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1 - 10 of 14 (0.21 seconds)The Sick Industrial Companies (Special Provisions) Act, 1985
Adhyaksha Mathur Babu'S Sakti ... vs Union Of India on 7 September, 1962
14. Dealing with the prayer for appointment of Government directors, Shri Mookherjee and Shri Ganesh, advocates for the directors of the company, submitted that the company having become sick and being under the purview of the BIFR, the Company Law Board should refrain from approving the appointment of any Government directors especially when the BIFR has itself appointed a director on the board of the company. Even though, the BIFR passed an order for revival of the company under Section 17(3) of the Sick Industrial Companies (Special Provisions) Act, 1985 (SICA), on an appeal, this order has been stayed by the AAIFR as the management proposes to revive the company under Section 17(2) of the Sick Industrial Companies (Special Provisions) Act. While both of them agreed that there is no bar to the Company Law Board considering the prayer of the Central Government, even though the company is under the purview of the BIFR, yet they submitted that such an appointment, instead of furthering the cause of revival, would only create apprehension in the minds of all concerned that all is not well with the company and as such may estrange them from contributing for the revival of the company. Shri Ganesh further submitted that since all the allegations relate to a back period, many of the directors who were in position during that period have ceased to be directors now and presently, in addition to the BIFR nominee, Shri Virender Prakash, who has held various positions in the Government as an IAS officer and R. N. Tripathi, ex-MD of Life Insurance Corporation who is a financial institutions nominee, four directors have joined the board in 1997 or 1998. In other words, according to him, presently the board has a BIFR nominee, a financial institutions nominee and four other new directors who are not in any way connected with the affairs of the company during the alleged period of mismanagement. Therefore, he submitted that there is no scope for appointment of Government directors. Further, relying on Sakthi Trading Co. P. Ltd. v. Union of India [1985] 57 Comp Cas 789 (Delhi) wherein it was held that an order under Section 408 may not be able to cure the illegal and prejudicial acts which may have been performed by the company and its directors but it can be used to prevent repetition of such acts in future by appointment of directors on the company, he stated that now that there is a watch dog appointed by the BIFR, he will be in a position to ensure that nothing goes wrong in the affairs of the company.
Deputy Commercial Tax Officer & Ors vs Corromandal Pharmaceuticals & Ors on 12 March, 1997
He also submitted, rebutting the stand of the counsel for the Central Government relying on Deputy Commercial Tax Officer v. Corromandal Pharmaceuticals [1997] 89 Comp Cas 1 ; AIR 1997 SC 2027, that Section 24 of the Sick Industrial Companies (Special Provisions) Act provides for initiating misfeasance proceedings against the promoters of the company in case it is established that sickness has been brought about by the acts of the management. He, therefore, submitted that since the BIFR has not formed any opinion as specified in Section 24 of the Sick Industrial Companies (Special Provisions) Act, the Company Law Board should not form an opinion and appoint Government directors.
Section 24 in The Sick Industrial Companies (Special Provisions) Act, 1985 [Entire Act]
South India Viscose Ltd. And Another vs Union Of India And Others on 24 April, 1981
He further stated relying on South India Viscose Ltd. v. Union of India [1982] 52 Comp Cas 247 (Delhi) that the powers under Section 408 should be used very sparingly as any order under this section would have serious effect on the reputation and credibility of the management. Shri Ganesh pleaded that both the factories of the company remained closed and the management has already taken steps to seek the approval of the BIFR to revive the company under Section 17(2) of the Sick Industrial Companies (Special Provisions) Act and appointment of any director at this stage would prejudicially affect the revival process. Further, he also submitted that on the various allegations made in the petition, the then existing directors of the company have already filed a petition before the Calcutta High Court under Section 633 of the Act against notices issued by the Registrar of Companies and the High Court has injuncted the Registrar from taking any action pursuant to the notices issued. Therefore, he submitted that if any order is to be issued on the basis of these allegations it would mean as if the allegations have been proved while actually action against these allegations has already been stayed by the High Court.
All India Shaw Wallace Employees ... vs Shaw Wallace And Co. Ltd. And Ors. on 27 July, 1998
In this connection it is worthwhile referring to the observation of the Principal Bench of the Company Law Board in Central Government v. Shaw Wallace Co. Ltd. [1998] 31 CLA 254, at paragraph 45. "Therefore we are of the view that in addition to whatever grounds the courts have held to justify appointment of Government directors, we may add that when the acts of the directors/company have brought the affairs of a company to a state wherein its existence is under threat due to financial difficulties, then such a situation would definitely be prejudicial to the interest of the company and its members satisfying the parameters of Sections 408 and 398". The present case is still worse in the sense the company has been declared a sick company and its factories remain closed, the workers are not being paid their wages and the banks have shut their doors as far as financial assistance is concerned. In the normal circumstances, in view of the company having become sick due to the inaction of the management to avert the same by timely remedial action, we would have held that in the interest of the company its workers and the public interest, with a view to bring about confidence in the company, it is essential to appoint Government directors on the board of the company. However, in the present case, during the pendency of the proceedings before us, the BIFR has declared the company as a sick company and has appointed an operating agency under Section 17(3) of the Sick Industrial Companies (Special Provisions) Act on June 22, 1998. In exercise of its powers under Section 16(4), it has also appointed a special director on the board of the company. Section 16(4) of the Sick Industrial Companies (Special Provisions) Act reads as follows : "....... it (BIFR) may appoint one or more persons to be. a special director or special directors of the company for safeguarding the financial or other interests of the company or in the public interest". Even though BIFR has the power to appoint one or more special director, in the present case, it has chosen to appoint one such director. While we do not attach much importance to the four new directors who have been appointed on the Board by the management itself, the very fact that BIFR has appointed a special director to safeguard the financial and other interest of the company cannot be taken lightly. In a recent similar case of Peerless General Finance and Investment Co. Ltd. [1999] 95 Comp Cas 846 (CLB), in which the Central Government prayed for appointment of Government directors under Section 408 of the Act, we took a view that when the RBI was constantly monitoring the activities of the said company, there was no need to appoint Government directors at this stage and we gave the liberty to the Central Government to move Company Law Board at any time in future if the performance of the company did not improve. The main allegation in the reference is that the company funds have been diverted and its properties have been disposed of. We find from the BIFR proceedings dated June 22, 1998, that the company has been restrained from disposing of any of its assets and the question of diversion of funds also would not arise as the company has no funds even for its pressing commitments towards workers, wages, etc. The question of carrying on the business, under these circumstances, would arise only when a revival scheme is sanctioned by the BIFR. Since the BIFR has appointed a special director to safeguard the financial and other interests of the company, whatever purpose is sought to be achieved through the provisions of Section 408, the same has been ensured by the BIFR by appointing its own special director. We called for the details of the board meetings held during the last two years from which we find that the special director appointed by BIFR, Shri Virender Prakash has attended every board meeting held after his appointment.