Case Note & Summary
The petitioner, Kotak Mahindra Bank Limited, challenged an order dated 25.1.2011 passed by the Board for Industrial and Financial Reconstruction (BIFR) in Misc. Application No.3361/DC/3011. The respondent no.1, Pharmaceuticals Products of India Limited, was a company registered under the Indian Companies Act that had taken a loan from Tata Finance Limited. An award was passed in favour of the company and against respondent no.1. There were other secured and unsecured creditors of the company. The BIFR had earlier sanctioned a scheme under Section 18 of the Sick Industrial Companies (Special Provisions) Act, 1985 (SICA). Subsequently, the BIFR passed the impugned order reopening the scheme. The petitioner contended that the BIFR had no jurisdiction to reopen a duly sanctioned scheme after its implementation. The court examined the provisions of SICA, particularly Sections 18 and 20, and held that the BIFR does not have any power to review or modify a sanctioned scheme once it is final. The court noted that the Act is a complete code and any such power must be expressly conferred. The BIFR's reliance on inherent powers was misplaced. The court allowed the writ petition, quashed the impugned order, and held that the BIFR's order was without jurisdiction and liable to be set aside.
Headnote
A) Sick Industrial Companies Act - BIFR Jurisdiction - Reopening of Sanctioned Scheme - Section 18, SICA - The BIFR cannot reopen a scheme that has been duly sanctioned under Section 18 of SICA after its implementation, as the Act does not confer any power to review or modify a sanctioned scheme once it is final. The court held that the BIFR's order reopening the scheme was without jurisdiction and liable to be set aside. (Paras 1-10) B) Sick Industrial Companies Act - Inherent Powers - Section 20, SICA - The BIFR does not possess inherent powers to reopen a sanctioned scheme, as the Act is a complete code and any such power must be expressly conferred. The court held that the BIFR's reliance on inherent powers was misplaced and the order was ultra vires. (Paras 5-8) C) Sick Industrial Companies Act - Scheme Sanction - Finality - Section 18, SICA - Once a scheme is sanctioned under Section 18, it attains finality and cannot be reopened except in accordance with the provisions of the Act. The court held that the BIFR's order reopening the scheme was contrary to the scheme of the Act and the principles of finality. (Paras 6-9)
Issue of Consideration
Whether the BIFR has jurisdiction to reopen a scheme duly sanctioned under Section 18 of the Sick Industrial Companies (Special Provisions) Act, 1985 (SICA) after the scheme has been implemented and the company has been declared a sick industrial company.
Final Decision
The court allowed the writ petition, quashed the impugned order of the BIFR dated 25.1.2011, and held that the BIFR had no jurisdiction to reopen the sanctioned scheme.
Law Points
- BIFR jurisdiction
- SICA scheme sanction
- reopening of scheme
- inherent powers
- Section 18 SICA
- Section 20 SICA
- Section 22 SICA
- writ petition maintainability
