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TMI Blog2013 (8) TMI 505X X X X Extracts X X X X X X X X Extracts X X X X ..... nt Services ("Gati") filed a creditor's winding-up petition under sections 433(e)/434(1)(a)/439 of the Companies Act, 1956 ("the Act") in the year 2001 seeking winding up of SBL. The petition was admitted by this court and the official liquidator ("OL") attached to this court was appointed as provisional liquidator. In the year 2006 the provisional liquidator was appointed the OL and a final winding-up order was passed. In the year 2007, Gati was paid off and it exited from the scene. Sometime in the year 2008, one P.C. Sen entered the scene with proposals for reviving SBL; he claimed himself to be the ex-director/largest shareholder in SBL, having bought those shares from SRF Ltd., a company which held a majority of shares in SBL; he also expressed his willingness to infuse funds into SBL and revive it, both through himself and through another company by name Gitanjali Infratech Ltd., which was stated to be his strategic partner. Monies were due by SBL to the State Bank of India (SBI), amongst other creditors. P.C. Sen brought in funds to pay off a sum of approximately Rs. 13 crores; the workmen who initially claimed that they would pay off SBI and present a scheme of revival, cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by SRF Ltd. in SBL were transferred to him was never produced; (d) P.C. Sen acquired the shares from SRF Ltd. under an agreement dated 5.6.2000 for a paltry sum of Rs.400/-, which is illusory. This shows that the share purchase was a sham transactionand that P.C. Sen was only a stooge of the owners of SRF Ltd. who did not really want lose control of SBL on account of its attractive real estate potential. (e) When P.C. Sen acquired the shares, there is no evidence that it was through a public offer as required by the relevant rules of the SEBI. (f) P.C. Sen succeeded in the revival scheme because he did not disclose the material facts truthfully to the court; several crucial facts were withheld by him from the court when his application in C.A.(M) 83/2013 was allowed. 5. The contentions of Mr. Kathpalia, appearing for the respondent-propounder (P.C. Sen), per contra, are as under: (a) The order of this Court dated 30.4.2009 records that there was no dispute at any time about the directorship of P.C. Sen. All the documents were submitted to the Registrar of Companies ("ROC") as required by the Act in which full disclosure was made. In fact, by this order he was not allowed to res ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tor of the company" and that apart from him there were only two directors, viz., Pankaj Kumar Dey and Ashok Chatterjee. There is reference to the fact that P.C. Sen had also submitted the statement of affairs on 18.3.2008. The aforesaid application was filed by him, according to the court, "submitting that Sh.P.C. Sen was not ex-director of the company and that he was only a major shareholder of the company". The court proceeded to note that P.C. Sen was a member of the audit committee and an independent and non-executive director, as per the annual return filed by the company as on 31.3.2005 with the ROC. It was then noted that since the company was under liquidation, the appointment of P.C. Sen and two other persons as additional directors with effect from 28.8.2005 was void (paragraph 8 of the order). Since the appointment itself was void, it was observed in the same paragraph that the "purported resignation" of P.C. Sen w.e.f. 1.9.2005 as chairman of the company "is also of no legal consequence and effect". It would thus appear that P.C. Sen did act as director of SBL for some time, but the court held his appointment void and of no effect. In fact, he had himself filed the appl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s not in dispute that he was a major shareholder of SBL and therefore it is irrelevant that he was not a director of the company, even if in fact he never was, in considering the question of his eligibility to apply for revival. This is however subject to the argument of Mr. Sinha, seriously contested by Mr. Kathpalia, that there was no real and effective transfer of shares in favour of P.C. Sen. That argument will now be examined. Was there a real transfer of shares in favour of P.C. Sen? Was the transaction sham? 11. So far as the first question is concerned, I have good reasons to think that there was. P.C. Sen bought 10,14,853 equity shares of SBL, of the face value of Rs. 1,01,48,530 from four different companies, of which SRF Ltd. was the main company, since it held 9,00,000 shares of SBL; the other three companies held, in the aggregate, the balance of 1,14,853 shares. A perusal of the agreement dated 5.6.2000 shows, inter alia, that SRF Ltd. did not sell the preference shares held by it to P.C. Sen. These were 2,47,50,000 in number of the face value of Rs.10/- each. The total consideration payable by P.C. Sen for the acquisition of the equity shares was Rs. 400/-, @ Rs.10 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... workmen did not object to the claim of P.C. Sen that he represented the ex-management and therefore had the right to participate in the settlement proceedings with the SBI and that they (i.e., workmen) alone have the right to do so. 13. On 12-10-2012, this court took up for consideration Co.Appln. No. 181/2011, filed by the workmen; no orders were passed and the application was directed to be listed on 7-1-2013. On 7-1-2013, the above application filed by the workmen was taken up for consideration along with the Co.Appln.No. 48/2008 filed by the ex-management, which was for revival of the rehabilitation package. In the order passed by this court on 7-1-2013, the following observations were made: i) Pursuant to the order dated 30-11-2011, the ex-management has settled the dues to SBI, a fact which was confirmed by counsel appearing for the Bank. Even the preference shareholders were paid off. The workers' dues would be paid as soon as the Committee appointed by the court submits its findings. These observations were made in the application filed by the ex-management. ii) In view of the fact that the dues to the secured creditors as well as the preference shareholders have been p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e this court for a long span of time - almost twelve years, reckoning from the date on which the Co.Petn.No. 321/2001 was filed. They never appear to have seriously questioned the bona fide of the revival scheme propounded by P.C. Sen, except to stake a claim to put forth a scheme themselves; but that right came to an end when this court passed an order on 7.1.2013 in Co.Appln. No. 181/2011, rejecting the application on the ground that their right would arise only if the ex-management failed to pay off the secured creditors and the preference shareholders. That order was accepted by them and I have not been informed of any appeal against the same having been filed by the workmen. 18. No objection was taken at any time to the transfer of shares in favour of P.C. Sen, on the ground of non-existence or non-execution of the transfer deed. In any case, annual returns showing the transfer of shares were filed, as pointed out by Mr. Kathpalia. Moreover, the share sale agreement dated 5.6.2000 itself speaks of the obligation of the buyer (P.C. Sen) to comply with SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 which he has fulfilled by making a public offer to buy ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... benami of the owners of SRF Ltd., which company held the majority of shares in SBL. There is no suggestion that the funds for the payment of Rs. 13 crores to SBI flowed from them (i.e., those who held shares in SRF Ltd.). To me, it makes no sense to first disgorge the majority shareholding in a loss-making, negative net worth company, and then attempt to infuse funds into the self-same company through the purchaser of the majority shareholding. No other close connection between the owners of the company which held the majority shares in SBL and P.C. Sen was shown, which could compel or persuade them to favour him, if at all there was any favour. It would appear that SRF Ltd. just wanted to exit because of the liabilities and the negative net worth of SBL, and found a buyer for its majority shareholding in SBL in P.C. Sen, who, along with his strategic partner Gitanjali Infratech Ltd. was adventurous enough to attempt to revive SBL. 21. Attention was drawn to a letter written by P.C. Sen on 27.8.2007 to the AGM, SBI, Shakespeare Sarani, Calcutta, seeking a one-time settlement (OTS). It was pointed out that P.C. Sen has stated therein that in view of the liquidation proceedings pend ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and on that basis dismissed the applications filed by SBL. 24. Since no proceedings have been shown to be pending under SICA before the BIFR, the argument based on section 22 of SICA need not be further examined. Is the propounder of the revival scheme guilty of concealment of material facts? 26. It was repeatedly urged by Mr. Sinha for the workmen that P.C. Sen did not furnish the complete facts, or furnished misleading information, before this court. Some of these were (a) that there was no public offer to purchase shares by P.C. Sen, a fact not made known to the court; (b) that he claimed to be an ex-director of SBL, while he was not; and (c) that the directors' report was not filed along with the balance sheet as on 31.3.2005. 27. I have already noticed that the share sale agreement dated 5.6.2000 itself confirms the fact that P.C. Sen had made a public offer to purchase shares in accordance with the SEBI rules and had also received 58 written offers through which he acquired 25,237 shares of SBL which were duly registered in his name. As regards the question about his holding the position of a director, I have already discussed this aspect; there is no need to repeat it h ..... 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