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TMI Blog2004 (8) TMI 392X X X X Extracts X X X X X X X X Extracts X X X X ..... reto was proposed to be transferred to and be vested in petitioner No. 2 Company on the terms and conditions which had been enumerated in the said Scheme of Arrangement. The salient features of the proposed Scheme of Arrangement between both the petitioner-Companies and their respective shareholders and creditors have been spelt out in detail in para-2 of the Company Petition and other paragraphs. 3. The relevant facts of the case are narrated in detail in the judgment dated 10-6-2004 and it is not necessary to reiterate them to burden this judgment. 4. The proceedings in this Company Petition were ordered to remain in abeyance vide order dated June 10, 2004 till the BIFR would decide the reference pending before it which had been prepared by the petitioner No. 1 Company under section 15 of SICA. No findings were recorded by me in the said order on the merits of the Modified Scheme of Arrangement proposed to be approved by means of this Company Petition. 5. The petitioner-Companies, feeling aggrieved against the judgment dated June 10, 2004 of this Court, filed Company appeal No. 5/2004 before the Division Bench of this Court. The Division Bench on July 12, 2004 allowed the appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wo) creditors of petitioner No. 1 Company including secured creditors, namely, IDBI, ICICI, Exim Bank, West Bengal Industrial Development Corporation (for short WBIDC), State Bank, Indore, Allahabad Bank and other unsecured creditors voted in favour of proposed modifications being adopted and carried into effect to the Scheme of Arrangement. However, State Bank of India (SBI) and Industrial Investment Bank of India (IIBI) secured creditors have opposed the Modified Scheme of Arrangement. The Modified Scheme of Arrangement was prepared, adopted and carried into effect by more than 3/4 (three fourth) majority. Thereafter the Modified Scheme dated 16th November, 2003 was submitted before this Court. Petitioner-Company accordingly have filed the present Company Petition for final sanction of the Modified Scheme of Arrangement. 9. It appears from the record that when the Company Petition No. 13 of 2003 came up before this Court on 10-12-2003, 'SBI' had filed its objections to the Scheme of demerging the two Companies. The petitioner-Companies filed reply to the said objections. Affidavit of the Regional Director, Northern Region, Department of Company Affairs has also been filed. Subse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to any contract or arrangement by virtue of which such debts, liabilities, contingent liabilities duties and obligations have arisen in order to give effect to the provisions of the scheme. 14. Clause 4.4 provides that the transfer and vesting of the demerged undertaking of GPIL as aforesaid, shall be subject to the existing securities, charges and mortgages, if any subsisting, over or in respect of the property and assets or any part thereof unless otherwise agreed by the relevant creditors of GPIL. Proviso to this clause says that any reference in any security, documents or arrangements (to which GPIL is a party) to the assets of the GPITL offered or agreed to be offered as security for any financial assistance or obligations, shall be construed as reference only to the extent the said assets are pertaining to the demerged undertaking as are vested in GPITL by virtue of this clause. 15. Mr. Rajesh Gupta, Company Secretary and Senior Manager (Accounts) of petitioner No. 1 Company in reply to the objection of the 'SBI' has stated that the State Bank of India has provided the financial assistance to the Ist petitioner-Company against its textile Project only. None of the financia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e summary record of the proceedings of the joint meeting held on September 22, 2003 at the office of IDBI at Mumbai placed on record by the SBI along with affidavit of Smt. Inderjeet Bakshi, Assistant General Manager, State Bank of India. The summary record reveals that SBI was agreeable to the suggestion of sharing the recoveries from the Company among all institutions/Banks on pro rata basis and for the purpose, an escrow account could be opened with SBI and made operative from October 1, 2003. The Modified Scheme of Arrangement has been approved by the overwhelming majority of the creditors and Directors. The Scheme would facilitate the rationalisation of the financial structure of both the Companies. Both the projects would be implemented effectively and that the management of the two projects by the two separate Companies would be convenient and advantageous, keeping in view the future independent management set up with focus on stipulation. The demerger of the Companies would result in better administration, operational organization and efficiency with optimum utilization of all the resources. All the shareholders and creditors of both Companies have taken cautious decision f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... That all the requisite material contemplated by the proviso to sub-section (2) of section 391 of the Act is placed before the Court by the concerned applicant seeking sanction for such a scheme and the Court gets satisfied about the same. 6.That the proposed scheme of compromise and arrangement is not found to be violative of any provision of law and is not contrary to public policy. For ascertaining the real purpose underlying the Scheme 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 latter comprising of the same class whom the 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reply to the objections of the SBI has made specific and categorical statement in sub-para (viii) at page 334 (Part-II of the paper book) that at present neither Shri Pramod Mittal is the Managing Director nor Shri V.K. Mittal is the Joint Managing Director of Petitioner No. 1 Company and both of them would continue to remain shareholders as well as promoters of both the petitioner-Companies even after the implementation of the Modified Scheme of Arrangement. In the face of the said unequivocal statement the apprehension of SBI that Shri Pramod Mittal and Shri V.K. Mittal, Managing Director and Joint Managing Director respectively of petitioner No. 1 Company have ceased to be shareholders does not sound to reason. 22. I have examined the ratio of the decided cases on which reliance has been placed by the learned Senior counsel for SBI objector. In Bedrock Ltd., In re [2000] 101 Comp. Cas. 343 1, the learned Single Judge of the Bombay High Court on the facts of that case observed that the Scheme of Arrangement or compromise was ostensibly to dispose of unutilised assets to pay off creditors and in reality to profiteer from proceeds thereof and the Scheme was not found bona fide. In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of the reply filed by Mr. Rajesh Gupta, Company Secretary and Senior Manager (Accounts) of petitioner No. 1 Company to the objection filed by IIBI, it is stated that the total outstanding amount of IIBI as on the date of meeting of creditors held on 16-11-2003 to approve the Scheme was only Rs. 7,58,26,267 (Rupees Seven crore fifty eight lakhs twenty six thousand two hundred sixty seven) only against the total outstanding amount of R. 6,37,30,93,037 (Rupees Six hundred thirty seven crore thirty lakhs ninety three thousand thirty seven) only and IIBI outstanding amount constitutes to 1.19% only of the total outstanding amount as on that date. The Modified Scheme of Arrangement as approved by the shareholders and creditors of both the petitioner- Companies does not in any manner affect the interest of IIBI as a creditor in respect of amount lent by it for acquisition and installation of a particular imported machinery which is at present with the Roll Division of the GPIL and will continue to be with the Roll Division of the Ist petitioner-Company even after the implementation of the Scheme. A categorical statement has been made in the reply that there is no arrangement or compro ..... X X X X Extracts X X X X X X X X Extracts X X X X
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