BEFORE THE APPELLATE AUTHORITY FOR INDUSTRIAL & FINANCIAL RECONSTRUCTION, NEW DELHI 

VIVEK SIBAL, Advocate, for the appellant. 

A. B. PANDAY, Advocate, M. L. WALI, Manager, Pronto Steerings Ltd.; S. K. CHADHA, Dy. Manager, Department of Industries, H.P./HPSIDC/HPFC; V. K. GUPTA, V. K. KAUSHIK, R. S. GULATI, Senior Managers, PNB; AMRIK SINGH, II ESIC, Ro Delhi. 

ORDER 

(Date of hearing : 12.8.1999.) 

This is an appeal against BIFR's order, dated 31.3.99 in case No. 175/88 (new case No. 4/97) approving the modified rehabilitation scheme for M/s. Pronto Steerings Ltd. (PSL), a sick industrial company. The appellants, shareholders of PSL, are aggrieved by clause 8(iv) of the modified-rehabilitation scheme for PSL. By that clause, the capital of PSL has been restructured by writing down the same by 75%. They are aggrieved because their shareholding of 13,450 shares (collectively) has been reduced to 25% of the face value. 

2. The learned counsel contends : the appellants came to know about the provision for the restructuring of capital by PSL by writing it down by 75% only when a notice, dated 12.5.99 was issued by PSL for an extraordinary general meeting of the members of PSL to be held on 12.7.99 for giving effect to clause 8(iv) of the modified rehabilitation scheme; when the brief particulars of the draft rehabilitation scheme were published in newspapers on 13.8.97, the said public notice did not include the fact that the proposed rehabilitation scheme for PSL included a provision for restructuring the capital of PSL by writing it down by 75%. He, therefore, contends that the appellants, members of PSL, did not have any reason for apprehending that their interest would be adversely affected by the proposed rehabilitation scheme and had no opportunity for objecting to this provision in the proposed rehabilitation scheme. He further contends that the scheme sanctioned by BIFR and the BIFR's order do not give any justification for the reduction in the face value of the existing share capital. He adds that as a result of the sanctioned modified rehabilitation scheme, the promoters would acquire more than 90% of the share capital after restructuring and thereby the small shareholders will lose certain rights which otherwise would have been available to them under the company law. He, therefore, prays for setting aside clause 8(iv) of the rehabilitation scheme for PSL. 

3. It is an admitted fact that public notice of the draft rehabilitation scheme was, dated 13.8.97. That notice included a clause that copy of the scheme was available for inspection in the library of BIFR during working hours on any working day. The appellants could have gone to the library of BIFR to check the particulars of the proposed rehabilitation scheme and found out as to whether their interests were going to be adversely affected in any way. Moreover, the scheme was sanctioned by BIFR on 5.3.98. The order impugned in this appeal is, dated 31.3.99 which only modified certain clauses in the scheme. The scheme sanctioned by BIFR on 5.3.98 included the aforesaid clause 8(iv). That clause has not been modified subsequently. During this entire period, the appellants do not appear to have taken any care to find out the particulars of the sanctioned scheme and also whether they were in any way going to be adversely affected in any way. The appeal against clause 8(iv) of the scheme is too much delayed. 

4. In the case of a sick industrial company as defined in section 3(1)(o) of the Sick Industrial Companies (Special Provisions) Act, 1985 (for short 'the Act'), the real value of the shares is zero unless shown to the contrary. Section 18(2)(f) specifically provides for the reduction of the interests or rights of the shareholders in the sick industrial company to such an extent as BIFR considers necessary in the interests of restructuring, revival or rehabilitation of the sick industrial company. In the scheme sanctioned for PSL, the secured creditors have accepted a sacrifice of Rs. 10.42 crores. When the State financial institutions and the bank have accepted such a large sacrifice in order to facilitate the rehabilitation of PSL, the shareholders cannot have a grievance about reduction in their interest. In fact, in the event of winding up of PSL, even the secured creditors would not have got payment of their full dues. The entire proceeds would have been distributed proportionately amongst the secured creditors and workers. The unsecured creditors and the shareholders would not have received any payment. Therefore, even the reduced interest of the shareholders under the rehabilitation scheme should be seen as a concession and not as a punishment to the shareholders. 

5. Since section 18(2)(g) of the Act specifically provides that in the case of restructuring of the capital of the sick industrial company in a rehabilitation scheme, if the interest of shareholders is reduced, shareholders may ask for payment in cash in full and final settlement of their interest in their shareholding. If, therefore, the appellants wish to receive payment at Rs. 2.50 per share for their entire shareholding or part of it, the promoters will have to buy their shares at Rs. 2.50 per share. Having said that, we do not see any reason for interference in the impugned order. With the above observation, the appeal is dismissed.