2004 (11) TMI 332 - HC - Companies Law

Issues Involved:
1. Winding up of Baranagar Jute Factory Plc.
2. Constitution and functioning of the Committee of Management.
3. Revival schemes for the company.
4. Payment to unsecured creditors.
5. Role and actions of the Official Liquidator.
6. Legitimacy and actions of the current management.
7. Claims of post-scheme creditors.
8. Interests and claims of workers and statutory creditors.

Detailed Analysis:

1. Winding up of Baranagar Jute Factory Plc.
The learned Company Judge directed the winding up of Baranagar Jute Factory Plc. on 28th October 1987. Various applications and appeals followed, seeking to stay the winding up and revive the company.

2. Constitution and Functioning of the Committee of Management
Initially, an ad hoc Committee of Management was appointed to run the jute mill. Subsequent orders modified the composition of this Committee, including representatives from various groups and financial institutions. The Supreme Court later restrained the Committee from functioning but retained a Special Officer to oversee the revival schemes.

3. Revival Schemes for the Company
Multiple schemes for revival were proposed, including those by Shri Raj Kumar Nemani and M/s. Shiva & Company. The Supreme Court accepted Nemani's scheme, but it was later canceled due to failure. A new Committee of Management was formed, which also failed, leading to the appointment of a fresh Committee by the Appeal Court.

4. Payment to Unsecured Creditors
The Supreme Court and the Company Judge issued several orders regarding payments to unsecured creditors. Initially, payments were directed at 1% and later increased to 2%. The Committee of Management was required to deposit substantial sums to ensure these payments.

5. Role and Actions of the Official Liquidator
The Official Liquidator was directed to take possession of the company's assets but not interfere with the management. Later, the learned Single Judge directed the Official Liquidator to assume full charge of the company and its assets.

6. Legitimacy and Actions of the Current Management
The current management took over the jute mill without the Court's leave but claimed to have done so at the workers' request. They argued that they had successfully revived the mill, paid off significant dues, and provided employment to thousands of workers. However, the legitimacy of their status as Directors was questioned.

7. Claims of Post-Scheme Creditors
Post-scheme creditors were advised to seek adjudication of their claims through appropriate forums. The learned Company Judge indicated that payments were intended for unsecured creditors as of the winding-up order date.

8. Interests and Claims of Workers and Statutory Creditors
The workers and statutory creditors supported the current management, stating that the mill was being run satisfactorily and dues were being paid. The workers' unions unanimously requested that the current management be allowed to continue.

Conclusion:
The Court acknowledged the efforts of the current management in reviving the company but emphasized the need for legitimizing their status. The judgment allowed the current Directors to function as the Committee of Management for six months, with oversight by the Joint Special Officers. The learned Company Judge was requested to verify the Directors' status and reconsider the matter for a permanent stay of the winding-up proceedings. The judgment set aside the learned Single Judge's order directing the Official Liquidator to take charge, allowing the current management to continue under specified conditions.

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