2008 (10) TMI 694 - HC - Companies Law

Summary

Issues Involved:
1. Acquisition of non-performing assets by ARCIL.
2. Revival and rehabilitation schemes for the sick company.
3. Legal actions and proceedings by BIFR and AAIFR.
4. Rights and actions of secured creditors under SARFAESI Act.
5. Role of the Official Liquidator and company court in winding up proceedings.
6. Protection of workmen's dues under Section 529A of the Companies Act.
7. Harmonization of SARFAESI Act and Companies Act provisions.
8. Confirmation and procedure of sale of assets by ARCIL.

Issue-wise Detailed Analysis:

1. Acquisition of non-performing assets by ARCIL:
The Asset Reconstruction Company (India) Ltd. (ARCIL) acquired non-performing assets from ICICI Bank and IFCI Ltd., stepping into the shoes of the secured creditors of M/s BPL Display Devices Ltd. This acquisition was formalized through Deeds of Assignment dated 30th June 2007 and 12th September 2008.

2. Revival and rehabilitation schemes for the sick company:
M/s Uptron Colour Picture Tube Ltd. (UCPTL) was declared a sick industrial company in 1993, and a Draft Rehabilitation Scheme was prepared. Despite several efforts and schemes, including capital expenditure and contributions from incoming promoters, the company failed to settle dues with secured creditors and workers, leading to the conclusion that it was not possible to revive the company.

3. Legal actions and proceedings by BIFR and AAIFR:
The BIFR, after multiple reviews and extensions, declared the rehabilitation scheme failed and issued directions for the secured creditors to take legal action. Ultimately, BIFR opined that the company should be wound up and forwarded this opinion to the High Court. The AAIFR dismissed appeals against BIFR's orders as infructuous.

4. Rights and actions of secured creditors under SARFAESI Act:
ARCIL, representing secured creditors, issued a notice under Section 13(2) of the SARFAESI Act for payment of outstanding amounts. ARCIL obtained consents from secured creditors holding 93.76% of the secured debt to invoke SARFAESI Act provisions and took possession of the company's assets under Section 13(4) of the Act.

5. Role of the Official Liquidator and company court in winding up proceedings:
The Official Liquidator is responsible for taking over the company's books, records, and uncharged assets. The court appointed the Official Liquidator as provisional liquidator and limited his powers to scrutinizing the statement of affairs and inviting claims from stakeholders. The court emphasized the need for the Official Liquidator to be involved in the sale process to protect the interests of workmen and other stakeholders.

6. Protection of workmen's dues under Section 529A of the Companies Act:
Workmen's dues have a pari passu charge with the security of secured creditors. The court directed that workmen's dues be estimated and deposited by ARCIL before any appropriation or disbursement of sale proceeds. The Official Liquidator was tasked with inviting claims and ensuring workmen's dues are paid in priority as per Section 529A.

7. Harmonization of SARFAESI Act and Companies Act provisions:
The court noted that while SARFAESI Act allows secured creditors to enforce security interest without court intervention, it must be harmonized with the Companies Act to protect workmen's dues and other stakeholders. The company court must be informed of the sale process to ensure statutory duties are fulfilled.

8. Confirmation and procedure of sale of assets by ARCIL:
The court allowed ARCIL to remain outside the winding-up proceedings and to realize securities by selling the company's assets under SARFAESI Act, subject to conditions such as filing details of charged assets, valuation reports, and obtaining court approval for sale confirmation. The sale proceeds must be kept in a separate account, and expenses incurred by ARCIL and the Official Liquidator should be deducted before any disbursement.

Conclusion:
The court appointed the Official Liquidator as provisional liquidator and allowed ARCIL to sell the company's assets under the SARFAESI Act, subject to conditions ensuring protection of workmen's dues and other stakeholders' interests. The matter was listed for further proceedings on 1st December 2008.