1991 (3) TMI 315 - HC - Companies Law

Issues Involved:

1. Winding up of Kamla Spinning and Manufacturing Mills Private Limited.
2. Valuation of assets and properties by GTCO.
3. Invitation of offers to take over the assets on lease.
4. Scheme of compromise and/or arrangement by Neptune Trading Co.
5. Approval of the scheme by various creditors and stakeholders.
6. Objection by All-India Scheduled Castes Development Co-operative Society Limited.
7. Sanctioning of the scheme by the court.

Detailed Analysis:

1. Winding up of Kamla Spinning and Manufacturing Mills Private Limited:

On April 14, 1986, Kamla Spinning and Manufacturing Mills Private Limited was ordered to be wound up under the provisions of the Companies Act, 1956. The official liquidator was appointed as liquidator of the company.

2. Valuation of assets and properties by GTCO:

By order dated March 27, 1989, GTCO was appointed as a valuer to assess the value of the assets and properties of the company and also to prepare an inventory. GTCO submitted a valuation report dated May 24, 1989, showing the total value at Rs. 2,00,23,975.

3. Invitation of offers to take over the assets on lease:

After receiving the valuation report, the court directed the official liquidator to invite offers for taking over the assets on lease to re-start the company and generate employment for the workers. The court considered the interests of the company in liquidation, creditors, and workers. Fresh advertisements were issued, and five offers were received, out of which three were withdrawn.

4. Scheme of compromise and/or arrangement by Neptune Trading Co.:

Neptune Trading Co. sponsored a scheme of compromise and/or arrangement between Kamla Spinning and Manufacturing Mills Private Ltd. and its creditors and employees. This was filed in Company Application No. 218 of 1990. Arvind Mills Limited had also proposed a scheme earlier but withdrew it in favor of the scheme tendered by Rajiv Cotton Traders.

5. Approval of the scheme by various creditors and stakeholders:

Separate meetings of various classes of creditors and employees were held, and the scheme was voted in favor by:
- Secured creditor (Bank of Baroda)
- Employees' State Insurance Corporation
- Ahmedabad Electricity Company Ltd.
- Government of Gujarat
- Unsecured creditors
- Employees of the company

The statutory creditors like the Collector of Central Excise and Customs, Chief Commissioner of Income-tax, Regional Provident Fund Commissioner, and Commissioner of Sales Tax did not attend the meetings.

6. Objection by All-India Scheduled Castes Development Co-operative Society Limited:

The society proposed to take Kamla Spinning Mills on leave and license basis for a minimum period of five years, offering a monthly compensation of Rs. 1,11,000. However, the court noted that the society lacked experience in running a textile mill and had no bona fide intention. The society's proposal was objected to by the secured creditor (Bank of Baroda) and the Textile Labour Association.

7. Sanctioning of the scheme by the court:

The court sanctioned the scheme proposed by Neptune Trading Co. (Rajiv Cotton Traders) as it was approved by almost all concerned parties, complied with statutory requirements, and was deemed fair and reasonable. The court ordered the following terms and conditions:
- Revocation of the winding-up order from March 25, 1991.
- Official liquidator to hand over possession of the assets.
- Kamla Spinning and Manufacturing Mills Private Limited to file a certified copy with the Registrar of Companies by April 25, 1991.
- Official liquidator to submit a report on the commission payable to the Central Government within 15 days.
- Court reserved the right to direct civil proceedings against ex-directors for criminal acts.
- Expenses incurred by the official liquidator to be borne by the company.
- Scheme to be implemented under court supervision.
- Liberty to apply for further directions if any difficulty arises in execution or implementation.

The court rejected Company Application No. 42 of 1991 and Company Application No. 173 of 1988, as they did not survive in view of the sanctioned scheme.

Conclusion:

The scheme proposed by Neptune Trading Co. was sanctioned as it was in the best interest of the company, creditors, and employees. The objections raised by All-India Scheduled Castes Development Co-operative Society Limited were dismissed due to lack of experience and bona fide intentions. The court provided specific directions for the implementation and supervision of the scheme.

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