2017 (12) TMI 1271 - HC - Companies Law

Winding up petition - BIFR had rendered its confirmed opinion on 11.03.2008 for winding up of the company and to forward its opinion to this Court for necessary action in accordance with law and the company / promoters were directed to safeguard the assets of the company in their possession till regular Official Liquidator of the High Court took possession of the same - Held that - It is true that the opinion of the BIFR may not bind this Court for winding of the company, however, if the company fails to satisfy this Court that it has become viable economically and financially, there is no reason not accept the opinion of the BIFR which was rendered after giving full opportunities to the company and after finding that the company was not viable for rehabilitation. As stated above the BIFR rendered its opinion before three years and there is no headway by the company to establish any viability before this Court. Simply because the company has made application under the scheme introduced by the Government for extending reliefs to the Sick Industries, such would not be a ground to defer making order for winding up of the company. In view of the above, the Company M/s. Hari Raj Paper Mills is ordered to be wound up. The Registry shall forward / intimate the present order of winding up to the Official Liquidator, the Registrar of the companies as also to the company within two weeks from today. On receipt of the order of winding up from the Registry of this Court, the Official Liquidator shall give the publication of winding up order in Gujarati daily Newspaper as also in English daily Newspaper within 14 days thereafter. The Official Liquidator is appointed as liquidator of the company and is directed to take possession of the assets and properties of the company and to discharge all statutory functions as per the provisions made in the Companies Act, 1956.

Issues Involved:

1. Determination of the company's status as a Sick Industrial Company under the SICA Act.
2. Viability of the company's rehabilitation proposals.
3. Consideration of the winding-up order by the BIFR.
4. Appeals and remands by the AAIFR.
5. Examination of the company's efforts and opportunities for revival.
6. Impact of the Government of Gujarat's rehabilitation scheme.
7. Arguments and submissions by various respondents and their representatives.
8. Final decision on the winding-up order.

Issue-wise Detailed Analysis:

1. Determination of the company's status as a Sick Industrial Company under the SICA Act:
The BIFR, after conducting an inquiry under Section 16 of the SICA Act, confirmed its prima facie opinion that it was just and equitable for the company to be wound up under Section 20(1) of the SICA Act. The company was declared a Sick Industrial Company as it could not revive on its own and measures under Section 18 of the SICA Act were deemed necessary.

2. Viability of the company's rehabilitation proposals:
The BIFR appointed IDBI as an operating agency to report on the company's viability and formulate a rehabilitation scheme. Despite several opportunities, the company failed to submit a fully tied-up Draft Rehabilitation Scheme (DRS). No rehabilitation proposal was received from any party, indicating the company's inability to become viable.

3. Consideration of the winding-up order by the BIFR:
The BIFR rendered its confirmed opinion on 11.03.2008 for winding up the company and directed the company/promoters to safeguard the assets until the Official Liquidator took possession. This opinion was challenged and remanded by the AAIFR for reconsideration, but the BIFR ultimately reaffirmed its decision on 30.10.2013, observing that the company was not likely to become viable and winding up was in the public interest.

4. Appeals and remands by the AAIFR:
The AAIFR set aside the BIFR's initial winding-up order and remanded the case with directions for the company to submit a fully tied-up DRS within a month. The BIFR was to examine the viability of the scheme or provide detailed reasons for its infeasibility. Despite these directions, no viable rehabilitation proposal emerged.

5. Examination of the company's efforts and opportunities for revival:
The BIFR observed that the company had been with it since 2001 and had failed to submit a viable DRS despite several opportunities. The company's attempts to settle dues and explore alternative measures, including a change of management, were unsuccessful. The BIFR concluded that all efforts for revival had failed.

6. Impact of the Government of Gujarat's rehabilitation scheme:
The company applied for relief under the Government of Gujarat's rehabilitation scheme for Sick Industrial Enterprises. However, the court noted that the company had not made any significant efforts to settle its dues or show viability even after the BIFR's opinion in 2013. The company's application under the government scheme did not justify deferring the winding-up order.

7. Arguments and submissions by various respondents and their representatives:
Respondents argued that the company had sufficient opportunities to come up with a viable scheme but failed to do so. They highlighted the company's substantial outstanding dues and lack of business activity since 2003. The court was urged to accept the BIFR's opinion and order the winding up of the company.

8. Final decision on the winding-up order:
The court, considering the BIFR's opinion and the company's failure to demonstrate viability, ordered the winding up of the company. The Official Liquidator was appointed to take possession of the company's assets and discharge statutory functions as per the Companies Act, 1956. The court emphasized that the company's application under the government scheme did not warrant postponing the winding-up order.

Conclusion:
The court ordered the winding up of the company, M/s. Hari Raj Paper Mills, based on the BIFR's confirmed opinion and the company's inability to present a viable rehabilitation proposal. The Official Liquidator was directed to take possession of the company's assets and proceed with the statutory functions.

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