Allowed

Registrar of Companies Karnataka v. M/S Namste Exports Ltd.

Karnataka HC27 Jan 2026WP/7734/2020

Case brief

AI extract

What is this about?

Petitioners sought quashing of BIFR orders permitting a sick company to raise authorised capital from ₹20 to ₹50 crores with fee exemption. Holding circulation of the scheme under Section 19 SICA and Regulation 34 mandatory and admittedly not done, the court quashed the orders; estoppel/delay pleas rejected; company free to pay fee and seek benefit.

What did the court decide?

Orders dated 12.02.2008, 09.03.2009, 18.11.2013 and 24.05.2016 quashed; respondent at liberty to pay fee as per law and seek benefit of Board order.

Registrar of Companies Karnataka Vs M/S Namste… — Company and Corporate | Karnataka HC (2026)

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NC: 2026:KHC:4430 WP No. 7734 of 2020

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HC-KAR

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IN THE HIGH COURT OF KARNATAKA AT BENGALURU

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DATED THIS THE 27^TH DAY OF JANUARY, 2026

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BEFORE

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THE HON'BLE MR. JUSTICE M.G.S. KAMAL WRIT PETITION NO. 7734 OF 2020 (GM-RES)

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BETWEEN:

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REGISTRAR OF COMPANIES-KARNATAKA BENGALURU 2^ND FLOOR, E-WING, KENDRIYA SADAN, KORAMANGALA, BENGALURU-560034

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MINISTRY OF CORPORATE AFFAIRS 5^TH FLOOR, A-WING, SHASHTRI BHAVAN, DR. RAJENDRA PRASAD ROAD, NEW DELHI-110001

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…PETITIONERS

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(BY SRI. KUMAR M.N., ADVOCATE)

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Digitally signed by SUMA B N Location: HIGH COURT OF KARNATAKA

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AND:

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M/S NAMSTE EXPORTS LTD., 21/2, VITTAL NAGAR, CHAMARAJPET, BENGALURU-560018

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…RESPONDENT

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(BY SRI. G.V.SATISH, ADVOCATE)

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THIS WP IS FILED UNDER ARTICLES 226 AND 227 OF THE CONSTITUTION OF INDIA PRAYING TO QUASH THE ORDER DATED 12.02.2008 PASED BY LD.BOARD FOR INDUSTRIAL AND

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FINANCIAL RECONSTRUCTIONS IN CASE NO.281/1998 VIDE ANNEXURE-A AND ETC.

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THIS PETITION, COMING ON FOR FURTHER HEARING, 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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ORAL ORDER

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The petitioners are before this Court seeking the

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following reliefs:-

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a. "Issue a writ of certiorari quashing the order dated 12.02.2008 passed by Ld.Board for Industrial and Financial Reconstructions in Case No.281/1998 vide Annexure-A.

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b. Issue a writ of certiorari quashing the order dated 09.03.2009, passed by Ld.Board for Industrial and Financial Reconstructions in Case No.281/1998 vide Annexure-B.

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c. Issue a writ of certiorari quashing the orders dated 18.11.2013 passed by Ld.Board for Industrial and Financial Reconstructions in Case No.281/1998 vide Annexure-D.

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d. Issue a writ of certiorari quashing the order dated 24.05.2016 passed by Ld.Board for Industrial and Financial Reconstructions in Case No.281/1998 vide Annexure-E.

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e. Issue a writ or direction for deleting/modifying para 15(i) of the modified sanctioned scheme MS 13 dated 03.12.2013 approved by BIFR.

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f. 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.

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g. Pass such other order/s as this Hon'ble Court may deem fit in the facts and circumstances of the case."

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Facts in brief are that:-

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(a) The respondent was declared a 'SICK Industrial

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Company' in terms of Section 3(1) (o) of the SICK Industrial Companies (Special Provisions) Act, 1985 (hereinafter referred to as 'the Act, 1985', for short) by the Board of Industrial and Financial Reconstructions (Board) in the hearing held on 19.03.1999. The Board sanctioned the rehabilitation scheme in terms of Section 18(4) read with Section 19(3) of the Act, 1985 vide order dated 11.07.2003 known as (SS-03) for revival of the respondent and considered the cutoff date as 30.09.2002. The Board appointed IDBI as the monitoring agency to monitor the progress of implementation of the scheme and also reviewed by the Board.

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(b) The respondent had prayed for permission to increase its authorized capital from ₹20 crores to ₹50 crores and the Board vide order dated 12.02.2008 permitted the respondent to increase its authorized capital

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as prayed for and further by its order dated 09.03.2009 directed the concerned Registrar of Companies to exempt the respondent from paying any fee on the increased authorized capital.

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(c) That on receipt of the said order, the petitioner No.1 filed an application on 25.01.2011 in the proceedings under Section 18(5) the Act, 1985 seeking for modification of the order dated 12.02.2008, on the premise that the scheme requiring waiver of payment of fee for increase in the authorized capital from ₹20 crores to ₹50 crores was not circulated to the petitioners and was contrary to the provisions of the Companies Act, 1956 and the Board lacked jurisdiction to pass such an order directing the petitioners to waive the fee to be paid on the increased authorized capital.

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(d) That the Board without considering or referring to the said application filed by the petitioners, by its order dated 18.11.2013 held that the Board's order dated

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12.02.2008 has become final and consequently, Registrar of Companies (ROC), Karnataka was directed to comply with the said direction.

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(e) That the respondent, vide its letter dated 16.02.2016, requested the petitioners to give effect to the increased authorized capital annexing a copy of the order dated 12.02.2008. That since the order was passed against the provisions of law and could not be given effect to. The respondent preferred a miscellaneous application for direction to the petitioners to comply with the order dated 24.05.2016. In response whereof, the Board issued a direction to the petitioners to comply with its order dated 12.02.2008. Thereafter, the Ministry by letter dated 20.09.2016 directed the petitioners to file an appeal for amendment of Board's orders dated 12.02.2008, 09.03.2009, 18.11.2013 and 24.05.2016.

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(f) That in the meanwhile, Act 1985 was repealed by the SICK Industrial Companies (Special Provisions) Repeal

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Act, 2003 (hereinafter referred to as 'Act, 2003', for short). Consequently, the Board and Appellate Authority were dissolved and substituting the relevant provisions with the Eighth Schedule of the IBC, which provided for preferring an appeal to the Appellate Authority or any reference made or enquiry pending to or before the Board or any proceedings of whatever nature pending before the Appellate Authority or the Board under the Act, 1985 stood abated.

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(g) In view of certain difficulties which arose, the Government had issued order dated 24.05.2017 providing that any appeal preferred to the Appellate Authority or any reference made or inquiry pending before the Board etc., stands abated. It further provided that a company in respect of which such appeal or reference or inquiry stands abated under this clause may make a reference to the National Company Law Tribunal under the Code within 180 days from the date of communication of the Code. Accordingly, petitioners preferred an appeal before the

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National Company Law Appellate Tribunal in Company Appeal No. (AT) Insolvency 647-650 of 2018.

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(h) In the meanwhile, in the light of the order passed by the Hon'ble Apex Court in the case of M/s.Spartek Ceramics India Ltd. vs. UOI and others¹ , wherein the notification issued directing to avail the alternate remedy was struck down, consequent upon which, the appeal preferred by the petitioners were dismissed by the National Company Appellate Tribunal vide order dated 21.12.2018 (NCLAT) as not maintainable reserving liberty to the petitioners to approach any forum for appropriate relief. It is under these circumstances, the present petition is filed.

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Sri.M.N.Kumar, learned counsel appearing for the petitioners taking this Court through the records more particularly, provisions of Section 19 of the Act, 1985 and

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1 Civil Appeal Nos.7291-7292/2018

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Regulation 34 of the BIFR Regulation, 1987 vehemently submits;

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(a) That circulation of the scheme as contemplated thereunder is a condition precedent, non compliance of which would render the whole scheme void ab initio . That such a provision is provided to ensure public money is safeguarded, which has to be given utmost priority unless exempted otherwise in the manner known to law.

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(b) That though it was the statutory obligation on the part of the Board to ensure compliance of such a requirement, yet the petitioners had filed an application on 25.01.2011 bringing to its notice non-compliance of the said provisions. Said application however was not considered by the Board, which deficiency cannot be attributed to the petitioners.

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(c) That in the light of there being no effective alternate remedy either under the repealed Act or under the IBC, petitioners are left with no other option but to

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approach this Court seeking the relief as sought for and

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seeks for allowing of the petition.

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Sri.K.V.Satish, learned counsel appearing for the respondent, at the outset submits:-

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(a) That the Rehabilitation Scheme was initially approved on 11.07.2003, in which there was neither any concession sought nor was any concession given with regard to enhancement of the authorized capital. That such order was passed only on 12.02.2008 and the said order was communicated to the petitioner No.1 ROC (Registrar of Companies).

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(b) That in furtherance to the order passed by the

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Board, the respondent - company submitted Form-2 as provided under the Companies Act, 1956 and proceeded further in issuing the shares in respect of the enhanced

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authorized capital which is also to the very notice of the petitioner No.1 - ROC. That subsequent thereof, the respondent company has been continuously submitting its

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returns to the very knowledge of the petitioner No.1 - ROC

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yet no action has been taken.

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petitioner No.1 to take appropriate action in the matter as per the direction issued by the Board and to apprise the development in the matter. Thus, he submits that there is substantial compliance of the provisions of law in the nature of repeated direction by the Board as well as by the petitioner No.2 - Ministry ensuring compliance of the directions issued by the Board.

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(d) Petitioner No.1 - ROC, despite having the knowledge of the same, has come up before this Court reopening the issue which is not permissible. Referring to Section 25 of the Act, 1985, he submits that ROC - petitioner No.1 if at all was aggrieved by the order of the Board was required to file an appeal within 45 days from the date of receiving the order, no such appeal having

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been filed, the application even if one filed under Section

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25(1) being belated cannot be entertained.

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(e) He also refers to the repeal provisions of the Repeal Act, 2003 to contend that the petitioners cannot plead ignorance of the change of law and if not having taken any action, the order by the Board authorising the respondent - Company to increase the authorise capital and consequent implementation of the same by the respondent - Company cannot be called in question under the guise of the present writ petition.

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(f) He relies upon the judgment of the Hon'ble Apex Court in the case of Rajasthan State Industrial Development and Investment Corporation and another versus Diamond and Gem Development Corporation Ltd. and another² as well as University of

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Delhi versus Union of India and another³ in support of

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2 (2013) 5 SCC 470

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3 (2020) 13 SCC 745

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his submission regarding waiver, estoppel, delay and

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latches. Hence, seeks for dismissal of the petition.

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Heard and perused the records.

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There is no dispute of the fact that respondent company which was declared 'SICK' Industry was subject matter of a revival in term of a scheme approved by the Board, vide its initial order of revival dated 11.07.2003 which was modified subsequently on 12.02.2008 passed in Case No.281 of 1998. By said order dated 12.02.2008, the Board accepted the request of the respondent - Company to increase the authorized capital from ₹20 crores to ₹50 crores. By the same order, Board issued direction, which is as under:-

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"i) The company is permitted to enhance its authorized capital from existing Rs.20.0 crs. to Rs.50.0 crs. and the concerned ROC would exempt the company from payment of any fees in this regard."

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It is this direction of the Board which has given

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rise to this stalemate. On a query by this Court as to if

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the scheme, specifically the modified scheme, providing

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for increase in the authorised capital was circulated as required under Section 19 of the Act, 1985 and Regulation 34 of Regulation 1987, learned counsel for the respondent submitted that there has been no such circulation. The

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question therefore requires consideration is:-

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(i) Whether the Board is justified in issuing such a direction in the light of provisions of Section 19 of the Act, 1985 and the Regulation No.34 of Board for Industrial and Financial Reconstruction (BIFR) Regulations, 1987 and in the light of admitted fact of there being no compliance of the said provisions?

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Appropriate to refer to Sub-sections (1) & (2) of

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Section 19 of the Act, 1985 which reads as under:-

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"19. Rehabilitation by giving financial assistance.- (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

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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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Also appropriate to refer to Regulation 34 of the

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Board for Industrial and Financial Reconstruction (BIFR)

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Regulations, 1987, which 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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Sub-section (2) of Section 19 referred to above makes it mandatory that before according scheme of rehabilitation, if the scheme provides for any financial assistance by way of loans, advances or guarantees or reliefs or concessions or sacrifice from the Central Government and the State Government etc., such scheme shall be circulated to such persons/entity, within the time specified thereunder.

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Once the scheme is circulated, the statutory obligation would be on such person/entity to pass appropriate order if not, a deeming provision is provided to consider such consent having been given. Regulation 34 of the Board for Industrial and Financial Reconstruction (BIFR) Regulations, 1987 as extracted hereinabove provides the procedure for sanctioning the scheme, which also mandates that consent of the Central Government, State Government etc., shall be obtained prior to approval of the scheme involving providing of loan, advances, guarantees, reliefs and concessions or sacrifice.

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There is no dispute of the fact that either before passing the order dated 11.07.2003 or on its subsequent modification on 12.02.2008 there was no circulation of the scheme as mandated under Section 19 of the Act, 1985 and Regulation No.34 of the Board for Industrial and Financial Reconstruction (BIFR) Regulations, 1987.

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Needless to state that requirement of circulation is a sine quo non and no provision is provided under statute for relaxation of the same. Settled principle of law is that, if a statute provides for doing of an act in a particular manner, the same has to be done in that manner and no other. Since admittedly there is no compliance to that, as rightly pointed out by learned counsel for the petitioners, BIFR could not have provided approval for increase of authorized share capital from ₹20 crores to ₹50 crores. It could also not have directed the petitioner No.1 - ROC to provide the exemption from payment of fee post according the sanction. Both these

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orders run contrary to the provisions of Section 19 of the

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Act, 1985 as well as Regulation 34 of BIRF, 1987 such

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orders and directions are unsustainable.

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This takes this Court to the second limb of

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argument of learned counsel for the respondent, that is, with regard to estoppel, delay and laches attributed on the

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part of the petitioners. Same is liable to be rejected. Firstly, for the reason that when there is non-compliance of statutory requirement, which is an obligation casted on

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the Board, the same cannot be a ground to treat petitioners to be an aggrieved parties. Nonetheless, upon the subsequent order passed by the Board directing the petitioners herein to comply with the order dated 12.02.2008 of providing exemption, the petitioners, though not obligated, had indeed preferred an application under Section 18(5) of the Act, 1985 on 25.01.2011 as found at page No.38 of statement of objection produced by the respondent itself. No order on the said application

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has been passed either. As already noted above, in view

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of the repeal of the statute and the change of regime, the petitioners had indeed preferred appeal before the NCLAT, which resulted in dismissal reserving liberty to the petitioners to approach this Court.

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Secondly, the direction issued by the petitioner No.2 in its communication dated 20.09.2016 produced at Annexure - F to the writ petition directing the petitioners to file an application for amendment of Board's order sanctioning scheme, which is heavily relied upon by the counsel for the respondent, is hardly of any avail. The second paragraph of the said communication cannot be read in isolation to the first paragraph. Inasmuch as by the said communication, the second respondent's Ministry has directed the petitioner No.1 to file necessary application before the Board for amendment of its order. This perhaps in the light of non-compliance of mandatory requirement of provisions of Section 19 of the Act, 1985 and Regulation 34 of Regulation, 1987 it has to be read only to that extent and nothing more.

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Thirdly, petitioners have not derived any benefit whatsoever by the impugned orders of the Board to press into service the principles of estoppel or waiver. Reliance placed on by the learned counsel for the respondent as to the judgment in the case of Rajasthan State Industrial

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Development and Investment Corporation and another stated supra is of no avail.

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At paragraph No.10 of the writ petition, the petitioners have provided the details of the fee payable by the respondent company on account of increase in the authorized capital from ₹20 crores to ₹50 crores. The fee payable as per paragraph No.10 is Rs.23,81,000/-. Said amount is substantial and is public money.

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In the light of non-compliance of the mandatory provisions of the law referred to above, scheme to the extent according to permission to increase the share capital without payment of applicable fee cannot be sustained. Accordingly, the following:-

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ORDER

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i. The writ petition is allowed .

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ii. Orders impugned at Annexure - A dated 12.02.2008, Annexure - B dated 09.03.2009, Annexure - D dated 18.11.2013 and Annexure - E dated 24.05.2016 to the extent noted above are quashed.

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iii. Notwithstanding the aforesaid order allowing the writ petition, the respondent is at liberty to pay the amount/fee as per law and seek the benefit of the order of the Board, if so advised.

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

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MH/List No.: 1 Sl No.: 10

Registrar of Companies Karnataka v. M/S Namste Exports Ltd.

Case brief

What is this about?

What did the court decide?

Registrar of Companies Karnataka v. M/S Namste Exports Ltd.

Case brief

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