2003 (6) TMI 393 - HC - Companies Law

Summary

Issues Involved:

1. Winding up of the company due to inability to pay debts.
2. Adequacy of the company's assets and resources.
3. Appointment of a provisional liquidator.
4. Investigation into the affairs of the company.
5. Protection of investors' interests.
6. Compliance with court orders and coordination with other courts.

Detailed Analysis:

1. Winding up of the Company Due to Inability to Pay Debts:
The petitioner, National Investors Forum, sought the winding up of the company, Golden Forests (India) Limited, due to its inability to pay admitted debts. The company had collected substantial amounts from investors, creditors, and consumers but failed to repay them despite assurances. A legal notice was issued and published in a newspaper, but the company did not settle the claims, leading to the filing of the winding-up petition.

2. Adequacy of the Company's Assets and Resources:
The company argued that it had adequate assets and resources to pay back all its debts, claiming assets worth Rs. 1500 crores against liabilities of Rs. 761 crores. The company mentioned that it had moved an application before the Mumbai High Court to remove the receiver and expedite the repayment process under court supervision. However, the company faced restrictions due to an order from the Chief Judicial Magistrate and sought intervention from the Chandigarh High Court to manage repayments.

3. Appointment of a Provisional Liquidator:
The court considered the appointment of a provisional liquidator necessary to protect the interests of creditors and shareholders. Despite the company's claims of solvency, the court found it prudent to appoint a provisional liquidator to manage and sell the company's properties to ensure repayment to investors. The court emphasized that the official liquidator attached to the court might not have the resources to handle the responsibility, suggesting the need for a competent individual to oversee the process.

4. Investigation into the Affairs of the Company:
The court found it essential to investigate the company's affairs thoroughly due to allegations of fraudulent and unlawful conduct. The company had avoided investigation by a committee appointed by the Mumbai High Court. The court ordered an investigation by an independent auditor to assess the extent of the company's assets, including land ownership, marketability, and whether funds were siphoned off to directors or associates.

5. Protection of Investors' Interests:
The court highlighted the need to protect the interests of the large number of investors who had invested their hard-earned money. The court noted that the company's affairs were conducted in a manner that deprived investors of their returns and required a mechanism to facilitate the sale of the company's properties to ensure timely payments to investors. The court directed the provisional liquidator to prepare a scheme for settling investors' claims, prioritizing small investors.

6. Compliance with Court Orders and Coordination with Other Courts:
The court acknowledged the ongoing proceedings in the Mumbai High Court and the possibility of transferring all cases to the Supreme Court. The court emphasized the need to avoid contradictory orders and ensure coordination with other courts. The court restrained the company from alienating any property without permission and directed the directors and administrative staff to assist the provisional liquidator.

Conclusion:
The court issued several directions, including appointing a provisional liquidator to manage and sell the company's properties, preparing an inventory of assets, and investigating the company's affairs. The court aimed to protect the interests of creditors, shareholders, and investors by ensuring a fair and transparent process for settling claims and addressing allegations of fraudulent conduct.