2005 (2) TMI 534 - HC - Companies Law

Issues Involved:
1. Petition for winding up of the company.
2. Application for framing a scheme for repayment to small fixed deposit holders.
3. Modification of the management order.
4. Approval of the committee's scheme for repayment.
5. Disposal of the company's office premises.
6. Initiation of contempt proceedings against an advocate.
7. Application by secured creditors to vacate the stay on civil and criminal proceedings.

Detailed Analysis:

1. Petition for Winding Up of the Company:
The original petitioner filed for winding up to recover Rs. 3,75,00,000 advanced as a fixed deposit with 18% interest. The court directed the company to deposit the amount, failing which the petition would be admitted. The company did not deposit the amount, leading to the admission of the petition.

2. Application for Framing a Scheme for Repayment to Small Fixed Deposit Holders:
Various creditors and small fixed deposit holders sought a scheme for repayment instead of winding up the company. They argued that winding up would result in no recovery for small depositors who invested their hard-earned money. A committee was appointed to manage the company's affairs and formulate a repayment scheme.

3. Modification of the Management Order:
An order modified the management structure, vesting day-to-day affairs in the formal directors while the special committee supervised. The committee was authorized to recover outstanding dues and was supported by the Economic Offence Wing. Civil and criminal cases against the company and directors were stayed.

4. Approval of the Committee's Scheme for Repayment:
The committee proposed a scheme to repay depositors with amounts less than Rs. 5,000, suggesting Rs. 20 lakhs per month for repayment. The court approved the scheme with modifications, allocating 37.5% of the company's monthly income to operating expenses, 37.5% to depositors below Rs. 5,000, and 25% to secured creditors. The scheme would extend to depositors with amounts up to Rs. 10,000 after the initial category is paid.

5. Disposal of the Company's Office Premises:
The committee sought to dispose of office premises to recover blocked funds and prevent unnecessary expenses. The court permitted the sale, directing the proceeds to be deposited separately and used only for secured creditors' liabilities upon further court directions. The committee was authorized to seek the vacation of an interim injunction from the DRT.

6. Initiation of Contempt Proceedings Against an Advocate:
The committee reported that an advocate, despite court orders staying proceedings, filed a criminal case against the company and committee members. The court found prima facie grounds for contempt and directed the issuance of a show-cause notice to the advocate.

7. Application by Secured Creditors to Vacate the Stay on Civil and Criminal Proceedings:
Secured creditors sought to vacate the stay to prosecute their claims, arguing that the blanket stay obstructed their interests. The court rejected this, emphasizing the scheme's dependence on lease rent from properties held by the company's clients. Allowing proceedings would frustrate the scheme. The court directed guarantors to disclose their assets and authorized the committee to negotiate one-time settlements with secured creditors.

Conclusion:
The court approved the modified scheme for repayment to small depositors, permitted the sale of office premises with conditions, initiated contempt proceedings against an advocate, and maintained the stay on proceedings against the company. The court emphasized protecting small investors while balancing the interests of secured creditors.

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