Vs. Rohtas Industries Ltd.  INSC 278 (2 May 1994)
Singh (J) Kuldip Singh (J) Agrawal, S.C. (J)
1994 AIR 2211 1994 SCC Supl. (2) 359 1994 SCALE (2)762
Rohtas Industries Ltd. (hereinafter referred to as 'the Company') owns an
industrial complex at Dalmianagar in the State of Bihar having units for
manufacturing cement, paper, vanaspati, asbestos and vulcanised fibres. It was
employing about 10,000 workers. The Company started having troubles in 1982-83
and ultimately the industrial units were closed with effect from 9-9-1984. The workmen moved this Court by filing this writ
petition under Article 32 of the Constitution. This is how this Court has been
concerned with the affairs of this undertaking.
Proceedings for the winding up of the Company have also been started and the
same are pending before the Patna High Court wherein a Provisional Liquidator
has been appointed.
the pendency of this petition, the provisions of Sick Industrial Companies
(Special Provisions) Act, 1985 Under Article 32 of the Constitution of India
360 (hereinafter referred to as 'the Act') came into force which provide for
the establishment of the Board for Industrial and Financial Reconstruction (for
short 'the Board') with power to enquire into and determine the incidence of
sickness in industrial companies and devise suitable remedial measures through
appropriate schemes or other proposals and for proper implementation thereof.
On 28-10- 1987, the Court passed an order whereby the Central Government was
directed to make a reference to the Board for framing a scheme as contemplated
under Section 18 of the Act for revival of the Company. The Board submitted a
report wherein it was indicated that three of the units of the Company, viz.,
cement, asbestos and vanaspati could be revived as the same appear to be viable
but the paper unit could not be revived. Keeping in view the said report of the
Board as well as the statements filed on behalf of the State of Bihar and the
Union of India and the memorandum prepared by the learned Attorney General and
filed before this Court, the Court passed an order dated 28-10-1989 whereby the
State of Bihar was directed to appoint an authorised officer from the senior
IAS cadre with appropriate commercial background to be the Rehabilitation
Administrator and the State Government agreed to deposit a sum of Rs 15 crores
to enable him to pay the arrears of wages to the workers and for disbursement
of secured loans of financial institutions and the parties for which security
of Company's assets had been furnished. By the said order it was directed that
the asbestos, cement and vanaspati units shall be commissioned after effecting
such repairs as may be necessary and steps shall be taken to explore the
viability of the paper unit within three months after the Company is recommissioned
in respect of three units. The considerations which weighed with the Court in
passing this order were that a lot of assets of the Company were fast becoming
useless and will soon become junk and though several attempts were made to
dispose of some of the stocks held by the Provisional Liquidator but for one
reason or the other it had not been possible to complete the sale and if the
Company is not revived and gets liquidated the liabilities would turn out to be
far in excess of the assets and notwithstanding first and second charge on the
assets, the creditors may not appreciably benefit. The Court also took note of
the fact that living to about 10,000 families has been denied for over five
years and apart from national loss, the workmen have been put to serious
jeopardy and that it was of paramount importance that tile Company in respect
of the viable units should be revived and allowed to come into production. In
accordance with the said directions, the State of Bihar designated an officer who took over
as the Rehabilitation Commissioner and paid a sum of Rs 15 crores. The
necessary repairs were carried out and vanaspati plants were able to start
functioning which started providing employment to about 2900 workers. But
viability of the units could not be achieved and losses have continued to
mount. When the matter was taken up on 7-5- 1993, Shri Kapil Sibal, learned
Senior Counsel appearing for the Rehabilitation Commissioner, stated that in
order to keep the units which are already functioning as going concerns, it is
necessary to invest another sum of Rs 10 crores and the Court expressed the
hope that keeping in view the urgency of the matter the State of Bihar will
consider the request made by the Rehabilitation Commissioner for the
contribution of the funds. On 3-9-1993, an affidavit of Shri S.N. Sinha,
Commissioner and Secretary, Department of Industries, Government of Bihar, was
filed wherein it was stated that due to 361 resource constraints and financial
difficulties, the State Government is not in a position to contribute/advance
any amount to the Rohtas Industries for its operation and that the State
Government is not in a position to take any liabilities of the Company. It was
further stated that the State Government have no objection to privatise the Rohtas
Industries and that the State Government has decided to invite private
entrepreneurs through advertisement for running it. The learned counsel
appearing for the State Government expressed the inability of the State
Government to nationalise the industry. Having regard to the aforesaid stand of
the State Government, the Court on 8-9-1993 passed an order wherein it was
observed that the best course would be to dispose of the whole undertaking but
in order to ensure that the undertaking fetches an adequate price it is
necessary that it should be disposed as a running concern.
in view the need of the Rehabilitation Commissioner for funds for making the
units functioning, the Court directed the State of Bihar to advance a sum of Rs
10 crores as a loan to the Company for the resumption of the production in the
units amount of Rs IO crores it was directed that the Union of India shall
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. By the said order, it was also
directed that the Commissioner and Secretary, Department of Industries,
Government of Bihar shall publish an advertisement inviting
offers for the purchase of the entire industrial undertaking of the Company as
a running concern. In pursuance of the said order Rs 10 crores have been made
available to the Rehabilitation Commissioner.
advertisement was also published and in response to the same 14 offers were
received. The maximum offer was for Rs 15 crores for the entire complex. Since
the total assets of the company have been assessed by the Rehabilitation
Commissioner at about Rs 250 crores, the Court in the order dated 3-3-1994 observed that it is not possible for the Court to
even consider any of the 14 offers received by the State of Bihar. Thereafter on 29-3-1994 a proposal
has been submitted by the Rohtas Industries Workers' Cooperative Society Ltd.
to purchase the industrial undertaking with its allied and sister concerns and
to run the same on a moratorium basis for three years only through the Workers'
Cooperative Society which postulates grant of certain exemptions, reliefs and
concessions as provided under Section 18 of the Act.
25-4-1994, Shri B.B. Singh, learned counsel appearing for the State of Bihar,
placed before us a statement indicating the line of action for revival of the Rohtas
Group of Industries which has been agreed upon during the course of discussion
that was held at Patna by Shri B.B. Singh with the Chief Minister of Bihar in
the presence of the Chief Secretary to the Government of Bihar, the Principal
Secretary to the Chief Minister of Bihar, the Industrial Development
Commissioner, the Rehabilitation Commissioner and the Director Technical
said line of action as agreed upon at the said discussion is as under:
(i) Considering the valuation of the Rohtas Group of Industries, it was felt
that no viable offer is likely to be received for outright purchase as is
evident from the offers received so far.
The State Government have already indicated to the Hon'ble Supreme Court that
the State was not in a position to take over the responsibility of managing the
affairs of Rohtas Industries either as a 362 Government or Public Undertaking,
nor it is in favour of running it through its officers on deputation.
It was felt that public auction of assets or liquidation of the Company also do
not offer any viable solution particularly from the standpoint of the interest
of the workers as also the running of this complex.
It was agreed that the only viable option currently available is to entrust the
management of Rohtas Industries on a long-term lease basis to some reputed industrial
was decided that in order to identify the industrial
house/entrepreneur/workers' cooperative etc. to manage and run the Rohtas
Industries on long-term management lease, newspapers advertisement should be
taken out inviting suitable offers. Personal contract/negotiation should also
be carried out to identify and to evolve an appropriate revival package.
It was indicated that the exercise should be completed by the Committee already
constituted by the Hon'ble Supreme Court in January 1994 comprising the Chief
Secretary, Industrial Development Commissioner and Rehabilitation Commissioner,
It was further agreed that Development Commissioner and Financial Commissioner,
Government of Bihar should also be included in the Committee with the approval
of Hon'ble Court.
It was agreed that the Committee would complete the exercise and present its
recommendations in regard the choice of the industrial houses/entrepreneurs as
well as the terms of lease before the Hon'ble Court within three months."
According to the Status Note as on 31-3-1994 submitted by the Rehabilitation
Commissioner on 18-4-1994 none of the units is in operation
presently and the total number of ex- employees who were employed as on 15-1-1994 was 3108. The salaries of the workmen for the months
of February and March have not been paid. A sum of Rs 553.52 lakhs is lying as
balance an stocks of raw material/finished goods valued at Rs 259.52 lakhs are
lying. The current liabilities are to the tune of Rs 490.90 lakhs.
a careful consideration of the whole matter we are of the opinion that the best
course would be to revive the reference which was made to the Board by the
Central Government in pursuance of the order of the Court dated 28- 10-1987 because
the Board which is an expert body, would be in a better position to examine the
matter in its various aspects and form an opinion about the viability of the
various units of the industrial undertaking and the possibility of their
revival, and if the Board comes to the conclusion that the units are viable and
can be revived it can frame a scheme in accordance with the provisions of the
Act. It is, therefore, directed that the reference that has already been made
by the Central Government to the Board in pursuance to the directions given by
this Court in the order dated 28-10-1987, be revived and a report be submitted
by the Board to the Court in relation to the following matters:
Whether the Company is capable of being rehabilitated in a manner that it can
operate profitably so that its net wealth would ultimately become positive and
the units become financially stable and self-supporting.
The short-term measures, if any, which can be taken immediately.
The long-term measures required to rehabilitate the Company.
Questions regarding matters (b) and (c) would arise only if the Board is
satisfied on question (a) that the Company is capable of being rehabilitated.
As a short-term measure, the Board may consider whether it will be advisable to
grant all or some of the units to some promoters on a leave and licence basis
for running the units with the promoter paying a fixed licence fee with or
without a further share in profits and obtaining the unit on licence for a
fixed period without taking over the past liabilities.
long-term, the Board may consider rehabilitating the unit either on a
"stand alone" basis, or by an amalgamation with some healthy company
or by a sale of some of the units.
proposal submitted by the Rohtas Industries Workers' Cooperative Society may
also be considered by the Board.
Board shall submit its report to the Court within a period of three months.
the meanwhile it is directed that:
The Rehabilitation Commissioner shall continue in office till an order
relieving him is passed by the Court.
The Rehabilitation Commissioner shall pay the wages of the employees for the
months of February and March 1994 which remain unpaid as well as the wages for
the months of April and May 1994. No wages will be paid for the period
subsequent to 31-5-1994, (3) The units which are lying closed may be operated
till 31-5-1994. The finished goods and the raw material left on 31-5-1994 be
sold in the market.
The Rehabilitation Commissioner shall maintain the essential services such as-
(a) security for the maintenance of the units against any pilferage and/or
supply to the quarters of the workers and maintenance of office/factories;
of essential infrastructure for the office and the industrial complex.
The moratorium against the units of the Company which had been extended till
8-3-1994 is further extended for a period of six months from that day till
matter be listed after three months. A copy of this order be sent to the
Secretary of the Board.