2004 (3) TMI 438 - HC - Companies Law

Court denies stay applications in company suit, citing lack of support for scheme, creditor opposition, and criminal case concerns.

Prakash Hassaram Mahtani Versus Official Liquidator of Nielcon Ltd.

Prakash Hassaram Mahtani Versus Official Liquidator of Nielcon Ltd. - [2004] 53 SCL 264 (BOM.) Issues:1. Stay of suits against the company and its promoters during the consideration of the Scheme of Compromise.2. Convening meetings of shareholders and creditors to consider the Scheme of Compromise.3. Opposition by secured creditors to the proposed scheme.4. Lack of material details in the proposed scheme.5. Jurisdiction of the Debts Recovery Tribunal and its impact on the company's revival.Stay of Suits:The applicant sought a stay on suits against the company and its promoters during the consideration of the Scheme of Compromise. The court was asked to grant a stay for 20 weeks after the Chairman's report of the last meeting of any class of creditors. However, the court rejected this relief due to opposition from secured creditors and lack of fruitful purpose in exploring support for the proposed scheme.Convening Meetings:Another issue involved convening meetings of shareholders and creditors to consider the Scheme of Compromise. The court was requested to give directions on the method of conducting these meetings and appoint a Chairman to report the results. The court addressed this issue in conjunction with the opposition from secured creditors and ultimately rejected the applications due to lack of support for the proposed scheme.Secured Creditors' Opposition:Secured creditors, including Bank of India and others, opposed the proposed scheme, claiming it lacked support from major creditors and essential details. The court noted that over 50% of secured creditors did not favor the scheme, leading to the rejection of the applications. The objections raised included defects in the scheme and concerns about the applicant's criminal cases, further contributing to the rejection.Lack of Material Details:The court found the proposed scheme to be defective, lacking material details such as the company's statutory liability and latest financial position. The absence of clear statements regarding statutory liabilities and financial information, especially the latest financial position, led to the rejection of the applications.Debts Recovery Tribunal Jurisdiction:The jurisdiction of the Debts Recovery Tribunal and its impact on the company's revival was a significant issue. The court considered the Tribunal's orders for the sale of the company's property, noting that the sub-stratum of the company had been affected. Due to the Tribunal's orders not being challenged, the court rejected the applications, emphasizing that any revival proposal would need to address the Tribunal's decisions.In conclusion, the court rejected both applications due to the lack of support from secured creditors, deficiencies in the proposed scheme, concerns about the applicant's criminal cases, and the impact of the Debts Recovery Tribunal's orders on the company's revival. The judgment highlighted the importance of creditor support, material details in schemes, and adherence to legal procedures in insolvency matters.