[2025:RJ-JP:51374] HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH AT JAIPUR S.B. Civil Writ Petition No. 990/2018 Lords Chloro Alkali Ltd., S.P. 460, M.I.A., Alwar Raj. Through Its AGM (Accounts & Finance) ----Petitioner Versus 1. State Of Rajasthan, Through Secretary Industries Department Government Of Rajasthan, Jaipur 2. Rajasthan State Industrial Development And Investment Corporation Ltd. Through M.D. ----Respondents For Petitioner(s) : Shri Anil Mehta, Senior Advocate with Mr. Saurav Mehta, Mr. Ranvijay Singh For Respondent(s) : Mr. Basant Singh Chhaba, AAG with Mr. Rahul Gupta, Mr. Satyam Bhardwaj, Mr. Rishabh Khandelwal, assisted by Mr. Kartik Soti. HON'BLE MR. JUSTICE PRAVEER BHATNAGAR Judgment Date of conclusion of arguments:- 02/12/2025 Date on which the judgment was Reserved :- 02/12/2025 Whether the full judgment or only the operative part is pronounced:- Full Judgment Date of pronouncement:- 19/12/2025 1. The present writ petition under Article 226 of the Constitution of India arises out of and relates to the provisions of Sections 4(b) and 5 of the Sick Industrial Companies (Special [2025:RJ-JP:51374] (2 of 15) [CW-990/2018] Provisions) Repeal Act, 2003. The petitioner seeks quashing of the demand notices dated 10.08.2017 and 15.09.2017 issued by Respondent No. 2, and prays for directions to implement the Rehabilitation Scheme sanctioned by the Board for Industrial and Financial Reconstruction on 30.11.2006 in Case No. 308/2001. 2. The facts in brief are that the petitioner–Company was incorporated on 01.03.1979 under the name Modi Alkali & Chemicals Limited and, upon change of name on 01.10.2003, was renamed as Lords Chloro Alkali Limited, operating a chemical manufacturing unit at Alwar, Rajasthan. 3. Owing to continuous financial losses and erosion of its net worth, a reference was registered before the Board for Industrial and Financial Reconstruction (in short, ‘BIFR’) as Case No. 308/2001. 4. By order dated 15.01.2002, the petitioner was declared a sick industrial company under Section 3(1)(o) of the Sick Industrial Companies (Special Provisions) Act, 1985 (hereinafter referred to as ‘SICA’) and thereafter, Industrial Development Bank of India (IDBI) was appointed as the Operating Agency. 5. A Draft Rehabilitation Scheme (in short, ‘DRS’) was thereafter circulated on 22.09.2006 to the State Government, Rajasthan State Industrial Development & Investment Corporation Limited (in short, ‘RIICO’), secured creditors, financial institutions and statutory authorities. 6. After consideration of the responses received from stakeholders, the BIFR sanctioned the Final Rehabilitation Scheme on 30.11.2006 under Section 18(4) of SICA. The sanctioned scheme, inter alia, recorded the restructuring of liabilities and a [2025:RJ-JP:51374] (3 of 15) [CW-990/2018] consolidated settlement of the outstanding Interest Free Sales Tax Loan at 26.58% of the principal amount, payable in 7 annual installments. 7. Following the sanction of the rehabilitation scheme, correspondence was exchanged between the petitioner, RIICO and the State authorities from 2007 to 2013 regarding certain aspects of implementation. During this period, RIICO also issued various communications concerning the petitioner’s dues. Subsequently, on 06.07.2017, RIICO raised a demand relating to the IFSTL Loan, pursuant to which an amount of ₹40,48,280 was deposited by the petitioner on 27.07.2017. 8. Thereafter, RIICO issued further demand notices dated 10.08.2017 and 15.09.2017, seeking recovery of the entire principal and interest due from IFSTL, leading to the filing of the present writ petition. 9. Learned counsel for the petitioner submits that the impugned demand notices have been issued in complete violation of the Rehabilitation Scheme sanctioned on 30.11.2006. Under clause 10.8 of the Scheme, the unsecured IFSTL Loan of ₹152.76 lakhs was finally settled at 26.58% (Rs. 40.48 lakhs), payable in seven installments without interest. Objections before the BIFR were filed only regarding the secured term loan under clause 10.1(A) (4); RIICO or the State Government never raised any objection concerning IFSTL, and further, no appeal was filed to the AAIFR, and in light of the same, the scheme attained finality and binds all respondents. 10. It is submitted that RIICO’s No Objection Certificate (‘NOC’) dated 30.05.2007, issued in respect of the secured loan, illegally [2025:RJ-JP:51374] (4 of 15) [CW-990/2018] demanded full principal and interest on IFSTL contrary to clause 10.8 of the Scheme, prompting the petitioner to address several representations between 2007 and 2013. The departmental record, including notesheets, annexure P-20, and RIICO communications, annexure R-2/2, shows that RIICO itself forwarded the matter to the State Government and that the issue remained pending for Government directions; therefore, the petitioner cannot be held liable for delay or default. 11. Learned counsel has placed a reference to the judgment passed in Principal Director of Income Tax v. Indian Plywood Manufacturing Co., (2023) 240 Comp Cas 282, wherein it was held that repeal of SICA does not affect the binding force of a sanctioned scheme; therefore, the 2006 scheme continues to govern the rights and obligations of all stakeholders. 12. It is argued that the decisions in the State of U.P. v. Upton Employees Union, (2006) 5 SCC 319 and M/s Ultratech Cement Ltd. v. State of Gujarat, 2017 SCC OnLine Del 12222, relied upon by the respondents, deals with waiver of statutory liabilities and have no application in the present case, since the IFSTL Loan is a non-statutory Government loan and further reliance is placed on the case of Modi Rubber Ltd. v. Continental Carbon India Ltd., (2023) 17 SCC 263, to submit that reopening liabilities conclusively settled under a BIFR scheme frustrates the very object of rehabilitation and is impermissible. 13. It is also submitted that the DRS was circulated separately to RIICO and the State Government, and no objection was filed regarding the IFSTL component; thus, Section 19(2) of SICA operates and deemed consent stands established, reference in this [2025:RJ-JP:51374] (5 of 15) [CW-990/2018] regard was made to the case of Union of India v. Cimmco Ltd., 2014 SCC OnLine Del 909 and M/s Ambuja Cements Ltd. v. State of Rajasthan, 2014 SCC OnLine Raj 5014, reiterating that failure to file objections within the statutory period results in binding deemed consent. 14. Furthermore, with respect to admissibility of internal records, counsel relies on the three-Judge Bench of the Hon’ble Apex Court in the case of Subodh Kumar Singh Rathour vs. Chief Executive Officer and Ors., 2024 SCC OnLine SC 1682, wherein it was held that file notings and internal deliberations forming part of the decision-making process may be examined by the Court in judicial review. It is argued that the notesheets produced by the petitioner show that neither RIICO nor the State Government objected to the IFSTL settlement. That implementation remained pending only due to the absence of Government directions. Despite the petitioner depositing ₹40,48,280 in accordance with the scheme, RIICO raised fresh demands of ₹7,64,21,476 through the impugned notices, resurrecting principal and interest extinguished under clause 10.8. Such action, it is contended, is arbitrary, without jurisdiction, and contrary to the sanctioned scheme dated 30.11.2006. 15. At last, the petitioner prays for quashing of the impugned notices dated 10.08.2017 and 15.09.2017 and for a direction to the respondents to implement the sanctioned Rehabilitation Scheme dated 30.11.2006 in its entirety. 16. Per Contra, it is submitted by learned Counsel appearing on behalf of Respondent No.1 and 2 that the sanctioned rehabilitation scheme dated 30.11.2006 cannot bind the State Government [2025:RJ-JP:51374] (6 of 15) [CW-990/2018] insofar as it purports to incorporate financial concessions relating to the waiver of sales tax, interest, penalty or surcharge, in the absence of express written consent from the competent authority of the State as required under Section 19(2) of the SICA. It is urged that the statutory provision contemplates affirmative, explicit consent before any relief impacting the revenue interests of the State can be made part of a rehabilitation package, and that neither silence, nor forwarding of correspondence, nor pendency of internal consideration can be construed as consent. 17. In support of this proposition, reliance is placed on the judgment of the Division Bench of this Court in Ambuja Cements Ltd. v. State of Rajasthan (supra), wherein it was held that BIFR has no authority to direct the State to extend incentives or grant remission in the absence of express consent, and that any such direction would be beyond its jurisdiction. The respondents further rely on the decision of the Hon’ble Supreme Court in the State of U.P. v. Upton Employees’ Union (supra), where it was categorically held that BIFR cannot compel a State to forego statutory liabilities, the power of the Board being limited to restructuring corporate sickness, not altering statutory obligations unless the statute itself permits such alteration. Furthermore, reliance is also placed on the decision of the Delhi High Court in M/s Ultratech Cement Ltd. v. State of Gujarat (supra), where the contention of ‘deemed consent’ under Section 19(2) was expressly rejected, reiterating that consent must be expressed and cannot be presumed by implication or by mere participation in the proceedings. On this basis, it is urged that the IFSTL settlement [2025:RJ-JP:51374] (7 of 15) [CW-990/2018] recorded in clause 10.8 of the sanctioned scheme is unenforceable against the State Government. 18. The respondents further contended that the internal communications and notesheets relied upon by the petitioner cannot be treated as part of the legally operative record and reliance in this regard is placed upon the judgment of the Hon’ble Supreme Court in Shanti Sports Club v. Union of India, (2009) 15 SCC 705, wherein it was held that internal notings, departmental deliberations and file drafts do not confer enforceable rights and cannot be relied upon to bind the Government unless they culminate in an approved decision communicated by a competent authority. The respondents submit that the notesheets produced by the petitioner merely reflect internal processing and do not evidence any decision of the State Government to accept the terms of the DRS or to waive any component of the IFSTL liability. It is submitted that such materials cannot be elevated to the status of a binding governmental decision. 19. It is further submitted that the petitioner’s claim is barred by delay and laches. If the petitioner considered the sanctioned scheme binding upon it, it was obliged to make installment payments under clause 10.8 from 2007. However, from 2007 to 2016, no payments were made towards the IFSTL liability. The respondents submit that the petitioner cannot now seek to enforce the scheme after a nearly decade-long gap, particularly when the scheme itself prescribed a specific repayment timeline. The petitioner’s silence and inaction over an extended period, during which no steps were taken to comply with the scheme, dis-entitle [2025:RJ-JP:51374] (8 of 15) [CW-990/2018] it from seeking equitable relief under Article 226 of the Constitution of India. 20. The respondents further contend that the petitioner’s own conduct undermines its claim that State consent was a precondition for the scheme's implementation. It is argued that if the petitioner believed that express consent was required, there was no occasion for it to deposit Rs. 40,48,280 in 2017–2018 without any such consent having been issued. Conversely, if the petitioner believed that such consent was not required for making payment, no satisfactory explanation is offered for the petitioner's failure to make payments from 2007 onwards in accordance with the scheme. The respondents accordingly submit that the petitioner cannot rely on the sanctioned scheme selectively, nor can it revive obligations or rights after the stipulated timelines have lapsed. 21. Lastly, reliance is placed on the decision in Mafatlal Industries Ltd. v. S.A. Chemicals, (2005) 127 Comp Cas 711, wherein the Gujarat High Court stressed that the implementation of a sanctioned scheme is a mutual obligation binding both the company and the concerned authorities. It was held that neither party can shift the entire responsibility for implementation to the other, and that compliance by both is necessary to give effect to the objective of rehabilitation. 22. On this basis, it is submitted that the petitioner, having failed to discharge its own obligations under the scheme, cannot now invoke the provisions of SICA to enforce the same against the respondents after an inordinate delay. [2025:RJ-JP:51374] (9 of 15) [CW-990/2018] 23. Heard Learned Counsels for the Parties and perused the material available on record. 24. The core questions, which require consideration is to whether the respondent-State Government granted consent under Section 19 (2) of the Act of 1985 and petitioner is liable to enforce the sanctioned scheme proposed by BIFR. 25. The State in para 4 of its reply has categorically stated that on 30.11.2006, during hearing of objections/suggestions, the respondent No.2 i.e. RIICO, which is a Nodal Agency of a State Government objected to the DRS of the petitioner’s company, however, the proposal given by the petitioner-company was never accepted by the respondent No.2 and it was duly recorded at the Point No.5 in the order dated 30.11.2006 which reads as under:- “The representative of RIICO submitted that the company’s compromise proposal was under consideration by their competent authority. However, generally, RIICO do not accept any settlement below the principal amount.” 26. In the present case, the petitioner has not produced any document demonstrating the State of Rajasthan's expressed written consent to waive sales tax, interest, penalty, or surcharge. The routine demonstrative correspondence between the Nodal Agency, i.e., the respondent No. 2, and the State does not indicate that the State Government rendered any consent approving the DRS. 27. The Division Bench in the case of Ambuja Cements Ltd. Vs. State of Rajasthan (supra), held as under:- [2025:RJ-JP:51374] (10 of 15) [CW-990/2018] “63. We may observe here that the BIFR under section 19 of the Sick Industrial Companies (Special Provisions) Act, 1985, read with Regulation 33, does not have any power to direct, in the absence of specific consent, the State Government to grant any incentive, which is not a part of the policy of the State Government. In view of the decision of the Supreme Court in State of U.P. Vs. UPTRON Employee’s Union CMD, (2006) 5 SCC 319), no direction can be given by the BIFR directing any State to grant or not to grant any incentive or to relieve the petitioner of any statutory liability.” 28. The petitioner has relied upon the judgment of Union of India Vs Cimmco Ltd. & Others (supra); however, in the judgment of M/s Ultratech Cement Ltd. V. State of Gujarat (supra), delivered on 07.12.2017, the doctrine of deemed consent was expressly rejected, and the Court has held as under:- “51. This Court concurs with the view of the AAIFR that since it is not in dispute that the Government of Gujarat did not give its consent in terms of Section 19(2) above and instead filed its objections to the relevant provisions of the rehabilitation scheme, there was no question of deemed consent. As is evident from Section 19(4) of SICA, it is in the absence of consent by any person, the Board may adopt such other measures including the winding up of the sick industrial company as it may deem fit. Likewise, the Maharashtra State had no notice of the scheme and became aware of it later. In its case, too, its consent cannot reasonably be deemed. Therefore, BIFR could not have overridden or completely ignored the requirement of consent [2025:RJ-JP:51374] (11 of 15) [CW-990/2018] under Section 19(2) of SICA. The argument that since there is a provision for filing an appeal against the order of BIFR (under Section 25 of SICA), the BIFR can ignore the mandate of Section 19(2) of SICA and sanction a scheme in the absence of consent without intimation to any state, or contrary to its object, is an untenable proposition. To admit of this eventuality is to countenance any order of BIFR contrary to the law, as it can be challenged in an appeal. There is nothing to indicate to why the BIFR thought it fit to reject the State of Gujrat’s objections, to the proposed scheme. 52. In the circumstances mentioned above, this Court is of the opinion that the sanctioned scheme was not binding on both the States for want of consent on part of the State authorities rendering financial assistance.” 29. The High Court of Delhi in Union of India Vs. Cimmco Ltd. (supra) has held as under:- “As regards the first two questions, the Court notes that the provisions of Section 18 and 19 are complementary, and dealing with different spheres of action. Section 18(8) states that the scheme sanctioned by the BIFR will be binding on the sick company, its creditors, employees, guarantors etc. Indeed, these are the only entities which the BIFR can unilaterally bind. The scope of application of Section 19, however, is different. In the words of the section, as regards, “the Central Government, a State Government, any scheduled bank or other bank, a public financial institution or State level institution or any institution or other authority”, the BIFR does not have the authority to bind these [2025:RJ-JP:51374] (12 of 15) [CW-990/2018] entities by its orders and thus modify the obligations and rights owed between the sick company and these entities. However, the scheme for rehabilitation may, in the interests of ensuring that the sick company returns to a profitable state as soon as possible, envisage “financial assistance by way of loans, advances or guarantees or reliefs, concessions or sacrifices from” any of the above entities. These provisions in the DRS will not be binding on these entities unless their consent is obtained. Thus, these entities may determine whether the concessions envisaged in the DRS will be provided by them and either consent or reject the provision. If the entity rejects the provision, unlike in the case of entities covered under Section 18(8), they will not be bound by the scheme sanctioned subsequently. This is made clear by clause 2 of Section 19, which states that the DRS must be circulated to obtain consent. Once consent is obtained, however, the provision becomes binding for the period of the sanctioned scheme. Crucially in this regard, Section 19(2) categorically provides that “if no consent is received within such period or further period, it shall be deemed that consent has been given.” 30. Thus, in all three judgments, it has been categorically held that there must be positive and affirmative consent. In the present case, the order passed by the BIFR does not show that the Nodal Agency of the State Government, i.e. the respondent No.2-RIICO, gave an affirmative consent; therefore, in the light of the aforesaid judgments, this Court is of the view that in the absence of consent from the State Government. The DSR proposed by the BIFR cannot be implemented. [2025:RJ-JP:51374] (13 of 15) [CW-990/2018] 31. Furthermore, the petitioner has failed to make any payment under the 2006 BIFR Scheme for 11 years, and an amount was paid in 2017; such prolonged non-compliance itself constitutes a fundamental breach of the scheme's timeline and undermines any equitable foundation for relief. The explanation rendered by the petitioner that it waited for the State's instruction and consent is also untenable, as consent under Section 19(2) of the SICA is required, as laid down in the aforesaid judgment. Once a scheme is sanctioned, compliance with its timeline becomes obligatory unless modification or extension is sought. 32. The petitioner has also not performed its obligations. The petitioner's non-compliance extinguishes any claim arising from the scheme. 33. The Hon’ble Apex Court in the matter of Karnataka Power Corporation Ltd. V. K. Thangappan, (2006) 4 SCC 322, reiterated the doctrine of laches and held as under:- “7. What was stated in this regard by Sir Barnes Peacock in Lindsay Petroleum Co. v. Prosper Armstrong Hurd [(1874)] 5 PC 221: 22 WR 492] (PC at p. 239) was approved by this Court in Moon Mills Ltd. v. M.R. Meher [AIR 1967 SC 1450] and Maharashtra SRTC v. Shri Balwant Regular Motor Service [(1969) 1 SCR 808: AIR 1969 SC 329]. Sir Barnes had stated: “Now, the doctrine of laches in courts of equity is not an arbitrary or a technical doctrine. Where it would be practically unjust to give a remedy either because the party has, by his conduct done that which might fairly be regarded as equivalent to a waiver of it, or where by his conduct and neglect [2025:RJ-JP:51374] (14 of 15) [CW-990/2018] he has though perhaps not waiving that remedy, yet put the other party in a situation in which it would not be reasonable to place him if the remedy were afterwards to be asserted, in either of these cases, lapse of time and delay are most material. But in every case, if an argument against relief, which otherwise would be just, is founded upon mere delay that delay does not amount to a bar by any statute of limitation, the validity of that defence must be tried upon principles substantially equitable. Two circumstances always important in such cases are the length of the delay and the nature of the acts done during the interval, which might affect either party and cause a balance of justice or injustice in taking the one course or the other, so far as it relates to the remedy. 8. It would be appropriate to note certain decisions of this Court in which this aspect has been dealt with in relation to Article 32 of the Constitution. It is apparent that what has been stated as regards that article would apply, a fortiori, to Article 226. It was observed in Rabindranath Bose v. Union of India [(1970) 1 SCC 84 : AIR 1970 SC 470] that no relief can be given to the petitioner who without any reasonable explanation approaches this Court under Article 32 after inordinate delay. It was stated that though Article 32 is itself a guaranteed right, it does not follow from this that it was the intention of the Constitution-makers that this Court should disregard all principles and grant relief in petitions filed after inordinate delay.” [2025:RJ-JP:51374] (15 of 15) [CW-990/2018] 34. Thus, for the aforesaid reasons, this Court does not find any cogent grounds to accept the writ petition. The writ petition is devoid of merit; hence, it is dismissed. (PRAVEER BHATNAGAR),J Ramesh Vaishnav/86 43