2002 (4) TMI 799 - HC - Companies Law

Summary

Issues Involved:
1. Winding up of the respondent-company.
2. Sale of assets and settlement of liabilities.
3. Net worth and financial viability of the respondent-company.
4. Application for recalling the winding-up order.
5. Rights and claims of secured and unsecured creditors.

Issue-wise Detailed Analysis:

1. Winding up of the respondent-company:
The respondent-company was ordered to be wound up by the High Court on 2-5-1991, following the recommendation of the Board for Industrial & Financial Reconstruction (BIFR) and the dismissal of an appeal by the appellate authority on 8-2-1991. An official liquidator was appointed to conduct the winding-up proceedings. However, a writ petition was filed challenging the orders of BIFR and AAIFR, leading to the winding-up order being kept in abeyance by the Court on 2-11-1994.

2. Sale of assets and settlement of liabilities:
The respondent-company entered into an agreement to sell land and disposed of other assets to clear liabilities. The Court initially prohibited further sales without permission. The company settled dues with United Commercial Bank (UCO Bank) and Uttar Pradesh Financial Corporation (UPFC) through one-time settlements. UCO Bank's claim for additional interest was rejected, and a special appeal was pending.

3. Net worth and financial viability of the respondent-company:
The company filed an application (A-63) claiming positive net worth and seeking to drop winding-up proceedings. An audited balance sheet showed assets exceeding liabilities, indicating financial recovery. The official liquidator's report confirmed the company's ability to meet its liabilities, with a surplus of assets over liabilities.

4. Application for recalling the winding-up order:
The Court considered the improved financial condition and subsequent developments, including the sale of non-productive assets and settlements with creditors. The Court referred to precedents where improved financial conditions led to reconsideration of winding-up orders. The Court found that winding up was no longer in the interest of shareholders, creditors, or public interest.

5. Rights and claims of secured and unsecured creditors:
The Court directed the official liquidator to retain a sum claimed by UCO Bank pending a special appeal. The remaining amount was to be returned to the respondent-company after deducting valid expenses. The decision did not affect the rights of unsecured creditors, workmen, the State Government, and others to recover their dues in accordance with the law.

Conclusion:
The company petition was disposed of with specific directions to the official liquidator regarding the retention and disbursement of funds. The writ petition was also disposed of with no order as to costs. The Court emphasized that the winding-up order was no longer justified due to the company's improved financial condition and subsequent developments.