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Issues Involved:
1. Locus standi of the applicant. 2. Maintainability of the application. 3. Timeliness of the application. 4. Viability and feasibility of the proposed scheme. 5. Objections from secured creditors. Issue-Wise Detailed Analysis: 1. Locus Standi of the Applicant: Objection (a): The secured creditors argued that the application was filed by a co-operative society (Applicant No. 1), which is a private party with no locus standi to move such an application under Section 391 of the Companies Act, 1956. They contended that Applicant No. 1 is unconnected with the workers of the mill company in liquidation. Court's Response: The court acknowledged that initially, the application was filed by Gujarat Kamdar Sahakari Mandali Ltd., which is neither a creditor nor a shareholder of the company in liquidation. However, during the course of the hearing, leave to amend the application was granted, and Applicants Nos. 2 and 3, who are workers of the company, were added as party applicants. Since these applicants are creditors entitled to retrenchment compensation, gratuity, etc., the objection to locus standi was overruled. 2. Maintainability of the Application: Objection (b): It was contended that Applicant No. 1-society is neither a creditor nor a shareholder of the company in liquidation and thus the application is not maintainable. Court's Response: The court held that once Applicants Nos. 2 and 3, who are creditors of the company, were added, the application became maintainable. The objection was overruled as the amended application laid a foundation for maintainability under Section 391. 3. Timeliness of the Application: Objection (d): The secured creditors argued that the application was filed belatedly, at a stage when significant progress had been made towards the sale of the company's assets. They contended that the application was filed to defeat the sale process initiated by the court. Court's Response: The court noted that although steps were taken towards the sale of the company's assets, no concrete sale had been completed. The court found that the delay in filing the application had not adversely affected the secured creditors' rights. The objection was overruled, recognizing the potential for restarting the unit and providing employment opportunities. 4. Viability and Feasibility of the Proposed Scheme: Objection (e): The secured creditors argued that the proposed scheme was vague, technically and economically unviable, and based on unrealistic assumptions, such as the waiver of liabilities by the Government of India. Court's Response: The court emphasized that Section 391 of the Companies Act gives the court wide discretion to approve schemes of arrangement and compromise. The court held that the scheme should not be rejected at the threshold unless it is shown to be unfair, unjust, or absolutely unworkable. The court noted that the scheme's viability could be discussed and deliberated upon in the meetings of the affected interests. The objection was overruled, allowing the scheme to be considered in the meetings. 5. Objections from Secured Creditors: Objection (c): The secured creditors raised a technical objection regarding the procedural competence of the application, arguing that it was filed in the context of previous incompetent proceedings. Court's Response: The court dismissed this objection as purely technical and not affecting the substantive rights involved. The court held that the application could be filed in the winding-up proceedings, and the procedural context did not render the application incompetent. Conclusion: The court overruled all objections raised by the secured creditors and granted the application under Section 391(1) of the Companies Act, 1956. The court directed the convening of meetings of various stakeholders, including equity shareholders, preference shareholders, employees, preferential creditors, debenture holders, unsecured creditors, and secured creditors, to consider the proposed scheme of compromise and arrangement for the revival of the company. The court emphasized the importance of consulting affected interests and providing an opportunity for discussion and deliberation on the proposed scheme.
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