1996 (11) TMI 391 - HC - Companies Law

Issues Involved:
1. Application by State Bank of India for permission to sell assets of Aryodaya Ginning & Mfg. Co. Ltd. (in liquidation).
2. Rights and objections of workmen represented by Textile Labour Organisation.
3. Legal provisions under sections 529 and 529A of the Companies Act, 1956.
4. Role of the Official Liquidator and the formation of a sale committee.
5. Potential revival of the company versus liquidation of assets.

Issue-wise Detailed Analysis:

1. Application by State Bank of India for Permission to Sell Assets:
The State Bank of India (SBI), as a secured creditor, filed an application seeking leave to sell the assets of Aryodaya Ginning & Mfg. Co. Ltd. to recover dues. SBI, along with other financial institutions (ICICI, IFCI, and IDBI), had provided financial assistance to the company and held a charge over its assets. Due to the company's financial difficulties and subsequent winding up order dated 27-10-1989, SBI sought to sell the assets outside the winding-up proceedings to realize their dues.

2. Rights and Objections of Workmen Represented by Textile Labour Organisation:
The Textile Labour Organisation, through its advocate Mr. DS Vasavada, opposed the application, arguing that selling the assets would render workmen permanently jobless. They hoped for a potential revival of the company and thus opposed any hasty disposal of assets. Mr. Vasavada emphasized the need for a humanitarian approach and the workmen's right to participate in the winding-up proceedings.

3. Legal Provisions under Sections 529 and 529A of the Companies Act, 1956:
SBI's advocate Mr. RM Desai highlighted that under sections 529 and 529A, workmen are entitled to a portion of the sale proceeds. He argued that selling the assets would benefit both secured creditors and workmen. The Official Liquidator, representing the workmen, had already made ad hoc payments from the sale of current assets. Mr. Desai stressed that delaying the sale would only diminish the value of the assets, adversely affecting all parties involved.

4. Role of the Official Liquidator and the Formation of a Sale Committee:
The court directed the formation of a sale committee consisting of the Official Liquidator as the convener and representatives from ICICI, IDBI, IFCI, and SBI. The committee was tasked with deciding the mode of sale and exploring possibilities for the company's revival. The sale would be subject to the court's confirmation, and proceeds would be deposited with the Official Liquidator in a separate account.

5. Potential Revival of the Company versus Liquidation of Assets:
The court acknowledged the slim chances of the company's revival, noting that no buyer had come forward since the winding-up order in 1989. The BIFR had also recommended winding up the company. Despite Mr. Vasavada's hope for financial assistance from the government, both the Union of India and the State of Gujarat had declined to provide any. The court concluded that selling the assets was in the best interest of all parties to expedite the winding-up process and ensure dues were paid to secured creditors and workmen.

Conclusion:
The court granted SBI's application to sell the assets, forming a sale committee to oversee the process. The implementation of the order was delayed for six weeks to allow the Textile Labour Organisation to challenge the order if desired. The decision aimed to balance the interests of secured creditors and workmen while acknowledging the improbability of the company's revival.

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