BIFR Scheme Cannot Bind State Without Express Approval Under SICA, Rules Rajasthan High Court
Lords Chloro Alkali Ltd. v. State of Rajasthan & Anr., S.B. Civil Writ Petition No. 990/2018
Judgment dated 19 December 2025
The Rajasthan High Court, Jaipur Bench, has dismissed a writ petition filed by Lords Chloro Alkali Ltd., holding that a rehabilitation scheme sanctioned by the Board for Industrial and Financial Reconstruction cannot be enforced against the State Government in the absence of express consent as required under the Sick Industrial Companies (Special Provisions) Act, 1985. The Court also found that prolonged non-compliance by the company itself disentitled it from any relief under writ jurisdiction.
The petition arose from demand notices issued in 2017 by the Rajasthan State Industrial Development and Investment Corporation for recovery of dues relating to an Interest Free Sales Tax Loan. The company contended that these demands violated a rehabilitation scheme sanctioned by BIFR in November 2006, under which the sales tax liability was settled at 26.58 per cent of the principal amount, payable in instalments without interest. On this basis, the company sought quashing of the demand notices and enforcement of the sanctioned scheme.
Tracing the background, the Court noted that the company had been declared a sick industrial unit in 2002 and that a final rehabilitation scheme was approved in 2006 after circulation to various stakeholders. While the scheme contemplated substantial concessions, including in respect of sales tax dues, the State Government and its nodal agency, RIICO, disputed that any binding consent had ever been granted for such concessions.
The High Court examined whether the scheme could bind the State in the absence of express consent under Section 19(2) of SICA. It found that no document or record showed affirmative approval by the competent authority of the State Government for waiver or reduction of sales tax liabilities. The order of BIFR itself recorded that RIICO had only stated that the proposal was under consideration and that settlements below the principal amount were generally not accepted, which, according to the Court, could not be treated as consent.
Rejecting the argument of deemed consent, the Court held that internal correspondence, file notings, or prolonged silence cannot substitute the statutory requirement of express consent when public revenue is involved. Relying on settled judicial precedents, the Court reiterated that BIFR has no power to compel a State Government to grant fiscal concessions without such consent, and that schemes lacking this requirement are unenforceable against the State.
The Court also took serious note of the petitioner’s conduct. It observed that despite the scheme prescribing a clear repayment schedule from 2006 onwards, the company had failed to make any payment for nearly eleven years and deposited an amount only in 2017. This prolonged non-compliance, the Court held, amounted to a fundamental breach of the scheme and eroded any equitable basis for invoking writ jurisdiction.
On the issue of repeal of SICA, the Court acknowledged that repeal does not automatically nullify sanctioned schemes. However, it clarified that only legally binding components of a scheme survive repeal, and a provision that was never enforceable against the State for want of consent cannot be revived later.
Applying the doctrine of laches, the High Court held that the petitioner’s delay and inaction were fatal to its claim. It observed that discretionary relief under Article 226 cannot be granted to a party that has failed to perform its own obligations and approaches the Court after an inordinate lapse of time.
For these reasons, the Jaipur Bench concluded that the writ petition lacked merit and dismissed it, thereby upholding the demand notices issued by RIICO and reinforcing the principle that State consent is mandatory before any rehabilitation scheme can impose financial concessions affecting public revenue.
