Case Note & Summary
The case arose from the closure of a large industrial undertaking owned by Rohtas Industries Limited at Dalmia Nagar, Bihar. The company operated units manufacturing cement, paper & board, asbestos, vulcanised fibres and vanaspati, and employed about 10,000 workmen. Troubles began in 1982-83, and the units closed with effect from September 9, 1984, leading to denial of employment. A petition for winding up was filed before the Patna High Court, which appointed a Provisional Liquidator on May 22, 1986. The workmen filed a writ petition under Article 32 before the Supreme Court seeking revival and rehabilitation. The Court entertained the petition to solve the human problem of unemployment. Notice was issued to State of Bihar and Union of India. Meanwhile, the Sick Industrial Companies (Special Provisions) Act, 1985 came into force. On the suggestion of the Attorney General, the Court on October 28, 1987 directed the Central Government to make a reference to BIFR to frame a scheme. BIFR submitted a report on April 22, 1988 stating that cement, asbestos and vanaspati units could be revived but paper unit could not. The Court by order dated October 24, 1989 observed that if the company is not revived and gets liquidated, creditors may not benefit and 10,000 families have been denied living for over five years. It directed the State to appoint a senior IAS officer as Rehabilitation Commissioner/Administrator, and the Provisional Liquidator to hand over assets. It imposed a one-year moratorium on proceedings against the company and suspended limitation. The State Government undertook to deposit Rs.15 crores and the Union of India was directed to advance Rs.15 crores to State from plan assistance. The amount was to be used for arrear wages and secured loans. The Administrator was directed to set up a committee to examine claims. The Administrator took over assets and received Rs.30 crores, out of which Rs.6 crores was grant and Rs.24 crores repayable. He started four units employing 2900 workmen but they had to be closed due to financial constraints. The State and financial institutions expressed inability to advance more funds. The Court directed sale of the undertaking as a running concern. By order dated September 8, 1993, the Court directed State to advance Rs.10 crores as loan, and Union of India to advance that sum to State. The Rehabilitation Commissioner was directed to value assets and advertise in national newspapers. In response, 14 offers were received, maximum Rs.15 crores for entire complex, but the Court on March 3, 1994 observed that assets assessed at Rs.250 crores made offers too low. On May 2, 1994, the Court revived the reference to BIFR and asked for a report on rehabilitation capability, short-term and long-term measures, and to consider the workers' cooperative society proposal. BIFR appointed IFCI, which appointed SIRCON. After considering reports and proposals, BIFR submitted report dated May 22, 1995. The report concluded that no viable private proposal existed; RIL as a whole was viable only under Variant IV requiring State Government to bring Rs.225.71 crores as equity, OTS of dues, and massive tax/royalty reliefs. Cement, Asbestos and Paper Units were independently viable under Variant IV with reliefs; Vanaspati unit non-viable. Three associated companies non-viable. Crucial factors included raw material, power, and professional management. The Supreme Court by order dated July 21, 1995 observed that the cumulative effect of the report was that there was no possibility of revival through the efforts of the Court as at pre... The final decision was not fully available in the provided text, but the Court appeared to conclude that revival was not feasible without state equity and reliefs. No specific contentions of the parties are recorded in the available text; the proceedings were dominated by court-supervised rehabilitation efforts and reports from BIFR.
Headnote
A) Constitutional Law - Article 32 Writs - Rehabilitation and Revival of Sick Industry - Constitution of India, 1950, Article 32 - The workmen of a closed industrial undertaking invoked Article 32 seeking revival and rehabilitation; the Supreme Court entertained the petition to solve the human problem of unemployment of about 10,000 workmen and issued notices to State of Bihar and Union of India. Court directed reference to BIFR and supervised rehabilitation efforts. Held that Article 32 jurisdiction could be exercised to revive industry and rehabilitate workers (Paras Not mentioned). B) Sick Industrial Companies - Reference to BIFR - Revival Scheme Framing - Sick Industrial Companies (Special Provisions) Act, 1985 - On suggestion of Attorney General, the Court directed Central Government to make reference to BIFR to frame a scheme under the Act. BIFR submitted report in 1988 stating cement, asbestos and vanaspati units could be revived but paper unit could not. Held that BIFR report would form basis for further directions (Paras Not mentioned). C) Insolvency and Winding Up - Provisional Liquidator and Administrator - Handover of Assets and Moratorium - Companies Act, 1956, Not mentioned - Court directed State to appoint Administrator, Provisional Liquidator to hand over assets, and imposed one-year moratorium on proceedings against company with suspension of limitation. Held that assets encumbered with financial institutions not be proceeded against for one year to facilitate revival (Paras Not mentioned). D) Secured Creditors and Financial Institutions - Moratorium and Restructuring - One-year moratorium and direction to State and Union to advance funds - State Government and Union of India directed to provide Rs.15 crores each for payment of arrear wages and secured loans. Held that court can direct financial assistance from governments to rehabilitate sick units (Paras Not mentioned). E) Sale of Undertaking - Running Concern Valuation and Advertisement - Disposal of assets as a running concern - Court directed further loan of Rs.10 crores, valuation by approved valuer, and advertisement in national newspapers; 14 offers received with maximum Rs.15 crores against assessed assets of Rs.250 crores, which court rejected. Held that assets should be sold as running concern at adequate price (Paras Not mentioned). F) Sick Industrial Companies - BIFR Viability Report - Revival Requiring State Equity and Long-Term Measures - Sick Industrial Companies (Special Provisions) Act, 1985 - Court revived reference to BIFR and directed report on rehabilitation capability and measures; BIFR report concluded no viable private proposal, viability only under Variant IV with State equity, OTS of dues, tax/royalty reliefs and long-term measures. Held that cumulative effect was no possibility of revival through efforts of Supreme Court (Paras Not mentioned).
Issue of Consideration
Whether the closed industrial undertaking of Rohtas Industries Limited could be revived and its workmen rehabilitated through court-supervised measures including reference to BIFR, appointment of Administrator, moratorium, and disposal of assets as a running concern.
Final Decision
The Supreme Court, after considering the BIFR report dated May 22, 1995, passed an order on July 21, 1995 observing that the cumulative effect of the report was that there was no possibility of revival of the industry through the efforts of the Court as at pre... The text is incomplete, and the final operative directions are not available in the provided judgment excerpt.
Law Points
- Article 32
- sick industrial company
- rehabilitation
- BIFR reference
- moratorium
- valuation
- running concern sale
- workers' rights
