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TMI Blog2004 (8) TMI 399X X X X Extracts X X X X X X X X Extracts X X X X ..... e BIFR of even date. The order passed by the BIFR dated 31-12-1997 was carried further in Appeal by the Mills Company as well as by the President of Kamdar Ladat Samiti of the respondent Company being Appeal Nos. 28 of 1998 and 68 of 1998 respectively. Both these appeals were disposed of by the Appellate Authority for Industrial and Financial Reconstruction (hereinafter referred to as AAIFR for short) on 21-7-1998 confirming the order passed by the BIFR. 3. Company Application No. 292 of 1998 is filed by Kamdar Ladat Samiti requesting this Court not to order winding up of the Mills Company on the basis of the order of BIFR dated 31-12-1997 in Reference No. 24 of 1996 and to stay further proceedings pursuant to the said order of BIFR. It is also prayed in this application to consider and approve the scheme of revival as proposed by Kamdar Ladat Samiti in respect of the Mills Company produced at Annexure B to the application and to direct the erstwhile operating agency to consider the same and place its analysis and report before this Court for further direction. 4. It is worthwhile to mention here that Kamdar Ladat Samiti has also filed S.C.A. No. 10307 of 1998 simultaneou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ala, learned advocate appearing with Mr. Mihir Joshi for Kamdar Ladat Samiti has made a request to the Court that the applicant has challenged the order of the learned Single Judge passed in S.C.A. No. 10307 of 1998 in L.P.A. filed before the Division Bench and hence, the hearing may be deferred for some time. The Court was not inclined to accede to the said request of the learned advocate as while disposing of S.C.A. No. 10307 of 1998, the Court has made it very clear that the petitioner has sought similar, if not identical reliefs both in the said Company Application and the present petition and hence, the said petition was not required to be entertained as the relief sought for by the petitioner can be equally available in the proceedings in Company Petition No. 2 of 1998 and Company Application No. 292 of 1998 and other cognate matters. The Court has further observed in the said judgment that the subsequent event which have supervened have admittedly taken place in proceedings of Company Petition No. 2 of 1998 and cognate matters. The said proceedings are alive and hence, there is no question of moulding relief in the said petition on the basis of such subsequent facts to do su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tent of Rs. 11.5 crores would be required for payment of workers dues and the VRS for surplus workers on account of proposed closure of the processing unit. The requirement of the fund was, therefore, to the tune of over Rs. 15 crores and as the sale proceeds from the land and machinery of the processing unit would at best be only Rs. 7 to 8 crores as there was no rehabilitation proposal found acceptable to the financial institutions/bank, it was indeed difficult to hold that worthwhile steps could be pursued further in the matter. The appellate authorities have also negatived the arguments of Kamdar Ladat Samiti to the effect that it would be possible for them to rehabilitate the Company by utilising the sale proceeds of the land/machinery of processing unit in view of the fact that it would not be possible to meet the demands of the Secured Creditors and workers. 13. When the Board s opinion was forwarded to this Court and Company Petition was registered on that basis, this Court has passed an order on 12-1-1998 taking the view that since the Board has followed the same procedure, it was not necessary for this Court to again follow that very procedure after receiving the opi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to be revived so that they can properly raise their grievance before this Court and may also make a prayer to send back the matters to BIFR or AAIFR. With a view to do substantial justice to the litigating parties, the Court has thought it fit to revive the said two matters and directed the office to hear the same along with all other Company Petitions. 16. It is in the above backdrop, all these matters are heard by this Court. The case of Kamdar Ladat Samiti before this Court is that its scheme for revival of the Company by disposal of surplus assets and commencing weaving operations on jobwork basis, has not been properly considered at any stage. It would not be just and equitable to order the winding up of the Company without fully treating all avenues for revival. It is also their submission that the revival scheme is required to be examined by this Court particularly in light of the changed circumstances being the repeal of the ULC Act, which would result in escalation of the price of surplus land proposed to be sold under the scheme, thereby improving its liability as a revival package. It is also their case that the opinion of the BIFR as confirmed by the AAIFR holdin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons would forego interest and principal amount; accepting Rs. 3.3 crores in full settlement. The new venture would adopt an aggressive marketing strategy which would be executed by a marketing professional and would receive active marketing support from members of various committees. According to them, the proposal was eminently workable and deserves acceptance. 18. It is also their case that if the opinion of the BIFR is accepted, it would result in destruction of the only source of livelihood for the hundreds of workers without any hope for compensation. According to them, the principal dues of the secured creditors are not more than Rs. 3 crores and the sale of assets was likely to fetch about Rs. 7 to 8 crores which would certainly be used to revive the Mills Company. Looking to the present economic condition and severe recession in the textile business, it is absolutely improbable that the workers would ever get another job. Even in the case of disposal of assets, the dues of the workers rank pari passu with those of the secured creditors and, therefore, the equilibrium of sacrifice is implied. It is, therefore, contended that there was no reason for winding up order bei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ant and machinery, which were belonging to private parties and the machinery as identified by Kamdar Ladat Samiti, which are not to be sold as being required for the purpose of implementation of the Scheme). He has further submitted that the workers proposed to revive the unit and they proposed to re-employ themselves after arriving at a ratio as per the provisions of section 529 of the Act, Secured Creditors initially have agreed to pay 50% of the sales realisation to the workers as a special case in view of the scheme framed by Kamdar Ladat Samiti. However, it is clearly understood that Secured Creditors would not have any responsibility for running the affairs of the Company. It was also made clear that on the plant and machinery which will be utilised by the Kamdar Ladat Samiti and/or Co-operative Society formed by Kamdar Ladat Samiti, the charge of the secured creditors will continue on the said plant and machinery. If the scheme fails and if in the opinion of IDBI, the scheme is not working, it will be open to IDBI along with IIBI and UCO Bank to proceed for sale of the hypothecated assets and the sale proceeds be distributed between the secured creditors and workers on pari ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uld be handled by the Society. This is contrary to the Provisions of the Companies Act, 1956 which deals with the "Management" of the Company. In case the Company is revived, the powers to appoint Directors of the Company for management of its affairs and day-to-day functions, shall rest with the shareholders of the Company. Precisely, for this reason, it is not possible to transfer the ownership of the Company to the workers or any Society and to hand over the management to them. 23. The other petitioning Creditors, namely, M/s. Uttara Achyut Chinubhai Others in Company Petition No. 65 of 1998, through their advocate, Mr. A.R. Majmudar and/or Ms. Desai, M/s. Jaybharat Credit Ltd. in Company Petition No. 210 of 1998, through their advocate Shri Ashwin L. Shah and Keshoram Rayon in Company Petition No. 9 of 1999, through their advocate Shri A.C. Gandhi have also opposed the revival scheme proposed by the Kamdar Ladat Samiti and pressed for the final winding up order. 24. After having heard the learned advocates appearing for the respective parties and after having gone through their pleadings and orders passed by this Court from time to time in different proceedings in rel ..... X X X X Extracts X X X X X X X X Extracts X X X X
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