Revival over asset sale: company court may reshape tender terms to support a genuine revival scheme for a sick unit.
In a winding up proceeding following a reference under sick industrial company law, the High Court recognised jurisdiction to examine whether a workable revival scheme existed as an alternative to winding up, because revival is distinct from a mere sale of assets. It also held that the proposed global tender had to be aligned with the revival objective and the interests of ex-employees, so the eligibility criteria were restricted to gold-mining experience, the ex-employees' co-operative was given a practical first right of refusal, and the valuation and counter-offer mechanism was adjusted accordingly. The tender process was approved only with these modifications.
Issues: (i) Whether the company court had jurisdiction, after a reference under the sick industrial companies law and the opinion for winding up, to consider revival of the company as an alternative to winding up; (ii) whether the draft global tender documents submitted for approval required modification to align with the object of revival and the interests of ex-employees, including the eligibility criteria, the first right of refusal and valuation mechanism.
Issue (i): Whether the company court had jurisdiction, after a reference under the sick industrial companies law and the opinion for winding up, to consider revival of the company as an alternative to winding up.
Analysis: The statutory scheme of section 20 of the sick industrial companies law contemplates a report by the Board, an order of winding up by the High Court on that basis, and also preserves the Board's power to sell assets under the non obstante clause. The earlier authorities relied on by the objectors were distinguished as cases dealing with sale of assets or with pendency before the Board, whereas the present matter concerned revival in the context of a company petition already pending before the company court. The Court held that revival is conceptually distinct from mere sale of assets, and that in a winding up proceeding the company court can examine whether a workable revival scheme exists as an alternative to winding up, without being mechanically bound to order dissolution merely because the Board has recommended it.
Conclusion: The company court had jurisdiction to consider revival of the company, and the objection to maintainability on that ground was rejected.
Issue (ii): Whether the draft global tender documents submitted for approval required modification to align with the object of revival and the interests of ex-employees, including the eligibility criteria, the first right of refusal and valuation mechanism.
Analysis: The Court accepted the need for a global tender only as a means to ascertain value in the context of revival, not as a pure sale-of-assets exercise. It held that the tender documents had to reflect that object, and that the ex-employees' co-operative should be given a practical first right of refusal based on minimum technical competence, not on parity with all other bidders. The Court further held that gold mining is a specialised activity and the eligibility clauses had to be confined to gold-mining experience rather than being diluted by allowing experience in other minerals or coal. The valuation and counter-offer structure was also adjusted so that the ex-employees would be offered the lower of the highest bid and the in-house valuation, and if they declined, the highest bidder would be considered on the bid price quoted by it. Clauses describing the process as a sale of assets were directed to be read and amended in the context of revival.
Conclusion: The tender documents were approved only in part, subject to the specified amendments and directions.
Final Conclusion: The proceeding was disposed of by permitting the revival-oriented tender process, but only after substantial modification of the bid documents and related procedure to ensure consistency with the revival objective and fairness to ex-employees.
Ratio Decidendi: In a winding up proceeding arising from a reference under the sick industrial companies law, the company court may still examine and facilitate a genuine revival scheme as an alternative to winding up, and may regulate the tender process accordingly to ensure that revival, not mere asset disposal, remains the governing objective.
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