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TMI Blog2010 (3) TMI 911X X X X Extracts X X X X X X X X Extracts X X X X ..... 9-3-2010 - S.R. BRAHMBHATT, J. Mihir Thakore and Ms. Megha Jani for the Applicant. Y.H. Motiramani, J.S. Yadav and Navin K. Pahwa for the Respondent. JUDGMENT S.R. Brahmbhatt, J. The applicant, a former managing director of and a contributory to M/s. Asian Transformers Export P. Ltd. (hereinafter referred to as "the company" for brevity) a company under liquidation, has filed this application for recalling the winding up order dated November 22, 1976, passed by this court in Company Petition No. 34 of 1976 for winding up of the company and appointing the official liquidator ("the OL") as liquidator of the company to take charge of all the properties and assets of the company. 2. The applicant has, in the affidavit filed in support of the judge s summons, stated that he was the managing director of M/s. Asian Transformers Export P. Ltd. (the company in liquidation) against which Company Petition No. 34 of 1976 came to be filed by M/s. Suresh Steel Corporation, a partnership firm, under the provisions of the Companies Act, 1956, for winding up, alleging that the company had failed and neglected in paying Rs. 77,054.72 to the petitioner. The court vide its o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion Co. (India) Ltd., a company incorporated under the Companies Act, 1956 and under section 3 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002. Asset Reconstruction Co. (India) Ltd., has assigned all its rights, titles, benefits and interests in respect of the assets of the company to Pegasus Assets Reconstruction P. Ltd. A company incorporated under the Companies Act, 1956 and registered as a securitisation and asset reconstruction company pursuant to section 3 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002. The Pegasus is respondent No. 4 in the present application. 7. The applicant has further stated in his affidavit in support of the judge s summons that in view of the changed circumstances it is possible for the erstwhile management of the company to pay its creditors and make a come back. The company has good chance of revival. It is stated that M/s. Suresh Steel Corporation has settled its outstanding amount for Rs. 1,50,000 and has agreed to co-operate and withdraw the winding up petition. Their letter dated May 12, 2009, is also placed on record at an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reditors ( a )Bank suspense account (which will become nil on settlement with the bank) 18,29,409.00 ( b )Directors and shareholders 2,30,441.00 ( c )M/s. Asian Transformers, proprietor N. B. Shah 14,19,274.00 ( d )Sundry creditors Suresh Steel Corporation 77,054.72 Others 35,032.28 ( e )Other liabilities 61,863.00 Total 36,38,163.00 12. In respect of secured creditors, learned counsel has submitted that the State Bank of India is the only secured creditor having assigned its secured as well as unsecured debt to ARCIL and ARCIL is now the only secured creditor of the company. In view of the settlement arrived at with Pegasus Assets Construction P. Ltd., constituted attorney of ARCIL, with respect to the secured debt, as well as its unsecured debt, ARCIL has agreed to accept a sum of Rs. 70,00,000 in full and final settlement of its claims. The said amount shall be paid to ARCIL immediately on the revival of the company or during the present proceedings, as may be ordered by this court. 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the company application, the applicant had published an advertisement in The Times of India, Ahmedabad edition dated May 23, 2009 and in Gujarat Mitra, Surat edition dated May 23, 2009, inviting objections to the revival of the company. The applicant states that despite the fact that more than ten months have passed since the publication of the advertisements, no person has come forward raising any objection against the revival of the company. In view of this, it is submitted that the company has no debt other than the ones stated above, the settlement of each of which has been done as narrated in the preceding paragraph. It is further submitted that though there is no possibility of claims being made against the applicant-company, the applicant agreed that out of the total amount of money lying with the official liquidator towards the credit of the company, an amount of Rs. 5,00,000 or any amount that may be deemed fit by this court, may be retained and kept aside for a period of 3 months, or for the period that may be deemed fit by this court, from the date of revival of the company for the payment of any possible legally enforceable claims that may be made against the company a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that in the above order there is only invitation to creditors and their ascertainment. He has also stated that the advertisement vide above said order is not issued as per the order passed by this court. 20. Shri Yadav has further submitted that as per rule 24 of the Companies (Court) Rules, 1959, as framed by the apex court, issuance of the advertisement one in English and one in regional language is necessary. In the present case the applicant has issued advertisement as per his affidavit dated June 17, 2009, both in English daily only, i.e., even in Gujarat Mitra which is a Gujarat daily the advertisement is published in English language. Rule 24 of the Companies (Court) Rules, 1959, therefore stands violated and there has not been any advertisement as per the order passed by this court. Shri Yadav has submitted that "revival" necessarily does not mean payments/repayment to all creditors even the same should be as per the scheme under section 391 of the Companies Act, 1956. That, public (creditors) at large may not take "revival" as an occasion for them to claim their own past dues. This becomes clear only when their claims are invited. 21. Shri Yadav has submitted that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te Bank of India (SBI), and all the workers were discharged after payment of their legal dues. (b)Company Petition No. 34 of 1976 was filed on June 9, 1976, by M/s. Suresh Steel Corporation for winding up of the applicant-company on the ground that the applicant-company had failed to pay Rs. 77,054.72, which came to be admitted on August 16, 1976. (c)Winding up order was passed on November 22, 1976. While passing the order for winding up, property of the company at Vapi was in the possession of receivers appointed by the Court of Civil Judge (S. D.), Navsari in Special Suit No. 68 of 1976 filed by the SBI against the company in liquidation and the property of Asian (a proprietorship concern of Niranjan B. Shah) was in the possession of receivers appointed under Civil Suit No. 69 of 1976 filed against Niranjan B. Shah the sole proprietor of Asian. The Commissioners did not segregate the assets of the two different entities and maintained joint possession of the same till it was taken over by the official liquidator. The total liability of the company was Rs. 18,23,664.42 out of which unsecured amount was only Rs. 96,895. Therefore on settlement with the present applicant, secure ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ive of non-agreement on the part of the minority or the secured creditors in minority, the revival scheme is to be sanctioned by the court. Whereas in the instant case there is absolutely nothing on record to show which can be said that anyone would object to the prayer for recalling the order from among the creditors of the company. 27. The applicant s counsel has stated under instructions of the applicant that the part of the amount which is lying with the official liquidator be kept for a period of 3 years and not for only three months as submitted earlier, in a fixed deposit so as to meet with the admissible claim of any creditor of the company who could not claim so far. Moreover the applicant is prepared to file an undertaking to this effect before this court and on that ground it is submitted that the application deserves to be allowed. 28. Counsel for the official liquidator has mainly urged that rules 149 and 24 of the Companies (Court) Rules, 1959, have not been completely complied with especially on account of the fact that the advertisement issued pursuant to the order of this court dated May 15, 2009, though issued in Gujarati daily also, but is issued in English l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection s real purport and its effect. 29. The court has express powers under section 391 of the Companies Act, 1956, to decide and accept any genuine viable proposal of revival of the company under liquidation. The proposal needs to be genuine and viable. Section 391 of the Companies Act, 1956, reads thus : "391. Power to compromise or make arrangements with creditors and members. - (1) Where a compromise or arrangement is proposed- (a)between a company and its creditors or any class of them ; or (b)between a company and its members or any class of them ; the Tribunal may, on the application of the company or of any creditor or member of the company, or, in the case of a company which is being wound up, of the liquidator, order a meeting of the creditors or class of creditors, or of the members or class of members, as the case may be, to be called, held and conducted in such manner as the Tribunal directs. (2) If a majority in number representing three-fourths in value of the creditors, or class of creditors, or members, or class of members, as the case may be, present and voting either in person or, where proxies are allowed under the rules made under section 643, by pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) above. This declaration presupposes two things : that the question whether the High Court could recall the order of winding up was in the mind of the Supreme Court in paragraph 14 (see page 832 supra) of the judgment and perhaps this question had come up earlier before the Supreme Court and the Supreme Court would have taken the view that the High Court has the power of recalling its order. It may be that those earlier decisions of the Supreme Court in which they have taken that view are not reported. But it does not mean that for the first time the Supreme Court has laid down the proposition per incuriam in Sudarsan Chits (I.) Ltd. v. G. Sukumaran Pillai [1985] 58 Comp Cas 633 , that the High Court has power to recall its order of winding up. This is also made clear by the Supreme Court in S. L. A. (Civil) No. 2583 of 1987 preferred against the order of winding up which was affirmed in appeal by the Division Bench. For these reasons, taking a contrary view would be to ignore the declaration of law made by the Supreme Court. It would not be proper for this court to take such a stand because these decisions of the Supreme Court do not indicate that there was a proposition by one ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... minority secured creditors and despite their objections the court in a given case to sanction the revival scheme. In view of this the official liquidator s objection that the applicant ought to have moved the court only under section 391 of the Companies Act, 1956, only amounts to a technical objection based upon his apprehension that recalling of winding up order might affect adversely any claimant or creditors who could not make his claim for all these years for want of specific invitation to lodge claim. This apprehension may be taken care of by issuing appropriate directions while passing the order of staying or recalling the winding up order in the interest of justice. The official liquidator has not pointed out as to how and in what way the revival of the company would affect any creditors or it is merely a facade for receiving back the valuable assets of the company. In the absence of any such plea and its establishment and in view of the fact that no objections have been received so far from any quarters and in view of the fact that sufficient precautions could be ordered for taking care of those creditors and claimant, if any, who despite two earlier notices have chosen to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y been produced on page 20 of the present application. 36. Shri Pahwa, learned counsel hands over documents which were lying with the bank to learned counsel Ms. Jani for the applicant in lieu of acknowledgment towards acceptance of the banker s cheques and fulfilment of the company s liabilities towards the SBI and its assignees. 37. Shri Yadav, learned counsel appearing for the official liquidator at this stage submits that the amount which is lying as mentioned on page 34 be considered while passing appropriate order. He further submits that if this court is inclined to accept the application, then sufficient care be taken in view of the fund position as mentioned in page 34 and the expenses so far incurred by the office of the official liquidator be permitted to be deducted and rest of the amount be ordered as may be deemed fit by the court. The fund position mentioned on page 34 of the application as on May 28, 2009, is as under : Cash Nil Bank Rs. 05,63,960.65 FDR Rs. 21,64,000.00 Total Rs. 27,27,960.00 38. Counsel for the applicant h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for intimating the claimants and creditors if any about the safeguard being provided hereinafter, and after arriving at an exact figure (including interest earned on the total amount of Rs. 27,27,960) same be notified to the other side or its advocate. From the amount, thus arrived at, 50 per cent. thereof be deposited in any scheduled bank by the official liquidator himself and that amount shall be kept for a period of 3 years. If any admissible claim is lodged, during the period of these three years then after honouring the same, the remaining amount if any, shall be returned to the applicant-company. The official liquidator is to function as the official liquidator qua the sum in fixed deposit and disburse the same to the claimant or creditors in accordance with law and in case the claim amount exceeds the amount so fixed deposited then the company would be liable to make good the deficit if it fails to meet with this liability then the same would be realised from its assets as if the company is under liquidation. If no claim is lodged by any one then the entire amount so deposited with interest accrued thereon be returned to the company. (b)After effecting the aforesaid deduc ..... 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