law: Sick Industrial Companies (Special Provisions) Act, 1985
  18. Preparation and sanction of schemes 
  (1) Where an order is made under sub-section (3) of section 17
  
  in relation to any sick industrial company, the operating agency specified in
  
  the order shall prepare, as expeditiously as possible and ordinarily within a
  
  period of ninety days from the date of such order, a scheme with respect to
  
  such company providing for any one or more of the following measures, namely,- 
   3  [(a) the financial reconstruction of
  
  the sick industrial company;]
  (b) the proper management of the sick
  
  industrial company by change in, or take over of, management of the sick
  
  industrial company;
   7  [(c) the amalgamation of- 
  (i) the sick industrial company with any other
  
  company; or
  (ii) any other company
  
  with the sick industrial company;]
  (hereafter in this section, in the case of
  
  sub-clause (i), the other company, and the case of sub-clause (ii), the sick
  
  industrial company, referred to as "transferee company");]
  (d) the sale or lease of a part or whole of
  
  any industrial undertaking of the sick industrial company;
   7  [(da) the rationalization of managerial
  
  personnel, supervisory staff and workmen in accordance with law;]
  (e) such other preventive, ameliorative and
  
  remedial measures as may be appropriate;
  (f)such incidental, consequential or supplemental
  
  measures as may be necessary or expedient in connection with or for the purpose
  
  of the measures specified in clauses (a) to (e).
  (2) The scheme referred to in sub-section (1) may provide for
  
  any one or more of the following, namely,- 
  (a) the constitution, name and registered
  
  office, the capital, assets, powers, rights, interests, authorities and
  
  privileges, duties and obligations for the sick industrial company or, as the
  
  case may be, of the 8[transferee company;]
  (b) the transfer to the 8[transferee
  
  company] of the business, properties, assets and liabilities of the sick
  
  industrial company on such terms and conditions as may be specified in the
  
  scheme;
  (c) any change in the Board of Directors, or
  
  the appointment of a new Board of Directors, of the sick industrial company and
  
  the authority by whom, the manner in which and other terms and conditions on
  
  which, such change or appointment shall be made and in the case of appointment
  
  of a new Board of Directors or of any director, the period for which such
  
  appointment shall be made;
  (d) the alteration of the memorandum or
  
  articles of association of the sick industrial company or, as the case may be,
  
  of the 8[transferee company] for the purpose of altering the capital
  
  structure thereof or for such other purposes as may be necessary to give effect
  
  to the reconstruction or amalgamation;
  (e) the continuation by, or against, the sick
  
  industrial company or, as the case may be, the transferee company of any action
  
  or other legal proceeding pending against the sick industrial company
  
  immediately before the date of the order made under sub-section (3) of section
  
  17;
  (f) the reduction of the interest or rights
  
  which the shareholders have in the sick industrial company to such extent as
  
  the Board considers necessary in the interests of the reconstruction, revival
  
  or rehabilitation of the sick industrial company or for the maintenance of the
  
  business of the sick industrial company;
  (g) the allotment to the shareholders of the
  
  sick industrial company of shares .in the sick industrial company or, as the
  
  case may be, in the 8[transferee company] and where any shareholder
  
  claims payment in cash and not allotment of shares, or where it is not possible
  
  to allot shares to any shareholder, the payment of cash to those shareholders
  
  in full satisfaction of their claims- 
  (i) in respect of their interest in shares in
  
  the sick industrial company before its reconstruction or amalgamation; or
  (ii) where such interest has been reduced
  
  under clause (f) in respect of their interest in shares as so reduced;
  (h) any other terms and conditions for the
  
  reconstruction or amalgamation of the sick industrial company;
  (i) sale of the industrial undertaking of the
  
  sick industrial company free from all encumbrances and all liabilities of the
  
  company or other such encumbrances and liabilities as may be specified, to any
  
  person, including a co-operative society formed by the employees of such
  
  undertaking and fixing of reserve price for such sale;
  (j) lease of the industrial undertaking of the
  
  sick industrial company to any person, including a co-operative society formed
  
  by the employees of such undertaking;
  (k) method of sale of the assets of the
  
  industrial undertaking of the sick industrial company such as by public auction
  
  or by inviting tenders or in any other manner as may be specified and for the
  
  manner of publicity therefor;
  (l) transfer or issue of the shares in the
  
  sick industrial company at the face value or at the intrinsic value which may
  
  be at discount value or such other value as may be specified to any industrial
  
  company or any person including the executives and employees of the sick
  
  industrial company;
  (m) such incidental, consequential and
  
  supplemental matters as may be necessary to secure that the reconstruction or
  
  amalgamation or other measures mentioned in the scheme are fully and
  
  effectively carried out.
  (3) 3[(a) The scheme prepared by the operating agency
  
  shall be examined by the Board and a copy of the scheme with modification, if
  
  any, made by the Board shall be sent, in draft, to the sick industrial company
  
  and the operating agency and in the case of amalgamation, also to any other
  
  company concerned, and the Board shall publish or cause to be published the
  
  draft scheme in brief in such daily newspapers as the Board may consider
  
  necessary, for suggestions and objections, if any, within such period as the
  
  Board may specify.]
  (b) The Board may make such modifications, if
  
  any, in the draft schemes as it may consider necessary in the light of the
  
  suggestions and objections received from the sick industrial company and the
  
  operating agency and also from the 8[transferee company] and any
  
  other 9[* * *] company concerned in the amalgamation and from any
  
  shareholder or any creditors or employees of such 9[* * *]
  
  companies:
  PROVIDED  that where the scheme relates to amalgamation
  
  10[* * *], the said scheme shall be laid before the company other than
  
  the sick industrial company in the general meeting for the approval of the
  
  scheme by its shareholders and no such scheme shall be proceeded with unless it
  
  has been approved, with or without modification, by a special resolution passed
  
  by the shareholders of the 8[transferee company.]
  (4) The scheme shall thereafter be sanctioned, as soon as may
  
  be, by the Board (hereinafter referred to as the 'sanctioned scheme') and shall
  
  come into force on such date as the Board may specify in this behalf:
  PROVIDED  that different dates may be specified for
  
  different provisions of the scheme.
  (5) The Board may on the recommendations of the operating agency
  
  or otherwise, review any sanctioned scheme and make such modifications as it
  
  may deem fit or may by order in writing direct any operating agency specified
  
  in the order, having regard to such guidelines as may be specified in the
  
  order, to prepare a fresh scheme providing for such measures as the operating
  
  agency may consider necessary.
  (6) When a fresh scheme is prepared under sub-section (5), the
  
  provisions of sub-sections (3) and (4) shall apply in relation thereto as they
  
  apply to in relation to a scheme prepared under sub-section (1).
   2  [(6A) Where a sanctioned scheme provides for the transfer
  
  of any property or liability of the sick industrial company in favor of any
  
  other company or person or
  where such scheme provides for the transfer of any property or
  
  liability of any other company or person in favor of the sick industrial
  
  company, then, by virtue of, and to the extent provided in, the scheme, on and
  
  from the date of coming into operation of the sanctioned scheme or any
  
  provision thereof, the property shall be transferred to, and vest in, and the
  
  liability shall become the liability of, such other company or person or, as
  
  the case may be, the sick industrial company.]
  (7) The sanction accorded by the Board under sub-section (5)
  
  shall be conclusive evidence that all the requirements of this scheme relating
  
  to the reconstruction or amalgamation, or any other measure specified therein
  
  have been complied with and a copy of the sanctioned scheme certified in
  
  writing by an officer of the Board to be a true copy thereof, shall, in all
  
  legal proceedings (whether in appeal or otherwise) be admitted as evidence.
   3  [(8) On and from the date of the coming into operation of
  
  the sanctioned scheme or any provision thereof, the scheme or such provision shall
  
  be binding on the sick industrial company and the transferee company or, as the
  
  case may be, the other company and also on the shareholders, creditors and
  
  guarantors and employees of the said companies.]
  (9) If any difficulty arises in giving effect to the provisions
  
  of the sanctioned scheme the Board may, on the recommendation of the operating
  
  agency 2[or otherwise], by order do anything, not inconsistent with
  
  such provisions, which appears to it to be necessary or expedient for the
  
  purpose of removing difficulty.
  (10) The Board may, if it deems necessary or expedient so to do,
  
  by order in writing direct any operating agency specified in the order to
  
  implement a sanctioned scheme with such terms and conditions and in relation to
  
  such sick industrial company as may be specified in the order.
  (11) Where the whole of the undertaking of the sick industrial
  
  company is sold under a sanctioned scheme, the Board may distribute the sale
  
  proceeds to the parties entitled thereto in accordance with the provisions of
  
  section 529A and other provisions of the Companies Act, 1956.
   2  [(12) The Board may monitor periodically the
  
  implementation of the sanctioned scheme.]
  Comment: "While the Act enacted in 1985 does
  
  envisage the revival of sick units by the workers who had been rendered
  
  unemployed, it is (as far as is known) for the first time that the legislative
  
  intent reflected in the relevant provisions of the Act to encourage workers'
  
  schemes is being given a concrete shape in this manner. It is perhaps for the first
  
  time that such a Scheme sponsored by the suffering employees themselves has
  
  come to be sanctioned. Under the circumstances a very heavy burden rests on the
  
  shoulders of KEU and the concerned employees. Tens of thousands of similarly
  
  situated workers would be watching with anxious eyes the outcome of this bold
  
  experiment undertaken by the workers of KTL. On their success or failure will
  
  depend the future hope and destiny of tens of thousands of similarly situated
  
  workers. Success of this venture will instill new @page-SC19 confidence and
  
  enable the workers to try to build their own future with their own hands albeit
  
  at some initial sacrifice." Navnit R. Kamani v. R.R. Kamani, AIR 1989
  
  SUPREME COURT 9