Tamil Nadu Industrial Development Corporation Ltd. v. Board for Industrial and Financial Reconstruction & Ors.

i.For reduction of share capital from Rs.10/- per share to paise 10/-per share;ii.Conversion of face value (after writing down) of Re.0.10/- pershare into Rs.10/- per share by accepting 1 (one) equity share ofRs.10/- each against every 100 shares of Rs.0.10 held in thecompany;iii.For stepping down from the Board of the company; andiv.For transferring the entire equity holding in the company to thenew promoters;contained in the sanctioned scheme approved by the 1st respondent by itsorder dated 27.7.2005 made in BIFR Case No.327 of 2000, confirmed by the2nd respondent by its order dated 12.10.2006 in Appeal No.107 of 2005and for further direction to the BIFR to include in the sanctionedscheme a direction to M/s.Satidham Syntex Limited to execute a promotersagreement with the petitioner in terms similar to the agreement dated31.12.1992 between the petitioner and Thiru K.Jagdeesh Reddy, theoriginal promoter with modifications.For Petitioner: Mr.G.Masilamani,Advocate General,for M/s.King and PartridgeFor 3rd Respondent:Mr.R.Muthukumarasamy,Senior Counsel,for Mr.A.R.RamanathanO R D E RBy consent the writ petition itself was taken up for finaldisposal.2.Prayer in the writ petition is to quash the order of the firstrespondent (BIFR) made in BIFR Case No.327 of 2000 dated 27.7.2005,confirmed by the second respondent (AIFR) in appeal No.107 of 2005,dated 12.10.2006 and for consequential directions.3.The facts necessary for disposal of the writ petition are asfollows:(a)The petitioner is a State Level Institution, fully owned bythe Government of Tamil Nadu, incorporated on 21.5.1965 as a Company,under the Companies Act, 1956, with a purpose of development and growth https://hcservices.ecourts.gov.in/hcservices/ of the Industrial Undertakings in Tamil Nadu (hereinafter called as'TIDCO'). (b)Petitioner on 31.12.1992, entered with an agreement to thepromoter viz., K.Jagadeesh Reddy, for setting up 100% export orientedunit for the manufacture of 40.50 lakh metres per annum of Coarse Cottongray fabric at Mugalapalli village, Hosur Taluk, as a result, the thirdrespondent herein was incorporated in March, 1993, which commenced itsoperations in April, 1995.(c)In June, 1996, the third respondent Company undertook anexpansion of its weaving capacity to 80.25 lakh metres per annum tomanufacture gray heavy fabric like bull denim at an estimated cost ofRs.760 lakhs. The said project was completed in December, 1997, and itsuffered a set back due to the recessionary trend in the overseas marketand low sales realisation. By 31.3.2000, the worth of the thirdrespondent Company was eroded by accumulated losses of Rs.1,537.00 lakhand it was referred to the BIFR, the first respondent herein.(d)Under Section 15(1) of the Sick Industrial Companies (SpecialProvisions) Act, 1985 (Act 1 of 1986), the first respondent on17.1.2001, declared that the third respondent is a sick industrialcompany in terms of Section 3(1)(o) of the Act 1 of 1986 and theIndustrial Development Bank of India (IDBI) was appointed as the'Operating Agency' under section 17(3) of the Act.(e)The Operating Agency was directed to examine the viability forrehabilitation of the third respondent Company and the cut-off date forrehabilitation was fixed as 30.6.2001. The third respondent/Promoterswere directed to submit rehabilitation proposal. In the meeting held on11.2.2004, the BIFR observed that there was no rehabilitation proposalsubmitted in spite of sufficient opportunity having been afforded andissued a show cause notice on 15.3.2004 for winding up of the thirdrespondent Company.(f)On 21.5.2004, the third respondent submitted a proposalenvisaging the taking over of the management by the 4th respondent andfor one time settlement of the dues of the IDBI and the IndustrialFinancial Corporation of India Limited (IFCI). Thereafter, BIFR keptthe show cause notice dated 15.3.2004 in abeyance during the meetingheld on 26.5.2004 and granted 45 days time to the third respondent andthe secured creditors to finalise the one time settlement proposal andother pending issues.(g)The Operating Agency submitted a report with the scheme forrehabilitation by letter dated 23.11.2004. BIFR, taking the cut-offdate as 31.3.2004, framed a draft revival scheme and directed thecirculation of the scheme for information seeking suggestions andobjections of the shareholders including the petitioner, which accordingto the petitioner is under section 19(2) read with 19(1) of the Act.All the parties were directed to submit their objection/suggestions inwriting within 60 days.(h)In the draft rehabilitation scheme, the following suggestionswere made insofar as the equity share holders:"(i)To agree to the proposed change of management in favour https://hcservices.ecourts.gov.in/hcservices/ of M/s.Satidham Syntex Limited as also terms of OTSoffered to institutions for revival of the company.(ii)To agree to write down the present equity shareholdingin the company by 99%. The face value of each equityshare would be brought down from existing Rs.10/- pershare to Re.0.10/- per share.(iii)To agree for conversion of face value (after writingdown) of Re.0.10/- per share into Rs.10/- per share byaccepting 1 (one) equity share of Rs.10/- each againstevery 100 shares of Re.0.10 share held in the company.(iv)Shareholding pattern post scheme-ExistingPost SchemeAmount Percentage(Rs.in Lakh)Amount Percentage(Rs.in Lakh)Promoters &Associates448.60 43.96804.49 88.39TIDCO (JointSector Promoter)266.00 26.062.66 0.29FinancialInstitutionsIDBIIFCI Limited 206.00 20.18100.00 9.80 91.29 10.0311.77 1.29General PublicNIL NIL NIL NILTOTAL1020.60 100.00910.21 100.00Post scheme holding arrived after writing down of existing equity by 99%and fresh issue of shares of Rs.900 lakh to incoming promoters andinstitutions."(i)On 16.6.2005, petitioner submitted its objection as the schemewould adversely affect the rights of the petitioner since equityshareholding of the petitioner was for a sum of Rs.266.00 lakhsconstituting 26.06% of the equity shares in the third respondentCompany. Petitioner requested that the rivival scheme be sanctionedwithout reduction of existing share capital.(j)Petitioner further states that it is a Trustee of public fundsfor investment and it cannot agree to the writing away of public funds https://hcservices.ecourts.gov.in/hcservices/ in a manner adverse to the public interest. It prayed for deletion ofthe following paragraphs from the draft rehabilitation scheme:(i)For reduction of share capital from Rs.10/- per share to paid 10/-per shareholding;(ii)Conversion of face value (after writing down) of Re.0.10/- pershare into Rs.10/- per share by accepting 1(one) equity share of Rs.10/-each against every 100 shares of Rs.0.10 held in the company;(iii)For stepping down from the Board of the company; and(iv)For transferring the entire equity holding in the company atreduced value from Rs.10 per share to 10paise per share to the newpromoters.(k)However, the BIFR by the impugned order dated 27.7.2005,recorded that the petitioner had given its consent to all theconcessions and reliefs sought in the draft rehabilitation scheme andpassed an order under section 18(4) read with 19(3) of the Act andsanctioned the rehabilitation scheme. The said order of the BIFR waschallenged by filing an appeal before the AIFR, the second respondentherein in Appeal No.107 of 2005 which was also dismissed by the secondrespondent by order dated 12.10.2006.(l)The above said orders are challenged in this writ petition onthe ground that consent of the petitioner, which is a State LevelFinancial Institution, is mandatory for sanction of the rehabilitationscheme in accordance with section 19(2) of the Act and reduction ofshare capital value is without any basis. The revival of the scheme canbe implemented without reduction of capital and without affecting thecontrol of the new promoters. According to the petitioner, therespondents 1 and 2 have failed to protect the interest of thepetitioner, which is a State Level Financial Institution.4.The third respondent filed counter affidavit by stating thatthe writ petitioner TIDCO, even though is a State Level institution, hadnot provided any financial assistance to come within the purview ofsection 19(1) of the Sick Industrial Companies (Special Provisions) Act,1985, but only invested the shares and as such it is a equityshareholder and therefore no consent as claimed by the petitioner needbe obtained for approving the rehabilitation scheme. It is furtherstated that the IDBI and IFCI were the lending institutions and theyagreed for approval of the rehabilitation scheme. The scheme is alsoimplemented by spending about Rs.10 crores for about 20 months towardssettlement to lenders and for operational purposes. Petitioner, who isonly a shareholder in the third respondent Company, has no locus standito object the scheme, which is approved by the BIFR in accordance withSection 18 of the SICA and approved by the AIFR. The shareholding ofthe petitioner was 26.06% and the share value became 0% and thereforethe third respondent industry was declared as sick industrial company.Petitioner being the shareholder, invested its shares in the third https://hcservices.ecourts.gov.in/hcservices/ respondent company with an intention to earn profits in its capacity asowner of the shares, cannot be treated as Creditor. Section 19 wouldcome into operation only if there is any financial assistance providedby a State level Institution and the petitioner has not provided anyfinancial assistance, either prior to the financial sickness or afterthat. The IDBI and IFCI, which are financial institutions have lent asum of Rs.15.97 crores and 92.19 crores respectively, and they are theparties who are covered within the purview of section 19 of SICA andthey had consented to the scheme. The revival of the third respondentCompany could not be taken place without the reduction of the existingshare capital. The 4th respondent who is the new promoter, has agreedto infuse a huge amount of Rs.17.68 crores. If the revival proposal isnot implemented, the Company would be left with no other option exceptto wind up under section 20 of the Act, which would cause not only lossto the petitioner, but also to the creditors and the employees. Thescheme having been approved on 27.7.2005 and being in operation for morethan 20 months, the same cannot be stalled at the instance of thepetitioner, who is only a shareholder and as per section 18(8) of theAct, once the sanctioned scheme comes into operation it is binding onthe Sick Company's shareholders, creditors, guarantors and employees ofthe said company. BIFR and AIFR being expert bodies, created under thestatute for speedy determination and take remedial and other measures,and they having exercised their statutory duty, the petitioner is notentitled to challenge the said order by way of this writ petition beforethis Court. Stating all these things, third respondent prayed fordismissal of the writ petition.5.The learned Advocate General appearing for the petitionersubmitted that the petitioner TIDCO being a State owned Company andhaving invested huge amount for promoting the third respondent Company,is to be treated to be a person rendered financial assistance and interms of section 19(2) of the Sick Industrial Companies (SpecialProvisions) Act, 1985, consent is necessarily required to be obtained bythe operating agency for revival of the company. Petitioner submittedobjections for the revival proposal on 16.6.2005 and the BIFR withoutconsidering the said objection in its order stated that consent wasgiven by the TIDCO, which is apparently wrong. The appellate authorityalso treated the petitioner only as shareholder and not as a financialinstitution and dismissed the appeal. The learned Advocate Generalfurther submitted that due to the mistake committed by the Directors ofthe third respondent Company, it went sick and the same cannot be takenadvantage of to reduce the capital value of the shares owned by thepetitioner. It is further contended that even though the rehabilitationis mandatory, the petitioner company being a Government owned company,having invested the public money in the third respondent Company throughshares, is entitled to object the scheme offered for revival and thepetitioner need protection to its share capital value without anyreduction. https://hcservices.ecourts.gov.in/hcservices/

6.The learned Senior Counsel appearing for the third respondenton the other hand submitted that the petitioner is only an equityshareholder even according to the agreement entered into with thepromoter and it will have only the shareholder's right under theCompanies Act, 1956, though it is styled as a State owned FinancialCorporation. Except the share capital no financial assistance wasadvanced through loan by the petitioner company and only IDBI and IFCIprovided loan to the company for its establishment and towards workingcapital and consent from the said two lenders/secured creditors havingbeen obtained, BIFR is justified in rejecting the objection raised bythe petitioner Company while approving the revival scheme. The learnedSenior Counsel further submitted that the petitioner being only theshareholder, its consent is not necessary under section 19(2) of theSICA. Based on the revival scheme approved by the BIFR and confirmed bythe AIFR, the revival has already been implemented by spending hugeamount and if at this stage the same is set at naught, the interest ofthe party, who revived the industry will be affected and if the revivalproposal was not approved and acted upon, the third respondent Companyis liable for winding up and in that event the writ petitioner Companywill not get anything since the secured loan is more than the assets ofthe third respondent Company. The Company having been revived, the writpetitioner is also benefited to certain extend and the same was theconsideration made by BIFR and AIFR, who are the expert bodies in thefield, approved the scheme and the same is just and proper.7.I have considered the rival submissions made by the learnedAdvocate General appearing for the petitioner as well as the learnedSenior Counsel appearing for the third respondent.8.Petitioner has entered into an agreement with the promoters ofthe third respondent Company on 31.12.1992. The agreement states thatthe third respondent Company is permitted to be promoted by the partieswith authorised capital of Rs.50 lakhs, divided into 5,00,000 equityshares of Rs.10/- each. Petitioner, who was the first party in the saidagreement, agreed to arrange for subscription for equity shares of thecompany within the limits of 26%. Petitioner as well as the promoterfurther agreed that they will not transfer, sell or encumber any part ofthe shareholding of the Company, without the prior consent of the otherparty in writing. In clause 10 of the agreement it is stated that noguarantee or counter guarantee will be furnished by the first partyviz., the petitioner to any bank/financial institution for term loan,bridge finance, etc., granted to the company by the banks orinstitutions. In clause 14 it is stated that out of the Directorsnominated or designated by the parties, each party shall have the rightto appoint equal number of non-retiring Directors subject to the limitprescribed under section 255 of the Companies Act, 1956. Insofar as theproject implementation is concerned, Clause 28 of the agreementcontemplates the promoter (second party) shall also be responsible tonegotiate and obtain all necessary finance on behalf of the company for https://hcservices.ecourts.gov.in/hcservices/ the timely and effective implementation of the project and its efficientworking. The first party (petitioner) shall provid all assistancepossible in the procurement of sanctions, approvals, etc. If the firstparty dis-invest its entire shareholding in the Company progressivelyover a period of three years, it shall make an offer to the second partypursuant to clause 34(b) for purchase of shares and the same shall besubject to requisite approval of the Government of India and thefinancial institutions/banks, who have granted loan to the Company andsubject to the provisions of Companies Act, 1956 and other Acts. Clause41 clearly states that the agreement is exclusive to the parties andneither of them shall assign its rights or benefits thereunder, exceptas otherwise agreed to. Clause 46 contains an arbitration clause, whichreads as under:"46.If any dispute and/or difference shall atany time arise between the parties hereto touchingor concerning or arising out of these presents orthe interpretation of any clause hereof or therespective rights, claims or liabilities hereunderor otherwise however in relation to or arising outof or concerning this Agreement such dispute and/ordifference shall be referred to arbitration by twoarbitrators, one to be appointed by each party withthe provisions for an umpire to be appointed by thesaid two arbitrators before commencement of thearbitration. The Arbitration Act, 1940, as amendedfrom time to time shall apply."The agreement shall remain valid until either party withdraw itsshareholding in the Company by way of transfer or sale in terms ofClause 34 and 35 of the agreement. On behalf of the petitioner,Chairman and Managing Director signed the said agreement.9.The argument of the learned Advocate General is that thepetitioner being the State owned Corporation, fully financed by theState of Tamil Nadu, is to be treated as an institution, which gavefinancial assistance to the third respondent Company and therefore itsconsent is required to be obtained under section 19(2) of the SICA,1985.10.The learned senior Counsel for the third respondent on theother hand submitted that even though it is a State owned Company, ithas not given any financial assistance as secured credit and the amountinvested by the petitioner Company is only by way of equity shares viz.,26% and the petitioner being an equity shareholder of the SickIndustrial Company, for rehabilitation, no consent is required to beobtained from the petitioner, who is an equity shareholder.11.Section 19(1) and 19(2) of the Sick Industrial Companies(Special Provisions) Act, 1985, reads as follows: https://hcservices.ecourts.gov.in/hcservices/ "19.Rehabilitation by giving financialassistance.-(1) Where the scheme relates topreventive, ameliorative, remedial and othermeasures with respect to any sick industrialcompany, the scheme may provide for financialassistance by way of loans, advances or guaranteesor reliefs or concessions or sacrifices from theCentral Government, a State Government, anyscheduled bank or other bank, a public financialinstitution or State level institution or anyinstitution or other authority (any Government,bank, institution or other authority required by ascheme to provide for such financial assistancebeing hereafter in this section referred to as theperson required by the scheme to provide financialassistance) to the sick industrial company.(2) Every scheme referred to in sub-section(1) shall be circulated to every person required bythe scheme to provide financial assistance for hisconsent within a period of sixty days from the dateof such circulation or within such further period,not exceeding sixty days, as may be allowed by theBoard, and if no consent is received within suchperiod or further period, it shall be deemed thatconsent has been given."From the perusal of the above provision it is evident thatrehabilitation scheme prepared under section 19(1) is to be circulatedto every person required by the scheme to provide financial assistancefor his consent within a period of sixty days or not exceeding sixtydays as may be allowed by the Board. If no consent is obtained withinsuch period, it shall be deemed that consent has been given.12.Here, in this case, the rehabilitation scheme has beencirculated to the petitioner and it offered its remarks/objection on16.6.2005. The petitioner being an equity shareholder and not extendedany financial assistance by way of loan, it is to be treated asshareholder only and its consent is not required for approving therehabilitation scheme.13.Admittedly, the third respondent Company became sick anddeclared as a sick company on 17.1.2001 on the basis of the applicationsubmitted on 21.9.2000 as per the resolution passed in the Board ofDirectors meeting held on 20.9.2000 and operating agency was appointedand rehabilitation scheme was called for. Once the Company/Unit isdeclared as sick unit, every efforts should be taken to revive the unitto the extend possible as per the object of the Act 1 of 1986, i.e., anAct to make, in the public interest, special provisions with a view to https://hcservices.ecourts.gov.in/hcservices/ securing the timely detection of sick and potentially sick companiesowning industrial undertakings, the speedy determination by a Board ofexperts of the preventive, ameliorative, remedial and other measureswhich need to be taken with respective to such companies and theexpeditious enforcement of the measures so determined and for mattersconnected therewith or incidental thereto.14.The term 'sick industrial company' has been defined undersection 3(o) of the Act, which reads thus," "sick industrial company" means an industrialcompany (being a company registered for not lessthan five years) which has at the end of anyfinancial year accumulated losses equal to orexceeding its entire net worth."The Company having been declared as sick, the share value of the Companyalso become 0% as the liability is more than its assets. Hencedefinitely there will be a loss to the shareholders while taking stepsto rehabilitate the sick company. The IDBI and IFCI, who advancedloans, have given their consent for rehabilitation scheme and based ontheir consent, the BIFR by order dated 27.7.2005, approved therehabilitation scheme. The BIFR being the statutory authority,established under Section 4 of the Act, to approve the rehabilitationscheme, considered the objections filed by the petitioner as ashareholder and also the consent given by the secured creditors andreduced the shareholding amount from 26.06 to 2.66 i.e, by 0.29% of thepetitioner Company.15.The petitioner challenged the said approval granted by theBIFR by filing appeal before AIFR, constituted under Section 5 of theAct, in Appeal No.107 of 2005. The grievance of the petitioner withregard to Clause 9(7)(2) pertaining to the reduction of its sharecapital in the third respondent Company and the direction to accept oneequity share against every 100 shares was considered. In the AIFR'sorder it is stated that the objections of the petitioner were consideredby the BIFR in the hearing held on 27.7.2005 and the objections werefound to be untenable. The petitioner raised the following fourcontentions in the appeal,(1)even though TIDCO was 26% shareholder, its objections were notconsidered by the BIFR;(2)the consent of the TIDCO for reduction of share capital was notconsidered by the BIFR even though it was party under section 19(1) ofSICA;(3)the BIFR ordered reduction of share capital without following theprocedure laid down under the Companies Act, 1956; and finally, https://hcservices.ecourts.gov.in/hcservices/ (4)the revival of the Company could be achieved byimplementing theschemewhich does not involve reduction of the share capital.The AIFR heard the General Manager of TIDCO and gave a finding thatTIDCO was represented by its General Manager and objections were dulyconsidered by the BIFR.16.Insofar as getting consent from the petitioner, the TIDCObeing an equity shareholder and the share value having been eroded andthe Company having been declared as Sick, the revival leads to reductionof share capital and transfer of management control to includepromoters, who have infused substantial funds as a result of which duesof secured creditors are being settled. A definite finding is given byholding that TIDCO's role in the case was an equity shareholder and itsconsent under SICA is not a mandatory requirement and as per section 18(2)(d)(f) and (i) of the SICA, curtailment of rights of the shareholdercan be ordered if the same is required for the revival of a sickindustrial company.17.Insofar as the allegation for not following the provisions ofthe Companies Act, 1956, while reducing the share capital, the BIFR heldthat while reviving a sick industrial company, the provisions of SICAhave to be followed as per the express provisions under section 18(2)(f)of SICA and as shares of the sick companies are usually valued at zerosince the erosion under net worth has already been taken place and thenet value of the assets of the company is negatived and in thatcircumstance it is usual that such shares are transferred to newpromoters at a nominal value, which has been rightly done by the BIFR.Pointing out all these grounds, the appeal was also dismissed.18.As regards the fourth ground of challenge that revival of RQLcould have been accomplished by implementing a scheme, which did notrequire reduction of share capital, TIDCO's argument is not tenable. IfTIDCO/erstwhile promoters had brought in funds of the company i.e., RQLwould not have become sick. In the instant case the change inmanagement control/pattern of share holding structure coupled with areduction of share capital was required in view of the fact that the newpromoter i.e., M/s.Satidham Syntex Limited was infusing a substantialamount of Rs.16.68 crores for repayment of dues to creditors and alsofor meeting the capital expenditure. The new promoter was, therefore,well within his rights to demand that the control of RQL, which wasbeing revived should be handed over to him. BIFR had accordingly inexercise of its power under section 18(2)(d), (f) and (i) approved thescheme based on the change in the shareholding structure throughreduction in share capital and allotment/transfer of shares to the newpromoter of RQL, namely, M/s.Satidham.19.Since the petitioner company is having only the status ofshareholder in the third respondent company, as rightly held by the BIFR https://hcservices.ecourts.gov.in/hcservices/ and AIFR, the consent of the petitioner is not required to be obtainedwhile approving the rehabilitation scheme. Since the third respondentCompany has become sick, automatically there must be a reduction ofvalue of the shares and the same is a reason given by BIFR and AIFR forreducing share value of the petitioner company. There is no disputewith regard to the declaration of the third respondent Company as a sickunit. Hence the petitioner cannot contend that its share capital valueshould be preserved as before without any reduction and without reducingits share capital value, the company can be rehabilitated. Such anargument cannot hold good in view of the loss sustained by the thirdrespondent company, which was declared sick.20.Equity shares under the Company Law is treated as 'riskcapital', normally conferred on their holders the residue of rights ofthe Company, which have not been conferred on other classes. The equityshares usually carry the main financial risk if the company isunsuccessful, but they carry the greatest prospect of financial rewardif the vendor of the Company is successful. It is well settled in lawthat if a company earns profit, the share holders will get higherdividend and if the company is at loss, the value of the share will alsoget decreased. Hence the contention of the petitioner that withoutreducing the share capital, value of the petitioner the Company can berehabilitated, is unsustainable.21.(a)Whether the BIFR and AIFR are empowered to approve thescheme of rehabilitation by reducing the share value of the shareholdersin a Sick Industrial Company to the extent necessary for reconstructionand whether the willingness of the shareholders is relevant wasconsidered by the Supreme Court in the decision reported in 1989 (66)Company Cases 132 (Navnit R. Kamani v. R.R.Kamani). In the saidjudgment it is held that the value of the shares could be determinedonly at the intrinsic value of the shares and the Board reached the firmconclusion that each share at zero value. Even then the Board directedthat the value of the share be reduced to Rs.1/- per share and directedthem to transfer the shares at Rs.1/- per share. The said reduction wasfound perfectly right in order to effectuate the scheme for revival. Itis also held that the scheme having been approved by the statutoryauthority and directions were given to revive the industry in largerpublic interest and inasmuch as there is a necessary declarationcontained in section 2 of the Act, which attracts the applicability ofArticle 31-C of the Constitution of India, the decision rendered by theBoard for reconstruction is unassailable.(b)A Division Bench of the Delhi High Court in the decisionreported in (2007) 77 SCL 45 (Delhi) (National Textile Corporation Ltd.v. Suresh Chand Gupta) considered the scope of interference in theapproved schemes by BIFR under Article 226 of the Constitution of Indiaby the High Court. In paragraphs 31 and 32, it is held as follows: https://hcservices.ecourts.gov.in/hcservices/ "31.It is well-settled that even if there is aviolation of law, this Court is not bound tointerfere in discretionary jurisdiction underarticle 226 of the Constitution, vide Chandra Singhv. State of Rajasthan (2003) 6 SCC 545; andChampalal Binani v. CIT (1970) 76 ITR 692 (SC), etc.32.In Master marine Services (P) Ltd v.Metcalfe & Hodgkinson (P) Ltd., AIR 2005 SC 2299,the Supreme Court observed:"..... the modern trend points to judicialrestraint in administrative actions ......Quashing decisions may impose heavyadministrative burden on the administration andlead to increased and unbudgetedexpenditure. ... Even when some defect is foundin the decision-making process, the Court mustexercise its discretionary powers under Article226 with great caution and should exercise itonly in furtherance of public interest and notmerely on the making out of a legal point. TheCourt should always keep the larger publicinterest in mind in order to decide whether itsintervention is called for or not. Only whenit comes to a conclusion that overwhelmingpublic interest requires interference, shouldthe Court interfere.(p.2304)" (c)In the decision reported in (2006) 72 SCL 219(Guj) (DevrajMamdhawan v. Rohit Mills Ltd.) also it is held that orders passed by theBIFR and AIFR consisting of technical experts, unless it is shown thatthe policy or action is inconsistent with the constitution and the lawsare abuse of the power, the court will not interfere in such matters.(d)The same is the view taken by this Court in the decisionreported in 2003 (Vol.117) Company Cases 73 (K.C.Palanisamy v. AppellateAuthority for Industrial and Financial Reconstruction and others). Inthe said Judgment, this Court followed a Division Bench decisionreported in (1997) 89 Company Cases 600 (J.M.Malhotra v. Union of India)for the proposition that the Board consists of persons who are expertsin the field that it is presided over by a person who has been or isqualified to be Judge of the High Court and it has to record its opinionwith reasons after considering all the relevant facts and circumstancesand after hearing all the concerned parties. The Board while actingunder section 7, acts as a judicial body. There is no scope for theBoard to act arbitrarily and adopt different procedure and applydifferent modes or norms.Here in this case, AIFR also confirmed the order. The AIFR is alsoan expert body and its Chairman shall be a person, who is or has a Judgeof the Supreme Court or who is or has been a Judge of the High Court for https://hcservices.ecourts.gov.in/hcservices/ not less than five years. Hence the third respondent Company isentitled to be revived as per the rehabilitation scheme.(e)Whether the consent of the shareholder is required to beobtained while approving the revival of the scheme by the BIFR wasconsidered by a Division Bench of the Delhi High Court in the decisionreported in AIR 1996 Delhi 172 (Bennett, Coleman & Co. Ltd. v. AppellateAuthority for Industrial and Financial Reconstruction). In paragraph 5it is held as follows:".... As far as BIFR was concerned ACL wasanother shareholder though having substantialshareholding and it was not necessary for the BIFRto issue any separate notice to BCCL, and thatnotice issued to ACL, which was represented by itsManaging Director Dr.Jain, was enough notice for thepurpose of SICA. It is also difficult to believethat BCCL was ignorant of the proceedings pendingbefore the BIFR. BCCL, therefore, cannot have anygrievance that it was not associated in theproceedings before the BIFR on behalf of the ACLupto the time when ACL was represented through theManaging Director, Dr.Jain and till BCCL put in itsappearance."22.The scope of Judicial Review in writ jurisdiction wasconsidered by the Supreme Court in the recent decision reported in 2008AIR SCW 390 (Sarabjit Rick Singh v. Union of India) and in paragraph 45the Supreme Court held thus,"45...... We must bear in mind that the HighCourt was dealing with a writ petition filed by theappellant herein under Article 226 of theConstitution of India and not an appeal from theorder of the learned Magistrate.The superior courts while entertaining a writpetition exercises a limited jurisdiction ofjudicial review, inter alia, when constitutional/statutory protection is denied to a person. But whenit is required to issue a writ of certiorari, theorder under challenge should not undergo scrutiny ofan appellate court. Jurisdiction of the superiorcourt in this behalf being limited inter alia to thequestion of jurisdiction, it was obligatory on thepart of the petitioner to show that a jurisdictionalerror has been committed by the court whileexercising the statutory powers. ......." https://hcservices.ecourts.gov.in/hcservices/ Here in this case no jurisdictional error is pointed out by thepetitioner and the case of the petitioner is, its objections were notduly considered.23.In view of the finding arrived at by me that consent of thepetitioner is not necessary for approval of the rehabilitation scheme, Ihold, there is no error in the order passed by the firstrespondent/BIFR, confirmed by the second respondent/AIFR. There is nomerit in the writ petition and consequently the writ petition standsdismissed. No costs. Connected miscellaneous petitions are alsodismissed.Sd/Asst.Registrar/true copy/Sub Asst.Registrar vrTo1.The Board for Industrial and Financial Reconstruction,1, Tolstoy Marg, Jawahar Vyapar Bhawan,New Delhi - 110 001.2.The Appellate Authority for Industrial andFinancial Reconstruction,10th Floor, Jeevan Prakash, 26, Kasturba Gandhi Marg,New Delhi - 110 001.+1cc to M/s.King & Partridge, Advocate Sr 9100+1cc to M/s.S.Vijayadharani, Advocate Sr 9263MRD (CO)km/25.2.W.P.No.8846 of 2007 & connected MPs.