9911796707
TMI Blog2003 (7) TMI 496X X X X Extracts X X X X X X X X Extracts X X X X ..... for the purpose of considering the Scheme for Compromise with its creditors. The registered office of applicant-company is in Delhi, within the territorial jurisdiction of this Court. 2. The application, CA 797/2000 was initially filed pursuant to an order of this Court dated 31-12-1999. In these groups of winding up petitions, the first petition was filed on 1-7-1996 and thereafter upon a total deposit of Rs. 9 crores on 31-12-1999, the RAL was permitted to file a scheme for compromise, CA 797/2000. But pursuant to the Order dated 6-3-2003 the said scheme was updated by the directions of this Court, leading to the present CA 606/2003. 3. This is an updated Scheme of Arrangement, filed by the applicant pursuant to the order of this Court dated 6-3-2003 in CA 797 of 2000, which reads as under : "CA 797/00 will be taken up as the main case. There are two rival claimants to the management of the company. The company, i.e., Modiluft Ltd. (now known as Royal Airways Ltd. ) is represented by S/Sh. S.S. Mahmmod Sumanta De and S.K. Modi Group is represented Shri Rajiv Sawhney, learned Senior Counsel along with instructing counsel, Mr. Niraj Sharma. Mr. De, the learned c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt in Techno Metal India (P) Ltd. v. Prem Nath Anand [1973] 43 Comp. Cas. 556 (Cal.) as well as the judgment of the Division Bench of this Court in Diwan Chand Kapoor v. New Rialto Cinema (P.) Ltd. [1987] 62 Comp. Cas. 810 . 5. In support of this application, the applicant has urged as under : ( a )That more than Rs. 11 crores is available for utilization towards the disposal of the scheme as per the Order of the Division Bench of this Court dated 13-12-2001. The said order reads as follows : "Having heard the learned counsel for the parties, we are of the opinion that the impugned order need not be interfered with. However, we may observe that the question of disbursement of the money by the Company Judge may be considered at the time of the final hearing, in accordance with the outcome of the Scheme. This appeal is accordingly dismissed." ( b )That the debts of individual creditors except customs have been settled and about Rs. 51 crores have been settled towards statutory dues. The Customs dues are under litigation and have been questioned by filing of a writ petition No. 6611/2001 which is still pending. The payment of such statutory dues was a precursor for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eeting of RAL, held on 16-4-2003 : 1. Mr. Vijay Kumar 2. Mr. Ramesh Kansagara 3. Mr. Bhulo Kansagara 4. Mr. Kishore Gupta 5. Mr. Atul Sharma 6. Mr. Sidhantha Sharma 6. Mr. Sawhney, the learned Senior Counsel, appearing on behalf of the S.K. Modi Group submits that the scheme was already pending and the updated scheme seeks to oust certain set of creditors on the ground that a fraud has been perpetrated by the S.K. Modi Group and the call money on the shares has not been paid by the said Group. The scheme seeks to emphasize and concretize such claims of the applicant. The wrongful approval of the creditors is also accordingly sought. He has further submitted that right at the threshold the Court should consider the bona fide of the scheme and the basis of the updated scheme seems to be the alleged fraud by the S.K. Modi Group and its consequent liability towards the company. He has further submitted even referring the scheme for approval amounts to accepting the legality and correctness of the scheme by the Court as the Court is supposed to take into account the bona fides and feasibility of the scheme as per the law laid down in N.A.P. Alagiri Raja Co. v. N ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Enameling Stamping Co., Ltd. AIR 1961 Punj. 84 (V 48 C 27); S. Abdul Muthalibu v. K.M. Mohammed Abdul Khader AIR 1962 Mad. 506 (V 49 C 150) and Indian Turpentine Rosin Co. Ltd. v. Pioneer Consolidated Co. of India Ltd. [1988] 64 Comp. Cas. 169 (Delhi), it is not permissible for the company to leave out the creditors on the ground of limitation. 12. Mr. Rakesh Sawhney, who appears on behalf of M/s. Paradise Credit Pvt. Ltd. has submitted that due to the passage of time, the scheme propagated in CA 797/2000 has become impossible due to the breach of the contract by Royal Holdings Services Ltd. (RHSL). He has inter alia referred to the extensive adjudication, pending regarding ownership, management and control of the company being Suit Nos. 237 of 2002 and Suit No. 820 of 2002. Since the original application C.A. No. 797 of 2000 was no longer implementable, the present scheme which avowedly seeks to update the said scheme also cannot be implemented as it is mala fide and illegal. The payment to the public sector companies such as Oil Companies, Customs, MTNL is beyond what would have been payable as originally proposed. The preference given is statutory dues amoun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pounder of the scheme cannot be construed to be a bar to entertaining a scheme in the absence of any interim order. If Mr. Sawhney s plea as to the existence of dispute as to management pending in this Court as bar for propounding a scheme by the existing management is accepted, then all that an objector/opponent has to do is to file a suit and dub the management as disputed, to thwart a scheme. If such a plea is accepted even a suit without merit filed to ostensibly dispute the management s credentials, can have the effect of stalling a revival scheme for several years. Such a plea of Shri Sawhney about the pendency of a suit about the control of the company being a bar against the consideration of this scheme under section 391 cannot, therefore, be accepted inter alia in the absence of an interim order given in the civil suit. I am also not bound to consider the other pleas of the objectors at this stage as the creditors of this company are yet to give their verdict on the feasibility and desirability of the scheme. 17. Regarding the plea of Shri Sawhney that the original scheme has become impossible due to passage of time, the very fact that an updated scheme is being put ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her remaining present in person or through proxy. Consequently, when one and the same scheme is offered to the entire class if equity shareholders for their consideration and when the commercial interest of the appellant sofaras the scheme is concerned is in common with other equity shareholders he would have a common cause with them either to accept or to reject the scheme from commercial point of view. Consequently, there was no occasion for convening a separate class meeting of the minority equity shareholders represented by the appellant and his group as tried to be suggested. It is also to be kept in view that it is not the case of the appellant that any different terms of compromise were offered to persons holding equity shares who were covered by the family arrangement of 1979 or otherwise. In fact the entire proposal of the scheme of arrangement was one affecting equally and in the like manner all the existing equity shareholders of the respondent company. In this connection, it is profitable to refer to what the learned author Palmer in his treatise Company Law, 24th edition, as to say : What constitutes a Class : The Court does not itself consider at this point what ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 may or, in the case of a company which is being wound up, of the liquidator, order a meeting of the creditors or class of creditors, or of the members or class of members, as the case may be, to be called, held and conducted in such manner as the Court directs. (2) If a majority in number representing three-fourths in value of the creditors, or class of creditors, or members, or class of members, as the case may be present and voting either in person or, where proxies are allowed under the rules made under section 643, by proxy, at the meeting, agree to any compromise or arrangement, the compromise or arrangement shall, if sanctioned by the Court, be binding on all creditors, all the creditors of the class, all the members, or all the members of the class as the case may be, and also on the company, or in the case of a company which is bei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a s dues. When a meeting under section 391(1) takes place, Mallanpur will have adequate opportunity of putting forward its point of view. Thus the position of law laid down by Palmer would also apply to Mr. Dhawan s plea. In my view, Dr. Singhvi is further justified in submitting that the principles which come into operation when section 391(2) is to be applied are different from those which come into play when a scheme is sent for consideration under section 391(1). He is also justified in referring to the Company Court Rules 67 79 which clearly stipulate different parameters applicable under sections 391 and 391(2). It is noteworthy that the scheme is binding only when it is got sanctioned by the Court and the denial of even a consideration for revival would be extremely unfair and unjust to the proponents of the scheme and the creditors who have already lent their support to the scheme. 22. Therefore, on consideration of all the factors enumerated above, I am of the view that the updated scheme, sought to be submitted by the applicant is bona fide and reasonable and prima facie feasible as well as in public interest as well as the creditor s interest, and should accord ..... 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