9911796707
TMI Blog2009 (10) TMI 1005X X X X Extracts X X X X X X X X Extracts X X X X ..... e 'sick industrial company' in terms of section 3(1)(o) of SICA. 2. Briefly, facts of the case are that the appellant company was incorporated in the State of Tamil Nadu on 12-10-1990 and was engaged in the manufacture of edible oil refining, oil seed processing, shrimp farming, etc. The appellant company commenced commercial production on 5-9-1991 and, on account of technical problems, financial problems; shortage of raw materials, etc., the appellant company became sick. The appellant company filed a reference under section 15(1) of SICA based on its audited balance sheet (ABS) as on 31-3-1999. As per its ABS, as on 31-3-1999, its net worth of Rs. 2,838.71 lakhs was completely eroded on account of its accumulated losses of Rs. 9,951.50 lakhs. The appellant company had filed the reference on 16-7-1999 based on its provisional accounts which was rejected by the Secretary of BIFR on 10-8-1999. Subsequently, the appellant company got its accounts for the year ending 31-3-1999 audited and the board of directors (BoD) of the company formed the opinion that the company has become sick in terms of section 3(1)(o) of SICA and, accordingly, filed the reference before BIFR on 14-11-2000. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n industrial company. It is further contended that in Form 'A', the appellant company has itself given the status of various manufacturing units of the appellant company stating the dates on which the various units were closed. It is argued that it is not the production capacity of the appellant company which is relevant but the actual manufacturing activity going on in the factory which is relevant to decide whether there was closure or not. It is submitted that, in view of the clear admission on the part of the appellant company about the closure of its various units, the productivity capacity of the appellant company is immaterial. It has been further contended that an attempt has been made by the appellant by filing an additional affidavit along with documents to establish that some of the units of the company were functioning as on January, 2007. However, it is submitted that January, 2007, is not the relevant date for deciding whether the appellant company was an industrial company or not. It is also submitted that the additional documents filed by the appellant company along with its affidavit only show that there was no manufacturing activity in any of the units of the appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have the meanings, if any, respectively assigned to them in the Industries (Development and Regulation) Act, 1951." 7. Therefore, in the context of the definition of an industrial company and industrial undertaking as occurring in section 3(1)(e) and 3(1)(f) of SICA, we need to see the definition of word 'factory' as defined under section 3(c) of IDR Act. The word 'factory' has been defined under the IDR Act as under : "3(c) 'factory' means any premises, including the precincts thereof, in any part of which a manufacturing process is being carried on or is ordinarily so carried on :-- (i) With the aid of power, provided that fifty or more workers are working or were working thereon on any day of the preceding twelve months; and (ii) Without the aid of power, provided that one hundred or more workers are working or were working thereon on any day of the preceding twelve months and provided further that in no part of such premises any manufacturing process is being carried on with the aid of power." 7.1 The Hon'ble High Court of Delhi in the case of Kusum Ingots & Alloys v. AAIFR [2005] 7 Comp. LJ. 332 (Delhi)/[2006] 133 Comp. Cas. 394 (Delhi) while expounding ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the preceding 12 months and that factory would also be a factory in terms of the said Act." 8. It is clear from the above that by adopting a harmonious interpretation of the aforesaid statute, one is to take into consideration not only the situation where manufacturing activity is on but also the other situation where the manufacturing activity is ordinarily so carried on any day of the preceding 12 months from the relevant date. The Hon'ble Delhi High Court also pointed out that if a unit is sick, its chances of non-renovation and non-manufacturing is greater. 9. In a similar case, the Hon'ble High Court of Mumbai in the case of Shiva Suiting Ltd. v Union of India [2003] 3 Bom. CR 593 held that whether units of a company qualify to be defined as factories as defined in 3(c)( i) of IDR Act, is to be decided with reference to the date on which the appellant company filed the reference. This means that in a unit of a company where manufacturing process is being carried on or is ordinarily so carried on with the aid of power provided 50 or more workers are working or were working there in any day preceding 12 months of the date of filing of the reference, it would qualif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... riod for its status as an industrial company but it should have the status of an industrial company in any financial year at the end of which its accumulated losses are equal to or exceed its entire net worth. It should also fulfill the definition of 'industrial company' at the time of making a reference under section 15(1) of SICA as well as at the time when a decision is being taken by BIFR as to whether it falls within the definition of 'sick industrial company' under section 3 (1) (o) of SICA." 11. The above decision of this Authority clearly lays down that not only the company should have the status of an industrial company in any financial year at the end of which its accumulated losses are equal to or exceed its entire net worth, but it should also fall within the definition of an industrial company at the time of making the reference as well as at the time when a decision is being taken by the BIFR regarding its sickness. In the light of the above judgments of the Hon'ble High Court of Mumbai and this Authority, it is to be seen in the instant case whether the appellant company had the status of an industrial company on 31-3-1999 when its accumulated losses ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s twelve months preceding 31-3-1999. In La Mansion Granites Ltd. Appeal No. 104 of 1999, this Authority has held that as none of the three units of the company, i.e., La Mansion Granites Ltd., has 50 or more workers, none of them constitutes a 'factory' as defined under section 3(c) of the IDR Act. Consequently, though the company owns undertakings, these undertakings cannot be treated as 'industrial undertaking' as defined under section 3(1)(f) of SICA. 14. In the instant case, in the absence of the break-up of the workers who are working or were working in each of the seven units of the appellant company 12 months preceding 31-3-1999, it cannot be established that any of these units would constitute a 'factory' as defined in section 3(c) of IDR Act. Besides, the appellant company has not produced any documentary evidence, e.g., ESIC or EPF statements, etc., to establish that 50 or more works are or were working in any of these units of the company twelve months preceding 31-3-1999. Moreover, the shrimp farm and hatchery were closed on 1-10-1997. As per the settlement of the appellant company they have been closed as a result of a judgment of the Hon'ble Supreme Court banning aqu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any expenditure was booked on salary and wages. The additional documents filed by the appellant company would also not prove that the company was operating before January, 2007, and that the required numbers of employees were working in the units of the company 12 months preceding the relevant dates. 17. It is clear from the above that there is hardly any evidence to establish that in any of the units of the appellant company, 50 or more workers were employed on any date during the twelve months preceding 31-3-1999, i.e., last day of the financial year at the end of which the accumulated losses of the appellant company were equal to or exceeded its net worth. The appellant company has also failed to prove that any of the units of the appellant company had employed the required number of workers twelve months preceding the date of the reference, i.e., 14-11-2000, or at the time the BIFR decided as to whether the appellant company falls within the definition of a sick industrial company under section 3(1)(o) of SICA. 18. In the result, we find no illegality or infirmity in the impugned order of the BIFR. Accordingly, the appeal fails and is dismissed. 19. The Agri Development Fina ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
