1993 (5) TMI 163 - HC - Companies Law

Summary

Issues Involved:
1. Validity of the transfer of shares.
2. Approval of the scheme of revival.
3. Compliance with statutory requirements.
4. Representation of creditors and shareholders.
5. Commercial viability and public interest of the scheme.

Detailed Analysis:

1. Validity of the Transfer of Shares:
The court upheld the transfer of shares from the Seth group to Misra and Arneja. It was noted that the transaction was complete when the share certificates and transfer forms were handed over, and full consideration was paid. The court emphasized that the transfer was bona fide and in the interest of the company. The Division Bench affirmed that the court has jurisdiction under section 536(2) to validate such transfers, provided they do not adversely affect public interest or the company's interest. The Supreme Court did not interfere with the Division Bench's order, making the transfer final.

2. Approval of the Scheme of Revival:
The court considered the scheme proposed by Misra and Arneja, which was a modification of the original scheme by Seth. The scheme was approved by the requisite majority of shareholders and creditors. Misra and Arneja had already invested substantial amounts in the company, and their financial capacity was not disputed. The court emphasized the importance of reviving the company to generate jobs and put assets to productive use. The scheme proposed to pay all government dues and offered to buy shares from remaining shareholders at par. The court found the scheme commercially viable and in public interest.

3. Compliance with Statutory Requirements:
The court ensured that statutory requirements were complied with before sanctioning the scheme. Notices were sent to all shareholders and creditors, and meetings were held as directed. The court also considered the financial position of the company, its assets, and liabilities. The statement of affairs filed by Seth was taken into account, and the court found no material non-disclosure of facts. The court held that the scheme was approved by the statutory majority, fulfilling the requirements of section 391(2) of the Companies Act.

4. Representation of Creditors and Shareholders:
The court addressed the representation of creditors and shareholders in the meetings. Misra and Arneja stepped into the shoes of the creditors from whom they purchased credits. The court held that the number of creditors represented by a person voting should be considered. The votes cast in favor of the scheme exceeded those against it, both in number and value. The court rejected objections regarding the inclusion of certain creditors and the validity of their votes. The list of creditors was based on the statement of affairs and lawful transfers of credits.

5. Commercial Viability and Public Interest of the Scheme:
The court assessed the commercial viability and public interest of the scheme. It was noted that the revival of the company would generate employment and contribute to commerce and industry. Misra and Arneja's financial capacity and commitment to the scheme were acknowledged. The court provided for the formation of a management committee to oversee the implementation of the scheme. The scheme included provisions for paying off creditors, settling government dues, and preparing a project report for the company's operations. The court found the scheme fair, reasonable, and in the best interest of the company, its creditors, and shareholders.

Conclusion:
The court sanctioned the scheme proposed by Misra and Arneja, subject to certain directions. The winding-up order was recalled, and the official liquidator was directed to hand over the company's assets and records to the management committee. The court emphasized the importance of reviving the company and ensuring its productive use. The objections raised by Seth and others were rejected, and the scheme was found to be in compliance with statutory requirements, fairly represented, commercially viable, and in public interest.