9911796707
TMI Blog2005 (1) TMI 407X X X X Extracts X X X X X X X X Extracts X X X X ..... ipherals, modules, instruments, hardware, software and systems. After successful beginning, on account of various reasons beyond the control of the management, the company suffered heavy financial losses. The main reason for such financial losses was the failure of the Eastern block market and setback suffered by the hardware industries in the country. As a result thereof, the Company closed down its business activities on 31-3-1994 and by an order dated 17-4-1997 passed by this Court in Company Petition No. 97/1995, the Company was ordered to be wound up. Since then the Official Liquidator attached to this Court has taken over the charge of the assets of the Company. 3. Some times in the year 2001, the petitioners felt that if the winding up operations of the Company were continued, the Creditors were not likely to receive anything and as against that, there was a possibility of revival of the Company for the benefit of such Creditors and shareholders of the Company and in this view of the matter, the scheme of compromise and/or arrangement was being proposed by the sponsors with the objective of revival of the company and for repayment of a part of the dues of the Creditors o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng of the Statutory Creditors of the Company was attended by none in person or through Proxies. 8. The meeting of the Creditors for Goods and Expenses of the Company was attended by Secured Creditors in person and through Proxies and the total value of their debts was Rs. 71,21,946. All the eight Creditors have voted in favour of the Resolution and thus the Resolution approving the scheme of compromise was carried unanimously. 9. The Scheme proposed by the sponsors was divided into several parts. I. Part I deals with Loan Creditors As per the modified scheme, it was proposed that the total liability of the Company payable to the Loan Creditors shall be settled in full and final in the following manner:- ( i )The amount payable as on 31-3-1997 to each of the Loan Creditors shall be settled under the Scheme. Interest, including penalty interest, penalty or any other amount allegedly debited in the loan account or payable in respect of any period after 1-4-1997 shall be ignored and treated to have been settled with the settlement of the amount payable as on 31-3-1997. The amount payable as on 31-3-1997 shall be determined in the manner and order prescribed below:- ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the total liability of the Company payable to the Secured Creditors shall be settled in full and final in the following manner; ( i ) The amount payable as on 31-3-1997 to each of the Secured Creditor shall be settled under the Scheme. Interest, including penalty interest, penalty or any other amount allegedly debited in the loan account or payable in respect of any period after 1-4-1997 shall be ignored and treated to have been settled with the settlement of the amount payable as on 31-3-1997. The amount payable as on 31-3-1997 shall be determined in the manner and order prescribed below:- ( a )In case the Secured Creditor has filed any suit before March 31, 1997 for the recovery, value of the suit; or ( b ) Amount agreed between the Loan Creditor and the Company on a contractual basis subject to any compromise or settlement entered into upto 31-3-1997 + (plus) interest at document rate on the outstanding amount, if any; or ( c )If the amount cannot be determined either under clause ( a ) or clause ( b ), the same shall be determined on the basis of the amount recorded in the Books of Account of the concerned Loan Creditor. ( ii )the amount so calculated shall be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Secured Creditors of the Company as also the guarantors, if any, shall stand discharged and no amount whatsoever shall then be payable by the Company and/or any of the guarantors to the Secured Creditors. ( v ) In the event there being a dispute between the parties as regards the correct amount payable by the Company to the Secured Creditors, the same shall be referred to the Auditors of the Company whose decision shall be final. III. Part III deals with Creditors for Goods and Expenses 11. The amount payable to the creditors for goods and expenses shall be settled: ( i )by making a payment of 1 per cent of the outstanding amount on the basis of the books of account of the company as on 31-3-1997. ( ii )In the event there being a dispute between the parties as regards the correct amount payable by the Company to the Creditors, the same shall be referred to the Auditors of the Company whose decision shall be final. IV. Part IV deals with Statutory Creditors 12. In view of the fact that the company has remained closed from 31-3-1994 till the date of filing petition, various litigations as also assessments and other proceedings have remained unattended. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... emises/said property of the company are situate at A/10, GIDC Electronic Complex, Gandhinagar-382 015, situate on the land belonging to Gujarat Industrial Development Corporation ( GIDC ). GIDC be directed to execute in favour of the company a lease deed in respect of the said property. ( vi ) The company shall be permitted to revive the pending application to the Government of Gujarat for subsidy in respect of Investments made and also subsidy for interest paid thereon. The subsidy granted by the Government of Gujarat may be set off against the Sales Tax liability of the company. ( vii )On the company being revived pursuant to the sanction of the scheme, Apurva Parekh shall be considered as the Managing Director with authority/power to constitute a new board of Directors for carrying out the day-to-day affairs of the company. ( viii )On the scheme being sanctioned, the Official Liquidator, High Court of Gujarat shall cease to be the Official Liquidator of the company. The Official Liquidator shall hand over to the sponsors of the scheme or their duly authorised representative all papers, books and records of the company that may be in his possession or custody and also hand ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ter. He has submitted that as per the information gathered, no notice of the meeting or copy of the scheme or the explanatory statement under section 393 of the Companies Act, 1956 has been received by the objector. He has further submitted that the petitioner No. 1, in the aforesaid proceedings has filed an affidavit on 27-4-2001 wherein notices alleged to have been sent to the Creditors by Certificate of posting have been annexed. The address to which the alleged notices claimed to have been sent to the objector was that of 163 Backbay Reclamation, Mumbai-400 020. This Court in Company Application No. 112/2001 has directed the sponsor to send the notices to the last known address of the Creditors. The petitioners were aware that the Regd. office of the objector has been changed in view of the fact that the objector has filed a suit before the Debts Recovery Tribunal against the company in liquidation, and also against the petitioner No. 1. In the said suit, the present address of the objector was mentioned. Though the petitioners are well aware about the change in address of the objector, they have purposedly addressed the alleged notices to the old address of the objector only w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny in liquidation. It is not known as to how Pankaj Vijay Co. and Shri Ranchhodrai Traders are the Secured Creditors of the Company in liquidation. Mr. Singhi has further submitted that the said class has been constituted wrongly only for the purpose to ensure that the sponsor in the meetings got an illegal statutory majority. He has further submitted that the value as taken by the sponsor for the purpose of the meeting of the Secured Creditors was wrongly mentioned only to ensure that the sponsor garners illegal statutory majority. For the purpose of the Scheme of compromise, sponsor has taken 31-3-1997 as the cut-off date for the purpose of verifying the dues and the compromise to be offered thereof. The petitioners have not offered any scheme in respect of the dues after 31-3-1997. He has further submitted that for the purpose of calculating the votes in the meeting, no such cut-off date i.e., 31-3-1997 can be taken into consideration as sought to be done by the petitioners. 18. Mr. Sandeep Singhi has submitted that there was no proper quorum for convening the meeting and hence, this Court has no jurisdiction to entertain this petition. He has submitted that as per the o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the said secured creditors was adjourned to 22-5-1992. The Chairman of the meeting directed Essen Peripherals Limited to send fresh letters regarding adjourned meeting to all the secured creditors of Essen Peripherals Limited. It was just four days before the adjourned meeting that the alleged hypothecation Deed came to be executed in favour of Pankaj Vijay Co. and Shri Ranchhodrai Traders as claimed. In the adjourned meeting, ICICI, GIIC and GSFC voted against the Scheme of amalgamation. However, Bank of India voted in favour of the scheme of amalgamation and along with Bank of India Pankaj Vijay Co. and Shri Ranchhodrai Traders have also voted in the meeting in favour of the scheme by claiming themselves to be the secured creditors of the Essen Peripherals Limited. From these facts, it appears that both Pankaj Vijay Co. and Shri Ranchhodrai Traders illegally by claiming themselves to be the secured creditors helped Essen Peripherals Limited to garner logical majority, knowing fully well that they were not and were never secured creditors of Essen Peripherals Limited. From 18-5-1992, neither Shri Ranchhodrai Traders nor Pankaj Vijay Co. have been paid their alleged deb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs, as the Scheme is not to revive or rehabilitate the affairs of the Company in liquidation or to genuinely pay the dues of the Creditors, but the Scheme is intended to cover the misdeeds of the promoters/directors of the Company in liquidation, including the peti-tioners. 20. Mr. Singhi has further submitted that neither in the Company Application nor in the Company Petition, it has been disclosed about the particulars of pending criminal action against the Promoters or the erstwhile Directors of the Company. Further, no details have also been provided in respect of the suits instituted against the Promoters and the Directors of the Company in liquidation. No details of the petitioner No. 1 and petitioner No. 2 have been given in respect of their financial capacity to revive the company in liquidation. No rehabilitation plan has been provided in the Scheme. No details as stated above are mentioned in the Explanatory Statement under section 393 of the Companies Act, 1956 which is alleged to have been circulated by the petitioners to the Creditors of the Company in liquidation. The interest of the erstwhile Directors, including the petitioners in proposing the present Scheme is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... equested the Ex-Directors to hand over the possession of Books of Account. However, they have failed to do so and hence, the Official Liquidator has, on the basis of the preliminary papers available with him, initiated misfeasance proceedings under section 543 of the Act against the Ex-Directors/Officers of the Company. For the purpose of misfeasance proceedings, as per the directions given by this Court, a Chartered Accountant has been appointed to scrutinise the Books of Account and other records. However, since the Ex-Directors/Officers have not handed over relevant and important books of Account and records, the investigation by the Chartered Accountant was held up. No cogent reason has also been given by the Ex-Directors/Officers of the Company, including the petitioner/Sponsor of the Scheme, for not making available the Company s important Books of Account and other papers. M/s. Mukund and Rohit, Chartered Accountants have submitted their misfeasance Report dated 19-4-2001. In the said Report, it was stated that the report was based on the records available with the office of the Regional Director, Mumbai. In the said report it was also stated that for giving their final conc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt scheme, for instance, provides that on the Scheme being sanctioned and the Company being revived, the petitioner No. 1 shall be considered as the Managing Director with authority/power to constitute a new Board of Directors for carrying out the day to day affairs of the Company. The Managing Director of a Company has first to be a Director of the Company and the power to appoint a Director of a Company is a statutory prerogative of shareholders of a company under section 255 of the Act. Such prerogative power and right of the shareholders of the Company are sought to be taken away by the proposed Scheme and that too without convening a meeting of the shareholders of the Company and without obtaining their consent. 25. Mr. Shah has further submitted that the Scheme proposes to issue Zero Interest Fully Convertible Debentures to Secured Creditors to be converted into equity shares and the said equity shares shall rank pari passu with the old existing equity shares. This also affects the right of shareholders of the Company and without their meeting and consent, fully convertible Debentures cannot be issued and cannot be converted into equity shares ranking pari passu with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not be proceeded with further. A scheme with such a term cannot be approved or sanctioned without obtaining the consent of the parties to any such suit, claim, litigation or dispute which is sought to lapse or not to be proceeded with further. One of the terms of the Scheme envisages that GIDC should be directed to execute in favour of the Company a Lease Deed in respect of the property situated at A/10, GIDC Electronic Complex, Gandhinagar. Without the consent and approval of GIDC, a Scheme with such a term affecting its interest cannot be approved or sanctioned. The Scheme seeks certain reliefs from the Government of Gujarat in respect of subsidy regarding investments. Without the consent and approval of the Government of Gujarat, a Scheme with such a term cannot be sanctioned or approved. 29. Mr. shah has further submitted that one of the provisions contained in the Scheme was that on finalisation and approval of the Scheme by this Court, the liabilities of the guarantors stood discharged. Section 391 does not contemplate such a situation. Even otherwise, the proposed Scheme is also in violation of the provisions contained in section 393 of the Act as some of the Directors w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Nos. 80 of 1991 and 385 of 1991 wherein they had contended that they were illegally discharged from their employment and they sought reinstatement in the employment. The Labour Court, vide its orders dated 21-3-1994 and 5-12-1994 directed the Company to pay 50 per cent of the salary with allowance and incidental benefits to the applicants - employees from 20-7-1993 till the final disposal of the said references. He has, therefore, submitted that these five persons were entitled to claim amount under the references from the Company, but the same has not been provided for in the Scheme. He has, therefore, submitted that the present Scheme proposed by the Sponsors does not deserve for sanction or approval of this Court. 31. One Mr. Shailesh Prabhudas Mehta has also filed his objections against the proposed Scheme. It is his grievance that though he was holding the shares of the Company, the said shares were not deliberately registered in his name. The shares were lodged three times for transfer with the Company and they were still not registered in his name. It is the grievance of Mr. Mehta against the scheme that the said Scheme was in violation of the guidelines issued by Res ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Creditors. The petitioners are not putting any money personally towards the revival of the Factory. 33. It is further stated in the said affidavit that the classification done in the Scheme of the Secured and Unsecured Creditors is also wrong. In the statement of accounts, total amount outstanding towards Unsecured Creditors are shown as Rs. 28 crores whereas the actual outstanding amount of Unsecured Creditors comes to around Rs. 44 crores. There is also discrepancy with regard to the debt of the Secured Creditors of Bank of India as well as State Bank of India shown in the statement of affairs and the statements produced before this Court. The petitioners have wrongly classified the dues of the LIC and UTI towards the non-convertible debentures. According to the balance-sheet of the Company in liquidation for the years 1988-89 and 1989-90, the said amount was shown as secured debentures. The petitioners have omitted certain Creditors of the Company from the Scheme, namely, LIC Mutual Fund, State Bank of India Mutual Fund, Canara Bank Mutual Fund and Bank of India Mutual Fund who are the Creditors for the interest amount. In the Scheme, there is a proposal to give Zero In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the transferor and the transferee is not effective as against the Company and persons without notice of the transfer until the transferee is registered in the company s register. Indeed until the transfer is registered in the books of the Company the person whose name is found in the register alone is entitled to receive the dividends, notwithstanding that he has already parted with his interest in the shares. However, on the transfer of shares, the transferee becomes the owner of the beneficial interest, though the legal title continues with the transferor. The relationship of Trustee and cestui que trust is established and the transferor is bound to comply with all reasonable directions that the transferee may give. He also becomes a trustee of the dividends as also of the right to vote. The right of the transferee to get on the register must be exercised with due diligence and the principles of equity which makes the transferor a constructive trustee does not extend to a case where a transferee takes no active interest to get on the register . 35. Ms. Raval has further submitted that the scheme proposed by the petitioners are contrary to the provisions contained in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... required to be taken by the Court and are enumerated in sections 391 to 394A. The pre-requisites laid down in this section cannot be treated as empty formalities. If the purpose is to rehabilitate or revive the Company, definite proposals for revival should be insisted upon and the High Court should pass appropriate orders to ensure that the industry is put back on its wheels and starts production within a time-frame. A court will be overstepping the limits of its jurisdiction if it permits the sale of surplus land without complying with requirements for such a sanction. 37. Considering all the aforesaid issues, it is strongly urged that the Scheme may not be sanctioned by this Court as it is contrary to the Provisions of the Act and also contrary to the larger public interest. 38. Unit Trust of India has filed objections against the proposed Scheme of compromise and/or arrangement. Mr. K.I. Shah, learned advocate appearing for the UTI has relied on the said objections. He has submitted that notice for convening the meeting was received by UTI on 10-5-2001 for attending the meeting of the Creditors whereas the meeting was held on 7-5-2001. He has, therefore, submitted that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the Company from UTI is now due and outstanding represents the interests of millions of small investors who constitute the Unitholders of UTI. He has, therefore, submitted that the Scheme as proposed cannot be sanctioned by this Court. 40. LIC has also filed objections against the Scheme proposed by the petitioners. It is stated that LIC is entitled to recover Rs. 3,98,20,007 as on 1-1-2002 relating to Non-Convertible Debentures. Notice was not served on LIC for attending any meeting of the Creditors. The conduct of the petitioners is, therefore, not genuine and bona fide. The petitioners have not complied with the requirements of the Provisions contained in sections 391 and 394 of the Companies Act. The petitioners have also not disclosed all the material facts relating to the Company, namely, Accounts of the company, Auditor s Report, details of any legal proceedings against the Company and the latest financial position of the Company. It is also stated that LIC did not agree to the disposal of the assets of the Company under the said Scheme. If for revival of the Company, assets are required to be sold, then there is no need to revive the Company. If the repayment of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it is required to be rejected by this Court. 42. The Regional Director, Western Region (Department of Company Affairs), Mumbai has also filed objections against the proposed Scheme. Ms. P.J. Davawala, the learned Additional Standing Counsel has submitted that the Scheme does not provide for anything in respect of workers and their dues, if any, on revival of the Company and revocation of the winding up order. To make provisions regarding employees, therefore, becomes significance as the employees would be necessary for post revival functioning/working of the Company. The Scheme does not envisage anything about the post-revival plans/projections/reforms of funds and hence, except settlement of dues of Creditors by issuing Convertible and Non-Convertible Debentures and payments in cash, there is nothing in the Scheme. The Scheme provides that shares of the Company will be relisted on the Stock Exchange without insisting for completion of procedural formalities. This cannot be enforced upon concerned authorities in a Scheme under section 391 without hearing the concerned authorities. In para 16 of the petition, it is averred that no investigation proceedings under sections 235 to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... idation to the State Bank of India as on 31-3-1997. This aggregate amount was not taken into consideration and not included by the sponsors in the proposed Scheme. If the total dues of the objector were properly taken into consideration, the Scheme as proposed by the petitioners fails as the resolution for the said Scheme cannot be said to have been passed by requisite majority as required under the Provisions of Companies Act. The Sponsors had not come with clean hands and they are guilty of suppressio veri and suggestio falsi. Even otherwise, the Sponsors and the Directors are guilty of committing various acts of omission and/or commission by acting de horse the provisions of the Act and have not made full disclosure of true and correct figures. 45. It is further stated that the entire exercise of convening the meeting and discussing the proposed Scheme undertaken by the Sponsors by simultaneously acting as Chairman is illegal. The Chairman having voted in the said meeting as a Creditor per se shows that he has interest in the Scheme and thereby was disqualified to act as the Chairman. The State Bank of India had set up its GIDC Electronic Estate Branch at Gandhinagar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cceptance of combined compromise offer of Rs. 0.79 crores against total dues of Rs. 22.72 crores in the account of ECL and EFEL involving an amount of Rs. 0.17 crores already received in the year 1996 and also 1,36,000 Equity shares at face value of Rs. 10 each (Market Value Nil) and thus only upon receipt of net payment of Rs. 0.62 crores, the State Bank of India agree to withdraw the suit proceedings being O.A. Nos. 47/1997 and 128/1997 filed against Essen Computers Limited (In liquidation) and other guarantors pending before the Debts Recovery Tribunal, Ahmedabad. 48. In support of the Scheme, affidavit of one Mr. Pankaj Bihari Shah, proprietor of Shri Ranchhodrai Traders was filed on 18-3-2004. It is stated in the said affidavit that pursuant to the order passed by this Court on 12-4-2001 in Company Application No. 112/2001, separate meetings of the Loan Creditors, Secured Creditors, Statutory Creditors and Creditors for Goods and Expenses of the Essen Computers Limited (In liquidation) were conducted at the Sports Authority of India Complex, Gandhinagar on 7-5-2001. Shri Ranchhodrai Traders received notice dated 12-4-2001 from the Sponsors inclusive therewith a package of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CICI from attending the meeting as the Sponsors have already enjoyed the support of two major secured creditors and two minor secured creditors in their favour. ICICI was, therefore, under wrong illusion that its presence would have made any difference. Even otherwise, if it is assumed that they had attended the meeting and even if for a moment it is further assumed that they had objected to the Scheme, the Scheme still have had the support of Creditors having value of Rs. 12.60 crores i.e. 84.96 per cent in favour and Rs. 2.23 crores i.e. 15.04 per cent against the Resolution. With regard to classification of UTI/LIC as to whether they are secured or unsecured creditors, Mr. Soparkar has submitted that though ICICI is not concerned about it, it is only for the court s satisfaction that no illegality or irregularity has been committed by the Sponsors. UTI/LIC had never seriously been able to persuade GIIC/GSFC who were the only institutions who had charge on all fixed assets other than specific equipment charge as held by ICICI, to cede pari passu charge in their favour and hence, the NCDs so issued, continue to remain unsecured. The same was clearly reflected in the statemen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... charge on equipments which are absolutely obsolete and non-functional. It has no charge whatsoever on any other assets such as land, building, machinery and inventory. As against this, if the scheme is approved, no money was being asked for from Banks/Institutions. On the contrary, the petitioner No. 1 will infuse an amount of Rs. 2.5 crore into the Company on the date of its revival. Major creditors such as Banks were willing to revive the Company based on their understanding of the Company s ability to repay and they would receive over Rs. 3.50 crores in cash as per the proposed scheme, on revival. Over and above this Banks and Financial Institutions would hold 40 lakhs shares in the Company. The revived company would make good to the economic, social and human status of the Society and about 10,000 shareholders would get their due return from the Company. He has, therefore, submitted that there is no reason for objecting the scheme on any count. 53. With regard to the objection raised by Official Liquidator, the petitioners have filed their affidavit on 22-11-2001. Based on this affidavit, Mr. Soparkar has submitted that the Official Liquidator has no authority to raise any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed by the Regional Director, the petitioners have filed their affidavit on 22-11-2001. Based on this affidavit, Mr. Soparkar has submitted that the clauses in the scheme are for the benefit of all concerned. If the shares are not listed, the shareholders of the Company including those who will receive shares on conversion of debentures, shall suffer. The Clauses in the scheme only propose that only procedural requirements should be dispensed with because before liquidation, the shares of the Company were listed and by resorting to listing, no authority would suffer. The date of 1-4-1994 was selected because on and from that date, the Company ceased to function. Though the winding up order was passed on 17-4-1997, nothing has been done and no significant activity has been carried out during the period from 1-4-1994 to 17-4-1994. It is for this reason that the date of 1-4-1994 was selected. 56. With regard to the objections raised by Shri Shailesh Mehta, the petitioners have filed their affidavit on 12-12-2001. Based on this affidavit, Mr. Soparkar has submitted that Mr. Mehta has no authority to raise any objection and/or to file any affidavit as he has no locus standi in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... led affidavit on 2-2-2002. Based on this affidavit, Mr. Soparkar has submitted that the contention of LIC with regard to non-receipt of the notice is without any merit as photocopy of the postal certificate showing distinctly that due notice was posted by the petitioners on 12-4-2001 to the LIC. The LIC has to apply its mind seriously and very carefully to the facts as they are found rather than simply objecting to the scheme for the sake of objection. That the petitioners reply to the objections raised by UTI is equally applicable to the objections raised by LIC and hence, the same are not repeated here. 60. After having heard the learned advocates appearing for the respective parties and after having considered their pleadings as found in their applications, objections, affidavits and counter-affidavits and after having perused the papers and documents produced therewith as well as after having given my anxious thoughts to the relevant statutory provisions and the authorities cited during the course of hearing which lasted for good number of days, the Court is of the view that the petition deserves to be dismissed with exemplary cost. 61. The brief summary of the objecti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... petitioners have no means to pay or fructify the scheme. The scheme is speculative in nature and the scheme is contrary to RBI directives and, therefore, cannot be sanctioned. 65. The fourth category of objections is in respect of other issues which inter alia includes that the scheme proceedings are mala fide . The petitioners were required to serve a notice to the creditors before moving the application to convene the meetings and the cost of the scheme proceedings. 66. While dealing with all these four categories of objections, Mr. Soparkar has made very strenuous efforts to satisfy the Court that none of the objections is sustainable and the scheme deserves to be sanctioned. In this process, Mr. Soparkar has referred to various statutory provisions and also referred to judgments of this Court as well as of the Hon ble Supreme Court. While meeting with each of the objections raised, Mr. Soparkar has submitted that all these objections which are raised to the scheme proceedings are motivated and they are contrary to the provisions of law and against settled legal propositions. In support of these submissions, he has cited various authorities before the Court and based ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me with a view to be satisfied on this aspect, the Court, if necessary, can pierce the veil of apparent corporate purpose underlying the scheme and can judiciously x-ray the same. (7)That the company court has also to satisfy itself that members or class of members or creditors or class of creditors, as the case may be, were acting bona fide and in good faith and were not coercing the minority in order to promote any interest adverse to that of the letter comprising the same class whom they purported to represent. (8)That the scheme as a whole is also found to be just, fair and reasonable from the point of view of prudent men of business taking a commercial decision beneficial to the class represented by them for whom the scheme is meant. (9)Once the aforesaid broad parameters about the requirements of a scheme for getting sanction of the Court are found to have been met, the Court will have no further jurisdiction to sit in appeal over the commercial wisdom of the majority of the class of persons who with their open eyes have given their approval to the scheme even if in the view of the Court there could be a better scheme for the company and its members or creditors for w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ive at an informed decision for approving the scheme in question. All necessary materials were not placed before the voters at the concerned meetings as contemplated by section 391(1) of the Act. The petitioners have not produced the latest balance-sheets and hence, all requisite material contemplated by the proviso to sub-section (2) of section 391 of the Act were not placed before the Court by the petitioners seeking sanction for such a scheme and the Court was not satisfied about production of these requisite materials before the Court. 69. It is rather shocking and surprising that while seeking the order from this Court for appointment of Chairman of the meeting, the petitioner No. 1 has not disclosed the material fact before the Court that he is the debtor of the Company and he is going to cast his vote being one of the Creditors of the Company and he is also one of the beneficiaries under the scheme. Since he being the Judge of his own cause was not entitled to be appointed as the Chairman of the meeting and report submitted by him before the Court cannot be considered to be trustworthy. Looking to the other terms incorporated in the Scheme, it is difficult to hold that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... their dues and to the Creditors for Goods and Expenses at 1 per cent of their dues and to the loan creditors at 3 per cent of their dues is obviously unjust, unfair and improper. Even for such payment, the Sponsor of the scheme seeks permission to dispose off the assets of the Company. The Sponsors have not taken any care to hold the meeting of the shareholders despite the fact that the proposed scheme does affect their interest vitally. There is no provision with regard to the dues of the employees or even with regard to the future employment. It is nowhere found in the scheme as to how the business would be carried out after getting sanction from this Court. The Court is, therefore, of the view that the scheme is proposed only with a view to dispose off the assets of the Company and to get relieved the promoters and Ex-Directors of the Company from their personal liabilities. Since the broad parameters laid down by the Hon ble Supreme Court about the requirement of scheme for getting sanction of the Court are not found to have been met, the Court has no other alternative but to refuse to grant its approval and in such a situation, if the scheme is not approved by the Court, it ca ..... X X X X Extracts X X X X X X X X Extracts X X X X
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