2013 (9) TMI 1224 - Board - Companies Law

Summary

Issues Involved:
1. Liquidity problems and financial losses of the Applicant Company.
2. Scheme for repayment of fixed deposits.
3. Objections and suggestions from Fixed Deposit holders and other stakeholders.
4. Sanctioning of the repayment scheme by the Company Law Board.

Summary:

1. Liquidity Problems and Financial Losses:
The Petitioner Company, engaged in the manufacture of drugs and formulations, faced liquidity problems and incurred losses amounting to Rs. 111.29 crores during the financial year ending 31st March 2013. The reasons cited include reduction in EBITDA margin, increase in raw material cost, speculation in raw material prices, institutional sales margin reduction, increase in finance cost, insufficient cash flow to service debt obligations, high level of finished stock, fire at Unit I, Parwanoo, and slow-moving stock and sticky debtors.

2. Scheme for Repayment of Fixed Deposits:
The Applicant Company proposed a scheme for repayment of fixed deposits, including:
- Full payment of fixed deposits up to Rs. 10,000 within one year of maturity.
- A two-year moratorium for fixed deposits above Rs. 10,000.
- Repayment of fixed deposits above Rs. 10,000 to commence from the third year and payable in annual installments over five years.
- Future interest at 6% p.a. on the reducing balance.
- Quarterly Hardship Committee meetings to address hardship cases with a sum of Rs. 5,00,000 per quarter.

3. Objections and Suggestions from Fixed Deposit Holders and Other Stakeholders:
Objections raised included the long repayment schedule, non-payment of undisputed income tax liabilities, increase in directors' remunerations, and loans to related parties. Suggestions included:
- Repayment within three years for small deposit holders.
- Payment to senior citizens and those needing money for medical treatment on priority.
- Creation of a fund for hardship cases aggregating to Rs. 50 lakhs per month.
- Repayment of fixed deposits on original terms with penal interest for delays.

4. Sanctioning of the Repayment Scheme by the Company Law Board:
The Company Law Board sanctioned the scheme of repayment with the following directives:
- Payment of contracted interest rate till maturity and 8% p.a. post-maturity.
- Effective from 1st October 2013, covering matured and future fixed deposits.
- Specific repayment schedules based on deposit amounts, ranging from one to five years.
- Priority payment for hardship cases up to Rs. 15 lakhs per quarter.
- Adherence to guidelines for implementing the scheme, including individual treatment of deposits, order of maturity, and quarterly affidavits on repayment status.

The Company Law Board also appointed a committee to consider hardship cases and directed the company to send a copy of the order to all depositors and relevant authorities. Non-compliance would attract penal provisions u/s 58A(10) and 274(1)(g) of the Companies Act, 1956. The Company Petition was disposed of accordingly.