2009 (3) TMI 579 - HC - Companies Law

Winding up - Petition for revival - Held that - The petition for revival is ordered as prayed for. 5th respondent, M/s. Saket Steels (P.) Ltd. shall be entitled to be paid ₹ 1,00,000 and ₹ 50,000 with interest @ 12 per cent from the respective dates when the amounts were received by the company.The application for confirmation of the sale in favour of M/s. Freshness Coatings (P.) Ltd. is disallowed but M/s. Freshness Coatings (P.) Ltd. shall have a right of refund of the amount, which is deposited in Court and obtain a solatium of 5 per cent of the amount as bid at the auction and for which the confirmation of sale has been sought. The amounts as adjudged by the Official Liquidator and found expressed in the report are approved and the amounts detailed in the report shall become payable by the company.Apart from the amount as determined by the OL as payable to the Electricity Board, the HSEB and its successor DHBVNL shall have a remedy that it may independently have in relation to energy charges and the observations of the arbitrator or the Official Liquidator in that regard shall stand vacated. The amounts as detailed above from out of the amounts in deposit with OL and for any deficiency, the petitioners shall become liable to pay the respective amounts forthwith with interest at 12 per cent p.a from the date of this order till date of payment. There shall be a charge on the remaining asset of the company for the amount that is due and payable.

Issues Involved:
1. Petition for revival and principal objectors
2. Factual background
3. Simultaneous efforts by the Ex-Directors to settle claims by OTS
4. The proffered scheme of revival
5. Financial reckoning and objections for revival: HFC's woes
6. Objections from Freshness Coatings
7. Objections from the Electricity Board
8. M/s. Saket Steels' decretal claims
9. DESCL's response to objections
10. The objections omnibus in a nutshell
11. Revival, always the cherished goal
12. Answers to the objection by purchaser held by OL
13. Extent of enforceability of decree
14. Regarding objections by the Electricity Board
15. Answers as regards objection from HFC and in respect of all other sundry claims
16. Alleged non-compliance of statutory requirements
17. Final Disposition

Detailed Analysis:

I. Petition for revival and principal objectors:
The company, ordered to be wound up in 1995, is sought to be revived by major equity shareholders and a financier. The petition faces resistance from the Official Liquidator, Haryana State Electricity Board (HSEB), and M/s. Freshness Coatings (P.) Ltd., a successful bidder for the company's last remaining property.

II. Factual background:
Dabriwala Steel and Engineering Company Limited (DSECL) was incorporated in 1970 and faced financial constraints, leading to its closure in 1985. BIFR recommended winding up, which was ordered by the High Court in 1995. The Official Liquidator sold the company's assets, and the remaining property awaited sale confirmation.

III. Simultaneous efforts by the Ex-Directors to settle claims by OTS:
Ex-Directors initiated a One Time Settlement (OTS) with creditors and workers. Most claims were settled except for HSEB and a decree-holder for specific performance.

IV. The proffered scheme of revival:
The revival scheme proposed by the Directors includes:
(a) Increased property value since 1995.
(b) Liquidation of debts through OTS.
(c) Funding by petitioner No. 7, a financier.
(d) Assistance from Sanjiv Gulati for upfront payments.
(e) Shareholding restructuring with Mr. Sanjay Gulati as Managing Director.

V. Financial reckoning and objections for revival: HFC's woes:
The Official Liquidator reported available funds and expenses. HFC objected to the payment made to SBI, claiming it included dues from another company. HFC's dues were Rs. 85,57,600 with further interest from 1-10-2007.

VI. Objections from Freshness Coatings:
Freshness Coatings opposed the revival, claiming the scheme lacked a clear revival method and was a ploy to sell the property privately. They argued that the company's industrial activity had ceased, and the statutory requirements under sections 391, 392, and 394 were not followed.

VII. Objections from the Electricity Board:
The Electricity Board objected to the adjudication of their claims by the Official Liquidator. They argued that the Arbitrator's Award, which reduced their claim, was beyond jurisdiction. They sought inclusion of energy charges in their claim.

VIII. M/s. Saket Steels' decretal claims:
M/s. Saket Steels obtained a decree for specific performance against the company. They sought execution of the decree, arguing it was not invalid despite the winding-up order. The Ex-Directors contended the decree was void due to statutory stay under SICA and lack of leave under section 446.

IX. DESCL's response to objections:
The petitioners argued that all major creditors and workers' claims were settled, leaving only HSEB and HFC. They contended that the statutory procedures under sections 391, 393, and 394 were unnecessary as all shareholders and major creditors were satisfied.

X. The objections omnibus in a nutshell:
Opposition to revival came from a successful auction purchaser, a decree-holder, and the Electricity Board. The Official Liquidator aimed to satisfy creditors and complete the auction process. The Court emphasized the need for development over winding up.

XI. Revival, always the cherished goal:
The Court highlighted the importance of revival for development. It acknowledged the conflicting claims but emphasized the potential for industrial regeneration on the remaining valuable land.

XII. Answers to the objection by purchaser held by OL:
The Court referred to Supreme Court judgments, emphasizing that a revival scheme should not be a ruse to dispose of assets. It noted that the opposition aimed to sell the company's last asset, while the revival proposal aimed to reestablish industry.

XIII. Extent of enforceability of decree:
The Court held that the decree obtained by M/s. Saket Steels was not void but voidable. The decree was obtained after the winding-up order, making it subject to the Company's defense. The Court directed repayment of amounts paid by M/s. Saket Steels with interest.

XIV. Regarding objections by the Electricity Board:
The Court affirmed the Official Liquidator's adjudication of HSEB's claim at Rs. 6.61 lakhs. It allowed HSEB to pursue independent claims for energy charges, vacating any contrary observations by the Arbitrator or Official Liquidator.

XV. Answers as regards objection from HFC and in respect of all other sundry claims:
The Court noted the adjudicated claims and available funds. It directed payment of liquidation expenses and refund of earnest money to M/s. Freshness Coatings with a 5% solatium for loss of expected purchase.

XVI. Alleged non-compliance of statutory requirements:
The Court found no need for separate meetings of shareholders or secured creditors as all major claims were adjudicated. It emphasized the comprehensive consideration of objections in the petition.

XVII. Final Disposition:
The Court ordered the revival of the company, directed payment to M/s. Saket Steels with interest, disallowed the sale confirmation to M/s. Freshness Coatings but provided compensation, approved the Official Liquidator's adjudicated amounts, allowed HSEB to pursue independent claims, and imposed a charge on the company's remaining assets for any deficiencies. The petition and applications were disposed of accordingly.

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