1998 (3) TMI 535 - HC - Companies Law

Summary

Issues Involved:
1. Sanction of a scheme of compromise/arrangement under sections 391 and 394 of the Companies Act, 1956.
2. Bona fides of the scheme and the parties involved.
3. Proper constitution of creditor classes.
4. Compliance with statutory requirements.
5. Objections raised by Maharashtra Small Scale Industries Development Corporation Ltd. (MSSIDC).
6. Misleading and suppression of facts by the petitioner.

Detailed Analysis:

1. Sanction of a Scheme of Compromise/Arrangement:
The petition was filed under sections 391 and 394 of the Companies Act, 1956, for the sanction of a scheme of compromise/arrangement, referred to as the "1996 agreement." The scheme involved the sale of the petitioner's immovable property at B-2 Laxmi Industrial Estate, Goregaon, Bombay, to pay off preferential and unsecured creditors.

2. Bona Fides of the Scheme and the Parties Involved:
The petitioner, Bedrock, faced financial difficulties and proposed a scheme to revive its operations. However, the court found that the scheme was not bona fide. The court noted that Bedrock, Poddar Sales Corporation, and Poddar Tyres Ltd. were interconnected entities under the same management, and their inclusion as unsecured creditors was questionable. The court observed that the scheme aimed to profiteer from the sale of the Goregaon property and to defeat the decree in favor of MSSIDC.

3. Proper Constitution of Creditor Classes:
The court examined whether the creditor classes were properly constituted. It was found that Poddar Sales Corporation and Poddar Tyres Ltd. were not bona fide unsecured creditors and had common interests with Bedrock, which conflicted with the interests of other creditors like MSSIDC. The court referred to the principles laid down in the case of Hellenic & General Trust Ltd., emphasizing that creditors with different interests should not be included in the same class.

4. Compliance with Statutory Requirements:
The court scrutinized whether the statutory requirements for convening meetings and obtaining approvals were met. The meetings of creditors were repeatedly adjourned, and the court found that this was done deliberately to manipulate the approval process. The court also noted that the modification of the 1993 agreement to the 1996 agreement was not done bona fide.

5. Objections Raised by MSSIDC:
MSSIDC, an unsecured creditor, raised objections to the scheme, arguing that it was designed to deprive them of the benefit of their decree. They highlighted the discrepancies in the amounts due to them as shown in different documents and the inclusion of family-controlled entities as unsecured creditors. The court found merit in these objections and noted that the scheme was not in the interest of all creditors.

6. Misleading and Suppression of Facts by the Petitioner:
The court found that the petitioner had not disclosed relevant facts candidly and had made misleading statements. The petitioner failed to provide the current value of the Goregaon property and did not disclose the details of settlements with other creditors. The court emphasized that parties seeking discretionary relief must come with clean hands and not suppress material facts.

Conclusion:
The court dismissed the petition and the application for the scheme of compromise/arrangement, finding that the scheme was not bona fide, the creditor classes were improperly constituted, and the petitioner had misled the court. The court also noted that the scheme aimed to profiteer from the sale of the property and to defeat the decree in favor of MSSIDC. The court awarded costs against the petitioner.