1990 (10) TMI 261 - HC - Companies Law

Summary

Issues:
Application under rule 9 of Companies (Court) Rules, 1959 seeking directions to State Bank of India to accept proposals for company start-up and collateral securities.

Analysis:
The judgment pertains to an application filed under rule 9 of the Companies (Court) Rules, 1959, requesting the State Bank of India to accept proposals for commencing a company and the collateral and primary securities offered. The company in question, incorporated in 1981, failed to commence business, leading to a petition for winding up under section 439 of the Companies Act, 1956. Disputes arose between the petitioners and other shareholders, resulting in the factory closure and accruing interest on loans from the bank. Efforts were made to resolve the disputes for one group to take over the factory and commence business, subject to certain conditions, including transferring liabilities to the Mehtanis with adequate securities. The applicant sought relief and concessions from the bank to revive the unit, offering collateral security of a shed worth Rs. 8 lakhs and primary security of plant and machinery worth Rs. 16 lakhs.

The State Bank of India disputed the viability of the proposals, claiming the primary security offered was of scrap value and the machinery obsolete and useless. The court decided not to dispose of the application immediately, urging the bank to reconsider in light of the directions provided. The court directed both parties to have the value of the securities determined by an approved valuer, with reports to be submitted to the bank for a final decision. If the bank deems the securities inadequate, reasons must be provided, and a report forwarded to the court within two months for further consideration.

In conclusion, the judgment emphasizes the importance of fair valuation of securities and adherence to guidelines for the bank's decision-making process. The court aims to facilitate the revival of the sick unit while ensuring the bank's interests are protected through appropriate collateral and primary securities. The directive for valuation by approved valuers and a subsequent review by the bank within a specified timeframe reflects a balanced approach to resolving the dispute and promoting the company's potential revival.