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TMI Blog1984 (12) TMI 250X X X X Extracts X X X X X X X X Extracts X X X X ..... as authorised, valid and binding on the company and the petitioning creditors under section 536(2) of the Companies Act. Section 536(2) of the Companies Act, 1956, reads as under : "536(2). In the case of a winding-up by or subject to the supervision of the court, any disposition of the property (including actionable claims) of the company, and any transfer of shares in the company or alteration in the status of its members, made after the commencement of the winding-up, shall, unless the court otherwise orders, be void. " A question had arisen before a Division Bench of this court in the matter of Navjivan Mills Ltd., Mehsana (Company Application No. 95 of 1984 in Company Petition No. 105 of 1983 [1986] 59 Comp. Cas. 201 ), whether it is competent at this stage when no winding-up order is passed to sanction and validate any disposition of the properties of the company. This question has been decided by a Division Bench (Coram : B.K. Mehta and D.H. Shukla JJ.) of this court and it has been held that the court can exercise the jurisdiction of giving directions validating the transactions before the winding-up order is made. A similar view has been taken by my learned brothe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... start the mill immediately. The Government of Gujarat being seriously concerned about the non-employment problems, by its resolution dated May 31, 1984, sanctioned some concessions for the restart and revival of the closed textile unit of the company. Thereafter, the Government of Gujarat, Labour and Employment Department, issued a notification dated May 31, 1984, in exercise of the powers conferred by section 3 of the Bombay Relief Undertakings (Special Provisions) Act, 1958, and declared the textile unit of the applicant company, as a relief undertaking with effect from May 31, 1984. Thereafter, the Government of Gujarat in exercise of the powers conferred by section 4(1)( a )( iv ) of the Bombay Relief Undertakings (Special Provisions) Act, 1958, directing that in relation to the textile unit of the applicant company, which is declared to be a relief undertaking under Government notification dated May 31, 1984, issued under section 3 of the said Act, all rights, privileges, obligations, liabilities (except the SBI) accrued or incurred before the said undertaking was declared to be a relief undertaking under the said notification and any remedy for the enforcement thereof shall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Application No. 225 of 1984, further interim orders are sought for, pending final hearing of Company Application No. 148 of 1984. Now, as I am disposing of the main Company Application No. 148 of 1984, by this order, it is not necessary to pass any interim order on the said Company Application No. 225 of 1984 as prayed for. The applicant company owns a textile unit which is known as "Prasad Mills Ltd.", which is engaged in the manufacture of cotton and blended textiles. The company has 461 looms and 25,000 spindles along with a processing house at Raikhad, Ahmedabad. The company has employed about 1,200 workers in its unit. I am told by the learned counsel for the applicant company that the total assets of the applicant company are about Rs. 8 crores as per market value, liabilities are to the extent of Rs. 3,75,00,000 as per books and the facilities that are going to be granted by the SBI and the IDBI to the applicant company are worth Rs. 115.03 lakhs. The company has, as stated above, already received a sum of Rs. 20,00,000 as per the earlier order passed on October 22, 1984. It is stated that upon receipt of the said amount, the company has started its production activities ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... would otherwise be rendered jobless if the applicant company is not allowed to restart and revive the said textile unit, after entering into the said transactions. Under the provisions of the Companies Act, a company which is unable to pay its debts is liable to be wound up. But there is a discretion vested in the court which calls for exercise before the court passes a winding-up order. It may be possible that a company which at the moment is in adversity and is passing through evil days could be successfully revived by reason of change of circumstances and on account of the factors which may make it possible for the company to function economically once it is revived. No doubt, at a particular moment, it may be that it is unable to meet its liabilities. But if there is reasonable, if not certain, prospect of its revival and effective and commercially successful functioning, then a short wait by the creditors may be worthwhile. They may get better returns. It should be the policy of the court to promote revival of a company which at the moment may not be solvent and may not be able to meet its obligations to its creditors, if it is shown that there is reasonable prospect of resu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll be treated as bona fide transactions entered into between the SBI, the IDBI and the applicant company in the normal course of business of the applicant company and for the purpose of meeting the obligations of the company and for the purpose of keeping the business of the company going and they are declared as authorised, valid and binding on the company and the creditors. The application of the company under section 536(2) of the Companies Act shall stand granted as aforesaid. It is, however, clarified at this stage that the applicant company shall not utilise and/or disburse the funds provided by the SBI and the IDBI, pursuant to the present order, towards the satisfaction of the past dues of any of the creditors of the applicant company. Hence, no disposal of any property or assets, which may be effected by the company pending final hearing and disposal of the winding-up petition as aforesaid to or in favour of the SBI or the IDBI pursuant to the present order shall be, voided if the winding-up order is made, if at all, against the company in such position. It is also clarified that the amount of Rs. 20,00,000 which was permitted to be advanced by the SBI pursuant to my ord ..... X X X X Extracts X X X X X X X X Extracts X X X X
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