2018 (1) TMI 1180 - HC - Companies Law

Winding up petition - Held that - After going through the materials on record, this Court is convinced that no viable option is there for the revival of the Company. All efforts taken by the Company have been turned to be failure. The Managing Director of the Company, Sri. R. Hari, who was interested for the revival of the Company, is also now no more. No other effective schemes are before this Court. The matter has been pending before this Court for quite a long time. This Court is of the considered opinion that there is no other option for this Court but to order winding up of the Company. Accordingly, it is ordered that the above said Company be wound up in terms of the provisions contained in Section 20(2) of the SICA read with the enabling powers conferred on this Court in terms of the provisions contained in the Companies Act, 1956. Official Liquidator is appointed as the Liquidator for the winding up of the Company and the Official Liquidator shall take over all the assets and records of the company under liquidation, forthwith. The Canara Bank is directed to pay an amount of ₹ 20,000/- as initial expenses to the Official Liquidator within a period of three weeks from the date of receipt of a copy of this judgment. Since the Canara Bank was the monitoring agency appointed by the BIFR, it is also ordered that the Canara Bank will ensure that the winding up order is published in one issue of all Kerala editions of Kerala Kaumudi Malayalam Daily as well as in one issue of all Kerala editions and Madurai edition of the New Indian Express English Daily. The winding up order shall be drawn in Form No.52 of the Companies (Court) Rules 1959. Registry shall forward certified copies of this judgment as well as Form No.52 winding up order to the Registrar of Companies (Kerala) as well as to the Official Liquidator attached to this Court.

Issues Involved:
1. Recommendation for winding up by the Board for Industrial and Financial Reconstruction (BIFR).
2. Financial crisis and revival attempts of the company.
3. Objections and proposals for revival by the company's Managing Director.
4. Disputes with Kerala State Electricity Board (KSEB) and other creditors.
5. Interim orders and applications related to revival and financial settlements.
6. Legal provisions and jurisdiction regarding the winding up process.

Detailed Analysis:

1. Recommendation for Winding Up by BIFR:
The Company Petition (CP No.30/2006) was initiated following a recommendation by the BIFR under Section 20(1) of the Sick Industrial Companies (Special Provisions) Act, 1985 (SICA) to wind up M/s. Hindustany Cylinder Company Ltd. The BIFR concluded that it was just and equitable to wind up the company after the failure of the sanctioned rehabilitation schemes (SS-99 and MS-00).

2. Financial Crisis and Revival Attempts:
The company, a joint sector entity with equity participation from KSIDC, faced financial crises and labor issues after diversifying its production. Despite the BIFR's efforts to rehabilitate the company through sanctioned schemes, the company's operations remained suspended for three years, leading the BIFR to declare the rehabilitation scheme as failed.

3. Objections and Proposals for Revival by the Company's Managing Director:
The Managing Director objected to the winding up, presenting a One Time Settlement (OTS) with creditors, reducing liabilities from ?1737 lakhs to ?375 lakhs. He sought permission to submit a revival proposal based on decisions made at the state government level.

4. Disputes with KSEB and Other Creditors:
The company faced disputes with KSEB regarding electricity dues, with KSEB demanding ?1,57,00,764/- as arrears. Despite agreements to waive certain charges, the company failed to meet conditions, leading KSEB to oppose the company's application for reconnection. Additionally, the company faced financial demands from KSIDC and other creditors, complicating the revival efforts.

5. Interim Orders and Applications Related to Revival and Financial Settlements:
Several applications were filed by the company seeking to stay actions by creditors and to revive the company. The court issued interim orders staying actions like the sale proclamation by EPFO and revenue recovery proceedings by KSIDC. However, the company's failure to meet conditions, such as depositing agreed amounts with KSEB, led to the dismissal of certain applications.

6. Legal Provisions and Jurisdiction Regarding the Winding Up Process:
The court examined the legal framework under SICA, the Companies Act, 1956, the Companies Act, 2013, and related rules. Despite the repeal of SICA and the Companies Act, 1956, the court retained jurisdiction to continue winding up proceedings based on BIFR's recommendations, as per the Companies (Transfer of Pending Proceedings) Rules, 2016.

Conclusion:
After reviewing all materials and considering the lack of viable revival options, the court ordered the winding up of the company under Section 20(2) of SICA and the Companies Act, 1956. The Official Liquidator was appointed to take over the company's assets and records, with Canara Bank directed to provide initial expenses and ensure publication of the winding up order.

The court expressed appreciation for the assistance provided by the Central Government Counsel and closed all related company applications in light of the judgment.

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