SC: Company court should not act like a rubber stamp

Written by Indu Bhan | Indu Bhan | Updated: Jul 26 2013, 07:59am hrs
IFCL plea dismissed

The Supreme Court has endorsed the Madras High Court judgment which held that the Integrated Finance Co Ltds (IFCL) scheme of compromise with its creditors lacked bonafides, was contrary to public policy and violated RBI guidelines.

RBI during 1997-2003 had issued various circulars to regulate activities of NBFCs. Since RBI found various violations by IFCL, it also prohibited the leading NBFC from accepting deposits from the investors and restrained it from transferring assets.

Soon IFCL proposed a scheme of compromise, which was approved by its Board of Directors and also got sanction from the company court in 2005. However, depositors, RBI and others objected to the scheme. The division bench set aside the single judges order due to violations of the RBI rules. Approving the High Courts April 2008 decision, the Supreme Court observed that IFCL introduced the scheme only with a view to avoid repayment to small depositors and violated the rule that every deposit shall be repaid according to the terms of the deposit. Stating that the company court is not expected to substitute its own wisdom for that of the stakeholders, the top court said: The company court, whilst examining the fairness and the bonafide of a scheme of arrangement does not act as a rubber stamp. It cannot shut its eyes to blatant non-disclosure of material information, which could have a major influence/impact on the decision as to whether the scheme has to be approved or not.

Kerala to demolish tourism joint

Setting aside the Kerala High Courts order that allowed construction of a hotel/restaurant on the banks of the Periyar river, the Supreme Court directed the state government to demolish within three months the tourism joint, which was a part of renovation and beautification of Manalpuram Park in Aluva.

In this case, Association for environment protection vs State of Kerala, Aluva Municipality had reclaimed a part of the Periyar river and the District Tourism Promotion Council (DTPC) had started constructing a restaurant on the reclaimed land after getting administrative sanction from the state government. The association moved the High Court to restrain it from continuing the construction and also for removal of the constructions made. The High Court dismissed the petition of the environmentalists by taking into consideration the sanction accorded by the state government in 2005 and observed that only a restaurant is being constructed and not a hotel.

While the Aluva municipal and tourism authorities tried to justify sanction for the construction, the Supreme Court accused them of conveniently avoiding scrutiny of the project in the light of the parameters required to be kept in view for protection of environment of the area and the river.

The subterfuge employed by DPC and the Department of Tourism has certainly resulted in violation of the fundamental right to life guaranteed to the people of the area ..., the apex court said.

Pay scale not binding on state univs

The Supreme Court in a bunch of cases led by Jagdish Prasad Sharma vs State of Bihar & ors has held that retirement age and pay scale fixed by University Grants Commission (UGC) for teaching faculty are not binding on state-run universities.

It held that there would be no automatic application of UGC recommendations for state universities without any conscious decision being taken by the state in this regard, on account of the financial implications and other consequences attached to such a decision.

There is no ambiguity that the final decision to enhance the age of superannuation of teachers within a particular state would be that of the state itself. The right of the commission to frame regulations having the force of law is admitted. However, the state governments are also entitled to legislate with matters relating to education, it said.

While admitting the right of the commission to frame regulations having the force of law, it said that the state governments are also entitled to legislate with matters relating to education under Entry 25 of List III.