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Issues Involved:
1. Sanctioning the scheme of compromise and arrangement. 2. Validity of mortgages and equitable mortgages. 3. Financial status and obligations of the company. 4. Rights and claims of the secured and unsecured creditors. 5. Employment and compensation for workmen. 6. Compliance with statutory provisions. 7. Role and responsibilities of the official liquidator. 8. Revival of the company's industrial license. 9. Financial viability and obligations of the scheme's sponsor. 10. Cancellation of the winding-up order. Detailed Analysis: 1. Sanctioning the Scheme of Compromise and Arrangement: The petitioner, Shri Rajendrakumar Maneklal, filed under Section 39(2) of the Companies Act, 1956, seeking an order to sanction a scheme of compromise and arrangement between Hathising Manufacturing Company Ltd. (in liquidation) and its members and creditors. The court initially found the scheme "thoroughly unconscionable, absolutely unjust and unfair," particularly due to its inadequate compensation to workmen. However, after modifications, including provisions for restarting the mill and offering better compensation to workmen, the scheme was reconsidered and eventually sanctioned. 2. Validity of Mortgages and Equitable Mortgages: The court addressed the validity of three mortgages executed by the Authorised Controller in favor of the State of Gujarat and an equitable mortgage in favor of Shri Rajendrakumar Maneklal. Both sets of mortgages were challenged in separate legal proceedings. The court noted that these disputes were settled within the scheme, avoiding the need for further litigation. 3. Financial Status and Obligations of the Company: The company had faced severe financial difficulties, leading to multiple closures and an accumulated loss of Rs. 36,63,175. Various loans and mortgages were taken to sustain operations, but the company ultimately went into liquidation. The scheme aimed to address these financial obligations by restructuring debts and offering phased payments to creditors. 4. Rights and Claims of the Secured and Unsecured Creditors: The scheme included provisions for different classes of creditors, including secured creditors like the State of Gujarat and Shri Rajendrakumar Maneklal, and unsecured creditors like the Ahmedabad Municipal Corporation and the Sales Tax Commissioner. The court ensured that the scheme fairly represented all classes of creditors and provided reasonable settlements for their claims. 5. Employment and Compensation for Workmen: The court was particularly concerned about the workmen, who were offered a mere Rs. 25,000 in the original scheme. After modifications, the scheme proposed to re-employ workmen with continuity of service and offered 50% of their dues to those who could not be re-employed. The court further suggested that workmen should be given an option to receive either 75% of their dues or the balance 50% after the company starts making profits. 6. Compliance with Statutory Provisions: The court verified that all statutory provisions were complied with, including the convening of meetings for different classes of members and creditors and the issuance of explanatory statements as required by Section 393 of the Companies Act. The scheme was thoroughly debated and approved by the requisite majorities in these meetings. 7. Role and Responsibilities of the Official Liquidator: The official liquidator played a crucial role in managing the company's assets during liquidation and was involved in various legal proceedings to protect the company's interests. The liquidator was directed to hand over all assets and relevant papers to the scheme's sponsor upon the court's sanctioning of the scheme. 8. Revival of the Company's Industrial License: The court addressed the issue of the company's revoked industrial license under the Industries (Development and Regulation) Act, 1951. The Central Government constructively responded by canceling the revocation order, thereby reviving the company's license and enabling the possibility of restarting the mill. 9. Financial Viability and Obligations of the Scheme's Sponsor: The court examined the financial capacity of the scheme's sponsor, who provided an affidavit detailing his financial standing and experience in running a spinning unit. The sponsor was required to give an undertaking to restart the mill and deposit Rs. 50,000 as guarantee money. The court emphasized that the sponsor's financial viability should not be a primary concern as long as he adhered to the scheme's obligations. 10. Cancellation of the Winding-Up Order: To implement the scheme, the court needed to cancel the winding-up order. Following the precedent set in In re Pellad Bulakhidas Mills Company Ltd., the court concluded that it had the authority to cancel the winding-up order. The winding-up order passed on 16th August 1965 was thus canceled, allowing the company to resume operations under the new scheme. Conclusion: The court sanctioned the modified scheme of compromise and arrangement, emphasizing the need for restarting the company's operations, fair compensation to workmen, and reasonable settlements for creditors. The winding-up order was canceled, and the official liquidator was directed to hand over the company's assets to the scheme's sponsor. The judgment highlighted the court's role in ensuring that the scheme was just, fair, and in the best interest of all stakeholders involved.
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