Supreme Court of India
WORKMEN OF M/S ROHTAS INDUSTRIESversusROHTAS INDUSTRIES AND ORS.
- Citation
- 1995 INSC 634
- Decided
- 18 October 1995
- Disposal
- Disposed off
Holding
The Supreme Court held that revival of Rohtas Industries was not feasible and consequently dismissed the writ petition, ordering the winding‑up proceedings to be resumed.
Summary
Rohtas Industries, a large multi‑product manufacturer in Bihar, was ordered to be wound up in 1984, leaving about 10,000 workmen unemployed. The workmen filed a writ petition under Article 32 seeking revival of the undertaking, prompting the Supreme Court to direct the Union and State governments to refer the matter to the BIFR under the Sick Industrial Companies (Special Provisions) Act, 1985. After several rounds of funding, attempts at rehabilitation by a court‑appointed Rehabilitation Commissioner, and offers from private parties, the BIFR concluded that no viable revival scheme existed without massive state subsidies. The Court held that further judicial intervention to revive the industry was not feasible and ordered the writ petition to be dismissed, directing that the pending winding‑up proceedings before the Patna High Court be resumed. It also issued detailed transitional directions for the Rehabilitation Commissioner, the Official Liquidator, and the State regarding asset sale, payment of dues, and termination of the moratorium.
Issues considered
- The Supreme Court's jurisdiction to intervene in winding‑up proceedings under Article 32 for the purpose of industrial revival.
- Whether the Sick Industrial Companies (Special Provisions) Act, 1985 can be invoked to facilitate revival of a sick company pending a winding‑up petition.
- Whether the court‑appointed Rehabilitation Commissioner can be directed to continue operations, sell assets, and settle liabilities.
- Whether the moratorium on creditor actions imposed earlier should be lifted.
- Whether the winding‑up petition pending before the Patna High Court should be resumed after failed revival attempts.
Legislation cited
Subjects
winding upindustrial revivalBIFRSick Industrial Companies Actrehabilitation commissionermoratoriumArticle 32workmencorporate insolvency
Judgment
•
WORKMEN OF MIS ROHTAS INDUSTRIES A
v.
ROHTAS INDUSTRIES AND ORS.
OCTOBER 18, 1995
[KULDIP SINGH AND S.C.AGRAWAL, JJ.]
B
Company Law-S 396-Winding up proceedings-Efforts of the Court
to revive and rehabilitate the industry zmsuccessful-Directions for resuming
the Winding up proceedings issued.
c
Rohtas Industries situated in the State of Bihar, and its associate
companies were engaged in producing cement, paper- board, asbestos etc.
In 1984 the company closed down thus rendering about 10,000 workmen
unemployed. A winding up petition was filed before the Patna High Court
whereupon a Provisional Liquidator was appointed.
D
The workers filed a writ petition before this Court, during the pen-
dericy of the company petition, which was admitted to provide relief to. the
workmen and to revive the industry and notice given to both the State of
Bihar and the Union oflndia. Since the Sick Industrial Companies (Special
Provisions) Act 1985 came into force when the matter was before this Court, E
an order was made directing the Union Government to refer the matter to
the BIFR so that a scheme may be framed. On the report of the BIFR which
had opined that three of the units of the company could be revived while
one could not be, this Court in the interests of the workmen and the
problems that would have to be faced by the company, passed an order on
24-10-89 directing that the company in terms of vfable units should be F
revived. There was also a direction to the State to appoint an I.A.S. officer
with the right background as Rehabilitation Commissioner who would take
over from the Provisional Liquidator. A moratorium of one year in respect
of the assets was granted. The State Government was willing to deposit Rs.
15 lakhs with the Administrator and this Court directed the Union oflndia G
to deposit another sum of Rs.15 lakhs for use by the Administrator to meet
the wage bill, disbursement of loans etc. The Rehabilitation Commissioner
was successful in starting four units providing work for 2900 men. But he
needed more funds and approached the Court.
The State of Bihar and Financial Institutions could not provide the H
459
•
460 SUPREME COURT REPORTS [1995) SUPP. 4 S.C.R.
A funds. The Court felt that it would be best to dispose off the undertaking
and since a going institution would fetch a better price, directed the Union
of the India to advance a sum of Rs. 111. crores to the State of Bihar so
that the State could give the said sum to the industry. An advertisement
was issued inviting offers and 14 offers were received. The maximum offer
was Rs. 15 crores. Since the assets of the company were about Rs. 250
B
crores and the offers were way below this amount, the Court did not
entertain the offers and by another order directed the Union Government
to revive the reference to BIFR. Industrial Finance Corporation was
appointed by BIFR for preparing a report who in turn appointed SIRCON
to prepare the report. On receipt of the report the Court found that there
c was no possibility of revival though there were two proposals under
consideration. One of which offer was made by Shri L.N.Dalmia. Since
there were reservations expressed by BIFR, Union of India, and the State
of Bihar, the offer was found unworkable.
Disposing the writ petition with certain directions to the State
D Government, and the Rehabilitation Commissioner, this Court
HELD : 1. In spite of best efforts the object with which this Court
E
intervened in the matter by entertaining the writ petition, viz, to revive the
undertakings, does not appear feasible. The writ petition should be
brought to an end and the winding up proceedings pending before the
I
Patna High Court be resumed. [474-B]
2. Now while putting an end to these proceedings and permitting
resumption of the winding up proceedings in Company petition No.3 of
1984 pending before the Patna High Court, it is directed as under: [476-H]
F
(1) The Winding up proceedings in Company petition pending before
the Patna High Court will be resumed by the Company Judge. The parties
and the Rehabilitation Commissioner shall appear before the Company
Judge for seeking necessary directions on November 20,1995. [477-A]
G (2) The Rehabilitation Commissioner shall-
(a) complete the sale of the raw materials/finished products/wasted/
damaged materials including the burnt out transformer and rejected
copper cable be November 30, 1995; [477-B]
H (b) subject to availability of funds after incurring the expenses
'
WORKMEN OF M/S ROHTAS INDS. v. ROHTAS INDS. 461
towards payments under clauses (c), (d), and (e), pay the dues towards A
the supply of ra\v n1aterials on credit for the running of the units during
the period of tht!' pendency of these proceedings as wt'll as the amount
received as advance fron1 purchasers for the products to be supplied to
them by December 31, 1995; [477-C-D]
(c) pay the charges for the actual consumption of electricity for the B
period upto November 30, 1995; [477-E]
. (d) pay the charges for the security arrangements through the
Central Industrial Security Force for the period upto December 31, 1995
by December 1995;
c
(e) pay the salary of the staff employed for the period upto December
31, 1995 by December 31, 1995; [477-F]
(I} prepare an inventory of the properties, movable and immovable,
belonging to the company in his possession and control by December 10, D
1995;
(gJ handover the possession of the said properties to the Ollicial
Liquidator as per the inventory by December 31, 1995; [477-G]
(h) have the accounts for the period April I, 1995 till December 31, E
1·.
1995 duly audited and submit the same before the Company Judge in the
Patna High Court by January IS, 1996; [477-H]
(i) handover the papers relating to the affairs of the Company while
he was in control of the the san1e to the Official Lit1uidator by January 15,
1996.. [478-A] F
(3) With effect from the date of possession of the properties, as per
the inventory, is delivered to him by the Rehabilitation Commisioner, the
Official Lit1uidator \Viii assume charge of the assets of the Company for
I the purpose of winding up proceedings. [478-B]
G
(4) The otlicers, workmen and the staffs who are at present employed
in the undertaking of the Company shall continue in employment till
l)ecember 31, 1995. For their further continuance in employment the
Otlicial Liquidator \\ ill seek the necessary directions from the Company
1
- Judge. [47K-C] H
462 SUPREME COURT REPORTS (1995[ SUPP. 4 S.C.R.
A (5) Present security arrangements through the Central Industrial
Security Force will continue till December 31,1995. For further con-
tinuance of tlu~se arrang:ements, the ()llicial Lit1uidator may seek the
necessary directions from the Company Judge. [478-D]
(6) The existing arrangement for the supply of electricity by the
B Bihar State Electricity Board shall continue subject to the directions that
may be given by the Company Judge. No minimum guarantee charge will
be payable to the Bihar State Electricity Board and only the actual con-
sumption charges will be paid. The respective claims of the Rehabilitation
Commissioner and the Bihar State Electricity Board with regard to the
C supply of the electricity during the period the Company was under the
charge of the Rehabilitation Commissioner shall be considered by the
Company Judge. [478-E-F] 1I
i
(7) The State of Bihar will grant exemption from sales/ purchases
tax in respect of sales/purchases made by the Company during the period
D the units were revived by the Rehabilitation Commissioner while the
matter was pending before this Court. [478-G]
(8) The report of the Claims Committee on the claims of the Finan-
cial Institutions, creditors and the workers will be considered by the
Company Judge in the light of the objections that have been submitted
E against the said report. [478-H]
(9) The Company Judge may consider whether the industrial under-
l
takings of the Company can be revived in the light of the offers that have
F
been received from Shri L.N. Dalmia, Speedcrafts Pvt. Ltd. and Rohtas
Industries \Vorkcrs Cooperative Society Ltd. along with and other on·er
I
that may be received. [479-A]
(HI) In the event of sale of the assets of the Company during the
course of Vi'inding up proceedings, a su1n of Rs.34 crores which was
advanced by the State or Bihar as per directions of this Court in these
G proceedings shall be paid to the State of Bihar out of the sale proceeds
before discharging any other liability of the Company. [479-B]
(11) The Relief Commissioner shall stand discharged on January JS,
1996.
H (12) The n1oratorium iniposed_ under the order of this Court shall
,...
/
WORKMEN OF M/S ROHTAS INDS. v. ROHTAS INDS. 463
cease to operate with effect from December 31, 1995. A
(13) It \\-'ill be open to the Rehabilitation Con1nlissioner and the
Oflicial Lh1uidator to seek further directions fro1n this Court with regard
to any matter pertaining: to the period this writ petition was pending in
this Court. [479-D-E)
B
CIVIL ORIGINAL JURISDICTION: Writ Petition (C) No. 5222 of
1985.
(Under Article 32 of the Constitution of India.)
With c
Writ Petition (C) No. 443 of 1986.
(Under Article 32 of the Constitution of India.)
Dr. Shankar Ghosh, S.K. Verma, S.K. Sinha, K..J. John, G. Joshi, G. D
Kandpal, A.K. Sil, V.K. Verma, B.B. Singh, A.K. Ghosh, for Fox Manda!
& Co. L.R. Singh, K.K. Mani, K.V. Sreckumar, S.V. Deshpande, Pramod
I Swarup, M.T. George, Sudhir Kumar Gupta, P.R. Seetharaman, Ms.
Mridula Ray Bhardwaj, D. Goburdhan, Ranjit Kumar, Navin Prakash, Ms.
Binu Tamta, Ms. Abha Jain, C.V.S. Rao, Ajit Kumar Sinha and Ranbir E
Yadav for the appearing parties.
The following Order of the Court was delivered :
Rohtas Industries Limited (hereinafter referred to as 1'the Company11 )
\Vas running a large industrial undertaking corn prising of units for n1anufac~ f
turing cement, paper & board, asbestos, vulcanised fibers and vanaspati at
Dalmia Nagar in District Rohtas of the State of Bihar. The Company has
three associate companies, namely, Ashoka Cement Ltd., Parshava Mining
and Trading Company Ltd. and Dehri Rohtas Light Railway Company Ltd.
The Company was employing about 10,000 workmen. Troubles started in
1982-83 and ultimately the units of the Company were closed with effect G
from September 9, 1984 resulting in denial of employment to the workmen.
A petition (Company Petition No.3 of 1984) was lilcd for winding up of
• the Company heforc the Patna High Court and in the said petition the
Patna High Court on May 22, 1986 appointed the Provisional Liquidator.
During the pendency of the said petition, the workmen of the Company H
464 SUPREME COURT REPORTS [1995] SUPP. 4 S.C.R.
A moved this Court by filing this writ petition under Article 32 of the
Constitution. The petition was entertained by this Court with the object of
reviving the industry an<l rehabilitating the workmen. Notice \Vas issued lo
the State of Bihar and the Union of India so as to enable the Court lo solve ..
the human problem of unemployment of large number of workmen. While
the matter was pending consideration, the provisions of the Sick Industrial
B
Companies (Special Provisions) Act, 1985 (for short 'the Act') came into
force. As per suggestion of the learned Attorney General, the Court on
October 28, 1987 passed an order whereby the Central Government was
directed to, make a reference to the Board of Industrial and Financial
Reconstruction (BIFR) to frame a scheme under the Act and submit the
c same to the Court. The BlFR submitted a report on April 22, 1988 wherein
it was stated that three of the units of the Company, namely, Cement,
asbestos and vanaspati could be revived but the paper unit could not be
revived. Keeping in view the said report of the BlFR as well as the
statements filed on behalf of the State of Bihar and Union of India and the
D memorandum prepared by the Learned Attorney General of India filed
before this Court, the Court passed an order dated October 24, 1989
wherein it was observed :
"If the Company is not revived and gets liquidated the liabilities
would turn out to be far in excess of the assets and notwithstanding
E first or second charge on the assets, the creditors may not ap-
preciably benefit. This Court cannot lose sight of the fact that living
to about l0,000 families has been denied for over five years and
apart from national loss, the workmen have been put to serious
jeopardy. In these circumstances, \Ve are satisfied that it is or
paran1oun1 in1portancc that the Con1p<tny in respect of the viable
F 1
units should be revived and allowed to con1c into production' •
The Court directed the State of Bihar to appoint an authorised
officer from U1c senior !AS cadre with appropriate commercial background
to be the Rehabilitation Commissioner and the Provisional Liquidator
G appointed by the High Court in the winding up proceedings was directed
to hand over to the Administrator all the assets of the Company which he
had taken over under order of the Court and the several other assets of
the Company which had not been taken over the Provisional Liquidator
shall vest in the appropriate officer upon being designated and he was
H entrusted with the po\ver to take such steps as arc necessary to take over
WORKMEN OF MIS ROHTAS INDS. v. ROHTAS !NOS. 465
possession of such assets of the Company. It was also directed that the A
assets-of the con1pany encun1bered \Vith financial and other institutions
shall not be available to he proceeded against for a period of one year from
the date of the order and there shall be a moratorium for a period <if one
year in regard to proceedings taken and pending or to be taken against the
Company here after and limitation shall remain suspended under the said
B
order of the Court. The State Government undertook to deposit an amount
of Rs.15 crores with the Administrator and the Court directed the Union
of India to advance a similar amount of Rs. 15 crorcs to the Stale of Bihar
from out of plan assistance for the State and it was directed that the said
sum of Rs. 15 crores be paid by the State Government lo the Administrator
which amount shall be· utilized, in due course, for payment of arrear of c
wages and for disbursement of secured loans of financial institutions and
other parties for which security of the Company's assets had been fur-
nished. The Administrator was directed to set up one Committee to
examine the claims of the owners of the company and other parties
including financial institutions.
D
Jn accordance with said directions given by this Court, the State of
Bihar designated an officer to work as Administrator (Rehabilitation Com-
missioner) who took over the assets of the Company and a sum of Rs. 30
crores was paid by the State Government to the Rehabilitation Commis-
sioner. Out of the said sum of Rs. 30 crores a sum of Rs.6 crores was given E
by the State Government by way of grant and Rs.24 crores was to be repaid
by the company. The Rehabilitation Commissioner, by his efforts, was able
to start four of the units providing employment to 2900 workmen. But due
to financial constraints, the units could not function in a way as to earn
profits and had to be closed after some time. The Rehabilitation Commis- F
s10ner moved the Court seeking more funds but the State of Bihar and the
financial institutions expressed their inability to advance the funds. In the
circumstances, the Court felt that the best course would be to dispose of
the whole undertaking and that in order Lo en.sun; that the undertaking
fetches an adequate price it should be disposed of as a running concern. G
The Court, by order dated September 8, 1993, directed the State of Bihar
to advance a further sum of Rs. 10 crqres as loan to the Company for the
resumption of the production of the units of the undertaking and in order
to enable the State Government to pay the said amount, the Union of India
\Vas directed to advance to the State of Bihar a sum of Rs. 10 crores from
out of the plan assistance for the State or any other account. The H
466 SUPREME COURT REPORTS [1995j SUPP. 4S.C.R.
A Rehabilitation Commissioner was directed to have the assets of the under-
taking valued by an approved valuer and the Cornmissinner Jn<l Secretary,
Departn1ent of lndustries (Jovcrnrncnt of Bihar, was directed to publish
1
an advertisement in five prominent national ne\v:-.papers (English Lan-
guage) and three national newspapers (Hindi Language) inviting offers for
the purchase of the entire industrial undertaking of the Company as a
B running concern. IL was also directed that out of the amount received by
the disposal of the undertaking of the Company the Rehabilitation Com-
missioner shall first repay the loan of Rs.lO crores advanced by the Stale
of Bihar in pursuance of the said order before discharging any other
liability of the Company. In response to the advertisenient which was issued
c in pursuance of the directions contained in the order dated September 8,
1993, 14 offers were received by the Stale of Bihar for the purchase of the
units as a whole and the maximum offer was for Rs. 15 crores for the entire
complex. The said offers were placed before the Court for consideration
and on March 3, 1994 this Court observed :
D "Keeping in view the total assets of the company which have been
assessed by the Rehabilitation Commissioner at about Rs. 250
crores, it is not possible for us to even consider any of the 14 offers
received by the State of Bihar."
E On May 2, 1994 the Court passed an order wherein it was observed
that "the best course would be to revive the reference which was made to
BIFR by the Central Government in pursuance of the order of this Court
dated October 28, 1987." The Court therefore, directed that the reference
that had been made by the Central Government to the BIFR in pursuance
of the directions given by this Court in the order dated October 28, 1987
F be revived and a report be submitted by the BJFR to the Court in relations
to the fallowing matters :
"(a) Whether the Company is capable of being rehabilitated in a
n1anncr tha_t it can operate profitably so that its net wealth would
ultimately become positive and the units become financially stable
G
and self-supporting.
(b) The short-term measures, if any, which can be taken immedi-
ately;
H ( c) The long-term measures required to rehabilitate the Company."
WORKMEN OF M/S ROHlAS INDS. v. ROHTAS INDS. 467
The BIFR was also directed that the p"roposal submitted by the A
Rohtas Industries Workers', C:o-operative Society Ltd. may also he con-
sidered.
The BJFR appointed Industrial Financial Corporation of India
(IFCJ) for preparing a report and IFCI, in turn, appointed Soni Industrial
B
Revival Consultants (SJRCON) lo prepare schemes as per the directions
of this Court. SIRCON submillcd its report on 'Tcchno-Economic Viability
Status of Rohtas Industries Ltd.' and 'Viability Status of the Associates
Companies of Rohtas Industries Ltd.' After considering the said reports
submitted by SIR CON and the three proposals which were received by the
BIFR from Rohtas Industrial Workers' Cooperative Society Ltd., Shri L.N. c
Dalmia and Speedcrafls Pvt. Ltd., the BIFR submitted its report dated May
22, 1995.
The conclusions of the BIFR, as slated in the report dated May 22,
1995 are as follows :
D
"(i) No viable and feasible proposal for revival of the RIL or any
of its units has been received from the Rohtas Industries Workers'
Cooperative Society Ltd. or any other private party. It follows that
the RIL can be revived only if the State Government and the
financia1 institutions/banks can provide the requisite funds. E
(ii) RIL as a whole (excluding their three associated companies)
are viable only under variant IV i.e., if the Stale Government brings
in the entire amount of Rs. 225.71 crores required for rehabilitation
as equity makes ()TS of the Jucs of financial institutions and banks F
by paying them Rs.22.24 crores, and provides massive reliefs by
way of exemption/deferment/remission of sales tax/royalty. Ce-
ment, Asbestos and Paper Units are also independently viable
under Variant IV \vith these reliefs.
(iii) Cement unit is independently viable under Variant II, i.e., if G
the entire amount of Rs. 155.50 crores is brought by the State
Government as equity. Jt is also viable under Variant IV, i.e., if
there is OTS of the dues of financial institutions and banks and
the entire cost of rehabilitation of Rs. 159.79 crorcs is brought in
by the State Government as equity. H
468 SUPREME COURT REPORTS 11995] SUPP. 45.C.R.
A (iv) Asbestos unit is independently viable under Variant III, i.e., if
50% of the amount of_ Rs. 342 lacs required for rehabilitation is
brought hy the State (iovcrnn1cnt as equity an<l 50':iC is arranged
as loan and there is OTS of the dues of financial institutions
involving a payment of Rs. 106 lacs. It is also viable under Variant
IV, i.e., if the entire amount of Rs. 342 lacs is brought in as equity
B
by the State Government and there is OTS of the dues of the
financial institutions and banks.
(v) Paper unit is viable only under Variant IV, i.e., if the entire
amount of Rs. 57.65 crores required for rehabilitation is infused
c as State Government's equity, there is OTS of the dues of financial
institutions and banks involving a payment of Rs. 15.35 crores, and
the State Government provides reliefs by way of deferment of sales
tax for eight years (Rs.9.60 crores).
(vi) Vanaspati Unit is non-viable under all the four Variants.
D
(vii) Variant IV is the only viable alternative as Cement, Asbestos
and Paper Units arc independently viable and the RIL as a whole
is also viable under this Variant Under Variant III, only Asbestos
Unit is viable independently and RIL as a whole is non-viable.
Under Variant II, only Cement Unit is viable and the RIL as a
E whole non-viable. Under Variant I neither any Unit nor the RIL
as a whole is viable.
(viii) None of the three associated Companies, viz. Parshava Min-
ing & Trading Co. Ltd., (PMTL), Dehri Rohtas Light Railway Co.
Ltd., (DRLR) and Ashoka Cement Ltd., (ACL) is viable.
F
(ix) There are three crucial factors for achieving long-term
viability, if the RIL is to be revived under Alternative IV.
(a) Adequate supply of raw material is lo be ensured. This may
involve rcnc\val of existing mining leases exploration of new areas
G
and grant of new leases, in the case of Cen1ent Unit. Sin1ilarly,
existing forest leases may have to be renewed and/or some other
leases granted, and alternative sources of raw material like bagassc,
waste paper and pulp also explored for the Paper Unit.
H (b) Adequate power supply is to be ensured.
WORKMEN OF M/S ROHTAS INDS. v. ROHTAS INDS. 469
( c) The management is to be revamped, strengthened and profes- A
sionalised and made accountable. There has to be a broad based
Board of Directors \Vith representatives oF the State Government,
the concerned financial institutions and banks, \Vorkers and profes-
sionals. Professionals also need to he inducted in senior managerial
positions, particularly in Finance/Accounts, Production and Per-
B
sonnel/Industrial Rclations Internal audit, concurrent audit,
1
proper purchase and sales procedures, costing system and
Management Information System have also to be introduced."
After considering the said report of the BIFR, this Court passed an
order dated .July 21,1995 wherein it was observed : C
"The cumulative effect of the report is that there is no possibility
of the revival of this industry through the efforts of this Court as
at present. The BIFR has also discussed various proposals for the
revival of the industries received by it. Two proposals are worth D
mentioning. Proposal of Shri L.N. Dalmia and his son-in-law Shri
L.N. Mittal is still under consideration, Shri Ashok Sen, learned
senior counsel representing Shri L.N. Dalmia states that he would
consult his client in the light of the matters mentioned before the
Court and report back within four weeks from today. The other
offers is from Speedcrafts Pvt. Ltd. The learned counsel assisting E
us on behalf of Speedcrafts Pvt. Ltd. also States that he would also
consult his client in similar terms and report back to the Court.
We are keeping the options open so far as the suggestions which
may come from these two private parties.IT
F
Thereafter, when the matter was taken up on August 25, 1995 Shri
Ashok Sen representing Shri L.N. Dalmia, gave a positive offer to the effect
that he is prepared to pay Rs. 60 crores in the manner to be indicated by
him in his written offer. The said written offer of Shri L.N. Dalmia was
filed in this Court on August 31,1995. This State of Bihar as well as Union
of India were directed to give their response in writing to the said offer. A G
copy of the offer was also sent to the BIFR with the directions that it shall
consider the offer and give its comments. The matter V.'as thereafter taken
up on September 19, 1995 on which date the Court considered the com-
ments of BlFR and response of the State of Bihar and the Union of India
to the offer of Shri L.N. Dalmia. The BlFR in its comments on the said H
470 SUPREME COURT REPORTS 11995] SUPP. 4 S.C.R.
A offer has expressed the view that the total liabilities of the Company
(excluding the liabilities of the associated companies) as on March 3, 1995
arc reported to be Rs. 171.14 crorcs. The sacrifice involved in settling the
above liabilities of Rs.171.14 crores for Rs.60 crores could be Rs. lll.1
crores and the liabilities of the three associated con1panics also need to be
assessed and quantified and added to this amount to arrive al the total
B amount of sacrifices involved. B!FR has further observed that besides the
sacrifice n1entioned above, n1onctary value of the reliefs and concessions
to be provided by the State Government and the financial institutions and
Banks also need to be quantified and added to the cost and the cost
involved in connecting all railway sidings of the Rohtas industries with
c Dehri-on-son too would need to be added to the cost of the scheme and
the reliefs and concessions are of substantial value. B!FR has further stated
that even after such massive sacrifices by the banks, financial institutions
and the State Government, the employment of the entire work force of the
Company is not likely to be ensured and their past dues would not be paid
and that Shri Mittal also has not indicated precisely the sources from which
D
founds of the order of Rs. 560 crores would be mobilised and the resour-
cefulness of Shri L.N. Dalmia and his associate Shri L.N. Dalmia and their
credibility needs to be assessed by some independent agency.
On behalf of the State of Bihar reply in the form of affidavit of Shri
E S.P. Singh, Deputy Director, Industries Government of Bihar, has been
filed wherein it has been stated that the offeror has sought several conces-
sions from the State Government and that until and unless full financial
implications of these concessions are indicated, it may not be in the interest
of the State Government to agree to the proposal and this proposal can
F be considered by the State Government if the offerer agrees to pay Rs.34
crores in one installment to the State Government without any precondition
and without any concessions and the offeror should also clear all the legal
dues on account of commercial taxes, royalty, cess electricity, registration,
etc. The State Government has also pointed out the difliculties in the
matter of allotment of forest land and the waste land sought by the offeror
G and grant of mining lease for limestone and the restoration of 2807 acres
of land which has been declared surplus under the ceiling law. As regards
concessions/reliefs sought by Shri Dalmia, it is slated that the State In-
dustrial Policy, 1995 provides concessions/reliefs such as sales tax exemp-
tion/deferment and facility of either set-off or exemption on purchase of
H raw materials within the State if considered necessary for revival of the unit
WORKMEN OF M/S ROHTAS INDS. v. ROHTAS INDS. 471
by the State Government and that the Industrial Policy docs not provide A
facilities for exemption from royally on bamboo, wood limestone and
electricity duty on captive generations beyond 25 M.W.
The response of the Union of India is contained in the affidavit of
Shri Sohan Lal, Deputy Secretary working in the Department of Industrial
B
Development (Industrial Renewal Section), Ministry of Industry, Govern-
ment of India. In the said affidavit it is staled that the offer of Shri L.N.
Daln1ia has con1e from an individual and not from any corporate entity.
Hence it is not possible to assess the soundness of the financial status of
the offerer and that the offer is not accompanied by any realistic projec-
tions of profitability, cash flow, DSCR, etc, and the long term viability of C
the units therefore, need to be looked into more closely. According to
Union of India, the paramount interest in this case has been the protection
of workers interest and their employment and that the offerer has
proposed for employment of workers on need basis only without incurring
any liability towards their past wages, etc. It has also been stated that the D
liabilities of the Company are approximately Rs. 171.10 crores, some of
which are required to be updated and the transfer of the assets free from
the liabilities for only Rs.60 crorcs would violate the pre-emptive rights of
the original owners and hence, their concurrence would be necessary. As
regards the concession_s sought for in the offer towards dues on account of
railways, excise, import duty exemption, cement regulation account, etc., it E
has been submitted that all the statutory dues are required to be settled as
per the existing rules, guidelines and statutory provisions only.
An additional affidavit of Shri Sidhnath Singh, Chairman of Rohtas
Industries Workers Cooperative Society Ltd., has also been filed before F
this Court wherein it is stated that Shri L.N. Dalmia has already closed
down his M/s Punalur Paper Mills Ltd. in Kerala State and has not paid
salaries and wages of five months of about 1000 workers of that unit, Shri
Sidhnath Singh has also made an offer on behalf of the Rohtas Industries
Workers cooperative Society to purchase whole of movable and immovable
properties of the Company and its associated companies on payment of G
Rs.65 crores and has express readiness to absorb the workers of all the
units. The Society has offered to make cash payment of Rs. 16 crores after
reopening of Ashoka Steel Unit, Yanaspati Unit, Cement Unit within a
month and to pay the balance amount of Rs. 49 crores in three equal
instalment. H
472 SUPREME COURT REPORTS 11995] SUPP. 4 S.C.R.
A Spcedcrafts Pvt. Ltd. has also submitted a revised offer on August
21,1995 for Rs. 71.51 crores nut of which Rs. 40 crores will be paid ln the
Stale of Bihar by issuing zero interest debentures redeemable at par after
10 years and out of the balance amount of Rs.31.51 crores an initial
payment of Rs. 5.51 crores will be made at the time of-transfer nfthe entire
assets free from each and all encun1brances, liabilities, claim.s etc, and
B
handing over of peaceful vacant possession and other Rs.26 crores will be
paid over a span of 12 years (with an initial moratorium of two years) in
equal yearly instalment.
After taking into consideration the report of the BIFR dated May
C 22, 1995 and its comments to the offer made on behalf of Shri L.N. Dalmia
and the response made by the State of Bihar and the Union of India to the
said offer as well as the additional affidavit of Shri S.P. Singh and the
revised offer of Speedcrafts Pvt. Ltd., this Court on September 19, 1995
fixed the matter for September 29,1995. But before that date the State of
D Bihar appears to have had second thoughts. An affidavit of Shri S.P. Singh,
Deputy Director, Industries Government of Bihar dated September 26,
1995 was filed by way of reply to the offer made by Shri L.N. Dalmia where
in it was stated that in response to the offer n1ade by Shri L.N. Dalmia lhe
sate Government had reconsidered the matter and after review the State
Government had decided that in the interest of restarting the industry as
E also for safeguarding the interests of labourers and employees in the said
industry and having reconsidered the whole matter the State Government
was agreeable to deferment of payment of the dues of the State Govern-
ment over a period considered appropriate by the Court and were also
willing to extend all help and facilities to any intending purchaser of the
F industries. Jn view of the said affidavit of Shri S.P. Singh, the Court, on
September 29, 1995 passed the following order :
"Mr. S.P. Singh, Deputy Director (lndu;tries), Government of
Bihar, Patna has liled an affidavit dated September 26, 1995. It has
been averred in the affidavit that the State of Bihar in the interest
G of re.<;tarting the various units of the Rohtas Industries as also for
safeguarding the interests of labourers and en1ployees in the said
industries has reconsidered the \Vholc n1atter and is now agreeable
to extend all help and facilities to any intending purchaser of the
industries. The learned counsel for Shri L.N. Dalmia and Mr. B.B.
H Singh learned counsel for the State of Bihar, Stale that it would
WORKMEN OF M/S ROHTAS INDS. v. RO HT AS !NOS. 473
be necessary for the parties to n1eel Io sort out various issues A
arising in this maller. We adjourn the matter to 13th Octoher, 1995
al 2.00 p.m. In the meanwhile the learned counsel for Shri L.N.
Dalmia, whose offer we have already noticed in our earlier nrder,
states that the representatives of Shri Dalmia would meet and have
discussion with the concerned officers of the Bihar (J-ovcrnment
B
in the light of the affidavit filed by Mr. S.P. Singh. After discussion
the State of Bihar and Shri L.N. Dalmia may file a joint memoran-
dum of understanding before this Court before October 11, 1995.
In the event of Shri L.N. Dalmia being satisfied in the discussion
with the State of Bihar he should deposit a sum of rupees two
erores by way of a demand draft in the name of the Registrar c
General of this Court along with the memorandum of under-
standing. The workers be paid salary for the month of September,
1995."
When the matter was taken up on October 13, 1.995 a statement in D
the form of submissions was filed on behalf of Shri L.N. Dalmia in the light
of the discussions which Shri Dalmia had with the officials of the State of
Bihar and the Chief Minister of Bihar from September 30, 1995 to October
3, 1995. The said submissions filed on behalf of Shri Dalmia indicate that
there is wide divergence between the offer made by Shri L.N. Dalmia and
the stand of the State Government on many matters which arc crucial for
E
the revival of the industry and Shri Dalmia has expressed his inability to
proceed further with his offer in view of the stand taken by the State
Government. A supplementary affidavit of Shri S.P. Singh dated October
9, 1995 has been filed and along with the said affidavit the draft mcmoran-
<lu1n of understanding as proposed on behalf of the Ciovernment of Bihar F
as well as the draft memorandum of understanding circulated by Shri L.N.
Dalmia and the minutes of the discussions that were held between the
Committee of the Government of Bihar and Shri L.N. Dalmia on October
1, 2 and 3, 1995 have been filed.
G
We have considered the subn1issions that have been submitted on
behalf of Shri L.N. Dalmia as well as the Supplementary anidavit of Shri
S.P. Singh dated October 9, 1995 and the documents filed therewith.
Having regard lo the report of BlFR dated May 22, 1995, the comn1ents
of BIFR on the offer of Shri L.N. Dalmia as well as the response of the H
474 SUPREME COURT REPORTS [1995) SUPP. 4 S.C.R.
A State of Bihar and the Union of India to the said offer and the discussions
which Shri L.N. Dalmia had with the officers of the State of Bihar on
October l, 2 and 3, 1995. We have to conclude regretfully that inspite of
best efforts the object with which this Court had intervened in the'inattcr
by entertaining the writ petition, viz, to revive the undertakings, does not
B appear feasible. In these circumstances, the future course of action which
commends us is that the proceedings in this writ petition should be brought
to an end and the winding up proceedings pending before the Patna High
Court be resumed.
Before we give the necessary directions in that regard, we would
C briefly set out the present state of affairs with regard to the Company :
(i) The Rehabilitation Commissioner appointed as per directions
contained in the order date October 24, 1989 is in possession and
control of the property of the company. To assist him there are
D officers, staff and workmen. Since the units which had resumed
production while the matter was pending in this Court have been
closed the Court has been giving directions from time to time to
reduce the strength of the employees in order to cut down the
recurring expenditure on that account. By the last order passed on
July 21, 1995 the Rehabilitation Commissioner was directed to
E
reduce the number of workmen from 200 to 75, the staff from 75
to 40 and the officers from 25 to 10. As per the directions contained
in the order dated September 29, 1995 the salary of the officers,
workmen and the staff has been paid by the Rehabilitation Com-
missioner for the period upto the month of September, 1995.
F
(ii) Earlier staff was being employed by the Rehabilitation Com-
missioner for the purpose of ensuring security of properties in the
complex. This involved heavy expenditure by way of salary of such
staff. It was therefore, decided to entrust the security to the Central
G Industrial Security Force. When the Rehabilitation Commissioner
pointed out that a sum of Rs. 10 lacs was being spent every month
on the Central Industrial Security Force deployed in the industrial
complex for the purpose of sccurit y, the Court, by order July 21,
1995, directed the Director-General, Central Industrial Security
H Force to deploy the force in such a manner from August 1, 1995
WORKMEN OF M/S ROHTAS INDS. i•. RO HTAS INDS. 475
that the expenditure on that force is reduced by 40%. A
(iii) The Rehabilitation Commissioner brought to the notice of the
Court that the electricity charges were coming lo Rs. 5.5 !lacs per
month which amount included the monthly minimum guarantee.
By order dated .I uly 21, 1995 it was directed that keeping in view B
the present status of the industry specially the fact that it is lying
closed since May 1994, the Bihar State Electricity Board shall
charge only the actual consumption charges till further orders with
effect from August 1, 1995. It was also pointed out that electricity
was being supplied free of charge lo workers staying in the quarters C
and that many of them are no longer on the rolls of the industry.
By order dated July 21, 1995 the Rehabilitation Commissioner was
directed not to spend any more money on supplying electricity etc.
or any other amenities to all those workers, staff and officers who
are no longer on the rolls of the industry and this must be done D
with effect from August 1, 1995. It was also made clear that the
workers shall pay the normal electricity and water charges to the
Electricity Department directly or through the Rehabilitation
Commissioner and if any worker does not pay the charges his ·
electric supply would be disconnected. The Bihar State Electricity
Board has made a claim with regard to its dues which according E
to the Board runs into few crores. The Rehabilitation Commis-
sioner has disputed the said claim of the Board and has , on the
other hand, submitted that the company has suffered a loss of
approximately Rs. 752 lacs on account of burning of the trans-
former due to the fault of the Board and further that the meters F
recording the consumption were also found to be defective by the
Board itself and that the Board is claiming the charges on the basis
of the reading in those defective meters.
(iv) As a result of resumption of production in some of the units G
by the Rehabilitation Commissioner there is raw material/finished
products lying in stock. By order dated July 21, 1.995 the Rehabilita-
tion Commissioner has been directed to sell the said raw
material/finished products in stock preferably within the period of
one month. In his affidavit dated September 20, 1995, the H
476 SUPREME COURT REPORTS [1995] SUPP. 4 S.C.R.
A Rehabilitation Commissioner has stated that in pursuance of the
said directions offers have already been invited for sale of ap-
proxim~tcly Rs.70 lacs worth of raw 111aterials/linishcc.I products
wasted/damaged material out of which the sale has already been
made of Rs. 7 lacs and that offers have been invited in respect of
the burnt out transformer and rejected copper cable approximately
B
of the value of Rs. 20 lacs for which confirmed offers for purchase
have already been received.
(v) In his affidavit dated September 20, 1995 the Relief Commis-
sioner has also stated that in respect of the period during which
c the units had resumed production an amount of Rs. 23.4.84 lacs is
payable towards raw materials purchased on credit and a sum of
Rs. 184.56 lacs was advanced by purchasers for supply of products
by the company. There is a total liability of Rs.419.40 lacs under
both these heads. It is stated that there is a further liability for
sales tax on these transaction to the tune of Rs.400.23 lacs as on
D March 31,1995.
(vi) Out of a total amount of Rs.40 crores paid by the Stale of
Bihar the sum of Rs.6 crores was by way of grant and Rs.34 crores
is as loan. This amount was advanced by the State of Bihar as per
E directions of this Court.
. (vii) The Claims Committee constituted by the Rehabilitation
Commissioner under the directions given by this Court on October
24, 1989 has submitted its report after assessing the various claims
of the creditors, the financial institutions and the workers. ()hjcc-
F tions have been submitted against the said report of the Clain1s
Committee which are pending consideration.
(viii) The moratorium of one year which was imposed in respect
of proceedings taken and pending or to be taken against the
company by order dated October 24, 1989 have been extended
G from time to time and the last such extension was given till
December 31, 1995 by order dated July 21, 1995.
Now while putting an end to these proceedings and permitting
resumption of the winding up proceedings in Company Petition No.3 of
H 1984 pending before the Patna High Court, it is directed as under :
WORKMENOFM/S ROHTASINDS. v. ROHTAS INDS. 477
J. The winding up proceedings in Company Petition pending A
before the Patna High Court will be resumed by the Company
Judge. The parties and the Rehabilitation Commissioner shall
appear before the Company Judge for seeking necessary directions
on November 20, 1995.
2. The Rehabilitation Commissioner shall - B
(a) complete the sale of the raw materials/finished products/
wasted/damaged materials including the burnt out trans-
former and rejected copper cable by November 30, 1995 ;
(b) subject to availability of funds after incurring the expen-
c
ses towards payments under clauses (c), (d) and (e) pay the
dues towards the supply of raw materials on credit for the
running of the units during the period of the pendency of
these proceedings as \Veil as the amount received as advance
from purchasers for the products to be supplied to them by D
December 31, 1995;
( c) pay the charges for the actual consumption of electricity
for the period upto November 30, 1995 by December 31,
1995;
E
(d) pay the charges for the security arrangements through
the Central Industrial Security Force for the period upto
December 31, 1995 by December 31, 1995;
(c) pay the salary of the staff employed for the period upto
F
December 31, 1995 by December 31, 1995;
(I) prepare an inventory of the properties, movable and
immovable, belonging to the company in his possession and
control by December 10, 1995;
·1 G
" (g) handover the possession of the said properties to the
Official Liquidator as per the inventory by December 31,
1995;
(h) have the accounts for the period April l, 1995 till
December 31, 1995 duly audited and submit the same before H
478 SUPREME COURT REPORTS [1995] SUPP. 4 S.C.R.
A the Company Judge in the Patna High Court by .January 15,
1996;
(i) handover the papers relating to the affairs of the Company
while he was in control of the same to the Official Liquidator
by January 15, 1996.
B
3. With effect from date the possession of the properties, as per
the inventory, is delivered to him by the Rehabilitation Commis-
sioner, the Official Liquidator will assume charge of the assets of
the company for the purpose of winding up proceedings.
c 4. The officers, workmen and the staff who are at present employed
in the undertaking of the Company shall continue in employment
till December 31, 1995. For their further continuance in employ-
ment the Official Liquidator will seek the necessary directions from
the Company Judge.
D 5. The present security arrangements through the Central In-
dustrial Security Force will continue till December 31, 1995. For
further continuance of these arrangements, the Official Liquidator
may seek the necessary directions from the Company .I udge.
E 6. The existing arrangement for supply of electricity by the Bihar
State Electricity Board shall continue subject to the direction that
n1ay be given by the Company Judge. No minimum guarantee
charge will be payable to the Bihar State Electricity Board and
only the actuol consumption charges will be paid. The respective
clai1ns of the Rehahililation Co1n1nissioncr an<l the Bihar State
F Electricity Board with regard to the supply of electricity during
the period the company was under the charge of the Rehabilitation
Commissioner shall be considered by the Company Judge.
7. The State of Bihar will grant exemption from sales/purchases
tax in respect of sales/purchases made by the company during the
G
period the units were revived by the Rehabilitation Commissioner
while the matter was pending before this Court.
8. The Report of the Claims Committee on the claims of the
.financial institutions, crl!ditors and the \Vorkers \viii be considered
H lJy the Company Judge in the light of the objections that have been
,
WORKMEN OF M/S RO HTAS INDS. v. ROHTAS INDS. 479
submitted against the said report. A
9. The Company Judge may consider whether the industrial un-
dertaking of the Company can be revived in (he light of the offers
that have been received from Shri L.N. Dalmia, Specdcrafts Pvt.
Ltd., and Rohtas Industries Workers, Cooperative Society Ltd.,
along with any other offer that may be received. B
lO. Jn the event of sale of the assets of the Company during the
course of winding up proceedings a sum of Rs. 34 crores which
was advanced by the State of Bihar as per directions of this Court
in these proceedings shall be paid to the State of Bihar out of the
sale proceeds before discharging any other liability of the Com-
c
pany.
11. The Relief Commissioner shall stand discharged on January
15, 1996.
D
12. The moratorium imposed under the order of this Court shall
cease to operate with effect from December 31, 1.995.
13. It will be open to the Rehabilitation Commissioner and the
Official Liquidator to seek further directions from this Court with
regard to any matter pertaining to the period this writ petition was E
pending in this Court.
Shri Beck Julius, I.A.S. has been functioning as the Rehabilitation
Commissioner since April 4, 1994. During that period this Court found his
work to he satisfactory and good. This may be treated as assess1nent of his
performance as an officer of the Bihar cadre of l.A.S. during that period F
and it may form part of his Performance Appraisal Report.
Before we part with this case, we must say that this is a sad finale to
the episode. In order to secure the revival and rehabilitation of a large
inclustrial undertaking, the closure of which was not only a notional loss G
but had also rendered about l.0,000 workmen jobless, this Court adopted
the unprecedented course of assuming direct control over the functioning
of the undertaking.
The writ petitions are disposed of accordingly with no order as to
custs. H
4SO ' [1995] SUPP. 4 S.C.R.
SUPREME COURT REPORTS
A A eopy of this order shall be sent to the Registrar Patna High Court
for being placed before the Company .Judge dealing with Company Petition
No.3 of 1984. In addition, the following papers be sent with the order :
(a) copies of the orders passed by the Court in the writ petition.
B (b) copy of the reports of the BIFR dated April 22, 1988 and May
22, 1995 and the Annexure thereto.
(c) copy of the report of the Claims Committee and the objections
filed against the said report.
!.M.A. Petition disposed of.
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