9911796707
TMI Blog2000 (3) TMI 927X X X X Extracts X X X X X X X X Extracts X X X X ..... he ground that, with a view to overcome its financial difficulties, it was trying to restructure its financial position and, for that purpose, it had decided to transfer its Pellet Division to a company, namely, Higrade Pellets Ltd. In the application it was pointed out that the respondent-company was incorporated for manufacturing of high quality steel for which it had set up a huge industrial complex at Hazira, Surat for manufacture of high quality steel and steel products which are used in automobile industries, heavy industries, railways and for manufacture of gas cylinders etc. According to the respondent - applicant, its growth had been phenomenal and it had a turn over of Rs. 2,500 crores per year. The reserves and surplus of the company were to the tune of Rs. 2,414.18 crores as on March 1998 and its fixed assets were worth Rs. 5,753.30 crores as on 30-3-1998. The net current assets of the company was worth Rs. 1,300.21 crores as on March 1998. The profit before interest Depreciation and tax of the company at the year ending 31-3-1998 was to the tune of Rs. 726.19 crores. Its gross profit was increased by 34 per cent to Rs. 759 crores as on 31-3-1998. According to the respo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proper protection of unsecured creditors whose right to recover the amount by realizing the assets was being permanently destroyed. It was contended that the value of the assets proposed to be transferred was not taken into consideration by the learned Company Judge and that the effect of totality of circumstances shows that there was no justification for granting permission under section 536(2). It was also contended that the decision to transfer the assets was mala fide and was taken because the respondent-company was facing liquidity crisis since 1994. It was also argued that even by realizing the amount by transferring the assets, the respondent was not in a position to resolve its entire financial crisis. The learned counsel relied upon the decision of the Supreme Court in the case of Navalkha Sons v. Ramanya Das AIR 1970 SC 2037 in which the Supreme Court in para 6 of the judgment held that, unless the Court is satisfied about the adequacy of the price, the act of confirmation of the sale would not be a proper exercise of judicial discretion. That was a case in which the Supreme Court was concerned with rule 273 of the Companies (Court) Rules, 1959 in respect of sale ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is satisfied by credible evidence as to one or other of two factual conclusions and that the court must be satisfied that particular transaction (usually the sale of substantial asset) is beneficial to creditors, because it produced an advantageous price or some such benefit which are likely to be profitable and, therefore, will increase the company s assets to be beneficial to the creditors. It is thus clear that the Court was concerned with a claim put forth on the basis of a sale agreement on the ground that the appellants had a pre-existing right to purchase the land in question and, therefore, they were entitled to get the land at the rate stated in the agreement to sell. Thus, looking to the background in which the decision was taken in the aforesaid case, it can have no application to the present case. 5. Admittedly, the appellant has filed an application under section 19 of the Recovery of Debts due to Banks Financial Institutions Act, 1993 before the Debts Recovery Tribunal at Ahmedabad against the respondent as well as the principal debtor. The liability of the respondent is alleged on the basis of some guarantee for the dishonour of which the appellant has filed a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e said to have been made on 31-3-1999, there is a clear evidence to show that the Resolution to transfer the business of the company s pellet plant and liabilities attributable to the plant was made at the Twentieth Annual General Meeting of the respondent-company held on 24-9-1996. That Resolution reads as under : "Certified true extract from the minutes of the Twentieth Annual General Meeting of Essar Steel Limited held on September 24, 1996. TRANSFER OF PELLET PLANT. Resolved that pursuant to section 293(1)( a ) and other applicable provisions, if any, of the Companies Act, 1956, and subject to such other approvals as may be required, the consent of the Company be and it is hereby accorded to transfer the business of the Company s Pellet Plant and liabilities attributable to the Plant to a subsidiary company to be formed as a going concern on such terms and conditions as the Board of Directors of the Company may deem fit. Resolved further that the Board of Directors of the Company be and they are hereby authorised to do and delegate all such acts, deeds, matters and things as they may, in their absolute discretion, deem necessary or desirable, to a Committee of Direct ..... X X X X Extracts X X X X X X X X Extracts X X X X
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