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TMI Blog1999 (12) TMI 751X X X X Extracts X X X X X X X X Extracts X X X X ..... h and set aside the order dated 23-9-1997 sanctioning the Scheme of Compromise and/or arrangement proposed by the Engineering Majoor Sangh. ( ii )This Court may direct appropriate action to be initiated against Shri K.W. Desai of Engineering Majoor Sangh for making false statements on affidavit, concealing material facts, practising fraud on the Court and misleading this Court. For the present, this Court is only dealing with the first prayer and the parties shall be at liberty to make appropriate submissions regarding the second prayer at the time of the next hearing. It is necessary to make this segregation because the Company in question being Beclawat of India Ltd. was ordered to be wound up as far back as on 22-12-1992 and the properties of the Company were taken over by the Official Liquidator attached to this court. However, by virtue of the order sought to be reviewed ( i.e., the order dated 23-9-1997) possession of the properties of the Company was taken over by the Engineering Majoor Sangh ( the Union ). After the Court passed order dated 23-9-1997, by order dated 23-10-1997 the Court recorded the statement made by the learned counsel for the Engineering Majoor Sangh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ajoor Sangh filed Company Application No. 104 of 1994 before this Court proposing the scheme of compromise and/or arrangement between the workers of the said Company (in liquidation) as well as the unsecured creditors and other interested parties. The court issued notice to the State Bank of India. The State Bank of India appeared and opposed the prayer of the Union for convening the meetings for considering the scheme. Admittedly, no notice was issued to the other creditors who were unsecured creditors or to the shareholders of the Company. The union invited order of this court to convene the meeting of the workers of the Company stating that they be termed as a class of creditors . By order dated 6-3-1995 this Court directed the applicant to convene meeting of class of creditors but observed that the meeting will be held after giving due notice to the secured creditors. 3.4 Thereafter the Union wrote a letter dated 24-4-1995 to the Chairman appointed for the said meeting Mr. P.V. Chacko, Assistant Registrar of this court. The Union stated that the Court had granted the prayer to convene the meeting of class of creditors, i.e., the workers and staff of the Company in servic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7 that the applicants have filed these applications. 4. These applications for review are filed by the following four categories of persons : 4.1 Company Application No. 513 of 1997 is filed by State Bank of India on the ground that it is a secured creditor of the Company that separate meetings of the secured creditors as well as unsecured creditors were not convened, nor were they given any notice of Company Petition No. 224 of 1996. 4.2 Company Application No. 515 of 1997 is filed by shareholders of the Company in liquidation on the ground that no meeting of shareholders was convened at all nor were they given any notice of the Company Petition No. 224 of 1996. Hence, the Scheme could not bind them. 4.3 Company Application No. 516 of 1997 is filed by one of the unsecured creditors of the Company in liquidation supported by other unsecured creditors whose list is annexed to the affidavit. The application also contains the statement on behalf of the unsecured creditors supporting the applicant that they oppose the scheme proposed by the Union in Company Petition No. 224 of 1996. They have also prayed for review on the ground that no meeting of unsecured creditors w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... only the workers but also the secured creditors, unsecured creditors and the shareholders as will be clear from the relevant clauses of the scheme extracted hereafter and still no meeting of their respective class was convened or held. The relevant clauses of the scheme are as under : "(1) Total paid up shares of all class shall be forfeited by writing off its value which is practically nil today for the reason that the Company is wounded up by the consent of the Directors. . . ." (5) New Management shall accept total liabilities and assets of the Company. . . . (7) All the creditors including State Bank of India will be paid their dues without interest in the ten equal yearly instalments and first instalment will be paid after 12 months from the date of commencement of production. (8) Before deciding payable amount to the creditors the new management shall enjoy every right to negotiate and settle by deduction the dues of every creditors including the State Bank of India on every reasonable, commercial, industrial and legal grounds." 6.2 It is also submitted that there was also breach of the mandatory provisions of rule 80 which reads thus : (80) The Court shall f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ome of them did make a grievance orally before the Court on 23-10-1997 and that is why the Court required the Union to return possession of the assets of the Company to the Official Liquidator. Thereafter Company Application Nos. 513, 514 and 515 of 1997 came to be filed in November 1997 and Company Application No. 530 of 1997 by the affected workers came to be filed in the first week of December, 1997. Under the circumstances, there was no delay, or at least no unreasonable delay, in filing of the present applications for review of the order dated 23-9-1997. 9. The scheme in question was presented under the provisions of section 391(1), read with section 394. Sub-sections (1) and (2) of section 391 provide as under : [ "391 Power to compromise or make arrangements with creditors and members (1) Where a compromise or arrangement is proposed ( a )between a company and its creditors or any class of them; or ( b )between a company and its members or any class of them; The Court may, on the application of the Company or of any creditor or member of the Company, or, in the case of a company which is being wound up, of the liquidator order a meeting of the creditors or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n Miheer H. Mafatlal v. Mafatlal Industries Ltd. [1996] 87 Comp. Cas. 792/ 10 SCL 70 their Lordships of the Supreme Court drew support from the following passage on the concept of a class from Palmer s Company Law, 24th Edn. "What constitutes a class: The Court does not itself consider at this point what class of creditors or members should be made parties to the Scheme. This is for the Company to decide, in accordance with what the Scheme purports to achieve. The application for an order for meetings is a preliminary step, the applicant taking the risk that the classes which are fixed by the judge, usually on the applicant s request, are sufficient for the ultimate purpose of the section, the risk being that if in the result, and we emphasise the words in the result , they reveal inadequacies, the scheme will not be approved." It is thus clear that all the classes of persons whose interests are sought to be affected by the scheme in question were entitled to be called at the meeting of the respective class of creditors which meetings were unfortunately not convened. It was for the petitioner Union which had filed Company application No. 104 of 1994 to request the Court to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not in a position to dispute any of the aforesaid factual aspects although affidavit in reply is filed by him on behalf of the Union. The aforesaid factual aspects are not disputed even at the hearing of these applications. All that is contended is that in view of rule 9 of the Company Court Rules, the Company Court has inherent powers to give such directions or pass such orders as may be necessary for meeting the ends of justice or to prevent the abuse of process of the Court. 12. The aforesaid submissions overlooks the important aspect that all that Rule 9 does is to save the inherent powers of the Court but the rule does not and cannot abrogate the provisions the statute particularly section 391 which is the parent Act. Even in the context of section 151 of the Code of Civil Procedure, 1908 the Apex Court has held in Cotton Corpn. of India Ltd. v. U.I. Bank Ltd. AIR 1983 SC 1272 that the inherent powers under section 151 of the Code cannot be exercised in derogation of the express provisions contained in other sections of the Code. In view of the aforesaid settled legal position, reliance on rule 9 of the Company Court Rules cannot advance the petitioner Union s case any ..... X X X X Extracts X X X X X X X X Extracts X X X X
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