2020 (2) TMI 407 - HC - Companies Law

Approval of the proposed Scheme of Compromise and Arrangement - Mobilisation of funds - HELD THAT - When a company is ordered to be wound up, the assets of it are put in possession of the Official Liquidator. The assets become custodia legis. The follow-up, in the absence of a revival of the company, is the realisation of the assets of the company by the Official Liquidator and distribution of the proceeds to the creditors, workers and contributories of the company ultimately resulting in the death of the company by an order under Section 481 of the Act, being passed. But, nothing stands in the way of the Company Court, before the ultimate step is taken or before the assets are disposed of, to accept a scheme or proposal for revival of the Company. In that context, the court has necessarily to see whether the scheme contemplates revival of the business of the company, makes provisions for paying off creditors or for satisfying their claims as agreed to by them and for meeting the liability of the workers in terms of Section 529 and Section 529A of the Act. Of course, the court has to see to the bona fides of the scheme and to ensure that what is put forward is not a ruse to dispose of the assets of the company in liquidation. In the present case, the Scheme as a whole is just, fair and reasonable. There is no violation of any statutory provisions. It is in the interest of justice that the Scheme is approved subject to supervision of this court through a retired Judge of this Court. The scheme is approved - application allowed.

Issues Involved:
1. Approval of the proposed Scheme of Compromise and Arrangement under Sections 391-393 of the Companies Act, 1956.
2. Objections regarding the mobilization of funds.
3. Allegations of fraudulent intent behind the scheme.
4. Compliance with the requirement of 3/4th majority approval.
5. Specific objections from various associations and individual creditors.
6. Compliance with the Real Estate (Regulation and Development) Act, 2016 (RERA).

Detailed Analysis:

1. Approval of the Proposed Scheme:
The application was filed under Sections 391-393 of the Companies Act, 1956, by the promoters of Vigneshwara Developwell Private Limited and Vigneshwara Developers Private Limited, seeking approval for a Scheme of Compromise and Arrangement with their respective members and creditors. The court noted that winding-up petitions against the two companies were admitted, and a Provisional Liquidator was appointed on 22.7.2016.

2. Objections Regarding Mobilization of Funds:
Objectors argued that there was no clear source of funds for statutory payments. The promoters clarified that an escrow account with ?2.71 crores was opened, and additional funds were available through deposits and unsold inventory. The court observed that while the full amount was not readily available, the promoters might mobilize resources based on unsold inventory once the scheme was approved.

3. Allegations of Fraudulent Intent:
Objectors claimed the scheme was a facade to release promoters from judicial custody. The court refrained from commenting on this, stating that the criminal courts were best suited to decide on bail matters.

4. Compliance with the Requirement of 3/4th Majority Approval:
The court had previously concluded that the scheme had the support of a majority in number representing 3/4th in value of the creditors. This conclusion was not challenged, and the court found no merit in the contention that the scheme lacked the requisite approval.

5. Specific Objections from Various Associations and Individual Creditors:
- Vigneshwara Victims Welfare Association: Raised concerns about the scheme's feasibility, funding sources, and infrastructure development. The court noted that most members had entered into settlements and could not resile from them without reason.
- Individual Objectors (Group Captain S.M. Puri, Mr. S.N. Dasmahapatra, Mr. G.K. Uberoi): Claimed their properties were bartered with group entities and pursued cancellation of sales. The court found these objections irrelevant to the present scheme.
- Wellone Wash and Clean Services Pvt. Ltd.: Objected to non-inclusion in the scheme. The court noted that the scheme dealt with allottees and their dues would be settled as per law after the company's revival.
- Nitin Gupta, HUF: Raised procedural objections about meetings and creditor lists. The court found these objections unsubstantiated.

6. Compliance with RERA:
Objectors argued that the projects were not RERA compliant. The court noted that RERA was not in existence when the projects were launched and directed the propounders and associations to ensure compliance.

Judgment:
The court approved the scheme, subject to supervision by a retired judge, Mr. Justice Vinod Goel, and outlined specific directions for implementation, including the opening of an escrow account, periodic reviews, and leniency from statutory authorities.

Conclusion:
The scheme was deemed just, fair, and reasonable, with no statutory violations. The court emphasized the commercial wisdom of the majority and approved the scheme with supervisory provisions.

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