- (1.) This appeal, by special leave, is directed against the judgment of the Allahabad High Court dated December 9, 1994 in Civil Miscellaneous Writ Petition NO. 27998 of 1994 filed by respondents Nos. 1, 2 and 3 whereby it has been held that the U.P. State Sugar Corporation Ltd., appellant herein, (hereinafter referred to as 'the Corporation") was not entitled to alienate its assets in view of the pendency of the proceedings before the Board of Industrial and Financial Reconstruction (hereinafter referred to as 'the Board') under the provisions of the Sick Industrial Companies ( Special Provisions) Act, 1985 (hereinafter referred to as 'the Act').
(2.) The Corporation is a company registered under the Companies Act, 1956. The State of U.P. holds 99.9% shares in the Corporation. The Corporation was incorporated with the object of taking over and running the private sugar mills which had been acquired by the State of U.P. under the U.P. Sugar Undertakings (Acquisition) Act, 1971. 29 such sugar mills had been acquired and the Corporation has established 6 more units and at present it is holding 35 sugar units spread over the State of U.P. The 29 sugar mills which had been acquired were old units and some of them were established nearly forty years prior to their acquisition in1971. Their plant and machinery were obsolete and the units functioned at a very low capacity. Their operations were highly unprofitable and consequently the Corporation has been suffering continuing losses. In August 1992, the Government of U.P. took a policy decision to privatise some of the units of the Corporation and a Privatisation Committee comprising senior officials of the State Government after examining the matter came to the conclusion that the sale of continuing losses making units was absolutely necessary. The Board of Directors of the Corporation considered the matter and on February 27, 1993 they resolved that 8 of the units at Meerut, Bareilly, Barabanki, Burhwal, Nawabganj, Munderwa, Baitalpur and Ghughli be initially privatised. The said proposal for sale of units was accepted by the State Government and the said decision was communicated to the Corporation on September 4, 1993. The State Government also formed a Committee to recommend the procedure to be followed for such sale. The said Committee submitted its report on October 19, 1993 wherein the details of sale procedure to be followed was set out. This report was again considered by the Privatisation Committee on December 31, 1993 which broadly accepted the same and it was decided to set up a Committee to obtain proposals for privatisation, to negotiate with potential buyers and take appropriate action. The said Committee decided to get appropriate evaluation of each of the units proposed to be sold from independent valuers, namely, A.F. Ferguson and Company and S.R. Batliboi and Company.Thereafter, on March 20, 1994 an advertisement was published in leading newspapers in the country inviting tenders for outright sale of the said 8 sugar mills. In response to the said advertisement 41 offers were received but only 38 conformed to the requirements. The Committee presided over by the Principal Secretary, Sugar and Cane Department, after considering the said offers, submitted its report to the Government of U.P. on July 14, 1994. The said report was considered by the Privatisation Committee on July 19, 1994 and later by the State Government. Based on the recommendations of the Privatisation Committee the State Government issued directions to the Corporation on July 27, 1994 which were considered by the Board of Directors of the Corporation on July 28, 1994 and the said decision of the Board of Directors was approved at the annual general meeting of the Corporation held on July 28, 1994. On August 24/25, 1994 the Writ Petition giving rise to the present appeal was filed in the High Court by respondents Nos. 1,2 and 3 (hereinafter referred to as 'the petitioners'). In the said writ petition the petitioners assailed the decision for the sale of the 8 sugar mills and prayed for issuance of a writ, order or direction in the nature of certiorari to quash the sale notice as published in the newspapers dated March 25, 1994 and July 29, 1994 and all proceedings undertaken in pursuance thereof and also prayed for a writ, order or direction of a suitable nature restraining the Corporation as well as respondents Nos. 4 and 5 from taking any action on the basis of the impugned sale notice. The said Writ Petition has been allowed by the High Court by the impugned judgment.
(3.) At this stage it would be convenient to take note of the relevant provisions of the Act. As stated in the Preamble, the Act was enacted by Parliament to make, in the public interest, special provisions with a view to securing the timely detection of sick and potentially sick companies owning industrial undertakings, the speedy determination by a Board of experts of the preventative, ameliorative, remedial and other measures which need to be taken with respect to such companies and the expeditious enforcement of the measures so determined and for matters connected therewith or incidental thereto. The Act was amended by Act No.57 of 1991 and, more recently, by Act No. 12 of 1994 with effect from February 1, 1994. In the Act, as originally enacted, a Government Company, as defined in Section 617 of the Companies Act, was expressly excluded from the ambit of the Act inasmuch the expression 'Company' under Section 3(d) of the Act was defined to mean "a company as defined in Section 3, of the Companies Act, 1956 (1 of 1956) but does not include a Government company as defined in Section 617 of that Act." By Section 2 of Act No.57 of 1991 the words "but does not include a Government company as defined in Section 617 of that Act" have been omitted from the said provision. As a result, a Government company has also been brought within the ambit of the Act. In Section 4, of the Act provision has been made for the establishment of the Board.;