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TMI Blog2003 (6) TMI 393X X X X Extracts X X X X X X X X Extracts X X X X ..... incipal excluding returns thereon. 3. Petitioner is National Investors Forum who has sought the winding up of the company on account of its inability to pay admitted debts. Members of the petitioner forum are the investors. When the petition was filed, the petitioner was not a registered society. However, on an objection being raised by the company, the petitioners have got themselves registered as a society under the provisions of Societies Registration Act. It has been alleged that the respondent has collected more than 3,000 crores of rupees from investors, creditors and consumers by making false promises in the name of social justice, economic freedom for all. It has been alleged that the company got deposited the savings of millions of people which they have saved out of income of blood and sweat. The company have assured to repay the money of investors but in spite of such assurances, it has not made the payments. It is alleged that a legal notice was issued to return the money within 3 weeks and this notice was published in the Hindi Daily Bhaskar on 14-3-2001 as service by registered post was not possible. It may be stated that the Directors of the company were arrested ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y is in a position to off-set its liabilities and is otherwise sound. On 2-5-2002, the petition for winding up was admitted and factum of admission was ordered to be published in the newspapers and official gazette of U.T. Chandigarh. 6. The respondent company filed C.P. No. 237 of 2001 under section 391(1) of the Act seeking permission to enter into an agreement and making arrangement with the class of investors. On 20th December, 2001, com- pany was directed to give wide publicity to the proposed arrangement to enable any interested person to file objections. However, the counsel for the company stated on August 1, 2002 that the company is unable to comply with the directions issued to give wide publicity and therefore, the company petition No. 237 of 2001 filed by the company seeking permission to enter into agreement was dismissed as withdrawn. 7. In response to the publication of Admission Notice, three sets of objections have been filed one by the Golden Group Investors Welfare Association, Delhi through its General Secretary, Shri Chet Ram Sharma vide C.A. No. 929 of 2002, second by the Golden Forest India Limited from Orissa vide C.A. No. 935 of 2002 and third b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ity. The object of publication of admission in the newspapers is to invite objections from the persons interested, for and against the order of the winding up of the company. If there is no discretion with the court at that stage but to pass the order of winding up, the very purpose of publication of the admission is rendered nugatory. The company court is required to examine whether the winding up of the company is in the interest of shareholders, secured and unsecured creditors, workers as well as in public interest. It is natural consequence of admission of petition. Thus, I am unable to accept the argument raised by Shri Chhibar that the company court has no discretion after the admission of the petition but to pass the order of winding up. The judgments relied upon by the petitioner, no doubt, have taken a view that the Court has no discretion to refuse to make a winding up order ex debito justitiae if the company neglects to pay the sum demanded. However, the said judgments are distinguishable and not applicable to the facts of the present case. Here the company has stated on an affidavit that it has assets more than the due amount. The management of the company is not able ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssets worth Rs. 1500 crores as against liability of only Rs. 761 crores and this company is very much in a position to pay its dues. It is stated that the company was set up in 1987 and till 1988, there has been no default in repayment of any maturity amounts and refunds of investors. The company disclosed that in 1998 SEBI filed writ petition No. 344 of 1998 before Mumbai High Court seeking, inter alia , that the company may be prevented from conducting its business. Such writ petition was opposed on the ground that the petition was not maintainable as an instrumentality of a state without any statutory power, was not entitled to seek any relief against the private party. The respondent company was called upon to satisfy the Mumbai High Court in the interest of investors with regard to its workability. The company got their assets valued which were assessed at Rs. 1071.55 crores in addition to Rs. 33,880 crores on account of movable assets and bank balance as on 31-12-1997 against the total liability of Rs. 761 crores as on 31-12-1997. It is further stated in the written statement that the company invited offers for the sale of its certain properties but none of the buyers had sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icial liquidator, it is necessary to entrust the responsibility of the provisional Liquidator to such a person who commands respect and is able to discharge the onerous responsibility in a fair manner. Such provisional liquidator may have to look after the affairs of the company including its property and take steps for sale thereof. All such affairs should be supervised by a person who can discharge the duties of the provisional liquidator fairly and inspire confidence amongst the creditors as well as with the shareholders of the company. 14. Apart from vesting of the property with the provisional liquidator so as to facilitate the sale thereof to liquidate the claim of the investors, the affairs of the company are also required to be investigated by an independent agency. The company has avoided investigation by an agency appointed by Mumbai High Court on one pretext or the other. A committee appointed by Mumbai High Court consisting of representative of Reserve Bank of India and that of SEBI has found that the substantial amounts of money have been mobilised by alluring investors of promise of unrealistic returns through agents who have been paid hefty commission and other i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t only action in case of non-payment and finally the assets created in the form of land does not indicate realisable value enough to meet the liability which the company has already undertaken. The analysis further reveals that the schemes have survived so far only on account of the induction of new subscribers, amounts received from whom have gone for the payment of the previous subscribers. The entire scheme which has, very insignificant component of plantation activity is likely to run into serious problems if this chain of inducting new members comes to halt. Also, it needs to be borne in mind that the amount of farm income generated by the company since its inception has been negligible (Rs. 58 lakhs) as compared to the total amount paid to the investors (Rs. 412 crores). In any case, such schemes by its very nature-new investors in the chain servicing old investors - are bound to break and cannot be sustained for indefinite period. Similarly for the accounts, the entries analysed do not reveal the correct state of affairs. Misleading nomenclatures which would generally pre-empt probe hide more than they reveal. Substantial expenses have been incurred on items other than tho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to its Directors, associates, subsidiary companies, etc. Such investigations are required to be conducted by an auditor who shall exercise such powers and duties inclusive of those contained in section 227 of the Companies Act. 16. Thus, I am of the opinion that keeping in view the serious allegations against the management of the company and deficiencies prima facie found by the committee consisting of representatives of the Reserve Bank of India and SEBI, the affairs of the company are required to be investigated thoroughly. However, the sale of the property by the provisional liquidator is not dependent upon completion of the investigations. Investigation will proceed independent of the sale of the properties. 17. In view of the above, I am of the opinion that instead of winding up of the company, the interest of creditors, shareholders and the company, would be served if the following directions are issued : 1.The provisional liquidator shall be appointed. Such liquidator will take into his custody or under his control, all property, effects or actionable claims to which the claim is or appears to be entitled. All the property and effects of the company shall be de ..... 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