M/S Lord Chloro Alkalies Ltd v. Director General of Income Tax (Admn) and Anr

order as to costs.

S. RAVINDRA BHAT

(JUDGE)

NAJMI WAZIRI (JUDGE)

JULY 19, 2013

Page 1 * IN THE HIGH COURT OF DELHI AT NEW DELHI Reserved on: 04.07.2013 Pronounced on: 19.07.2013 + W.P.(C) 1915/2013, C.M. APPL. 3645/2013 M/S LORD CHLORO ALKALIES LTD. ..... Petitioner Through : Sh. J.P. Sengh, Sr. Advocate with Ms. Vinita Sasidharan, Ms. Varsha Banerjee, Sh. Sumeet Batra and Ms. Ankita Gupta, Advocates. versus DIRECTOR GENERAL OF INCOME TAX (ADMN) AND ANR. ..... Respondents Through : Sh. Sanjeev Sabharwal, Sr. Standing Counsel. CORAM: HON'BLE MR. JUSTICE S. RAVINDRA BHAT HON'BLE MR. JUSTICE NAJMI WAZIRI MR. JUSTICE S.RAVINDRA BHAT % 1. In these proceedings under Article 226 of the Constitution of India, the petitioner challenges the orders of the Appellate Authority for Industrial Reconstruction (hereafter "AAIFR") under provisions of the Sick Industrial Companies (Special Provisions) Act, 1985 (hereafter "SICA") dated 01.04.2009 and 27.09.2012 in Appeal No. 227/2008. By that order, the AAIFR had set aside a scheme Page 2 formulated under the SICA to the extent it dealt with waiver and deduction of interest under provisions of the Income Tax Act, 1961. 2. The Petitioner was incorporated under the Companies Act, 1956 on 1st March, 1979; it was originally named Modi Alkalies & Chemicals Limited, which was subsequently changed to M/s Lord Chloro Alkalies Ltd in the year 2003. It started commercial production of caustic soda in 1994-95 with a capacity of 126 TPD which was later enhanced to 195 TPD based on mercury cell technology which was replaced by membrane cell technology in the year 1994-95 with a further enhancement in its capacity to 255 TPD. Till 1997-98 the Petitioner-company operated satisfactorily. Later, due to adverse market conditions, change in government policy, high cost of power, high cost of production and heavy interest burden, the Petitioner started incurring heavy losses resulting in closure of its operations. On 30.06.1999, in view of the colossal losses, the net worth of the Petitioner eroded pursuant to which it made a reference under Section 15(1) of SICA to the Board for Industrial Finance and Reconstruction (hereafter "BIFR"); it was rejected in July 2001 as not maintainable. Later, on 30.06.2000, the Petitioner filed another reference before the BIFR based on its accounts. This time, it was registered as Case No.308 of 2001. On 15.01.2002, BIFR declared that the Petitioner was a sick company and directed IDBI to act as the Operating Agency (OA). 3. Holding that no feasible rehabilitation proposals were forthcoming from the Petitioner Company, BIFR by its order dated 19.08.2003 directed the OA to issue an advertisement for change of Page 3 management (COM) as the offers received by the OA for COM did not fructify. Taking these factors into account BIFR prima facie concluded that it would be just, fair and in public interest that the Company should be wound-up and show cause notice for Winding Up should be issued to the Petitioner Company. By ex-parte order dated 02.06.2004, BIFR directed winding up of the Petitioner Company under Section 20(1) of SICA and accordingly directed issuance of Show Cause Notice (SCN) for Winding Up. Aggrieved by that order of BIFR, the Petitioner filed an appeal being Appeal No. 154/ 2004. 4. During pendency of the said appeal, the first Respondent, i.e. the Income Tax Department filed an application on 14.11.2005 under Section 22(1) of SICA seeking permission to recover its dues of Rs. 997.79 lakhs with an alternative claim that in the event a scheme is allowed to be formulated then a suitable provision for payment of income tax dues of the Petitioner-Company ought to be made in the scheme itself. It is stated that on 14.03.2006, during the pendency of the appeal before BIFR, the Petitioner could settle the dues of all its secured creditors (except IIBI, RIICO & UTI). The AAIFR, taking note of the fact that the Petitioner, out of its 10 secured creditors namely IDBI, ICICI, IFCI SBI, PNB, Syndicate Bank, Indian Bank, IIBI, RIICO & UTI had already settled