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Ghanshyam Sarda v. M/s Shiv Shankar Trading Co. and others

Civil Appeal · Neutral citation not assigned (Civil Appeal No. 10221 of 2014)Decided 13 Nov 2014
Civil Appeal No. 10221 of 2014
Justice Anil R. Dave · Justice Uday Umesh Lalit

Background

J.K. Jute Mills was under BIFR supervision when it asserted that its net worth had turned positive. A creditor then filed a civil suit seeking payment and a declaration that the company was no longer sick, and obtained an order restraining the BIFR proceedings. A competing revival proponent and a workers' union challenged that approach.

Decision Breakdown

The Court allowed the appeals, set aside the civil-court injunction and held that only BIFR could determine whether the company had revived and should leave its supervision. The declaration claim was not maintainable, and the money-recovery suit required BIFR's express consent during the protected statutory period. BIFR was directed to assess the claimed positive net worth within two months, deregistering the company if satisfied or otherwise continuing revival consideration. A property sale without its permission required assessment after notice to the purchaser, rather than automatic cancellation here. The creditor was ordered to pay ₹5 lakh costs for concealing its prior request for consent and the pending BIFR consideration.

Lesson Learnt

Under the then-applicable sick-company framework, asserting a positive balance sheet did not let management or a creditor bypass BIFR supervision. Recovery proceedings required the statutory consent, and the specialised Board had to decide whether revival had actually occurred.

Official source (sci.gov.in)View Judgment (PDF)

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