2004 (8) TMI 399 - HC - Companies Law

Summary

Issues Involved:
1. Winding up of the respondent Company.
2. Sanction of the revival scheme proposed by Kamdar Ladat Samiti.
3. Payment of outstanding dues to creditors and landlords.
4. Legal validity and feasibility of the revival scheme.

Issue 1: Winding up of the respondent Company

The petitions and application in question all relate to Nanikram Sobhraj Mills Limited. The primary prayer across these petitions is for the winding up of the respondent Company, while the Company Application seeks the sanction of a revival scheme. Company Petition No. 2 of 1998 was initiated based on the opinion of the Board for Industrial and Financial Reconstruction (BIFR) dated December 31, 1997, which was confirmed by the Appellate Authority for Industrial and Financial Reconstruction (AAIFR) on July 21, 1998. The BIFR concluded that it was just and equitable in public interest to wind up the Mills Company under section 20 of the SICA, as no acceptable revival scheme could be worked out.

Issue 2: Sanction of the revival scheme proposed by Kamdar Ladat Samiti

Kamdar Ladat Samiti filed Company Application No. 292 of 1998, requesting the Court to stay the winding-up proceedings and consider their revival scheme. Their scheme proposed to revive the Company by disposing of surplus assets and commencing weaving operations on a job-work basis. They argued that the scheme was workable, especially in light of the repeal of the ULC Act, which would escalate the price of surplus land, thereby improving the revival package's viability. However, the BIFR and AAIFR, as well as the secured creditors and other workers' unions, did not find the scheme acceptable or feasible.

Issue 3: Payment of outstanding dues to creditors and landlords

Company Petition No. 65 of 1998 was filed by landlords seeking possession of their premises due to outstanding arrears of rent and the cessation of business activities by the Mills Company. Company Petition No. 210 of 1998 and Company Petition No. 9 of 1999 were filed by creditors for the recovery of significant outstanding amounts. The secured creditors, including IDBI, IIBI, and UCO Bank, were not willing to make sacrifices, and the financial burden was substantial, making the revival of the Company difficult.

Issue 4: Legal validity and feasibility of the revival scheme

The Court noted that the revival scheme proposed by Kamdar Ladat Samiti was not in accordance with statutory provisions and lacked viability and workability. The scheme was opposed by secured creditors and workers, and no sincere efforts were made by the Samiti to get it sanctioned. The Court emphasized that no scheme could be framed and sanctioned without bringing new funds and that the Samiti had not shown any interest in the scheme apart from keeping the matter pending.

Judgment Summary:

The Court, after considering all the petitions and applications, concluded that there was no chance for the revival of the Company. The BIFR's opinion, although not binding, was agreed upon by the Court. The revival scheme proposed by Kamdar Ladat Samiti was rejected due to its non-compliance with statutory provisions and lack of feasibility. Consequently, the Court passed the order of winding up of the respondent Company in Company Petition No. 2 of 1998. The Official Liquidator, already appointed as the Provisional Liquidator, was directed to act as the Liquidator of the Company and exercise all powers conferred under the Act. The Company Application No. 292 of 1998 was rejected, and Company Petition Nos. 65 of 1998, 210 of 1998, and 9 of 1999 were deemed to have been allowed, with winding up orders passed in all these petitions.