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TMI Blog2003 (4) TMI 431X X X X Extracts X X X X X X X X Extracts X X X X ..... n 20 of the Urban Land (Ceiling and Regulation) Act, (hereinafter referred to as the 'ULC Act'), directed the Special Officer, appointed by the Court to transfer and hand over the vacant possession of 300 cottahs of land declared surplus under the ULC Act to the 6th respondent on receipt of Rs. 3.90 crores and laid down the modalities of utilization of the said amount for the revival of the 2nd Respondent-Company. 2. The case has a long history. Certain essential facts need narration to come to the grips of the issue involved. In the year 1976, the 2nd Respondent by name Sur Enamel & Stamping Works (Private) Ltd. (hereafter referred to as 'Company'), filed a declaration under the ULC Act. In the year 1991, the Company totally suspended its operations on account of financial and marketing problems. It may be stated that the assets of the Company viz., the factory building, plant and machinery, contiguous land etc. were mortgaged to United Bank of India through equitable mortgage and the Bank filed a suit in the year 1992 for recovery of money by enforcing the mortgage. The Company filed an application under section 20 ULC Act on 18-6-1991 seeking exemption of excess vacant land hel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ties were obtained. The Company prayed for confirmation of proposed sale of approximately 20,000 square metres to C.M.S. Ltd. The Division Bench of the High Court noted that according to the proposal of C.M.S. Ltd., the dues to the Bank and other creditors will be cleared and arrears of salaries to workmen will be paid and the balance of about one crore could be utilized by the Company for revival of industry. The said proposals of the Company and C.M.S. Ltd. were accepted by the Division Bench by an order dated 16-1-1996. The learned Judges observed : "Considering the facts and circumstances of the case we accept and confirm the offer of Chatterjee Management Services (P.) Ltd. in view of the fact that the State is facing acute unemployment problem and here is an industrialist who has come forward with an offer, which appears to be a very much lucrative and which will serve the interest of the workmen as also to liquidate the creditor's dues, namely, Bank's dues, and when all the interested parties supported this without any qualification, this is also in public interest to accept the said offer." On 4-2-1997, the Division Bench passed a further order in the Company Appeal. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent wants to implement in the light of the policy decision already taken by the State Government and the decision of the Supreme Court mentioned above." The State Government, on consideration of the representation, passed a speaking order rejecting the application under section 20 on 30-7-1997. The Government referred to the decision of the Supreme Court and proceeded to consider the question from the angle of undue hardship and public interest. In doing so, the State Government placed strong reliance on certain guidelines issued by the State Government in regard to the surplus land held by sick industrial units. The Government was also of the view that, on account of vesting order, the grant of exemption would not be in accordance with law. This order passed under the ULC Act had created a stalemate in regard to implementation of the proposals submitted by CMS Ltd. which received the approval of Division Bench. The Division Bench heard arguments on the legality of the order passed by the State Government refusing the exemption and rendered the impugned judgment in the two matters before it. That is how the SLPs came to be filed by the State, leading to these appeals. This Court, p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n herein cannot stand and accordingly, this Court has no other option but to hold that the property stood exempted as it fulfils all the conditions laid down in section 20 and it also fulfils the decision of the Supreme Court in the case of T.R. Thandur (supra) and it also ensures the social and economic justice..." The High Court ultimately held that the twin considerations of undue hardship and public interest are satisfied in the instant case. 7. Coming to the operative part of the order, the High Court reiterated the confirmation of sale by its order dated 16-1-1996 in favour of CMS Ltd. for a consideration of Rs. 3.90 crores. The Company was permitted to sell 300 cottahs of land delineated in the annexed Plan for the sale price of Rs. 3.90 crores. Out of the said amount, the Company (appellant before the High Court) was directed to pay Rs. 1.80 crores to the United Bank of India as per the settlement terms, 60 lakhs to the workmen and the actual amount payable to Eastern Coal Agency. The Company was also required to pay the statutory dues and taxes. The balance amount was directed to be utilized for rehabilitation of the Company. The time schedule for payment of the amount b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rehabilitation package. The learned senior counsel further contended that the view of the High Court that Company Court's permission was required to proceed under ULC Act is opposed to section 42 of the Act. The learned counsel then commented that the High Court went wrong in holding that the ratio of the decision in T.R. Thandur's case (supra) was not kept in view. It is also contended that the High Court proceeded on a wrong assumption that the possession of the excess land was not taken over. Above all, it is submitted that the High Court exceeded its jurisdiction in declaring that the land in question stood exempted from the purview of ULC Act on its own conception of public interest and undue hardship and such approach cannot be legally sustained. Moreover, it is argued that the acceptance of offer of CMS Ltd. and the 'confirmation of sale' in favour of that party is without jurisdiction and against the accepted norms governing the sale of properties. The directions given to various authorities were in the teeth of statutory provisions. 9. The learned counsel for the 2nd Respondent-Company contended that the exemption was arbitrarily refused, the observations made by the Gove ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f that State passed another resolution approving and adopting the repealing Act. This legal position is explicitly made clear in the repealing Act itself. In sub-sections (2) and (3) of section 1, it is enjoined that the repealing Act shall apply to such other State which adopts the same by resolution passed in that behalf under clause (2) of article 252. Undisputedly, no such resolution has been passed by the State of West Bengal so far. Hence the repeal Act has no application in relation to that State. In that view, there is no need to consider the effect of saving provision in the repeal Act, which prima facie, appears to be another hurdle for the respondent. 11. Another point urged by the learned counsel for the Respondent-Company is that the land and other property of the Company had been mortgaged to the Bank and, therefore, it is not free from encumbrances, in which case section 10(3) of the Act has no application. Section 10(3) of the ULC Act provides for vesting of the excess vacant land (referred to in the notification published under sub-section 1) in the State Government free from all encumbrances with effect from the specified date. The learned counsel submits that if ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ision of the Companies Act under which the order in question was passed nor did the 2nd respondent mention any provision under which the application was filed. The only provision which could possibly be invoked to pass an order of this nature is section 394 read with sections 391(1) and 392 of the Companies Act. But, there is a definite procedure prescribed for sanctioning a scheme or arrangement sought to be entered into with the creditors and for facilitating the revival of the Company. Various steps required to be taken by the Court are enumerated in sections 391 to 393. Section 394A obligates the Court to give notice of every application under section 391 or 394 to the Central Government and the Court shall take into consideration the representation, if any, made by the Government before passing the order. Admittedly, this was not done. None of the creditors except the secured creditor, namely, the United Bank of India and Eastern Coal Agency, which filed the winding up petition, were involved in the so called arrangement or scheme. It does not appear that the latest financial position or the report on the accounts of the Company was placed before the Court as required by the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o earlier under which the bank had to receive Rs. 1.80 crore in full settlement of their claim. The learned counsel appearing for the Bank has contended with justification that it would be imprudent on the part of the Bank to now accept the sum which was offered about 7 years back. The accumulated interest since then would be almost double the amount offered to the Bank in the year 1996. The learned counsel further made it clear that the bank would like to remain outside the winding up proceedings and pursue the suit filed as long as back in 1992. In view of these two developments, we are of the view that the substratum and underlying basis of the order under appeal has disappeared and it is no longer possible to give effect to the directions given by the Division Bench in the Company Appeal. For all these reasons, the order passed in the company appeal is liable to be set aside. 15. The Company Petition No. 90 of 1992 will be restored to the file of High Court and the learned Company Judge will be free to deal with the Petition and the applications, if any, filed therein in accordance with law. 16. As already observed, the order of the High Court in regard to grant of exemption ..... X X X X Extracts X X X X X X X X Extracts X X X X
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