an industrial unit and on the next day, claim that though it has become an industrial company now, it was registered as a Company for more than five years ago and claim protection under SICA. Certainly, not. If two interpretations are possible, one whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld that Respondent-Company did not own any industrial undertaking at least till 5-12-2000. By virtue of section 3(1) of the SICA, the Respondent-Company was, therefore, not an 'Industrial Company' which is a sine qua non for the exercise of a jurisdiction by the BIFR. This is a jurisdictional fact. As this jurisdictional fact was absent, the BIFR lacked inherent jurisdiction to register a reference and hold an enquiry under SICA. Therefore, the registration of a reference by BIFR under section 16 was without jurisdiction. If so, such registration is a nullity and can be ignored by this Court. This being the position, it is not necessary to stay the winding up petition sine die as prayed by the Respondent-company. 24. On merits, the Respondent-Company admits that more than three consecutive defaults have been committed and, therefore, the Company Petition stands admitted by virtue of an order dated 5-7-2000. It is, therefore, necessary to issue the usual directions which follow as a consequence of admission of a Company Petition. 25. At this stage, the Counsel for the petitioner makes an oral prayer that an official liquidator should be appointed as provisional liquidator particul ..... X X X X Extracts X X X X X X X X Extracts X X X X
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