1999 (12) TMI 765 - HC - Companies Law

Issues Involved:
1. Quashing the order of the Board for Industrial & Financial Reconstruction recommending winding up of U.P. State Cement Corporation Ltd.
2. Mandamus against the State of Uttar Pradesh to contribute funds for the revival of the Corporation.
3. Examination of whether the Board performed its duty under the Sick Industrial Companies (Special Provisions) Act, 1985.
4. Consideration of surplus assets for the revival of the Corporation.
5. Publication of the scheme under Section 18(3)(a) of the Act.
6. Appropriation of funds and the role of the State Government.
7. Rights of workers and their involvement in the revival scheme.
8. Just and equitable grounds for winding up the Corporation.
9. Payment of wages to workers till the winding-up order.

Detailed Analysis:

1. Quashing the Order of the Board:
The petitioners sought to quash the order dated 2-7-1997 of the Board recommending the winding up of U.P. State Cement Corporation Ltd. and the appellate authority's order dated 19-2-1998, dismissing the appeal against the said order. The Corporation was declared a sick industrial company by the Board on 7-10-1992, and multiple meetings were held to explore revival possibilities, but no viable scheme was found.

2. Mandamus Against State of Uttar Pradesh:
The petitioners sought a mandamus against the State of Uttar Pradesh to contribute the required funds for the revival of the Corporation and to make payments of all dues to the employees. The State Government consistently indicated its inability to invest funds for the Corporation's revival and suggested privatization as the only feasible option.

3. Board's Duty Under the Act:
The Board, upon receiving the reference from the Corporation, declared it a sick industrial company and appointed IDBI as the operating agency. The Board held several meetings and directed the operating agency to prepare a suitable scheme, but no viable proposals were received. The Board's efforts to revive the Corporation were consistent with the provisions of the Act.

4. Surplus Assets for Revival:
The petitioners argued that surplus assets could generate funds for the Corporation's revival. The Board directed the operating agency to identify and dispose of surplus assets. Various reports estimated the value of surplus assets differently, but the petitioners' claim of Rs. 151 crores was not substantiated. The assets were either encumbered or insufficient to cover the revival costs.

5. Publication of the Scheme:
The petitioners contended that the Board failed to publish the scheme as required under Section 18(3)(a). The Board did not publish the scheme because the proposals did not have the means of finance fully tied up. Regulation 28 requires the preparation of a draft scheme before publication, which was not feasible in this case.

6. Appropriation of Funds and State Government's Role:
The State Government did not express consent to the proposed schemes, and the deeming provision under Section 19(2) did not apply due to the State's clear stance against funding the revival. The Board's conclusion that the Corporation could not be revived without State funds was justified.

7. Rights of Workers:
The workers had the right to submit a rehabilitation scheme and were given opportunities to do so. However, no viable scheme was presented by the workers. The workers' involvement was acknowledged, but their proposals were not feasible for revival.

8. Just and Equitable Grounds for Winding Up:
The Board examined all aspects and concluded that it was just and equitable to wind up the Corporation due to its continuous losses and the lack of viable revival schemes. The Court found no grounds to set aside the Board's opinion.

9. Payment of Wages to Workers:
The Court directed that workers should be paid their dues till the winding-up order is passed. If the Corporation is wound up, workers' dues should be prioritized as per Section 529A of the Companies Act, 1956.

Conclusion:
The writ petition was dismissed against the recommendation of the Board and the order of the appellate authority. The mandamus for payment of dues to workers was allowed, ensuring their wages till the date of the order. The petition was dismissed regarding other reliefs claimed.

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