Delhi High Court upholds the vires of S. 4(b) of Sick Industrial Companies (Special Provisions) Repeal Act, 2003

Delhi High Court: A Division Bench comprising of Sanjiv Khanna and Pratibha M. Singh, JJ dismissed a writ petition before it which challenged the constitutional validity of Section 4(b) of the Sick Industrial Companies (Special Provisions) Repeal Act, 2003 (hereinafter the ‘Repeal Act’).

The petitioner claimed to be engaged in manufacturing a full range of industrial equipment for sugar and other industries. It claimed to have run a highly profitable business till 1994-95. after which it started facing severe losses. The petitioner was consequently declared a sick company in 1999 by the Board for Industrial & Financial Reconstruction (hereinafter ‘BIFR’) and IDBI was appointed as the operating agency for the purposes of formulating the scheme. During the pendency of the draft rehabilitation scheme, the Repeal Act was enforced and the proceedings before BIFR were abated.

The petitioner’s grievance is that it’s scheme, which was pending before BIFR, was at a very advanced stage and was almost on the verge of acceptance a day prior to the notification. The petitioner had taken several steps throughout the lengthy process and had undergone, several rounds of the proceedings before the BIFR and the Appellate Authority for Industrial & Financial Reconstruction (hereinafter ‘AAIFR’) and that it was mere misfortune that the scheme was not approved by the BIFR on 30th November, 2016 and the notification came on 1st December, 2016. The petitioner, in effect, challenged the vires of Section 4(b). The petitioner also argued that classification between cases where schemes were pending and schemes that were sanctioned was not based on any intelligible differentia and does not satisfy the object sought to be achieved.

The Court rejected the arguments stating that the provision which differentiates between sick companies with approved draft schemes and those without one does not violate Article 14 of the Constitution of India. It also rejected the argument that the petitioner had a legitimate expectation pertaining to their claims. The Court observed that there was no legal basis to this argument, considering the right of the petitioner to approach the appropriate forum had not been taken away. Petition dismissed. [M/s ATV Projects (India) Ltd v. Union of India, 2017 SCC OnLine Del 12136, decided on 05.12.2017]

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