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TMI Blog2017 (7) TMI 226X X X X Extracts X X X X X X X X Extracts X X X X ..... ator if not properly safeguarded and utilized for the pressing public needs on the other hand may lead to even encroachments by unauthorized people on such public land, further engulfing the Government and the public authorities in a chain of litigations. Therefore, it is always appropriate and suitable if the idle immovable property of the Government Company like big chunk of land, as is available in the present case, is best utilized for the larger public interest and therefore this Court does not see any impediment or valid objection against such revival of the Company and restoring the assets of the Company to its Management under the provisions of the Companies Act, while staying the winding up process permanently at this stage subject to the compliance of the solemn Undertaking given by the State before this Court. As far as a few of the workmen are concerned, the learned counsel for the workmen also fairly submitted that such workmen whose dues have so far not been settled because of litigation by them or otherwise, they should be given an opportunity to place their claim before the concerned Nodal Agency viz. KSIIDC or the Management of the Company itself when a proper ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Winding Up order dated 03.08.2004 passed by this Court, on the recommendation of BIFR dated 02.08.2002 under Section 20(1) of the Sick Industrial Companies (Special Provisions) Act, 1985. 3. It has been stated in the said Company Application No.184/2015 that the State Government has 90.28% shareholding of the Respondent Company-NGEF Ltd., and the only other shareholder is M/s. Allgemeine Elektricitats - Gesellschaft Aktiengesellschaft, now known as 'EHG Elektoholding GmbH (EHG) ('German Company' for short) which held 9.72% of its shareholding. 4. The reasons stated in the said application and as canvassed before this Court by Mr. K.G.Raghavan, learned senior counsel appearing for the applicant-State of Karnataka are that after passing of the said winding up order on 03.08.2004, in the process of winding up, upon the sale of some of the assets of the Company, now the process of paying back all the secured and unsecured creditors including the workmen has been completed and all the secured and unsecured creditors have been fully paid to their satisfaction, barring the claim of a miniscule few of the ex-workmen, whose writ petitions were pending in this Court for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... plementation of infrastructure projects in public interest. Paragraph-17 of the said affidavit dated 09.03.2015 filed by the Managing Director of KSIIDC, the Nodal Agency, Mr. Naveen Raj Singh, IAS s/o late Rajkumar Verma, is quoted below for ready reference:- 17. I submit that, the crown jewel of the Company is the immovable properties situated at Bengaluru. The State had originally acquired the property during 1959 for the purpose of establishing of New Government Electrical Factory (NGEF), subsequent to which the same was transferred in to the Company in liquidation. Presently, the land measures 119.665 acres and is situated in the heart of the city. Further, by having integrated transport project in the adjacent land by BMTC, KSRTC and the Metro pursuant to acquisition of land which belong to the Company, there is an escalation in the value of the properties. The remaining land can be better utilized by the Applicant for implementation of infrastructure projects in public interest Paras 7 and 8 of the OLR No.85/2017 are also quoted below: 7. That relying on the Affidavit filed by the Special Land Acquisition Officer before this Court it appears that an extent of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sets and the repayment of all the creditors by now. The learned counsel for Official Liquidator Ms.Revathi Adinath Narde in the presence and upon instructions of the Deputy Official Liquidator, Ms. Latha Parimala Vadan, has also submitted before the Court that some of assets of the Company are situated outside the State of Karnataka and some silver items are still in the possession of the Official Liquidator for which they had filed OLR No.369/15 in this Court and OLR No.139/16, in which the details of these assets are given for seeking appropriate direction from this Court. 10. No creditor of the Company has raised any objection to the stay or recall of the winding up order. The only objection put forth before this Court is by the minority shareholder-the German Company (EHG) represented by learned counsel, Mr. R.V.S. Naik, who vehemently opposed the recall of the winding up order on the ground that Section 466 of the Companies Act, 1956, does not provide for any such recall of the winding up order by this Court and even for staying the winding up process under Section 466, there are no circumstances calling for such an order by this Court. 11. The learned counsel for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Company in liquidation. 48. In fact, it was on this basis that the Division Bench of the High Court proceeded when it passed the order dated 4.4.1995. Apart from the fact that the correct principle was adopted, the directions therein are binding on the Company Court and the Division Bench of the High Court of coequal jurisdiction when the proposal for amendment of the earlier scheme came up. It has to be noted that it was not a fresh scheme that was being mooted, but it was a proposal for an amendment of the scheme already considered by the Division Bench when it passed the order dated 4.4.1995. It was the plain duty of the Division Bench on the latter occasion to keep in focus the suggestions earlier made. 49. It was argued before us on behalf of the appellant that Sections 391 to 394A were procedural provisions and when once a Company was under liquidation, the Chapter dealing with winding up applied and the only provision or substantive provision conferring power of stopping the winding up was conferred on the court by Section 466 of the Act, and unless the court is satisfied that the Company is being taken out of liquidation by way of revival and that it will sub-ser ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and conforms to commercial morality. 52. We cannot understand the decision in Miheer H. Mafatlal v. Mafatlal Industries Ltd. [(1997) 1 SCC 579] as standing in the way of understanding the scope of the provisions of the Act in the above manner. We are therefore satisfied that the Company Court was bound to consider whether the liquidation was liable to be stayed for a period or permanently while adverting to the question whether the scheme is one for revival of the Company or that part of the business of the Company which it is permissible to revive under the relevant laws or whether it is a ruse to dispose of the assets of the Company by a private arrangement. If it comes to the latter conclusion, then it is the duty of the court in which the properties are vested on liquidation, to dispose of the properties, realise the assets and distribute the same in accordance with law. The principles as highlighted above are precisely what this Court intends to follow in the present case. But the facts in that case were very different from the facts of the present case. In that case, a private Textile Mill was purportedly sought to be revived through sale of its land to another Pri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther temporarily or even permanently and the applicant - State has also invoked Rules 6 and 9 of the Companies (Court) Rules, 1959, in which this Court has inherent powers to pass such appropriate orders as considered fit, in the facts and circumstances of the case before the Court. He submitted that Section 466 of the Companies Act applies only for staying of the winding up proceedings in particular circumstances either temporarily or permanently and there is no specific provision in the Companies Act, 1956, empowering this Court to recall the winding up order but Rules 6 and 9 of the Companies (Court) Rules, 1959 can be invoked for recall of the winding up order. He referred to several judgments, inter alia, also the judgment of the learned Single Judge of this Court in the case of G.T. Swamy v. Goodluck Agencies [1990] 69 Comp. Case 819 (Kar.), wherein this Court referring to two previous Supreme Court decisions, in the case of Sudarshan Chits v. Sukumara Pillai AIR 1984 SC 1579 and M.L. Chopra v. Rai Bahadur AIR 1962 SC 527 held that the power to recall the winding up order is clearly traceable to Rules 6 and 9 of the Companies (Court) Rules. He submitted that in the present ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rd the assets of the Company which has defaulted in payment of its admitted liabilities and under other contingencies as envisaged in Section 433 of the Act, under which the winding up order is passed by the Court, other than a case of the voluntary winding up as provided under Chapter -III of Part- VII of the Act and then to ensure that the assets of the Company are sold to realize and fetch the reasonable and maximum net value of such assets of the Company, so that the secured and unsecured creditors are paid off by the Official Liquidator, attached with the Court. The assets of the Company during the process of winding up remains in the custodia legis of the Official Liquidator of the Company Court and the Official Liquidator attached with the Court executes the winding up orders passed by the Company Court. There is no compulsion in law that the winding up order must finally culminate into a Dissolution order in all the cases. If during the process of winding up, the sale of some assets are enough to pay off all the secured and unsecured liabilities of the Company, as in the present case, and the Company is still left with surplus assets, it can certainly apply to the Court for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rence:- 466. Power of Tribunal to stay winding up .- (1) The Tribunal may at any time after making a winding up order, on the application either of the Official Liquidator or of any creditor or contributory and on proof to the satisfaction of the Tribunal that all proceedings in relation to the winding up ought to be stayed, make an order staying the proceedings, either altogether or for a limited time, on such terms and conditions as the Tribunal thinks fit. (2) xxxxxxx (3) xxxxxxx Rule 6. Practice and procedure of the Court and provisions of the Code to apply.- Save as provided by the Act or by these Rules, the practice and procedure of the Court and the provisions of the Code so far as applicable, shall apply to all proceedings under the Act and these Rules. The Registrar may decline to accept any document which is presented otherwise than in accordance with these Rules or the practice and procedure of the Court. Rule 9. Inherent powers of Court.- Nothing in these Rules shall be deemed to limit or otherwise affect the inherent powers of the Court to give such directions or pass such orders as may be necessary for the ends of justice or to prevent abuse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y NGEF before this Court in the present case is a Government Company whose 90% of shareholding is held by the State of Karnataka itself and the objection is being raised by a minority shareholder, the German Company, who holds only 10% of the shareholding and none else, not any of the creditors of the Company. Even if a detailed Scheme of revival could not be produced before this Court along with C.A.No.184/2015, which is being considered now, the undertaking given before this Court and the purpose for which a recall of winding up order is sought is, that the huge land of 119.665 acres of land will be used exclusively for public projects mostly infrastructural projects like those of Metro Rail, BMTC, KSRTC, viz. Super Speciality Public Hospitals or AIIMS Institutions, Gardens or other Educational Institutions, etc. only. The sub-serving of the public purpose and public interest at the hands of the State Government, the 90% shareholder of this Government Company can be presumed also from the averments and Undertaking of the State and there is no contra material placed before this Court to draw any adverse inference against the applicant State of Karnataka that it will not abide by i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r - German Company before this Court. In the present case the State is seeking the revival of a Government Company for larger public benefit by development of infrastructure projects, plantation to maintain ecological balance. There is no chance of surreptitious disposal of land for private gains of the Company, therefore question of sale by public auction does not arise at all. 26. On the other hand, in paragraph 14 of the judgment of the Hon'ble Supreme Court in the case of Sudarshan Chits (I) Ltd. (supra), the Hon'ble Apex Court held that the winding up order once made can be revoked or recalled but till it is revoked or recalled it continues to subsist and while it is subsisting, the Company Court can give necessary directions to the Provisional Liquidator to take recourse to Section 446(2) of the Act. Relying upon the decision of the Hon'ble Supreme Court in the case of National Textile Workers Union v. P.R. Ramakrishnan AIR 1983 SC 75, the learned Single Judge of this Court in the case of G.T. Swamy (supra) held in paragraph 17 of the judgment that the power of the Company Court to recall the winding up order is recognized by the Supreme Court in the aforesa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 28. In Palmers' Company Law, Volume 1, 22nd Edition in Article 81-98 at page.938 the principle is summarized as follows:- The Court has a discretion, on the application of the liquidator or official receiver, or any creditor or contributory, to stay the proceedings under a winding up order (S.256). In exercising this discretion the Court will be guided by the analogy of bankruptcy in rescinding a receiving order - that is to say, it will consider the interests of commercial morality and not merely the wishes of creditors and will refuse a stay if there is evidence of misfeasance or of irregularities demanding investigation. And also in Article 83-60 at Page 1001 which is as follows: The Court has discretion, on the application of the liquidator or any creditor or contributory, to stay winding up proceedings at any time (S.256(1). A copy of any such order must be sent by the Company, or otherwise as the Court may prescribe, to the Registrar of Companies (S.256(3). In exercising its discretion under this Section the Court will consider the interests of commercial morality and not merely the wishes of creditors, eg., if there appear to be irregularities requir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has helped to maintain confidence in the certainty and evenhandedness of the law. But in the field of statute law the Judge must be obedient to the will of Parliament as expressed in its enactments. In this field Parliament makes, and unmakes, the law; the Judge's duty is to interpret and to apply the law, not to change it to meet the Judge's idea of what justice requires. Interpretation does, of course, imply in the interpreter a power of choice where differing constructions are possible. But our law requires the Judges to choose the construction which in his Judgment best meets the legislative purpose of the enactment. If the result be unjust but inevitable, the Judge may say so and invite Parliament to reconsider its provision. But he must not deny the statute. Unpalatable statute law may not be disregarded or rejected, merely because it is unpalatable. Only if a just result can be achieved without violating the legislative purpose of the statute may the Judge select the construction which best suits his idea of what justice requires. Further in our system the rule stare decisis applies as firmly to statute law as it does to the formulation of common law and equi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t (page 641): However, the narrow question which is required to be considered in this appeal is: whether the winding up proceedings were pending or had come to an end when the Appellate Bench froze the winding up order by keeping it in abeyance? Let it be made at, once clear that the winding up order made by the learned company judges in respect of the appellant-company, has neither been quashed, set aside, cancelled, revoked nor recalled. On the contrary after directing that the winding up order shall be held in abeyance, the Appellate Bench directed that the official liquidator shall continue to act as provisional liquidator as provided by section 450 and that itself is a stage in the winding up proceedings. When the winding up order is kept in abeyance it is in a state of suspended animation. The fact that the Appellate Bench directed that pending implementation of the scheme as sanctioned by the High Court, the winding up order will be kept in abeyance itself without anything more shows that the order was neither cancelled nor recalled nor revoked or set aside. It continued to exist but was inoperative. Any default on the part of the company in carrying out its obligation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... applicants, be it Official Liquidator or a Creditor or a contributory or a share holder. Here, the applicant is the majority share holder, viz. the State of Karnataka itself and this Court is not only satisfied but records its happiness for a Government Company seeking to come out of the process of winding up by this Court and for removing the impediment on the user of the assets of the Company, the big chunk of land for public purposes and for that purpose seeking its revival. The revival of Company does not necessarily mean revival and restoring of the usual manufacturing or the business activity. It is a broader term including therein, the best utilization of its assets including the vacant land. 34. In other words, even by a permanent stay of winding up process under Section 466 of the Act at this stage, Section 466 of the Act provides for a platform to the Company Court to not only permanently or temporarily suspend the winding up process but to permit the Company to revive either its running business to utilize its assets which are free from the charge of the creditors and workers' liability or are likely to be free from it charge soon, if the Company has made adequat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acres only for public purposes in the form of infrastructure development etc. only would include the following and therefore this Court also directs and enjoins upon the State to undertake thick afforestation and Tree Plantation work on the said land which will maintain the ecological balance and provide additional lung capacity and fresh air to the otherwise dying Garden City of Bengaluru. With its first quarterly report, State shall submit the details of the total number of existing trees on the said land of 119.665 Acres of land, with types of the trees and the site photographs of the entire area covered in different photographs taken zone-wise and its plan to undertake the plantation work in phased manner in future as well. 39. In view of the aforesaid, Company Application No.184/2015 is allowed and the winding up order dated 03/08/2004 passed by a co-ordinate bench of this Court is stayed or sisted and kept in suspension sine-die and the recommendation of the BIFR dated 02/08/2002 forwarded to this Court for winding up of the Company is also stayed permanently subject to the further orders of this Court. 40. The Official Liquidator may now take steps to handover the a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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