2009 (5) TMI 1027 - HC - Companies Law

Issues Involved:

1. Revival of the company post-winding up order.
2. Validity of the cancellation of industrial sheds allotment.
3. Settlement of debts with creditors, including secured, unsecured, and preferential creditors.
4. Legal implications of actions taken post-winding up order without court permission.
5. Equitable treatment of creditors and objections to the revival proposal.

Issue-wise Detailed Analysis:

1. Revival of the Company Post-Winding Up Order:

The petition for revival was initiated by the ex-executive and ex-managing directors of the company, which was ordered to be wound up in 1992. The petitioners aimed to revive the company by negotiating settlements with creditors and addressing outstanding debts. The court considered the petitioners' proposal to pay all amounts due to creditors and the official liquidator, and their willingness to purchase shares at face value, even though the share value was zero at the time of winding up.

2. Validity of the Cancellation of Industrial Sheds Allotment:

The company had been allotted industrial sheds by the Haryana State Small Scale Industries and Export Corporation (HSSIEC), which were later cancelled due to non-payment of instalments. The petitioners argued that the cancellation, made after the winding up order, was void ab initio as it was done without court permission. The court agreed, citing that the cancellation was invalid since it occurred post-winding up without necessary leave under section 446 of the Companies Act. The court set aside the cancellation but allowed for potential future action by HSSIEC in accordance with the terms of allotment.

3. Settlement of Debts with Creditors:

The petitioners entered into a one-time settlement with UCO Bank, a major secured creditor, and obtained a no-objection certificate. They also proposed to pay the amounts due to other creditors, including unsecured and preferential creditors. The court noted that the petitioners had demonstrated bona fides by presenting demand drafts for the amounts due, including Rs. 2,83,213 for liquidation expenses and Rs. 29,74,000 to HSSIEC. The court directed the payment of these amounts to respective creditors within 15 days.

4. Legal Implications of Actions Taken Post-Winding Up Order Without Court Permission:

The court emphasized the legal requirement for obtaining court permission under section 446 of the Companies Act for any proceedings related to the company's assets post-winding up order. It ruled that actions taken without such permission, including the cancellation of the industrial sheds allotment, were void. The court referenced its previous rulings and the Supreme Court's stance on the interplay between the Companies Act and other financial legislation, reinforcing the necessity of court supervision in such matters.

5. Equitable Treatment of Creditors and Objections to the Revival Proposal:

Objections were raised by the respondents, including the original petitioner for winding up, who argued that the revival was not bona fide and that the company was commercially insolvent. The court addressed these objections by ensuring that all creditors would be paid amounts due up to the date of winding up, providing equitable treatment. The court deemed the petitioners' offer to pay interest up to the winding up date as the best possible settlement under the circumstances, as further liquidation would yield no better outcome for the creditors.

Conclusion:

The court ordered the revival of the company, subject to the payment of specified amounts to creditors and the official liquidator. It set aside the cancellation of industrial sheds allotment but allowed for future actions by HSSIEC as per the terms of allotment. The judgment emphasized compliance with legal procedures post-winding up and ensured equitable treatment of all creditors.

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