1993 (5) TMI 186 - HC - Companies Law

Summary

Issues Involved:
1. Validity of the transfer of shares and credits.
2. Approval of the revival scheme for the company.
3. Compliance with statutory requirements.
4. Representation and voting rights of creditors and shareholders.
5. Financial viability and public interest of the proposed scheme.
6. Role and authority of the Chairman in the meetings.
7. Objections raised by Mr. H.L. Seth.

Issue-wise Detailed Analysis:

1. Validity of the Transfer of Shares and Credits:
The court validated the transfer of shares and credits to M/s. Misra and Arenja. It was held that "the agreement was entered into bona fide and in the interest of the company." The court also noted that "Seth did not challenge the agreement at all" and that "Misra and Arenja stepped into the shoes of the Bank" after settling with the Punjab National Bank.

2. Approval of the Revival Scheme for the Company:
The court sanctioned the scheme proposed by M/s. Misra and Arenja, as modified by Resolution No. 1, and rejected the schemes proposed by Kelvinator and Mr. H.L. Seth. The court emphasized that "the revival of the company is in public interest" and that "Misra and Arenja have already contributed approximately Rs. 40 lakhs in this venture."

3. Compliance with Statutory Requirements:
The court ensured that the statutory requirements were met, noting that "the statement of affairs as required under Sub-s. (1) of S. 454 of the Act was filed giving the details of the debts and liabilities of the company." The court also directed the Official Liquidator to "substitute the names of M/s. A. K. Misra and Brahm Arenja and their nominees as per the transfer deeds in place of the members."

4. Representation and Voting Rights of Creditors and Shareholders:
The court addressed the objections regarding the voting rights and representation of creditors and shareholders. It was held that "the correct method would be that when a person acquires or buys the credits of a number of creditors, he merely steps into their shoes." The court found that "the Scheme was approved by over 95% of the total shares represented at the meeting."

5. Financial Viability and Public Interest of the Proposed Scheme:
The court found the scheme proposed by M/s. Misra and Arenja to be financially viable and in the public interest. The court noted that "Misra and Arenja are men of sufficient means and financial resources" and that "the Scheme is in the interest of the company, its creditors, as well as shareholders."

6. Role and Authority of the Chairman in the Meetings:
The court addressed the objections regarding the Chairman's role and authority. It was held that "the Chairman should not have travelled beyond what was ordered by court in this connection" and that "the Chairman's report has not been enclosed with the present petition and therefore the present petition has not been filed as per the requirement of Rule 40 of the Company Court Rules."

7. Objections Raised by Mr. H.L. Seth:
The court rejected the objections raised by Mr. H.L. Seth, noting that "the objections being raised by Mr. Seth in the light of the facts which have come to light in the course of hearing cannot be accepted as bona fide." The court also stated that "Mr. Seth has already sold practically all his shareholding of the Seth Group as well as their credits in favour of Misra and Arenja and their associates."

Conclusion:
The court allowed C.P. 131 of 1988 in terms of the above order, and C.A. 1082 of 1987 was partly allowed. Other C.As. 2083/88, 7626/89, 13375/89, 130/90, 328/90, 414/85, and 94/87 were dismissed. The court directed that "the order dated 9th March, 1978 in C.P. 54/77 for winding up of this company be and is hereby recalled and cancelled subject to the aforesaid directions."