Raj HC quashes RIICO recovery notice against Lords Chloro Alkali, holds BIFR rehabilitation scheme binding on State and creditors

Jaipur: The Rajasthan High Court has quashed a recovery notice issued by the Rajasthan State Industrial Development and Investment Corporation (RIICO) against Lords Chloro Alkali Ltd., holding that a rehabilitation scheme sanctioned under the Sick Industrial Companies (Special Provisions) Act, 1985 (SICA) is binding on all stakeholders including the State Government and its agencies.

The Division Bench comprising Acting Chief Justice Sanjeev Prakash Sharma and Justice Sangeeta Sharma delivered the ruling while deciding D.B. Special Appeal (Writ) No. 64/2026, Lords Chloro Alkali Ltd. vs State of Rajasthan & Ors. arising out of S.B. Civil Writ Petition No. 990/2018.

The appeal was filed by the petitioner company challenging the order of a Single Judge dismissing its writ petition seeking quashing of notices issued by RIICO demanding recovery of dues relating to an Interest Free Sales Tax Loan (IFSTL).

According to the record, the petitioner company, earlier known as Modi Alkalies & Chemicals Ltd., had availed loans from RIICO between 1985 and 1991, including an Interest Free Sales Tax Loan of ₹257.53 lakh and a term loan of ₹81.68 lakh.

Subsequently, the company was declared a sick industrial company under Section 3(1)(o) of SICA and a rehabilitation process was initiated before the Board for Industrial and Financial Reconstruction (BIFR). A rehabilitation scheme was circulated in 2006 and, after considering objections from stakeholders, the BIFR sanctioned the scheme on November 30, 2006.

Under the sanctioned scheme, the State Government agreed to accept repayment of 26.5% of the outstanding sales tax loan as full and final settlement, while waiving the remaining principal, interest, penalty and other dues. The amount was to be paid in installments over a period of seven years.

The High Court had earlier approved the rehabilitation scheme on March 15, 2007 after rejecting objections filed by certain creditors including RIICO.

However, despite the sanctioned scheme, RIICO later issued a demand letter dated July 6, 2017 seeking recovery of ₹7.64 crore towards the IFSTL from the petitioner company.

The petitioner contended that it had already deposited ₹40,48,280, representing 26.5% of the principal amount, in accordance with the rehabilitation scheme and that RIICO’s demand was contrary to the binding settlement approved under SICA.

Opposing the appeal, the State Government argued that the petitioner had failed to comply with the timeline prescribed in the scheme and had approached the Court after considerable delay. It was further submitted that the scheme could not be enforced without the consent of the State Government under Section 19 of SICA.

After considering the submissions, the High Court framed the key issue as whether the BIFR rehabilitation scheme dated November 30, 2006 was binding on the parties and whether delay on the part of the petitioner defeated its claim.

The Court observed that the object of SICA was to rehabilitate sick industrial companies and that once a rehabilitation scheme is sanctioned under the Act, it becomes binding on all stakeholders including creditors and government authorities.

The Bench noted that the scheme had been approved by the High Court in 2007 and the State Government had not challenged that order, thereby allowing it to attain finality.

The Court further observed that correspondence on record showed that the petitioner had repeatedly offered to pay 26.5% of the IFSTL amount in accordance with the scheme and that the delay occurred because RIICO failed to accept the payment and sought directions from the State Government.

The Court held that the silence of the State Government and its failure to challenge the sanctioned scheme amounted to deemed consent under Section 19 of SICA, and therefore the scheme was binding upon the State as well as RIICO.

Holding that the demand raised by RIICO was contrary to the binding rehabilitation scheme, the High Court concluded that the recovery notice was illegal, arbitrary and unjustified.

Accordingly, the Court allowed the appeal in part and quashed the demand letter dated July 6, 2017 issued by RIICO.

However, the Court directed the petitioner company to deposit interest at the rate of 12% per annum on the amount of ₹40,48,280 for the period from March 15, 2007, when the High Court approved the scheme, until July 27, 2017 when the payment was made.

Case Title
Lords Chloro Alkali Ltd. vs State of Rajasthan & Ors.

Case Number
D.B. Special Appeal (Writ) No. 64/2026
(In S.B. Civil Writ Petition No. 990/2018)

Court
High Court of Judicature for Rajasthan, Bench at Jaipur

Bench
Hon’ble Acting Chief Justice Sanjeev Prakash Sharma
Hon’ble Mrs. Justice Sangeeta Sharma

Date of Order
06 March 2026

Advocates
For the Appellant:
Mr. Amol Vyas
Mr. Saurabh Jain
Ms. Udita Singh
Mr. Aashu Kansal
Mr. Bajrang Singh Jaitawat
Mr. Abhishek Purohit

For the Respondents:
Mr. Rishabh Khandelwal

Judgments / Legal Principles Relied Upon
Rehabilitation schemes sanctioned under SICA are binding on all stakeholders including creditors and government authorities once approved and not challenged; recovery demands contrary to such schemes are unsustainable.