2000 (8) TMI 1050 - HC - Companies Law

Issues Involved:
1. Whether the company should be wound up as recommended by BIFR.
2. Evaluation of the Rehabilitation-cum-Repayment Scheme proposed by the company.
3. Terms and conditions for the One Time Settlement (OTS) with financial institutions.
4. Consideration of objections and acceptance by financial institutions.

Issue-Wise Detailed Analysis:

1. Whether the company should be wound up as recommended by BIFR:
The BIFR found that Universal Insulators & Ceramics Ltd., a public limited company, was not likely to make its net worth exceed its accumulated losses within a reasonable time while meeting all its financial obligations. Consequently, it was deemed just, equitable, and in public interest to wind up the company under section 20(1) of the Sick Industrial Companies (Special Provisions) Act, 1985. The BIFR forwarded its opinion to the High Court for winding up the company, and the company's appeal to AAIFR was dismissed.

2. Evaluation of the Rehabilitation-cum-Repayment Scheme proposed by the company:
While the winding up matter was pending, the company objected to its winding up and proposed a Rehabilitation-cum-Repayment Scheme. The scheme, submitted on 28-10-1999 and modified on 28-4-2000, was supported by affidavits from the Chairman-cum-Managing Director. However, the court noted that the proposal was not a true Rehabilitation Scheme but rather a Scheme of Repayment of the loan to creditors, essentially a one-time settlement (OTS).

3. Terms and conditions for the One Time Settlement (OTS) with financial institutions:
The company proposed to liquidate the amounts due to financial institutions (IIBI, Syndicate Bank, PICUP, and UPSIDC) in quarterly installments, with modifications based on IIBI's letter dated 7-4-2000. The modified proposal included repayment within 18 months with a moratorium period of six months, and payment of PLR interest from 1-7-1999 to 31-3-2000. The company accepted the terms and conditions stipulated in IIBI's letter and revised the liabilities accordingly.

4. Consideration of objections and acceptance by financial institutions:
IIBI, the operating agency of BIFR, agreed to the OTS proposal on specified terms and conditions, with further additions/amendments in a subsequent letter dated 4-5-2000. Syndicate Bank also laid down terms for accepting OTS, including a down payment of 20% of the revised offer amount and repayment within 24 months. PICUP did not file any written reply/counter affidavit but agreed to the scheme sanctioned for IIBI and Syndicate Bank. UPSIDC agreed to the company's proposal for payment for equity shares.

Judgment:
The court sanctioned the schedule of repayment (OTS) with specific directions and conditions:
1. The company shall pay 100% of the principal amount due to IIBI, Syndicate Bank, PICUP, and UPSIDC, as crystallized before BIFR.
2. Interest at PLR from 1-7-1999 to 31-3-2000 shall be paid.
3. A down payment of 5% of the total debt plus interest shall be made by 31-8-2000.
4. Post-moratorium, the balance amount shall be paid in 18 equal monthly installments starting from 31-3-2001.
5. The company shall reimburse IIBI for insurance premium and issue post-dated cheques for installment payments.
6. Any default would trigger liquidation proceedings as recommended by BIFR.

The court emphasized that the repayment schedule should balance the interests of the company and the financial institutions, ensuring the debts are liquidated within a reasonable time. The next hearing was scheduled for 4-9-2000 for further orders.

Order accordingly.

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