2013 (1) TMI 32 - HC - Companies Law

Court Upholds Winding-Up Order, Dismisses Stay Applications

The Court dismissed the applications for stay of the winding-up order dated 6th July, 2005, recall of the order dated 1st March, 2006, and modification of ... Stay of the winding up order – BIFR - Bonafide steps has been taken by the contributory to revive the Company – Held that:- At the meeting held on 25.2.2003 by BIFR it was specifically recorded that the Ministry of Chemical & Fertilizers, GOI was the promoter of the Company and had failed to implement the scheme formulated by it, though sanctioned by BIFR. From the order dated 25.2.2003 it will appear that ample opportunity was given to the Company and its promoters to submit a revival scheme and even after the formation of the prima facie opinion on 13.9.2002 a show-cause was issued and objections called to be heard on 25.2.2003. When no objection was filed or scheme submitted by the promoters BIFR recommended winding up. The last nail in the coffin so to say was the submission of the representative of the promoters. In favour of respondent Suppression of facts – Increase in price of the land since 1996 - Termination of the sale contract which has been accepted by HSCL - Land was belong to company under liquidation - After taking leave from BIFR said property was put up for sale by tender process to generate funds for implementation of a scheme - HSCL was the highest bidder and paid not only the earnest money but also sums aggregating to Rs.115.25 lacs out of the bid price of Rs.315.73 lacs till 7.1.1998 - By order dated 1.3.2006 HSCL was granted leave to deposit the balance consideration within 30 days from 1.3.2006 – Held that:- Price cannot be a factor as the Company accepted the offer of HSCL in 1996 and is seeking a revision in price in 2006, although there is no document disclosed evidencing price revision. The only document disclosed is with regard to revised payment schedule. In favour of respondent Appeal by Employees’ Union of the Company - From the order dated 25.2.2003 recommending winding up an appeal was filed by the Union - The said appeal was dismissed on 13.5.2005 - The restoration application was filed after the order dated 6.7.2005 - After the filing of appeal and before the filing of the restoration application the members of the applicant union had applied for VSS or VRS – On dated 3.3.2008 when the order was passed by the Appellate Authority there was no member of the Union – Held that:- It has been admitted by the applicant Union that on revival the workers will need to be reinstated and the workers will return the sums received. Once an employee has received VSS or VRS Voluntarily he can have no jural relation with the Company. The VSS or VRS taken is not conditional, therefore decides against respondent Issues Involved:1. Stay of the winding-up order dated 6th July, 2005.2. Setting aside the order dated 1st March, 2006.3. Modification of the order dated 24th March, 2006.4. Jurisdiction of the Company Court and AAIFR.5. Validity of the sale agreement between HSCL and ARCPL.6. Locus standi of the Workers' Union post-VRS acceptance.Detailed Analysis:1. Stay of the Winding-Up Order Dated 6th July, 2005The Union of India, as the 100% shareholder in Bengal Immunity Ltd. (BIL), sought a stay of the winding-up order dated 6th July, 2005, arguing that bonafide steps had been taken to revive the company based on a revival report. The Company Court had passed the winding-up order under Section 20 of the 1985 Act after BIFR recommended winding up on 25th February, 2003. The Appellate Authority (AAIFR) initially dismissed the Workers' Union's appeal against this recommendation but later set aside the winding-up order on 3rd March, 2008. However, the Company Court proceeded with the winding-up order as there was no pending appeal at the time. The Court concluded that the winding-up order dated 6th July, 2005, calls for no interference as the Company Court was empowered to pass the order when no appeal was pending.2. Setting Aside the Order Dated 1st March, 2006The applicant sought to recall the order dated 1st March, 2006, which directed the Official Liquidator to accept the balance sum from HSCL. The applicant argued that the sale agreement between HSCL and the company had been terminated due to non-fulfillment of terms, and there was an increase in the land price since 1996. The Court found that HSCL was the highest bidder and had paid substantial sums. However, due to mutual dissatisfaction, both parties had expressed a willingness to terminate the agreement. The Court observed that the order dated 1st March, 2006, was passed based on the submissions made by the parties and no extension of time for payment was sought by HSCL. Therefore, the application for recalling the order dated 1st March, 2006, warrants no order.3. Modification of the Order Dated 24th March, 2006The applicant sought modification of the order dated 24th March, 2006, arguing that the sale procedure was not followed, and the land price had increased. The Court noted that the sale was conducted after obtaining leave from BIFR and was outside the scheme. The order dated 24th March, 2006, was in implementation of the order dated 1st March, 2006, and calls for no modification or clarification.4. Jurisdiction of the Company Court and AAIFRThe applicant argued that BIFR's order dated 25th February, 2003, was set aside by AAIFR on 3rd March, 2008, thereby ousting the jurisdiction of the Company Court. The Court concluded that the Company Court was empowered to pass the winding-up order on 6th July, 2005, as there was no appeal pending at that time. The doctrine of merger did not apply as the BIFR's order could not merge with that of the High Court.5. Validity of the Sale Agreement Between HSCL and ARCPLHSCL argued that the sale agreement with the company was valid, and ARCPL had paid the monies on behalf of HSCL. The Court noted that both HSCL and the company had expressed willingness to terminate the agreement. The order dated 1st March, 2006, was based on the submissions made by the parties, and the application for recalling the order warrants no order. The agreement between ARCPL and HSCL was pursuant to the tender floated, and the sale was outside the purview of BIFR proceedings.6. Locus Standi of the Workers' Union Post-VRS AcceptanceThe Workers' Union argued that BIFR's order recommending winding up was set aside by AAIFR on 3rd March, 2008. However, the Court found that all employees had accepted VRS by 30th September, 2003, and the union could not maintain the appeal. The jural relationship between the company and its employees ceased upon acceptance of VRS, making the appeal and the application unsustainable.Conclusion:The applications for stay of the winding-up order dated 6th July, 2005, recall of the order dated 1st March, 2006, and modification of the order dated 24th March, 2006, were dismissed. The Court upheld the winding-up order and found no merit in the arguments presented by the Union of India, HSCL, and the Workers' Union. The sale agreement between HSCL and the company was deemed valid, and the Workers' Union lacked locus standi post-VRS acceptance.