Siva Cotton Mills (INDIA) PVT. vs. Board Of Industrial And

Facts

The petitioner, Siva Cotton Mills (India) Private Limited, borrowed a term loan of Rs. 250 lakhs from the second respondent, State Industries Promotion Corporation of Tamil Nadu Limited (SIPCOT), in 1996. The company later became sick and approached the Board for Industrial and Financial Reconstruction (BIFR). SIPCOT approved an One Time Settlement (OTS) Scheme on 10.12.2012, requiring the petitioner to pay Rs. 440.10 lakhs, with 25% due within 15 days and the balance within 90 days. The petitioner failed to meet the initial payment deadline due to industry sickness. Consequently, on 02.01.2013, SIPCOT issued an order stating the OTS Scheme would be cancelled if the petitioner did not remit 25% of the OTS amount immediately and the balance within 90 days. The petitioner filed a writ petition challenging this order.

Held

The Court considered the submissions of both parties and noted that the petitioner voluntarily came forward to pay the due amount under the OTS Scheme. The Court acknowledged the revised calculation by SIPCOT, as of 25.10.2021, stating the entire balance including interest at a revised rate of 6% (as per RBI guidelines) was Rs. 355.07 lakhs. The Court disposed of the writ petition by directing the petitioner to deposit Rs. 50 lakhs on or before 23.11.2021, along with the format application, affidavit, processing fee of Rs. 25,000/-, and Rs. 4500/- towards GST & upfront fee. Upon receipt of this partial payment and application, the Board was to consider and pass orders on the Scheme approval within four weeks. Thereafter, the remaining due of Rs. 305.07 lakhs (355.07 lakhs - 50 lakhs) was to be paid by the petitioner within 60 days. The Court clarified that any default would allow SIPCOT to initiate persuasive action as per the State Finance Corporations Act, 1951, and upon full payment, SIPCOT was to hand over all original documents. The issue regarding charging 8% interest as per SIPCOT O.O.7/2005 was implicitly addressed by accepting the revised calculation with a 6% interest rate.

Key Issues

1. Whether the impugned order dated 02.01.2013 passed by the second respondent, cancelling the OTS Scheme due to non-payment of the initial 25% amount, is liable to be quashed? 2. Whether the second respondent should be directed to charge 8% interest as per SIPCOT O.O.7/2005 dated 24.05.2005? Petitioner's Arguments: The petitioner argued that they are ready and willing to pay the entire due amount to the second respondent and sought a revised calculation of the OTS amount. They also sought to have the interest charged at 8% as per a previous order. Revenue/State's Arguments: The second respondent (SIPCOT) submitted that as per their policy, an application for OTS requires a processing fee of Rs. 25,000/- and Rs. 4500/- towards GST & upfront fee. They also stated that as of 30.11.2021, the balance amount under OTS was Rs. 355.07 lakhs, which could be accepted if paid within 90 days, subject to Board approval. However, they insisted that at least 25% of the OTS amount should be paid within 15 days to demonstrate bonafide.