2013 (8) TMI 505 - HC - Companies Law

Recall of Order - Creditor s Winding-up Petition u/s 433(e)/434(1)(a)/439 of the Companies Act, 1956 Held that - No case had been made out for recall of the order passed - The present application was frivolous and ill-advised - It was not obligatory for the court to hear the workmen at the first motion stage, for which there was no provision in the Act or the Rules and that the concerns of the workmen may be addressed at the meeting of the secured creditors or at the second motion stage Nature of Transfer - Whether there was a real transfer of shares in favour of P.C. Sen or the transaction was sham Held that - The transaction of transfer of shares to P.C. Sen was not a sham and was not made with a view to benefit him at the cost of the workmen and the creditors of SBL or was a fraudulent transaction with ulterior motives - The words utilize this property were not capable of conveying any sinister motive - In any case, since P.C. Sen was the sponsor of the scheme, there was nothing wrong if he wanted to utilise this property , by which was meant a profitable use of the assets of the company, unless one was inclined to hold the view that utilisation of property by a businessman for profits was proscribed - No objection was taken at any time to the transfer of shares in favour of P.C. Sen, on the ground of non-existence or non-execution of the transfer deed - It was not disputed that this much shares constituted the majority. Bar of Proceedings u/s 22 - Whether the pendency of BIFR proceedings a bar on the present proceedings before the Court Held that - Since no proceedings had been shown to be pending under SICA before the BIFR, the argument based on section 22 of SICA need not be examined - No other papers were filed to show that the factual position was different from what was shown in the status report; it was the duty of the applicant, having raised a vehement objection on this ground, to back it up and demonstrate how section 22 of SICA would apply to the present proceedings. Concealment of Facts - Whether the propounder of the revival scheme guilty of concealment of material facts - P.C. Sen had made a public offer to purchase shares in accordance with the SEBI rules and had also received 58 written offers through which he acquired 25,237 shares of SBL which were duly registered in his name - As regards the non-filing of the directors report with the balance sheet, at worst it may amount to an irregularity inviting some action by the ROC. It has no impact beyond that on the present proceedings Application Dismissed.

Summary

Issues Involved:
1. Recall of the order dated 3.7.2013.
2. Dismissal of the application for revival of SBL.
3. Validity of P.C. Sen's directorship.
4. Authenticity of the transfer of shares to P.C. Sen.
5. Pendency of BIFR proceedings and its impact.
6. Alleged concealment of material facts by P.C. Sen.

Issue-wise Detailed Analysis:

1. Recall of the Order Dated 3.7.2013:
The workmen filed an application under Rule 9 of the Companies (Court) Rules, 1959, seeking recall of the order passed on 3.7.2013, which allowed P.C. Sen's scheme of arrangement and compromise between SBL (in liquidation) and its creditors. The court had overruled the workmen's objections, stating that they had no right to be heard at the first motion stage and that their concerns could be addressed at the meeting of the secured creditors or at the second motion stage.

2. Dismissal of the Application for Revival of SBL:
The workmen sought the dismissal of P.C. Sen's application for the revival of SBL, arguing that Sen misrepresented himself as part of the ex-management and that the revival scheme was not in the interests of the workmen but rather aimed at exploiting the commercial potential of SBL's real estate.

3. Validity of P.C. Sen's Directorship:
The court examined whether P.C. Sen was an ex-director of SBL. It was found that Sen had acted as a director for some time, but his appointment was later declared void by the court. The court noted that even if Sen was never a validly appointed director, it did not matter for the purpose of section 391, as a member of the company could still apply for its revival.

4. Authenticity of the Transfer of Shares to P.C. Sen:
The court considered whether the transfer of shares to P.C. Sen was genuine or a sham. It was established that Sen acquired 10,14,853 equity shares of SBL from four different companies, including SRF Ltd. The court found that the transfer was valid and not a sham transaction, as the workmen had not raised any objections to the transfer earlier in the proceedings.

5. Pendency of BIFR Proceedings and Its Impact:
The workmen argued that the pendency of proceedings before the BIFR barred the current proceedings before the court under section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985 (SICA). However, the court found no evidence of any pending proceedings before the BIFR, as the status report from the BIFR website indicated that the case had "abated" on 28.12.2005. Therefore, section 22 of SICA did not apply to the present proceedings.

6. Alleged Concealment of Material Facts by P.C. Sen:
The workmen alleged that P.C. Sen concealed material facts, including the lack of a public offer to purchase shares and his claim of being an ex-director. The court found that Sen had made a public offer to purchase shares in accordance with SEBI rules and had acquired 25,237 shares of SBL, which were duly registered in his name. The court also noted that any irregularities in the filing of the directors' report with the balance sheet were minor and did not impact the current proceedings.

Conclusion:
The court dismissed the application filed by the workmen, holding that no case had been made out for the recall of the order passed on 3.7.2013. The court found that the objections raised by the workmen were either too late or lacked substance. The application was deemed ill-advised but not frivolous, and no costs were imposed on the applicant-workmen.