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TMI Blog2002 (2) TMI 1221X X X X Extracts X X X X X X X X Extracts X X X X ..... omments on the report submitted by Cemtech and thus BIFR directed the company to submit an alternative revival plan to the Operating Agency. The workers were also directed to submit rehabilitation proposal with the help of Tata Consultants within two months indicating the means of finance. No proposal was received by the Board within the time indicated. By the same order of the BIFR dated 28-12-1993, the State Bank of India, Allahabad Bank and IDBI were directed under section 21 of the Sick Industrial Companies (Special Provisions) Act 1985, to prepare a complete inventory of all assets and liabilities and lists of registers/records/documents of shareholders and creditors and to get valuation done and to report the matter to the Board. Since no proposal were received the Operating Agency issued an advertisement for change in management on 6/8-3-1995. Four offers were received in response to the advertisement. The Operating Agency was required to examine the relative merits of the proposals. The State Government was also required to indicate their view regarding their equity of Rs. 68 lacs, and loans of Rs. 50 crores to UPSCCL in the event of privatization. Out of the four proposals ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... exploring all possibility of rehabilitation formed a prima facie opinion that the company was not likely to make its net worth positive within a reasonable time, while meeting all its financial obligations, and was not likely to become viable in future, and that it was thus just equitable, and in public interest that it should be wound up under section 20(1) of the Act. A show-cause notice was issued on 18-11-1996. 2. On 6-2-1997 the Board found that H.B. Group had withdrawn their proposal and obtained refund of the amount. It gave a further opportunity to the company, State Government and Workers to submit a comprehensive twice. A revival proposal was submitted on 26-3-1997 for closure of two production lines, modernization/expansion of existing facilities. OTS of the dues of financial institution and banks, VRS as well as various concessions from the State Government including of induction of fresh funds for OTS, waiver of interest and conversion of their loans into equity. Operating Agency reported that the corporation will require interest free funds of order of about Rs. 250 crores for two years of implementation of scheme and that the State Government has not communicat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... company on 27-7-1998 through its counsel Sri Shiv Nath Singh for winding up of the company and to appoint Official Liquidator as liquidator of the company along with affidavit of Padam Singh, Managing Director of U.P.C.C.I. Churk, Mirzapur. 4. Cement Workers Union (CITU) an 13 other trade unions filed a Writ Petition No. 15134 of 1998 challenging the order dated 19-2-1998 passed by AAIFR and the order dated 2-7-1997 passed by the BIFR. They filed an affidavit (A-12) in this company application to keep the proceedings in abeyance till the disposal of the Writ Petition. The State Government filed a reply to the aforesaid application filed by the Cement Workers Union in the form of Affidavit of Sri K.L. Meena, Special Secretary, Government of U.P. Industrial Development Department, Lucknow, for rejection the application to keep the winding up proceeding in abeyance on the ground that UPSCCL is incurring losses. In detailed objection in the form of affidavit he gave reasons for losses suffered by the company. In para 9 it was stated that UPSCCL has on its rolls, including casual muster roll 5300 workers and that the major reason for the sickness of the Sick Company were financial, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he case of Rohtas Industries Ltd., Dalmia Nagar in District Rohtas Bihar reported in 1986 (86) Company Cases, Page 1, in which the Apex Court entertained the writ petition during the pendency of the winding up before the Patna High Court and experimented with adopting various alternative schemes for rehabilitation of that industry with the help of the BIFR and after keeping the winding up proceeding in abeyance for years together, concluded that inspite of the best efforts the object to revive the company does not appear feasible and held that in these circumstances, the future course of action and while bringing end to the proceedings directed, the winding up proceedings before Patna High Court be resumed. Sri Meena concluded that in view of the facts and circumstances enumerated by him and in view of Rohtas Industries experiment, the Court may order winding up of UPSCCL rather than entertaining similar rehabilitation scheme, as were submitted before the Board and were not found viable by the Board. 5. In his aforesaid affidavit Sri K.L. Meena also submitted that since 1992 the State Government has directed sales tax deferment to the sick company for a period of 5 years with a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by this Court on 8-12-1999 with observations that in case the assets of company are sold, the workers will be given first priority in payment. The operative portion of the order is quoted as below : "In the last, the learned counsel for the petitioner submitted that the workmen had been working in the sick unit. They are entitled to Wages till the winding up order is passed. This submission was also raised before the Board and it noted the submission in the meetings held on 26-9-1996 and observed as follows : In case the State Government decide to wind up the corporation they should do so and pay all the dues of the labour. The present Government has different policy regarding sick P.S.Us as compared to the previous Government and the workers are hopeful that a favourable view will be taken in this case. There is no reason why the workers be not paid their salary. In view of the above discussion the writ petition is dismissed against the recommendation of the Board dated 6-2-1997, and the order of the appellate authority dated 19-2-1998. The Writ Petition, in so far as the direction in the nature of mandamus commanding respondent No. 4 to make payment of all dues to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... properties with it under an agreement dated 31-3-1981. The applicant claims to be secured creditor. A secured creditor is entitled to preference for realization of its amount under section 529A of the Companies Act, 1956. The secured creditor cannot claim that the properties which have been hypothecated should be exempted from winding up. The winding up order is not to be passed in relation to a particular property. It consists of the whole assets of the company. The applicant has a right to submit its claim before the official liquidator. The application is accordingly dismissed." 10. Application (A-16) filed by employees (thirty seven in number) of the company (in liquidation) was also disposed of with the observation that these applicants can claim such relief for appropriate proceedings before the appropriate authority. Applications A-21 and A-22 filed by Balaji Trading Company was disposed of on 13-4-2000 by giving permission to the applicant to continue the arbitration case before the arbitrator Mr. Justice G.B. Singh (retired) in proceedings in O.S. No. 281 of 1999. 11. At this stage, the subject application No. 47788 of 2001 (A-31) was filed on 17-5-2001 by the S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which make package of incentive very clear. Three Cement companies initially showed interest, however, finally only one company namely Grasim Industries Ltd. came forward and submitted an offer on 30-4-2001 which was otherwise also valid as per tender notice. The bid submitted by Grasim Industries Ltd. was in two parts, which was opened by the concerned committee constituted for the purpose. The note of the committee has been annexed as Annexure A-6, which shows that the committee consisted of following officials: 1.Commissioner Industrial Development-Chairman 2.Secretary, Small Industries Development-Member 3.Secretary, Finance Department-Member 4.Secretary, Heavy Industries-Member 5.Managing Director, UPSIDC-Member The committee opened single tender on the stated reasons that the unit has closed production, its machinery is diminishing, five thousands and more employees are facing uncertainty and that such a big production capacity is suffering loss, and further that after two advertisements only one tender has been received. 13. The tender is in two parts namely qualifying offer of first part of Rs. 195 crores, towards settlement of dues of Banks and Financial In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o part bid offer. First part of bid would contain an Unconditional Acceptance clearing the outstanding workers retrenchment benefits to all the workers and the one time settlement dues for financial institutions and B. The amount expected for this is Rupees One Hundred Ninety Five Crores. This would be qualifying offer part of the bid would be an offer and above the qualifying offer. IInd part of the bid of only such bidders be opened who have tendered unconditional acceptance of first part (qualifying bid). The Highest Bidder of Part II would be awarded the tender immediately Reliefs and Concessions Government of Uttar Pradesh would be ready to : 1.Write off all past Government loans with interest of the company. 2.Write off all Electricity/Trade Tax/Royalty dues. 3.Offer Trade Tax exemption to the unit for Ten years. 4.Offer waiver of royalty dues for Ten years. 5.Renew the Lime stone leases in favour of the company. 6.Power load of the new plant would be sanctioned and required power supply ensured. 7.Electricity Duty Exemption would be granted on any captive power generation facility set up by the promoter for this plant. Properties on Offer Incl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ement Corporation Limited is State Government undertaking registered as a public Limited Company under the Indian Companies Act, 1956. The entire share capital is held by the Government of U.P. through the Governor of U.P. or his nominees. It has the largest installed capacity for manufacturing of cement. The four units of the company are situated at Churk, (wet process) commissioned in 1954 and 1962, installed capacity ( i ) Clinker 4.56 Lac MT and ( ii ) Cement 4.80 Lac MT; (2) Dalla (wet process) commissioned in 1971-72 installed capacity ( i ) Clinker 3.80 Lac MT and ( ii ) Cement 4.00 Lac MT; (3) Dalla (Clinker Unit) (Dry process) commissioned in 1983-84 installed capacity 8 Lac MT; and (4) Chunar (Grinding Unit) commissioned in 1983-84 with installed capa-city of Cement 16.80 (Lac MT). In the Liabilities statement as on 8-12-1999 is shown as share capital of 68.28 crores and total of 879.98 crores towards loans and current liabilities. The break-up of these loans and current liabilities is given as below : ( i )Long term loan from FIs/Banks: ( a )Principal-54.20 ( b )Interest-235.42 ( ii )Working Capital Loans-4.65 ( iii )Loans from State Government-165.80 ( iv )C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on, stay order has been understanding to have deemed to have become final until appeal, with or SLP is rejected and the time for filing appeal, writ or SLP has expired. The bidder required evidence/representation from the Governor of U.P. that all dues payable to U.P. Government shall be waived, Sales-tax exemption on sale without any ceiling of amount will be available to the bidder for a period of 10 years from the date of handing over possession and royalty tax exemption on limestone will be available to the bidder for a period of 10 years in case any land has been acquired the permission of State Government under section 44A of the Land Acquisition Act, 1984 for sale of transfer of the property in favour of the bidder and no additional/further payment shall be required to be made or if the land has been required by private purchase by UPSCCL to arrive and clear and marketable title free from encumbrances to the land and its weight to transfer the same without requiring any permission/approval or sanction of any statutory or other regulatory agency and that all taxes including land revenue shall be paid by UPSCCL. The bidder further required evidence of all these payable to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve instead filed an application for permission/approval for the sale of the assets. It has been submitted that provisions of the Central Act No. 51 of 1993, override the provisions of the Companies Act, 1956, conferring exclusive jurisdiction in respect of the adjudication of the claim and execution of the final order on the Tribunal and the Recovery Officer in respect of the debts payable to the bank, and that there can be no interference of the Company Court in respect of payment due to bank payable before Debt Recovery Tribunal. It is lastly alleged that the application of Government of U.P. and Corporation is mala fide and is not maintainable. 19. Arguments were heard on 25-5-2001. The matter was thereafter directed to be heard after vacations. On 25-7-2001 the Court called for report of the official liquidator with regard to handing over of the possession of the plant and machinery and other assets after preparing inventory. Directions were given that the official liquidator and his staff will be provided security for taking over the possession of the property of the company. The Chief Standing Counsel stated that he is in a position to hand over inventories to the offic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vocates for 75 days, on the issues of a bench in Western U.P. The Court, however, functioned and heard matters, in which personal appearance were put by the litigants. The court has held proceedings in this matter on 10-9-2001, 20-9-2001, 22-9-2001, 3-10-2001, 29-10-2001, 30-10-2001 and 5-11-2001. In between the official liquidator submitted his report Nos. 113, 114 and 115 of 2001 with regards to various matters, including application of State Government to consider the offer made by Grasim Industries Ltd. (report No. 114 of 2001), report No. 114 of 2001, was filed in compliance of direction of the Court to find out the views of State Government on possibility of sale of assets by advertising for exploring higher offer made to the official liquidator and report No. 115 of 2001, for giving direction to the District Magistrate, Principal of College, schools, hospitals, employees, workers and officials to deposit the rent of the building occupied by them giving authority to District Magistrate to realize the rent. 21. In pursuance of the orders passed by this Court on 20-9-2001, the official liquidator submitted his report No. 129 of 2001 in which the report to the Court that in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to revaluation of the land, building, plant and machinery of the company (in liquidation). 22. The State Bank of India filed application giving terms of compromise on which the State Bank of India has agreed to accept compromise proposal. The application was not supported by affidavit of any officer of the bank and it was submitted that the matter is under consideration with the Board of Director of State Bank of India. Adjournments were sought to file an affidavit supported by approval of the Board of Directors of the Bank. The Court directed that the copy of application filed by State Government shall be circulated to the official liquidator and other financial institutions and Allahabad Bank inviting their comments. The learned chief standing counsel was directed to produce the entire record pertaining to invitation of offer and acceptance of offer by the committee constituted by the State Government for perusal of the Court. On 4-12-2001 an affidavit of Sri Hemant Bansal, Chief Manager of State Bank of India, Ghosia, District Sant Ravidas Nagar was filed confirming the contents of application filed on 29-11-2001 and stating that the condition of settlement of the matter w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o entrepreneur. It was recommended that such incentive is against the agreement with the Central Government and will amount to giving unlimited rights to a private entrepreneur which will exhaust the raw material in the limited period. It found that at present all units are exempted from trade tax on purchase of raw material, and thus the benefit of exemption on finished product is not justified as it will also come in the way of application of VAT system. Industrial Development Commissioner opposed the exemption of arrears of trade tax and full exemption of 10 years on the ground firstly that in the Chief Ministers meeting it was decided that no such benefit will be given to any industry and if such benefit is extended the Central Government may stop giving assistance to such State Government. Secondly, there is no justification to give 10 years exemption from trade tax and from registration fees as there may not be difficulty in selling unit without giving such exemption. Thirdly he stated that exemption may discourage efficiency of sale of cement in the State and that the amount of profit to the promoter which shall not be estimated. He said that this profit can be somewhere bet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ceedings which may continue. The liquidator is required to find out the purchasers of the assets of the company (in liq.) and that the State Government may take responsibility of finding out the purchaser only to the extent to put mineral assets of the State to their utilization, and for early payment of the dues of the workers which may take a long time without putting any liability or responsibility on the State Government. 26. U.P. Power Corporation submitted its note informing that there is a liability of 110.70 crores to be paid by the company (in liq.) to U.P. Power Corporation. If the unit is rehabilitated by privatization, it will put development of the capacity of cement production and since the rate schedule for this industry is higher than other category of consumer, it agreed in the interest of future realizations, with the proposal to exempt the electricity dues of 110.70 crores, while putting forward to the difficult, to the effect that the financial condition of the power corporation is unsatisfactory and thus it will not be possible to give such exemption, and offered the only option that the dues to be paid by the U.P. Power Corporation to the State Government ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0 crores which can be used for Government purposes and that its decision shall be taken by the State Government separately. 29. The substance of the proposal was to remove official liquidator and to offer the assets of the company (in liq.) to a promoter by privatization after offering the reliefs and concessions to the extent of 663.70 crores, by guarantee offer of only 195 crores and by excluding 254 acres land building and factory at Churk and 564 acres at Gurma valued at about 30 crores. Further reliefs and concessions offered were ten years exemption from trade tax, supply of electricity for 3 years on fix electricity tariff exemption on electricity duty on captive power generation and peaceful possession of unit to the new promoters. 30. Section 466 of the Companies Act, which is quoted as below : "Section 466. Power of Court to Stay winding up. (1) The Court may at any time after making a winding up order, on the application either of the Official Liquidator or of any creditor or contributory, and on proof to the satisfaction of the Court that all proceedings in relation to the winding up ought to be stayed, make an order staying the proceedings either altogether ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inal Application No. 149 of 1999 which has been transferred to the Debt Recovery Tribunal at Allahabad and has been registered as Transfer Application No. 1464 of 2000 between Allahabad Bank v. U.P. State Cement Corporation. An injunction application filed by the Allahabad Bank on 26-2-2000 is still pending. It has objected to the application filed by the State Government and has prayed that the application may be dismissed with cost. The State Bank of India has filed application (A-44) dated 12-7-2001 with the same prayer to dismiss application filed by the State Government of sale of assets of the company (in liq.) to Grasim Industries Ltd. on the ground that the applicant being a secured creditor has first charged over all the assets of the company (in liq.) and that the sale proceeds receive therefrom are liable to be adjusted towards the dues of the State Bank of India. It is submitted in the application that the State Bank of India along with the Industrial Development Bank of India, Industrial Finance Corporation of India, Industrial Credit and Investment Corporation of India Ltd., Life Insurance Corporation of India Ltd. and Allahabad Bank granted a term of Rs. 4700 l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the registrar of the company. The title deeds of the company were deposited with the Industrial Development Bank of India which was the lead Bank by way of equitable mortgage. A declaration and undertaking dated 8-5-1994 has also been given by the company regarding joint mortgage. The Government of U.P. guaranteed the above loan by its letter dated 22-10-1980 and 23-12-1991 and also executed guaranteed agreement dated 23-12-1991. To secure credit facilities towards the working capital a second charge over all the immovable properties mortgaged in favour of the State Bank of India and other members of consortium under term loan was also created. After the company (in liq.) was unable to pay its dues and BIFR recommended for winding up of the company and the company was recommended for winding up the State Bank of India filed an application for Rs. 62,68,50,394.53 with pendente lite and future interest at the rate of 17.75 per cent p.a. with quarterly rests before the Debt Recovery Tribunal at Jabalpur which was registered as O.A. No. 249 of 1999 and was transferred and is pending before the Debt Recovery Tribunal at Allahabad. It is alleged that the total dues of State Bank of In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aves only six statutes from the purview of section 34(1). The Companies Act, 1956 is not one of them. It is submitted that the judgment in Allahabad Bank s case ( supra ) is not applicable in the proceedings arising out of Sick Industrial Companies (Special Provisions) Act, 1985. And that since the present proceedings of winding up are under section 20(2) of the Act of 1985 read with Companies Act, 1956, the ratio of the judgment is not applicable. In the alternative it is submitted that the Act of 1993 gives jurisdiction to decide for recovery of their debts and that the Tribunal cannot pass any winding up order or take proceedings to liquidate the company, and thus winding up proceedings and any exclusion can only be proceeded with in accordance with the Companies Act, 1958. The Recovery Officer under 1993 Act may apply to the Court in whose custody (including Company Court) the money belonging to defendants for payment in accordance with Act of 1993 is available and thus proceedings for sale of assets, under the Companies Act are not barred by the aforesaid Special Acts. Both Sri V.K.S. Chaudhary appearing for the Allahabad Bank and Sri Ashok Mehta, Chief Standing Counsel ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th for adjudication is a procedure clearly inconsistent with realization of these debts in any other manner. No other court of authority muchless Civil Court or the Company Court can go into these question namely adjudication of the liability of the defendant and the execution of the decree. The Supreme Court held in para 50 that at the stage of adjudication under section 17, and execution of the certificate under section 25, the provisions of the RDB Act, 1993 confer exclusive jurisdiction on the Tribunal and the Recovery Officer in respect of debts payable to bank and financial institutions and there can be no interference by the Company Court under section 442 read with section 537 or under section 446 of the Companies Act, 1956. In respect of the monies realized under the RDB Act, the question of priorities among the banks and financial institutions and other creditors can be decided only by the Tribunal under Act of 1993, in accordance with section 19(19) read with section 529A of the Companies Act and in no other manner. The provisions of the RDB Act, 1993 are to the said extent inconsistent with the provisions of the Companies Act, 1956, and the latter Act has to yield to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nts to remain outside the winding up. The Canara Bank had not obtained any decree and thus it could not claim any defence at that stage. 37. In a winding up petition an official liquidator was appointed and had taken custody of the assets of the company after preparing an inventory in the presence of secured creditors on an application filed by some other Bank claiming to be secured creditor before the Debt Recovery Tribunal, an Advocate Commissioner was appointed who required the official liquidator to appear before him and upon his failure moved before the Tribunal on which an order was passed by the Tribunal directing the Advocate Commissioner to take inventory of the company assets and in case of non-cooperation by the official liquidator to take assistance of the police to break open the locks. The official liquidator filed an application on which the company referred the matter to a Division Bench. It was held in this case by Andhra Pradesh High Court in Pannar Paterson Limited v. State Bank of Hyderabad [2001] 106 Comp. Cas. 338 that by reason of section 456, a legal fiction is created by the deeming provision contained in section 456, and the assets of the company ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t Recovery Tribunal, Allahabad. Their claims have not been adjudicated so far. Both these banks have not exercised their option to remain out side the winding up proceedings. The Debt Recovery Tribunal have exclusive jurisdiction under Act of 1993 for adjudication and thereafter recovery of such adjudicated amount and that the leave of the Court is not required to continue either for adjudication or recovery. The official liquidator is, however, not required to wait. He can proceed with the sale of the assets of the company under section 457(1)( c ), with approval of Court. There is no statutory bar or restriction applicable to the official liquidator under the provisions of the Recovery of Debts due to the Bank and Financial Institutions Act, 1993 with regard to exercise of powers by liquidator over the property of the company which are under the custody of the company Court under section 456. It is submitted on behalf of the Allahabad Bank, that the Companies Act, 1956 has not been mentioned in sub-section (2) of section 34 and thus the Act of 1993 shall have overriding effect over the provisions of the Companies Act, 1956. This submission has been accepted in Allahabad Bank ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tate Government raised objection to the application by the workmen to explore the possibilities of revival and rehabilitation. In the Counter Affidavit of Sri K.L. Meena, Special Secretary, Industrial Development Department, Government of U.P. filed in the year 1998, it was denied that there is any possibility of rehabilitation. The Government denied that there were any surplus assets free from encumbrances and specifically stated that the State Government is not in a position to further invest huge amount to make any scheme viable. Sri K.L. Meena, Special Secretary, Industrial Development Department, Government of U.P. categorically stated in para 76 of the affidavit filed in 1998 that the State Government had communicated to the Board about decision of not being in a position to invest huge amount of thousands crores of rupees, proposed by the Operating Agency and that the decision of the State Government has never been reversed. 40. The State Government was also aware that the company has been wound up and that all its assets are deemed to be in possession of the Court. All the departments of the State Government opposed the sale and for providing exemptions or creating any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ximum price, keeping in view the interest of all the creditors. 42. Sri R.P. Goel, Advocate General, pressed the application filed by the State of U.P. for considering the sale of the assets to Grasim Industries Ltd. It is submitted by him that the State Government keeping the interest of workmen and optimum utilization of its natural wealth, initiated the process of sale of assets as going concern by privatization, after obtaining approval from the cabinet, and advertisements were issued in the daily newspaper, a result of which only one valid proposal was received from Grasim Industries Ltd. It was considered by High Powered Committee. Part 1 of the bid of Rs. 195 crores covers the secured creditors and workmen, Rs. 11 crores was offered as Part II of the bid, and upon negotiation has also agreed to pay Rs. 35 crores towards VRS of the employees of the company (in liq.). The Advocate General agrees that the exercise should have been made by the official liquidator, who has been appointed as the liquidator of the company, after seeking approval from the High Court, but the State Government in right earnest, in public interest made advertisement and have received an offer which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... concessions and right offs is being accepted by the State Government causing stupendous losses to the State exchequer and that the process employed by the Government to sell the assets of the company (in liq.) is vitiated by arbitrariness, unfairness, illegality and wednesbury, unreasonableness. The floor price was to be used only for setting dues of the workmen and creditors, whereas the monetary value of the proposed sale by the Government for assets as well as concessions shows complete lack of commercial viability. According to the objector, the installed capacity of cement plants is Rs. 2.57 million tones, and that the cost of setting up new plant of the said installed capacity, is around Rs. 1300 crores, i.e., at the rate of Rs. Five thousand per metric tone, what is needed in the present old plant is only some repairs and modernization costing rupees two hundred crores. On making deductions on account of such repairs and modernization of the worth of the present plant is about Rs. 11000 crores. The entire share capital of the company (in Liq.) is about 70 crores. Apart from the plants, lime stone lease at Ninga and Kajrahat having over 100 millions tones limestone deposit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r generation. It is submitted that an advertisement should have been published in India and abroad for inviting objections, after consulting and involvement of the official liquidator attached to this Court. 45. The applicant-objector has brought about the objections which are relevant for consideration, but have not shown or indicated their interest in purchasing the assets. The reasons given by them that the sale was not made by the official liquidator after seeking approval from the High Court cannot be said to be sufficient reason for not making an offer. 46. The workmen appearing through Sri Saumitra Singh have filed application to the effect that the offer of Grasim Industries Ltd. be considered favourably to avoid any delay in the matter of sale of the assets. The application filed on behalf of the CITU and 15 others supported by affidavit of Harendra Kumar Pandey have brought on record the number of unions, number of workers/employees per unit the period for which they have not been paid, wages structure, pay in the revised pay-scale, actual number of workmen from the date till which they employed with the corporation and the loan agreement with IDBI and State Bank ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ings or to carry on business of the companies far as may necessary for the initiation of winding up of the company. He has been given all power under section 457(2) given in the name of and on behalf of the company and has powered under section 453 to exercise all his power on the subject to the control of the Court. Once the Court has accepted the opinion of the BIFR that the company is insolvent and is unable to make its net worth positive while meeting all liabilities it is in the interest of all the creditors, workman and shareholders that the assets of the company be sold as early as possible. It is also in public interest to sell the assets so as to save the increasing financial burden on the non-productive assets and further to save and utilize the natural resources. In the present case the company has been wound up and the order of the winding up of the company has been wound up and the order of the winding up of the company has been upheld upto the Supreme Court. The State Government and all concerned have admitted that there is no possibility of its commercial revival, without reliefs and concessions by the State Government. The BIFR made all attempts to persuade the Stat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r by way of assisting the Court in finding out a purchaser for sale of unit. The Court further finds that the aforesaid cabinet decision was arrived on considerations, which cannot be fully justified. These can be summarized as below : ( a )It was based on a consideration that the Official Liquidator will take more than twenty years to sell the assets. This advice was not based on any material or collection of data, and, in fact, the Official Liquidator U.P. has a record of selling assets of the Company (in liq.) at a much faster schedule of time. ( b )All the department of State Government, namely, Finance Trade Tax, U.P. Power Corporation etc. advised the state Government not to sell the properties as going concern by offering any reliefs and concessions. ( c )It was objected to by the Trade Tax Department and Finance Department that conference of the Chief Ministers had agreed not to offer any tax concession to any entrepreneurs being causing financial burden and in case of any breach, the Central Government may stop giving financial aid to the State Government. ( d )The Law Department clearly advised that such an action can only be taken under section 466 of the Compani ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e proceeds shall be paid to the State Bank of India over and above the aforesaid amount towards the liquidation of its dues as secured creditors and that sale must take place within six months and that the proceedings before the Debt Recovery Tribunal shall not be affected until the receipt of the sale proceed as above and the guarantees of the State of Uttar Pradesh shall also not stand discharged till the liquidation of bank dues to the extent of Rs. 14.65 crores, or such higher amount as mentioned above, is fully paid. The Bank further reserved its right to recover its dues before the Debt Recovery Tribunal and keeping all its securities fully effective. The last condition, i.e., condition No. 8 is most important in which the State Bank of India stated as follows : "8. That the above conditions are subject to the final approval of the Board of the applicant Bank, i.e., State Bank of India." 52. The Court required the application to be supported by affidavit of a responsible Officer of the Bank and granted time for approval of the aforesaid proposal by the Board of the Bank Sri Kush Saxena. Advocate, filed an affidavit of Harendra Bansal, Chief Manager of the State Bank ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the bank over such securities shall continue in favour of the Bank. (9) Under the circumstances we are unable to make any further comment except to say that the State Government should make a specific compromise proposals with definite terms that can be put before the Board of the Allahabad the competent authority for consideration and approval." 53. Sri Vikram Nath, Advocate appearing for IDBI filed a copy of the letter dated 28-11-2001 sent by Deputy General Manager (Legal) IDBI, in response to the order of the Court seeking comments from other bank and financial institutions to the application of the State Government in which it was stated that in joint meeting held on 2-8-2001, the Financial Institutions have agreed to accept Rs. 241 crores offered by Grasim Industries Ltd. To be distributed as follows : ( i )VRS of the workmenRs.35 crores ( ii )Workers duesRs.135 crores ( iii )Financial Institutions/Bank (principal amount)Rs.60 crores ( iv )Towards the dues of the Financial Institutions/ Banks proportionate basis)Rs.11 crores Further it is stated in this letter that the working capital limit sanctioned by the S.B.I. are secured by first charge on the assets ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assets and the natural wealth is likely to attract foreign participation in sale. (5) The concession granted by the State Government for exemption from Trade Tax for ten years, waiver of royalties for ten years sanction of power load and electricity duty exemptions for exceeded the offer of Rs. 241 crores made by Grasim Industries Ltd. (6) The anxiety of the State Government who did not make any response to give financial assistance before BIFR and AAIFR and was more than eager of winding up the company, casts a shadow of doubt on its intention, for accepting its single offer without exploring any possibility of higher offer. It is the duty of the Court which is trustee of the property to look for the highest amount to be received out of the sale of the assets, both in public interest as well as in the interest of the creditors, workmen and the shareholders. The Court is thus not satisfied by the process adopted for the sale of the assets by the State Government. (7) Inspite of repeated queries, the State Government was not able to explain as to why Grasim Industries Ltd. has not made offer directly to the official liquidator and was trying to remain in the shadow of the Stat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... esources, competence and experience to run the unit. (4) That the offer of M/s. Grasim Industries has been received after open public tender and they are one of the largest cement producers in the country. (5) That the request made by the State Government to the Hon ble Court was by way of helping and assisting the Liquidator in the disposal of the Company s property under section 457(1)( c ) to save time instead of initiating the process afresh at his level. (6) That the State Government has no objection to this Hon ble Court exploring the possibility of a higher bid and the State Government would in that even extended the same reliefs and concessions as those offered to M/s. Grasim Industries. However, it is submitted that the following concerns of the State Government may kindly be also kept in view while taking a decision in this regard: ( i )The process of restarting the Unit may not get unduly delayed. ( ii )There is no guarantee for a higher bid and meanwhile we may loose the offer already received. ( iii )Besides, the bid amount, the resources competence, experience and the commitment of the bidder to run the unit also has to be kept in view. (7) That, howev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... epresentative. The bids shall be made in sealed envelop to be received in the office of the official liquidator, to be opened by the committee on the previously specified and notified dates and time in the presence of the bidders or their representative, and shall be open for negotiation between the valid highest offerers for considering their offers subject to their resources, competence, experience, commitment and financial capacity. 4. The reserve price of the entire assets shall be Rs. 271 crores, worked out on the basis of the price offered by Grasim Industries Ltd. of Rs. 241 crores and the price of assets at Churk which were not included in the offer invited by State Government and valued by State Government in its proposals to cabinet at Rs. 30 crores. The offerer shall be required to deposit earnest money of Rs. 10 crores by Bank Drafts in favour of official liquidator, U.P. at Allahabad. This amount shall be forfeited if the party whose offer/bid is finally accepted, makes default in payment on the terms and conditions of sale, or such negotiated conditions of sale or completing the offered formalities within the due date. If, however, the sale is completed and the co ..... X X X X Extracts X X X X X X X X Extracts X X X X
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