*IN THE HIGH COURT OF DELHI AT NEW DELHI

Date of decision: 27th November, 2015

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W.P.(C) No.8693/2014
HENNA GEORGE
Through:

..... Petitioner
Ms. Purti Marwaha, C.S. Chauhan,
Mr. Arvind Kumar & Ms. Henna
George.
Versus

UNION OF INDIA & ORS.

Through:

..... Respondents
Mr. Sanjay Jain, ASG with Mr.
Akshay Makhija, CGSC, Ms. Mahima
Bahl, Ms. S. Moktan & Mr. Akash
Nagar, Advs. for UOI.

CORAM:HONBLE THE CHIEF JUSTICE

HONBLE MR. JUSTICE RAJIV SAHAI ENDLAW
RAJIV SAHAI ENDLAW, J
1.

The petitioner, an Advocate practicing inter alia before the Board for

Industrial and Financial Reconstruction (BIFR) has filed this petition under
Article 226 of the Constitution of India as a Public Interest Litigation (PIL)
to flag the issues of the functioning of the BIFR having virtually come to an
end owing to the vacancies in the office of the Members of the BIFR and
which have not been filled up for long and which has resulted in
enhancement of non-performing assets, scheme and for revival of distressed
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entities piling up, creditors of the sick companies being made to wait
indefinitely etc.
2.

The petition was entertained and the learned ASG asked to obtain

instructions. A counter affidavit dated 10th February, 2015 was filed by the
Director to the Government of India, Ministry of Finance informing that, (i)
BIFR then was existing of three members, of which one had been authorized
to act as Chairman; (ii) that the Sick Industrial Companies (Special
Provisions) Act, 1985 (SICA) under which BIFR had been constituted was
proposed to be repealed and the Sick Industrial Companies (Special
Provisions) Repeal Bill, 2003 providing for repeal of SICA and abolition of
BIFR and Appellate Authority Industrial and Financial Reconstruction
(AAIFR) had been passed in both the Houses of Parliament; (iii) the
Companies (Second Amendment) Act, 2002 providing for establishment of
National Company Law Tribunal (NCLT) and National Company Law
Appellate Tribunal (NCLAT) to deal exclusively with the company cases for
their speedy disposal had been passed in the Parliament; (iv) the further
steps for constituting NCLT were dependent on the outcome of W.P.(C)
No.1072/2013 pending adjudication before the Supreme Court; (v) in such a
situation, the filling up of the posts of the Members of BIFR remained; (vi) a
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Bench of BIFR as per Section 12 of SICA is to consist of not less than two
Members; that the three members of the BIFR were sitting in two Benches;
(vii) that though vide Section 4(2) of SICA BIFR is to consist of 14
members but only one post of Chairman and eight posts of Members have
been sanctioned; (viii) however all the said posts were also not being filled
owing to the proposed dissolution of BIFR and AAIFR; and, (ix) owing to
the legal challenges to the constitution of the NCLT, the proposal is held up.
3.

A further affidavit dated 22nd April, 2015 was filed by the Under

Secretary, Ministry of Finance informing that the Government in W.P.(C)

No.1798/2015 titled International Asset Reconstruction Pvt. Ltd. Vs. BIFR
had assured that steps would be taken to ensure the functioning of BIFR and
had been directed to pass appropriate orders, as recorded in the order dated
20th March, 2015 therein.
4.

The petitioner filed a further affidavit dated 23rd May, 2015 informing

that as on 30th April, 2015, 722 matters were pending in the BIFR and of
which 515 were at the stage of sanctioning of the schemes for rehabilitation
and 207 were at the stage of implementation of the schemes for
rehabilitation. It was further pleaded that BIFR, in the year 2014, owing to

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its depleted strength, could dispose of only 164 matters and approximately
100-150 matters were filed every year.
5.

Vide order dated 29th April, 2015 the Union of India was directed to

file an additional affidavit explaining whether any steps had been taken for
assessing the need for appointment of additional members of the BIFR.
6.

In response thereto an affidavit dated 26th May, 2015 has been filed

stating that steps were being taken to fill up the vacant post of Chairman and
one anticipated vacancy of member of BIFR.
7.

We heard the counsel for the petitioner and learned ASG for the

respondents on 27th May, 2015 and reserved judgment.

8.

It was the argument of the petitioner that though at the time of filing

of the writ petition BIFR had at least three members but now the strength
stands reduced to only two and the number of pending matters remained at
722. It was further argued that on an average, one Bench has been disposing
of around 80 matters per year and unless the number of Benches is increased
the pending 722 matters together with fresh filing of approximately 100
matters per year would remain pending for years, again throwing to the wind
the Bankruptcy Code as announced by the Government. Reference was also
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made to SRF Limited Vs. Garware Plastics & Polyesters Ltd. (1995) 3
SCC 465 and State of U.P. Vs. Uptron Employees Union (2006) 5 SCC
319 laying down that considering the nature of the controversy, the matters
before BIFR should be disposed of as expeditiously as possible. It was
contended that the respondents are obliged to fill up the posts and a proposal
for change in law cannot be a ground for not abiding thereby. It was yet
further argued that the respondents are not justified in awaiting the
constitution of the NCLT and the NCALT which is still likely to take more
than one to two years.
9.

The learned ASG informed that, applications had been invited for

filling up of one vacant post of Chairman and one vacant post of member; it
was also stated that the Supreme Court vide judgment/order dated 14th May,
2015 in W.P.(C) No.1072/2013 in Madras Bar Association Vs. Union of
India had cleared the hurdle in the constitution of NCLT and no purpose
would be served in making any further appointments for a short time to the
BIFR.
10.

The counsel for the petitioner in rejoinder controverted and contended

that functioning of the NCLT is still a far cry.

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11.

We have considered the matter. The Government of India does not

dispute that the functioning of BIFR has slowed down considerably owing to
the vacancies in the office of the Chairperson/member thereof. The reason of
the Government of India for not filling up the said vacancies is the proposed
repeal of SICA under which BIFR has been constituted and the proposed
taking over of the pending cases before the BIFR by the NCLT, to be
constituted. However the hard reality is that the aforesaid state of affairs has
continued for a considerably long time and which has resulted in the matters
which by their very nature require time bound consideration, languishing.
Our country in the last some years has seen the trend of Tribunalization.
Special fora have been created to deal with the matters/disputes which would
have ordinarily come to the Civil Court. One of the purpose of this
Tribunalization was to provide for and ensure expeditious disposal of
cases as it was felt that the long time normally taken for adjudication in the
Civil Courts would be prejudicial to such matters in need of immediate
decision. Reference in this regard may be made to L. Chandra Kumar Vs.
Union of India (1997) 3 SCC 261.

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12.

However the aforesaid purpose appears to have been totally defeated

by bringing the functioning of one such Tribunal i.e. the BIFR to a virtual
halt by non-filling up the vacancies therein.
13.

The reason given, of proposed repeal of SICA and abolition of BIFR

and AAIFR and vesting of their jurisdiction in NCLT and NCLAT does not
appear to us to be a sound one. We have recently in Employees Provident
Fund Appellate Tribunal Bar Association Vs. Union of India
MANU/DE/10655/2015 in the context of Employees Provident Fund
Appellate Tribunal observed that there is no justification for the Government
to initiate the process of filling up of vacancies in such Tribunals only after
they have arisen in as much as the likely vacancy is known on the very date
when the appointment is made. The process for filling up of the likely
vacancy in the office of the Chairpersons/members of the Tribunals should
be initiated well in advance, taking note of the usual time taken in filling up
of the vacancy.
14.

We had during the hearing enquired from the learned ASG as to what

was the hesitation in so filling up of the vacancies in the post of

members/chairperson of the BIFR from time to time even if its substitution

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by NCLT was imminent. We had yet further enquired whether not the filling
up of such vacancies is generally by deputation and the incumbents even if
become redundant by substitution of BIFR by NCLT would not
automatically stand reverted to their parent cadre.
15.

However we could not get any answer.

16.

A perusal of Section 6 of SICA shows that the term of the office of

Chairman and members of BIFR is of not exceeding five years, as may be

specified by the Government in the order of appointment. It is thus not as if
even if the Chairman/member is appointed, not by deputation, the
Government could not have provided for appointment for a certain period or
till the coming into operation of NCLT. However it appears that the
Government did not even bother to devise ways and means to take care of
the contingencies and merely after proposing substitution of BIFR with
NCLT presumed that there was no need for BIFR to function and without
even ensuring coming into operation of NCLT. Such a stand of the
Government has but to be deprecated. The Government as an appointing
authority is equally bound by the statutes which have vested it with the
power of making appointments and a clear case of violation of statute and

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dereliction in performance of statutory functions is made out. Supreme Court

in State of Punjab Vs. Okara Grain Buyers Syndicate Ltd. AIR 1964 669
held that one of the tests for determining whether the Government is bound
by a statute is, if the beneficient purpose of the statute would be wholly
frustrated unless the Government were bound.
17.

We have also gone through the dicta aforesaid of the Supreme Court

in Madras Bar Association supra. We were not told as to how much time
the appointment of Chairperson and members of NCLT and NCLAT is
likely to take. According to the counsel for the petitioner, the coming into
operation of NCLT was still an uncertainty and NCLT is not likely to be
operational for another two years. We have no reason to disagree. Moreover
even if it was to take lesser time, the same is still in our opinion no reason to
allow the cases to languish.
18.

Considering the pendency in BIFR and the disposal rate of Benches

thereof (and which was also not controverted), we are of the opinion that the
appointments being made of the Chairperson and one member may not be
sufficient.

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19.

We accordingly dispose of this petition with the direction to the

Central Government to (i) within a period of 30 days from today make an

assessment of the number of vacancies in the post of members of BIFR
required to be filled up to ensure expeditious disposal of the pending cases
as directed by the Supreme Court in SRF Limited and Uptron Employees
Union supra; (ii) in accordance with the said assessment initiate the process
of appointment and to make appointments within three months thereof; and,
(iii) to ensure that the appointments for which the process had already been
initiated are filled up within 45 days hereof.
No costs.

RAJIV SAHAI ENDLAW, J

CHIEF JUSTICE
NOVEMBER 27, 2015
pp..

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