1. Heard learned counsel for the petitioner and the contesting respondent.
1.1 This writ petition relates to order passed by the Appellate Authority for Industrial and Financial Reconstruction (in short, AAIFR) in appeal 179 of 2000. Petitioner No. 1 company had moved for a reference u/s 15(1) of the Sick Industrial Companies (Special Provisions) Act, 1985 (in short, SICA) on the basis of accounts for the period ended 31.3.1998 before the Board for Industrial and Financial Reconstruction (in short, BIFR). Taking note of the observations made for a previous period, i.e., ending on 31.3.1997, BIFR held that the petitioner company was a sick industrial company within the meaning of Section 3(1)(o) of SICA, in case No. 51 of 1997. Said order was challenged by the Syndicate Bank and the SBI in two appeals before the AAIFR. By order dated 14.8.1998, AAIFR allowed both the appeals and set aside the order dated 12.1.1998 and dismissed the petitioner No. 1 company''s reference u/s 15(1) of the SICA on the basis of its accounts for the period ended 31.3.1997. The orders were challenged before this court in CWP No. 4702 of 1998. On 19.7.2000, the petition was dismissed as withdrawn. An application was filed for review before AAIFR, which was dismissed. While considering the appeal filed by the petitioner No. 1 company in appeal No. 179 of 2000, AAIFR took note of the conduct of the petitioner No. 1 company in alleged manipulation of accounts and held that this was not a fit case for reconstruction of balance sheet after disallowing the inadmissible and manipulated/fake items of expenses/losses. AAIFR inter alias observed as follows :
"This is not a fit case for reconstruction of balance sheets after disallowing the inadmissible and manipulated/fake items of expenditure/loss. As concluded earlier in AAIFR''s order dated 14.8.1998, there have been large scale manipulations of accounts, fabrication of figures, and surreptitious, shady dishonest and fraudulent transactions. The beneficent provisions of SICA, which is a socio-economic legislation in public interest, are meant for industrial companies with bona fide sickness. The provisions of SICA are not meant to protect companies/managements who come to BIFR, claiming sickness by accounting manipulations, fabrications of figures and dishonest and fraudulent transactions. No workable rehabilitation scheme can be prepared and implemented for such companies because the consent of the creditor banks and financial institutions is a mandatory pre-requisite for the sanction of a scheme. In the present case, MSL/management have defrauded their bankers. Public interest would be much better served by expeditious liquidation of such companies and distribution of sale proceeds from the disposal of their assets according to law, and this process has to be accomplished through appropriate Debt Recovery Tribunals/High Courts. Moreover, such companies/managements must not be allowed to file references u/s 15(1) of SICA for successive years when their earlier references are dismissed on the ground that they had approached BIFR with unclean hands, or by accounting manipulations and fabrication of figures, or after shady and fraudulent transactions. In such cases, the creditors must be free to seek the process of law and recovery of their dues from the companies and the guarantors to the extent possible through appropriate tribunals/courts. MSL''s case deserve to be dealt with accordingly."
2. The aforesaid quoted portion of the AAIFR''s observations essentially forms the subject matter of challenge in this writ petition.
2.1 According to learned counsel for the petitioner even if it is accepted for the sake of argument that there were omissions in the accounts for a particular period that should not be taken into account in the subsequent periods to throw out a genuine reference. It is submitted that the scheme of the statute warrants consideration of the financial status of a company on the basis of accounts for a particular period. What the BIFR or, for that matter, AAIFR is required to do is to see whether the accounts, after scrutiny, indicate sickness of the applicant company. Merely because for some years there had been adverse observations that cannot continue to be a factor for non-acceptance of a case of sickness. Learned counsel for the contesting respondent on the other hand, submitted that the conduct of a party, more particularly, manipulating accounts, is a fact which has to weigh with the authority while considering reference under the Act.
3. It is true as indicated by learned counsel for the petitioner that the authorities under the Act are required to consider the sickness or otherwise of an applicant on the basis of accounts produced by it. They are required to record a finding after taking into consideration all relevant aspects. The broad directions given by the AAIFR that in future also, the petitioner company would not be permitted to approach the authorities, does not appear to be in order. In the circumstances, while not entertaining this writ petition, we make it clear that if, for any subsequent period, any reference has been made or is made, the same shall be dealt with and examined by the authority under the Act by taking note of the accounts position and other relevant aspects requisite for adjudication of the question as to whether the applicant is a sick company or otherwise.
3.1 We make it clear that we have not expressed any opinion on the merits of the case for the subsequent periods, which shall be examined by the authorities and without being influenced by the fact that we have not entertained the writ petitions for the previous periods. The observations made regarding non-acceptance of reference in future as made by AAIFR shall not be operative.
3.2 This petition stands disposed of.
