BIFR, AAIFR Not Competent To Issue Directions To Non-Sick Industrial Company: SC [Read Judgment]

Board can issue a direction not to dispose of assets only to a sick industrial company, the Court said.

The Supreme Court in President J.K. Synthetics Mazdoor Union, Kota vs. Arfat Petrochemicals Pvt. Ltd., has reiterated that the Board for Industrial and Financial Reconstruction (BIFR) has no competence to issue directions under Section 22A of the Sick Industrial Companies (Special Provisions) Act, 1985, to a company that is not a sick industrial company.

Certain directions like not to dispose of the assets were issued by the BIFR against M/s Arafat Petrochemicals Pvt. Ltd. (APPL), which was affirmed by Appellate Authority for Industrial and Financial (AAIFR). The said order was set aside by the Rajasthan High Court holding that the BIFR and the AAIFR do not have jurisdiction to issue directions to a company, which is not a sick industrial company under Section 22 A of the Act.

On an appeal, the apex court bench comprising Justice Anil R Dave and Justice L Nageswara Rao, referring to UP State Sugar Corporation Ltd vs UP State Sugar Corporation Karamchari Association and Anr., observed that the board can issue a direction not to dispose of assets only to a sick industrial company and does not have competence to issue directions to a company, which is not a sick industrial company under Section 22 A of the Act.

“There is no dispute that the first respondent is not a sick industrial company and that it purchased the assets from a sick industrial company in accordance with the Sanctioned Scheme,” the bench observed.

However, the court has not expressed any opinion on the jurisdiction of BIFR under other provisions of the Act.

Read the Judgment here.