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TMI Blog1991 (1) TMI 349X X X X Extracts X X X X X X X X Extracts X X X X ..... led in August, 1987. In all these petitions notices were issued to the respondent to show cause why the petition be not admitted. C.P. No. 80 of 1986 was, however, admitted by orders made on October 1, 1986, but the orders for advertisement of the petition were deferred. In C. P. No. 30 of 1987, on August 2, 1989, Sh. S.L. Nagpal and Sh. Sanjay Nagpal, being father and son, respectively, filed C.A. Nos. 4096 and 4097 of 1989. These applicants were directors and shareholders of the Company. The other shareholders are claimed to be their family members. C.A. No. 4096 of 1989 is accompanied by a tentative scheme of arrangement/compromise under section 391 of the Companies Act, 1956. The prayer in the application is that the scheme of arrangement sponsored by the applicants is highly beneficial to the interest of the creditors at large and that the scheme be put to vote to all classes of creditors and necessary summons for directions be given as to issue and publication of notices and convening of meetings of both classes of creditors, namely, secured and unsecured. The only secured creditor is the State Bank of India. By C.A. No. 4097 of 1989, the applicants have sought stay of variou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t No. 2003 of 1985, filed by the State Bank of India against the company for recovery of Rs. 1,53,38,107.14 which amount would now work out to more than Rs. 2.40 crores. Likewise, the petitioning creditors of C. P. Nos. 80 of 1986 and 149 of 1987 have also filed replies/affidavits opposing the prayers made in the application propounding the scheme. An affidavit has also been filed on behalf of Bharat Aluminium Co., being the plaintiff in Suit No. 512 of 1988, objecting to the reliefs claimed by the company., The petitioning creditor of C. P. No. 30 of 1987 has also filed a reply opposing the prayer made in the two applications filed by the Nagpals. During the course of hearing, counsel for the applicant informed the court that Sh. S. L. Nagpal has since died but submitted that his legal heirs are interested in pursuing the applications. I proceed on the assumption that the legal representatives of Sh. S.L Nagpal are also interested in propounding the scheme filed in C.A. No. 4096 of 1989. C.A. No. 653 of 1990 has been filed by the State Bank of India, inter alia, seeking an order for vacation of the ex parte order dated August 3, 1989, staying the proceedings in Suit No. 2003 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , etc., from the bank is frivolous and made solely for the purpose of delaying and/or denying the rightful claim of the State Bank of India against the company. The bank further states that it has considered the scheme of arrangement and is of the considered view that the scheme is not beneficial to the bank and that it would not be acceptable to it at all and as such no useful purpose would be served if the meeting of the secured creditors is called to consider the said scheme as that would be rejected by the State Bank of India who are the only secured creditors. On these grounds, it has been submitted by the bank that it would be an exercise in futility to direct the convening of the meeting of the creditors as the State Bank of India is bound to reject the scheme. Section 391(2) of the Companies Act, 1956, inter alia, provides that, if a majority of the members representing 3/4ths in value of the creditors or class of creditors agree to any compromise or arrangement, the compromise or arrangement shall, if sanctioned by the court, be binding on all the creditors, or class of creditors and other persons mentioned in the said section. There can be no dispute that the secured cr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... consider the scheme. In M.M. Sehgal v. Sehgal Papers Ltd. ( In liquidation ) [1986] 60 Comp Cas 510, the Punjab and Haryana High Court has held that section 391(2) lays down in categorical terms that the proposed arrangement or compromise has to be approved by a conscious act of the requisite majority of creditors. There is no scope for implied approval of the proposed scheme. Where the secured creditors withhold their consent to a proposed scheme of arrangement, there is nothing in the Companies Act or in the Rules which authorises the company judge to probe into the matter of withholding of the consent by the secured creditors and hold that the same has been done mala fide or arbitrarily. It was further held that if there is no valid arrangement before the court because of the non-satisfaction of the requirement of section 391(2) of the Act, it can never be sanctioned by the court and the question of modification by the court under section 392 does not arise. In view of the legal position as aforesaid, the applications filed by the propounders of the scheme are liable to be rejected and directions for convening of meetings as sought by the applicants cannot be issued. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... payable to the bank. The company has claimed Rs. 75 lakhs from the bank in a suit filed by it against the bank. It is, however, not necessary for me to go into these aspects but it does seem improbable that, by pumping in Rs. 15 lakhs, the propounders would be able to achieve the turnover as claimed by them when they could not achieve the turnover even with huge finances provided by the bank. There is nothing except a bald statement by the propounders to show that the company will be able to secure orders for supply of turnover which it claims it will achieve in five years of moratorium. In the scheme, it has been proposed that, from the year 1994-95 onwards, the liabilities to the extent of Rs. 40 lakhs per year will be paid. Even if these payments are made, it will not wipe out the liability of the company. If the scheme is accepted and five years' moratorium is allowed, the bank's apprehension that the whole of its amount will become a total loss is not wholly without basis though this court is not concerned with the reasons for the bank's stand. The scheme is not in the interest of the company or its creditors. As noticed above, the other creditors have also objected to the sc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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