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TMI Blog2004 (7) TMI 381X X X X Extracts X X X X X X X X Extracts X X X X ..... ll be permitted to resume manufacturing activities of Jalan Ispat Casting Limited (Company in liquidation) as well as Manganese Mine operations on the terms and conditions which may be imposed by this Hon ble Court as may be deemed fit, just and proper in the interest of justice and fairness of things, especially when the contributory is ready and willing to settle the dues of secured creditors, as per the details set out in the present Affidavit in Support. ( C )Your Lordships be pleased to restrain the Official Liquidator from taking possession of M/s. Jalan Ispat Casting Limited as till the date of filing of the present application, the possession of the Unit is with the applicant for the reasons stated in the application. ( D )Pending hearing and admission, hearing and till final disposal of this application, Your Lordships be pleased to permit the present applicant to restart and run M/s. Jalan Ispat Casting Ltd. (the Company in liquidation) and mining of Manganese Ore, on appropriate terms and conditions which may be deemed fit, just and proper in the interest of justice. 2. An affidavit in support of the Judges Summons is filed by Shri Gopal Jalan. It is stated in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which were beyond the control of Management of the Company in liquidation, the management could not arrange for the funds as suggested by the Operating Agency before the BIFR and in view of the said facts, the BIFR formed opinion under sub-section (1) of section 20 of Sick Industrial Company (Special Provision) Act, 1985 for recommending this Court that it is just, equitable and in the public interest to wind up the applicant company. This report has been received by the Registrar of BIFR and the report has been registered as Company Petition No. 69 of 2002 and public advertisement has been given in the newspapers following the order passed by this Court. This Court has thereafter passed an order for appointing Provisional Liquidator and finally the winding up order was passed on 12-11-2003. The said order was challenged by the Company in liquidation by filing O.J. Appeal No. 27 of 2003 and the Division Bench has directed the applicant to deposit Rs. 1 crore as suggested by BIFR, but the Company in liquidation could not deposit the said amount and ultimately, the said O.J. Appeal was withdrawn by the Company in liquidation with a view to take all available opportunities and content ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng-up order is passed, the ex-Management of the Company in liquidation had made all its sincere and honest efforts to revive the Unit, but the Management could not do so because the Secured Creditors of the Company in liquidation did not take any pragmatic view in the matter and did not show any interest or willingness to revive the Unit for the reasons best known to them, otherwise the Company might have been revived and might have been started its manufacturing activities since 2003 itself before passing of the winding up order by this Court. Because of the overall recession in the Steel industries, the Company could not make any progress and suffered huge losses. It was also on account of high electricity rates, the Company suffered a lot and steel plants in Gujarat, Maharashtra and Madhya Pradesh and Orissa have come in bad weather and 75% of the Industries have been closed down. On account of International development of Trade by South Asian countries and European Union, the market for steel industry started improving. In the international survey for requirement of steel, finished products, semi-finished products and Ferrous alloy, it was reported that even if the present Plan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act, 1956 as a contributory, is that on account of positive change in the market for Steel industry and Ferroy Alloy industry, the persons who have faith in the ability and skill of the applicant have made fixed deposit of Rs. 1.70 Crores in a Hold Up Account with Syndicate Bank, Alwar Branch at Alwar in Rajasthan. The proposal for one time settlement has been forwarded by the applicant to its Secured Creditors and when the Secured Creditors accept the said proposal, this amount of Rs. 1.70 Crores will be transferred to the Company s Account, which in turn, to be appropriated and transferred in the account of Secured Creditors and meeting of working capital requirement according to the terms of settlement as approved by them as well as by this Court. He has, therefore, submitted that this Court should revoke the order of winding up and grant permission to restart the unit and operation of mining the Manganese Ore. For this purpose, the applicant will make available additional amount of Rs. 60 Lakhs which would be invested for making the Unit functional. When the Unit was closed down its manufacturing and mining activities in the State of Madhya Pradesh, there were no outstanding du ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd have expressed their desire and willingness to extend full support and cooperation to the applicant if the applicant is allowed to restart the Unit. 10. With regard to the submission of Mr. Nanavati that the Court has power to stay the winding-up order, he relies on the decision of the Delhi High Court in the case of Voluntary Liquidator, Dimples (P.) Ltd. v. Registrar of Companies [1978] 48 Comp. Cas. 98 wherein it is held that "The power to stay the winding up of a Company under section 466 of the Companies Act, 1956, in the case of Companies which were wound up by the Court, could also be exercised when a company was in voluntary liquidation; and that since the management wanted to revive the company and there was no impediment whatsoever, the winding-up proceedings should be stayed altogether". 11. He has further relied on the decision of the Karnataka High Court in the case of V.B. Purohit v. Gadag and Jambukeshwara [1984] 56 Comp. Cas. 360 wherein it is held that : "Under section 466 of the Companies Act, 1956, the company court possesses the power to grant a stay of a winding up of a company even when it is a case of voluntary winding up, provided the fact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uge debts, far beyond the means of the company to meet and there was no reasonable prospect of the company reviving its normal operations". 13. Based the changed circumstances, such as improved market conditions of the steel industries, confirmed orders, infusion of funds, assurance to accept one time settlement proposal by Bank of Baroda and also the Courts approach to revive the sick units, Mr. Nanavati has strongly urged before the Court to allow the applicant to restart the Company in liquidation by revoking the winding up order and/or by staying the winding up proceedings. 14. Mr. B.G. Jani, learned advocate appearing for respondent No. 3, i.e., I.F.C.I. has opposed this application and placed on record detailed affidavit-in-reply. He has submitted that IFCI had sanctioned lease finance of Rs. 75 Lakhs to the Company in liquidation in March 1990 for purchase of Rolling Mill. As per the terms of sanction and the lease agreement entered into with the Company in liquidation on 26-4-1990, the Company was required to pay the monthly lease rentals for a period of 96 months. The machinery were actually invoiced in favour of IFCI and IFCI is the owner of the assets. The Comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 998 for non-payment of the dues of the Board to the tune of Rs. 1,83,86,063.24ps. Mr. Oza has further submitted that till date, the Company in liquidation has not made any payment towards dues of the Board. In the present application which is moved by the applicant, the applicant has not made any proposal as to how the Company is going to raise funds towards the dues of the Board. Unless and until, the Company in liquidation gets electric connection by paying the electricity dues, the Company cannot be started. The proposal which is moved by the present applicant is absolutely illusory and in fact the amount which was due on 1-12-1998 has gone upto Rs. 3,26,05,713.40 ps. as on February, 2004. Mr. Oza has lastly submitted that these facts have not been disclosed by the applicant before this Court and hence, the winding-up order which was passed by this Court is not required to be revoked. 16. Mr. S.P. Hasurkar, learned advocate appearing for respondent No. 9, i.e., Madhya Pradesh State Electricity Board has also objected the present application moved by the applicant. An affidavit-in-reply is filed by Shri Jagdish Prasad Dubey, Superintending Engineer (O M), MPSEB, Jhabua. Mr. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order of winding-up, the Bank would get Rs. 81.37 Lakhs upfront within a period of one month and thereafter, amount as proposed in the scheme of revival would be paid to the Bank by the promoters. It is further stated in the said affidavit that the respondent Bank has no objection if the winding up order is stayed and the Company is revived only after taking into consideration the financial interest of the Bank and public interest at large. 18. Mr. T.R. Mishra, learned advocate appearing for the respondent Nos. 10 to 18, i.e., workers of the Company have supported the application and has placed affidavits-in-reply of some of the workers. He has submitted that according to the record, gross assets of the Company is about Rs. 17 Crores and net assets are to the tune of Rs. 5 Crores. As against this, the liability of the Company in the form of loan taken from financial institutions and Banks is in the range of around Rs. 25 Crores. If the Liquidator takes the possession of the assets of the Company and proceeds further to auction the plant, machinery, land and building, the workmen would not get their legitimate dues. All the assets and properties of the Company are fully protec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tors with respect to settlement of their accounts in a manner acceptable to them. It is only after recording the above finding, the BIFR had firmed an opinion to the effect that it was just and equitable that the Company should be wound up and confirmed its earlier prima facie opinion to wind up the Company in terms of section 20(1) of the Act. 20. Pursuant to the aforesaid opinion of the BIFR and considering the facts and circumstances of the case, this Court has passed the winding up order on 12-11-2003. The said order was challenged by the Company before the Division Bench of this Court by filing O.J. Appeal No. 27 of 2003. To test the bona fide of the Company, the Division Bench of this Court has passed an order on 4-8-2003 directing the Official Liquidator to maintain status quo with respect to the assets of the Company on condition that the Company shall deposit Rs. 1 Crore before the Court on or before 1-9-2003. The Division Bench has made it very clear that the interim order was passed only with a view to test the bona fides of the Company and with a view to see to it that the final settlement, if any between the parties was arrived at. However, the Company was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provide fund of Rs. 229.09 lakhs to the Company in liquidation specifically for the purpose of implementation of the revival scheme and the said fund would not be utilised for any other purpose. M/s. Adhunik Cement Pvt. Ltd. would not claim any interest on the said unsecured loans before all secured creditors are paid and it would not demand repayment of the said loan before the scheme of revival is fully implemented and carried out and all payments to all the secured creditors are made as per the scheme of revival. It was also stated that the balance amount of Rs. 59.09 lakhs would be given by M/s. Adhunik Cement Pvt. Ltd. to the Company within seven days from the date as may be ordered by this Court and would produce a confirmatory letter from Syndicate Bank, Alwar to this effect. 22. The applicant has further submitted in support of its claim for revival of the company certain confirmed orders received from various parties and three of such letters are produced along with the application. The whole emphasis of the applicant is that since the steel market has been changed and there are bright prospects so far as the steel industry is concerned and there is already a shortage ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing up of a company even when it is a case of voluntary winding up, provided the facts justified the stay. The Court is of the view that looking to the present facts and circumstances of the case, it is not a fit case where the Court has to exercise its power under section 466 of the Companies Act, 1956 to stay the winding up of the Company. Even in the case of New Swadeshi Mills of Ahmedabad Ltd. (supra) after laying down the proposition that it is the duty of the Court to welcome revival rather than affirm the death of the Company and for that purpose, the court is called upon to make a discreet exercise, the Court has taken the view in that matter that it was proper that the company be ordered to be wound up, since there were huge debts, far beyond the means of the company to meet and there was no reasonable prospect of the company reviving its normal operations. While taking overall view of the matter and considering the entire facts and circumstances of the case, this Court is also of the same view that since there were huge debts far beyond the means of the Company to meet and all attempts made in the past have failed and despite several opportunities, no concrete proposal ..... X X X X Extracts X X X X X X X X Extracts X X X X
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