2013 (2) TMI 116 - HC - Companies Law

Winding up petitions filed by the creditors - BIPL and one NRI lead Bank referred to the arbitral Tribunal pursuant to an agreement entered & an Award was rendered in which SICOM, IDBI, IFCI and some other banks and State Financial Corporations were impleaded as parties. Relying on the Award, BIPL took possession of the factory premises & upon an application made by SICOM in the execution petition following the Award, an order was passed by the Court directing the status quo to be maintained. Ceylon Biscuits Ltd. ( CBL ), a Sri Lankan company made an offer of Rs. 12.5 crores and deposited the earnest money of Rs. 25 lakhs in US Dollars a bid for the land and plant and machinery of BIPL in Patiala, Punjab accepted by the Company Court and the sale in its favour was confirmed meanwhile, an application had been filed by BIPL in the Company Court for a direction to SICOM not to sell the property and for maintaining status quo in respect thereof - Held that - On or before 21st January 2013 CBL will be paid a sum equal to Rs. 8,18,02,491.65 minus Rs. 10,00,000 minus Rs. 11,91,190 minus Rs. 2,82,866 collectively by SICOM, IDBI and IFCI, simultaneous with the handing over of the possession of the factory premises by CBL to the OL, subject to the OL being satisfied about the inventory of the plant and machinery tallying with the report of ITCOT annexed to the Minutes of Inspection dated 5th December 2012 (except the five Kadam-on-edge packing machines in respect of which orders have already been passed hereinabove). IFCI and SICOM will pay their respective shares of the aforementioned amount to IDBI which, in turn, will pay the same along with its share to CBL in ACU. It will be open to the OL as well as SICOM and IFCI, to have one expert each of their choice present at the factory premises for verifying that the assets taken over tallies completely with ITCOT report as directed above. A representative of the exmanagement of BIPL is also permitted to remain present. Additionally, PSPC Punjab State Power Corporation Ltd claiming the electricity dues will also depute its representative to remain present in the premises and make an inventory of equipments belonging to it which are in the premises. CBL is permitted to take back such office equipment and furniture that may belong to it. If there is any dispute as to any office equipment and furniture which CBL claims belonging to it, then the OL will seek directions from this Court before handing over such office equipment and furniture to CBL. ITCOT is appointed as a Valuer and its representatives will remain present at the factory premises on 21st January 2013 and any further dates that it might require, subject to the orders of the OL, to make a complete inventory of the plant and machinery. ITCOT will submit a comprehensive valuation report of the land, plant and machinery to the OL within a period of six weeks from today. The fees of ITCOT is tentatively fixed at Rs. 2,00,000 will be paid which will be paid by the secured creditors, i.e., SICOM, IFCI and IDBI. 50% of the fees will be paid within four weeks and the balance on submission of the valuation report. Any further sum will be paid by the said secured creditors as and when the final bill is received from the Valuer. The OL will engage a security agency in consultation with the secured creditors for providing security to the factory premises and also retain the minimum number of workers and for upkeep of the plant and machinery. The expenses thereof will be reimbursed by the secured creditors. It will be open to the OL to engage a technically qualified person in consultation with the ex-management of BIPL for the upkeep of the plant and machinery. CBL will file an undertaking in this Court by way of an affidavit, within two weeks, stating that in the event that the OL finds that any further statutory dues is found payable for the period between 3rd March 2005 and 15th September 2008 the said dues will be cleared by CBL forthwith upon intimation to that effect by the OL. The application filed by PSPC is disposed of by directing the OL to decide the claim of PSPCL in accordance with law as and when it is lodged before the OL. The load sanctioned for the factory will be reduced to 15 KVA by PSPC at the earliest and not later than 21st January 2013. The OL will settle all the current bills raised by PSPC after such reduction of the load to 15 KVA as and when the bills are raised. The past dues of ITCOT in the sum of Rs. 3,35,209 will now be paid to it by the OL out of the Common Pool Fund within a period of four weeks. The notice dated 8th June 2011 issued by IFCI under Section 13 (2) of the SARFAESI Act and other incidental proceedings are hereby set aside.

Summary

Issues Involved:
1. Winding up petitions and statutory compliance under the Companies Act.
2. Arbitration award and possession of factory premises.
3. Sale of property and confirmation of bid.
4. Supreme Court judgment and its implications.
5. Reinstallation of machinery and interest claims.
6. Applicability of SARFAESI Act.
7. Payment of statutory dues and electricity charges.
8. Valuation and payment to Ceylon Biscuits Ltd. (CBL).
9. Payment of past dues to ITCOT.
10. Sales tax dues.
11. Various applications by parties involved.

Detailed Analysis:

1. Winding up petitions and statutory compliance under the Companies Act:
In 2003, 16 winding-up petitions were filed against Bakemans Industries Pvt. Ltd. (BIPL) under Section 433(e) read with Section 433(f) and Sections 434 and 439 of the Companies Act, 1956. The petition by New Cawnpore Flour Mills Ltd. (NCFML) was admitted on 6th April 2004, directing publication of citations. Prior to this, SICOM issued notices under Section 29 of the SFC Act in January and June 2003.

2. Arbitration award and possession of factory premises:
Disputes between BIPL and a lead NRI Bank were referred to an Arbitral Tribunal, resulting in an award on 16th August 2003. Relying on this award, BIPL took possession of the factory on 14th September 2003. Subsequently, a court order on 15th September 2003 directed maintaining the status quo.

3. Sale of property and confirmation of bid:
Ceylon Biscuits Ltd. (CBL) expressed interest in bidding for BIPL's land and machinery, offering Rs. 12.5 crores and depositing earnest money. The Company Court confirmed the sale in favor of CBL on 17th July 2004.

4. Supreme Court judgment and its implications:
The Supreme Court, in its judgment dated 16th May 2008, held that the Company Court erred in selling the property to CBL by treating SICOM as an agent. It emphasized compliance with the Companies Act and proper valuation of BIPL's assets before auction. CBL was to function as a Receiver under the Court's supervision until a final order was passed.

5. Reinstallation of machinery and interest claims:
Following the Supreme Court's order, CBL reinstalled dismantled machinery (Lines 5 and 6) at its expense. The Court ordered that Rs. 4 crores be held in a Fixed Deposit until the machinery was certified operational. CBL was awarded simple interest @ 5% p.a. on Rs. 12.5 crores from the date of payment till 10th January 2011.

6. Applicability of SARFAESI Act:
IFCI issued a notice under Section 13(2) of the SARFAESI Act on 8th June 2011. However, the Court set aside this notice, noting that the SARFAESI Act proceedings would lead to multiplicity and were impermissible in law, given the ongoing proceedings under the Companies Act.

7. Payment of statutory dues and electricity charges:
CBL was held liable for statutory dues and liabilities till 15th September 2008. The Court directed the reduction of the factory's electricity load to 15 KVA and instructed PSPC to lodge its claims with the Official Liquidator (OL).

8. Valuation and payment to Ceylon Biscuits Ltd. (CBL):
The Court ordered payment to CBL of Rs. 8,18,02,491.65 minus certain deductions, subject to verification of the inventory by ITCOT. CBL was permitted to take back its office equipment and furniture.

9. Payment of past dues to ITCOT:
The Court directed the OL to pay Rs. 3,35,209 to ITCOT from the Common Pool Fund for past valuation services.

10. Sales tax dues:
The Sales Tax Department of Maharashtra was permitted to file its claim for Rs. 95,55,924 with the OL, to be considered in accordance with law.

11. Various applications by parties involved:
The Court disposed of several applications, directing the OL to settle claims, scrutinize creditor and worker claims, and take steps for protecting BIPL's intellectual property rights. Applications that became infructuous were dismissed, with directions for fresh public notice inviting claims.

Directions:
1. Payment to CBL minus deductions, simultaneous with handing over possession to the OL.
2. Verification of assets by experts from OL, SICOM, IFCI, and ex-management.
3. Reduction of electricity load to 15 KVA.
4. ITCOT to submit a valuation report within six weeks.
5. OL to engage a security agency and retain workers for upkeep.
6. CBL to file an affidavit undertaking to clear any further statutory dues.
7. OL to decide PSPC's claims and settle current electricity bills.
8. Payment of past dues to ITCOT from the Common Pool Fund.
9. Setting aside the SARFAESI Act notice by IFCI.
10. Correcting the order dated 4th May 2012 to reflect the correct application number.
11. Directions for the OL to settle workmen's claims and scrutinize creditor claims.