Registrar of Companies Bangalore Vs M/S South India Cements Ltd.

M/S. SOUTH INDIA CEMENTS LTD., SURVEY NO.367, VILLAGE MALKHED, SEDAM TALUK, KALABURAGI DISTRICT, SEDAM, KALABURAGI, KARNATAKA - 585 317, REPRESENTED BY, MANAGING DIRECTOR.

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Digitally signed by SAROJA HANGARAKI Location: High Court of Karnataka, Dharwad Bench, Dharwad

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…RESPONDENT

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(BY SMT. SNEHA NAGARAJ, ADVOCATE)

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THIS WRIT PETITION IS FILED UNDER ARTICLES 226 AND 227 OF THE CONSTITUTION OF INDIA PRAYING TO ISSUE A WRIT OF CERTIORARI QUASHING THE ORDER DATED 31.07.2013 PASSED BY LD. BOARD FOR INDUSTRIAL AND FINANCIAL RECONSTRUCTIONS IN CASE NO.MSS-76/1993 VIDE ANNEXURE-A. ISSUE A WRIT OR DIRECTION TO THE RESPONDENT TO PAY THE REQUISITE FEE ON THE INCREASED AUTHORIZED SHARE CAPITAL AND FILE NECESSARY E-FORMS AS PER THE COMPANIES ACT, 2013 AND ETC.,

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THIS WRIT PETITION, COMING ON FOR PRELIMINARY HEARING ‘B GROUP’, THIS DAY ORDER WAS MADE THEREIN AS UNDER:

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CORAM: HON'BLE MR JUSTICE M.G.S. KAMAL

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HC-KAR

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ORAL ORDER

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Heard Sri M.N. Kumar, the learned counsel appearing for the petitioners and Ms. Sneha Nagaraj, learned counsel appearing for the respondent through Video Conference.

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Short question that arises for consideration is with regard to non compliance of statutory requirements contemplated under Section 19 of the Sick Industrial Companies (Special Provision) Act, 1985 read with Regulation No.34 of BIFR Regulation, 1987 while approving the scheme of limitation.

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It appears that the modified sanctioned scheme was purportedly approved by the then Board of Industrial and Financial Reconstruction (‘BIFR’) in case No.MSS 76/1993 providing exemption to the respondent- company from paying requisite filing fees while increasing its authorised share capital. Case of the petitioner is that prior approval of the Central Government has not been obtained while approving the modified sanction scheme.

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HC-KAR

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The learned counsel for the petitioner on 02.08.2024 while addressing his arguments had brought to the notice of this Court the provisions of Regulation 34 of BIFR Regulation 1987 in this regard. Matter was thereafter posted on 05.09.2024 on which date the learned counsel appearing for the respondents referring to provisions of Sub-sections (1) and (2) of Section 19 of the Sick Industrial Companies (Special Provision) Act, 1985 and para 3 of the Annexure –A (modified scheme) submitted that before finalising the scheme for rehabilitation, draft was circulated on 13.03.2013 and the final scheme was thereafter approved on 31.07.2013. She had submitted that the said process was in compliance with the requirement of Sub-sections (1) and (2) of Section 19 even as seen at para 3 of the said draft.

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In response, the learned counsel for the petitioner

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had filed an application seeking direction to the Registrar of NCLAT, New Delhi, to produce records pertaining to the aforesaid BIFR Case No.MSS 76/1993 in respect of

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HC-KAR

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respondent-company to verify if the draft scheme had been circulated as required under Sub-Section (1) and (2) of 19 of the Act as contended by the respondent. Said application was allowed. Summons were issued to the Registrar NCLAT, New Delhi Branch for production of records as sought for by order dated 21.01.2025. The Deputy Registrar, NCLAT, personally appeared before this Court on 28.02.2025 and submitted the records in the form of a pen-drive in a sealed cover. Contents of the said pen-drive were circulated to the respondent through the email. Matter was thereafter posted enabling the learned counsel for the petitioners as well as the respondent to verify the records and to make submission in this regard.

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Accordingly, listed today for their submission. The learned counsel for the petitioners as well as the learned counsel for the respondent in unison submit that on verification of the records so furnished by the Deputy Registrar of NCLAT, New Delhi Branch, nothing is forthcoming as regards draft of the scheme having been

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circulated to the Registrar of Companies/petitioner herein. Learned counsel for the petitioner therefore submits the grounds urged and apprehensions expressed in the petition of non compliance with the provisions of Section 19 and Regulation 34 of BIFR Regulation 1987 stands fortified. Resultantly, he submits that the impugned scheme produced at Annexure-A to the extent pertaining to the concession given at paragraph 10 at page 24 of the said scheme is required to be quashed.

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In response, the learned counsel for the respondent vehemently submits that though the records furnished by the Deputy Registrar do not contain acknowledgment regarding circulation of the scheme, since the drafts modified scheme refers to compliance of Section 19, inference may have to be drawn regarding compliance of requirement of circulation.

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Alternatively, she submits that if in the event of this Court coming to the conclusion of there being no compliance, and though in principle the respondent may

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HC-KAR

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not have any objection for remitting the matter to the concerned authority for fresh consideration giving an opportunity to the petitioner-Registrar, the same shall not

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be construed as the scheme having been set aside in its entirety giving rise to claims and objections by other entities.

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Heard and perused the records. Section 19 of the BFIR Act reads as under:-

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“19. Rehabilitation by giving financial assistance.—

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(1) Where the scheme relates to preventive, ameliorative, remedial and other measures with respect to any sick industrial company, the scheme may provide for financial assistance by way of loans, advances or guarantees or reliefs or concessions or sacrifices from the Central Government, a State Government, any scheduled bank or other bank, a public financial institution or State level institution or any institution or other authority (any Government, bank, institution or other authority required by a scheme to provide for such financial assistance being hereafter in this section referred to as the person required by the scheme to provide financial assistance) to the sick industrial company.

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(2) Every scheme referred to in sub-section (1) shall be circulated to every person required by the scheme to provide financial assistance for his consent within a period of sixty days from the date of such circulation [or within such further period, not exceeding sixty days, as may be allowed by the Board, and if no consent is received within such period or further period, it shall be deemed that consent has been given].

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(3) Where in respect of any scheme the consent referred to in sub-section (2) is given by every person required by the scheme to provide financial assistance, the Board may, as soon as may be, sanction the scheme and on and from the date of such sanction the scheme shall be binding on all concerned.

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[(3A) On the sanction of the scheme under subsection (3), the financial institutions and the banks required to provide financial assistance shall designate by mutual agreement a financial institution and a bank from amongst themselves which shall be responsible to disburse financial assistance by way of loans or advances or guarantees or reliefs or concessions or sacrifices agreed to be provided or granted under the scheme on behalf of all financial institutions and banks concerned.

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(3B) The financial institution and the bank designated under sub-section (3A) shall forthwith proceed to release the financial assistance to the sick industrial company in fulfilment of the requirement in this regard.]

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(4) Where in respect of any scheme consent under sub-section (2) is not given by any person required by the scheme to provide financial assistance, the Board may adopt such other measures, including the winding up of the sick industrial company, as it may deem fit.”

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10. Regulation 34 of the BIFR Regulation 1987

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reads as under:-

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“34. (1) A scheme under sub-section (1) of section 19, which provides for financial assistance to the sick industrial company by way of loans, advances, guarantees, reliefs, concessions or sacrifices from the Central Government, a State Government, any scheduled or other bank, a public financial institution or State level institution, or any institution or other authority, shall be sanctioned by the Board, with the consent of the Government, bank, institutions or other authorities called upon to provide loans, advances, guarantees, reliefs, concessions or sacrifices.

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(2) The Board shall cause the scheme to be circulated to every person required by the scheme, to provide financial assistance by way of loans, advances, guarantees, reliefs, concessions or sacrifices for giving his consent, latest within a period of sixty days from the date of such circulation [or within such further period not exceeding 60 days as may be allowed by the Board. If no such consent is received, it shall be deemed to have been given].

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(3) Upon receipt of consent from every person [or when such consent is deemed to have been given] in terms of sub-regulation (2), the Board may, as soon as may be, sanction the scheme, which shall be binding on all concerned on and from the date of such sanction.”

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Perusal of the aforesaid provisions would

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indicate that there is a requirement of obtaining prior consent from the central Government by way of circulating the scheme for rehabilitation before its approval and finalization by the BIFR. Since there is no dispute with regard to the records not containing the information regarding any such acknowledgement of circulation having been made, and the aforesaid provisions of law mandating compliance of such requirement, inference of its compliance cannot be drawn in the facts and circumstance of this case merely because the draft modified scheme

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HC-KAR

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produced at Annexure-A refers to the draft having been circulated.

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However, the alternate submission being made

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by the learned counsel for the respondent merits consideration. In that, it is made clear that since the petitioner/Registrar of companies Karnataka is aggrieved only to the extent of concession granted to the respondent as seen at paragraph X, this order is restricted and be read only to the said extent and not beyond. Said paragraph X is extracted for the immediate reference:-

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“X) From the Ministry of Corporate affairs/Registrar of companies, Karnataka

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To exempt the company from the provisions of companies Act, 1956 with regard to the compliance of section 100 and other applicable provisions of the Act, for reduction of existing equity capital and further exempt the company from paying the requisite filing fees for increase in the authorized share capital from Rs. 1500 Lakhs to Rs.5000 Lakhs. Further the company shall be exempted to suffix the word “and Reduced” on the balance sheet.”

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In that view of the matter, the following:

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HC-KAR

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ORDER

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a) Writ Petition is partly allowed.

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b) The order at Annexure-A to the extent of paragraph X as extracted herein above is quashed.

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c) Respondent is at liberty to seek such remedy as

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may be available under law including but not limited making representation/application before the jurisdictional NCLAT or the Ministry of Corporate Affairs as the case may be and seek such orders as may be available under law.

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d) Needless to state, before passing any order upon the representation/application to be made by the respondent as stated, concerned authority shall provide an opportunity to the petitioner herein.

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Sd/(M.G.S. KAMAL) JUDGE

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VMB/ sh CT-ASC, List No.: 19 Sl No.: 1

Registrar of Companies Bangalore v. M/S South India Cements Ltd.

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Registrar of Companies Bangalore v. M/S South India Cements Ltd.

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