2009 (7) TMI 779 - HC - Companies Law

Winding up petition - auction sale - bid document questioned - Held that - In the written arguments filed on 3-4-2009 by the Forum respondent No. 31 a list of 944 Gold Companies world wide as in November, 2008 has been given and, therefore, the global bid in the instant case must be restricted to only companies dealing in extraction of gold and gold mine activity only and not to entities concerned with extraction of other metals or coal. The concern of the Central Government that in order to ensure greater competition entities dealing with metals and ores other than gold can also be invited for the global bid, in the instant case is not well founded. The applicant to amend the respective clauses referred to in para 57 above.The applicant to amend as per para Nos. 61(I) to (IX).The price determined by the In-house Valuation Committee shall be placed in a sealed cover and deposited with the Registrar General of this Court before the bids are opened. The applicant shall give sufficient publicity with regard to inviting of global bids for receiving offers from the potential bidders.It is directed that the applicant would seek permission of this Court before making an offer to the employees and their Unions and making a declaration of the successful bidder. Petition partly allowed.

Issues Involved:
1. Jurisdiction of the Company Court.
2. Revival vs. Sale of Assets.
3. Approval and Modification of Bid Documents.
4. Role of BGML and Central Government.
5. Rights and Priorities of Ex-Employees.

Detailed Analysis:

1. Jurisdiction of the Company Court:
The preliminary objection raised by Bharat Earth Movers Limited (BEML) questioned the jurisdiction of the Company Court to deal with the revival of a company during winding-up proceedings after BIFR's recommendation. The court determined that under Section 20 of SICA, the Company Court has the jurisdiction to consider the revival of a company as an alternative to winding up, and the opinion of BIFR is not binding on the Company Court. The court cited several precedents, including the Supreme Court's decision in NGEF Ltd. v. Chandra Developers, which clarified that while BIFR remains the custodian of the company's assets until a winding-up order is passed, the Company Court can still consider revival options.

2. Revival vs. Sale of Assets:
The court emphasized that the revival of BGML is distinct from the sale of its assets. Revival aims to make the company viable again, whereas the sale of assets would lead to its dissolution. The court noted that the Division Bench's observations favored the revival of BGML, and thus, the bid documents titled "sale of assets" should be understood in the context of revival.

3. Approval and Modification of Bid Documents:
Several objections were raised regarding the bid documents prepared by Ernst & Young Pvt. Ltd. The court directed specific amendments to ensure the documents align with the goal of revival. Key modifications included:
- Ensuring the Ex-Employees Co-operative Society's eligibility and technical competence need not be on par with other bidders but should meet minimum standards.
- Clarifying that the offer to the Ex-Employees Society should be based on the lower of the highest bid or the in-house valuation.
- Updating various clauses to reflect the focus on revival rather than mere sale of assets.

4. Role of BGML and Central Government:
The court addressed the contention that BGML, rather than the Central Government, was taking steps to invite global bids. It was clarified that while BGML is the entity involved, the process is monitored and guided by the Central Government, aligning with the Division Bench's directions.

5. Rights and Priorities of Ex-Employees:
The court upheld the Division Bench's recommendation that the Ex-Employees Co-operative Society should have the first right of refusal. The bid documents were amended to ensure that the offer to the Ex-Employees Society is based on the lower of the highest bid or the in-house valuation, and in case of refusal, the highest bidder would be offered the company at their quoted price. This approach aims to balance the revival of BGML with the welfare of its ex-employees.

Conclusion:
The court allowed the prayers made by the applicant in part, directing specific amendments to the bid documents to align with the goal of reviving BGML and ensuring the Ex-Employees Co-operative Society's rights are prioritized in the process. The amendments and subsequent steps were to be carried out under the court's supervision, ensuring transparency and adherence to the revival objective.

← Previous Next →