TaxTMI 
TaxTMI 
2006 (2) TMI 290
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....eme of arrangement with regard to the secured creditors, whereas the later is with regard to the specified unsecured creditors. 2. The petitioner-company was incorporated on 15-5-1986 in accordance with the provisions of the Companies Act, 1956. The petitioner-company became a public limited company on 14-7-1986. The share capital of the petitioner-company as on 31-3-2005 is stated to be as under: Authorised Figures in Rs. 3,00,00,000 Equity Shares of Rs 10 each 30,00,00,000 10,00,000 2 per cent Cumulative Convertible Preference Shares of Rs.100 each 10,00,00,000 10,00,000 5 per cent Cumulative Convertible Preference Shares of Rs.100 each 10,00,00,000 20,00,000 Redeemable Preference Shares of Rs.100 each 20,00,00,000 Total 70,00,00,000 Issued subscribed and paid-up 95,34,090 Equity Shares of Rs. 10 each 9,53,49,900 2,50,000 Redeemable Preference Shares of Rs. 100 each 2,50,00,000 Total 12,03,40,900 3. The main objects of the petitioner-company on its incorporation are as follows: "(i )To carry on business in India and elsewhere as manufactures, products, processors, formulators, sellers, importers, exporters, merchants,....
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....p to streamline operations of both the companies-resulting in the petitioner-company overcoming its accumulated losses on the assumption that Wanbury Limited has global presence in APIs and is manufacturing Metformin and Salsalate and has introduced other products like Amytriptaline, Tramadol, Promethazine and Sertraline over the last few months. It is stated that Wanbury Limited is the World's largest producer of Metformin and it caters to API markets in over 40 countries especially the related markets in North America, Europe etc. It is further stated that Wanbury Limited enjoys an excellent customer loyalty with over 200 companies across the globe and is keen to explore avenues to enhance its sales and increase its capacities to address the increased need of its customers. 6. As mentioned earlier, for the offer made by the said Wanbury Limited who has come forward to act as strategic partner, on 14-4-2005, the board of directors of the petitioner-company considering all the aspects of the matter resolved that subject to the directions and sanction of the appro-priate court as may be required under law and subject to such permission of such other authorities as may be necessar....
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....le III hereto. On or prior to the date on which the present scheme is filed PPIL, shall procure and file before the Hon'ble Court before whom the scheme will be filed under section 391 of the Companies Act, 1956, a certificate of non-objection from the partners of Neeldeep Plastics, will be filed for the transfer of the aforesaid building described in Schedule III, in accordance with clause 5.1.5 of this scheme. 3.3 Terms and conditions: 3.3.1 The Secured Creditors have agreed that the consideration referred to in clause 3.2 shall be a settlement towards outstanding dues for which charge had been created on the assets of PPIL. 3.3.2 The amounts that remain outstanding out of the amounts set out in clause 3.1 shall be treated as unsecured loans and the rights of the secured creditors to the extent that the outstanding amounts which remain unpaid after the agreement of the secured creditors to the scheme have been procured shall be the same as those unsecured creditors of PPIL. 3.4 The Secured Creditors have also agreed that the payment of the consideration referred to in clause 3.2 shall occur only after the AAIFR or other competent forum or court has passed orders for t....
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.... and agree on this scheme. 4. Consideration to each secured creditors. 4.1 It has been agreed that the total payment of the consideration referred to in clause 3.2, to the secured creditors shall amount to the following: LendersEquityNCDOFCDCash Total ARCIL5,988,49214,970,92135,930,21014,856,38271,746,006 IIBI583,2221,458,0243,499,2581,446,8696,987,374 Unit2,400,4456,000,99014,402,3765,955,07828,758,889 Trust of India Bank of207,262518,1451,243,549514,1812,483,137 India Bank of442,5841,106,4362,655,4471,097,975,302,438 Baroda Union Bank78,195195,483469,160193,988936,826 of India Total9,700,20024,250,00058,200,00024,064,470116,214,670 Principal (Figures in Rupees) 4.2 In addition to the above the immovable assets referred to in clause 3.2 of the scheme valued at Rs. 2,25,80,000 (Two crores twenty five lakhs eighty thousand only) shall also be part of the consideration in accordance with the provisions of this scheme. 5. Method and Mode of paying consideration : 5.1 Subject to clause 3.3.1 and 3.3.2, as full and final consideration and in full settlement of all dues, overdrafts, borrowings, interest payments, penalties, guar....
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....deemable at the face value of Rs. 40 each at the end of three years from the date of issue of the NCDs. The NCDs shall be issued to the secured creditors within 30 days of the Effective Date and subject to the consents/approvals and in the manner prescribed by the relevant agencies, authorities and bodies including the BIFR/AAIFR and the appropriate Courts. Wanbury shall take all necessary steps to obtain such approvals. The NCDs shall be pari passu secured against the fixed assets of Wanbury. Lenders NCD No. of NCDs ARCIL 14,970,921 149,709 IIBI 1,458,024 14,580 Unit Trust of India 6,000,990 60,010 Bank of India 518,145 5,181 Bank of Baroda 1,106,436 11,064 Union Bank of India 1,095,483 1,055 Total 24,250,000 242,499 5.1.4. Zero coupon Optionally Fully Convertible Debentures (OFCDs) : (a )Wanbury shall take such steps as are necessary issue OFCDs of a face value of Rs. 1,000 per OFCD within 30 days of the Effective Date as stated below : Secured lenders amount No. of OFCDs ARCIL Trust 35,930,210 35,930 IIBI 3,499,258 3,499 UTI 14,402,376 14,402 BOI 1,24....
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....L to each of the secured creditors on the following basis : Sharing of ownership and sale proceeds As Secured Lender ARCIL 52.90 per cent IIBI 5.33 per cent Unit Trust of India 21.92 per cent Bank of India 1.89 per cent Bank of Baroda 5.55 per cent Union Bank of India 0.98 per cent Total Principal 88.57 per cent (b)PPIL shall extend suitable cooperation to ARCIL and sign or cause to be singed all documents necessary for the sale of the said properties to give effect to this clause. (c)Any fee and/or expenses/costs incurred by ARCIL/Wanbury/PPIL in relation to the said properties shall be deducted from the sale proceeds of the said properties. (d)The secured creditors shall if though necessary by then execute amongst themselves documents as required their agreement to the sale of the properties by ARCIL or make such other arrangement as they deem fit for the expeditious sale of the property and/or distribution of the consideration received from the sale thereof in the proportion mentioned in sub-clause 5.1.5(a). Wanbury and/or PPIL shall have no liability on these assets including taxes, costs and/or charges payable or incurre....
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....y be directed by the High Court of Judicature at Bombay. (c)Sanctions and orders under the provisions of section 391 of the Act being obtained by PPIL from the High Court of Judicature at Bombay. (d)Receipt of the order of AAIFR and/or such other forum setting aside the recommendations for winding up of PPIL, passed by the BIFR. (e )Approvals of the shareholders of Wanbury. (f )Approval and acceptance of an overall settlement including an order for merger, or other mode of acquisition of assets of PPIL by Wanbury or such scheme of PPIL by BIFR/AAIFR. (g )Filing and submission of any of the aforesaid orders of any forum with any agency/statutory body, as may be required,including the RoC and. (h)All other sanctions and approvals as may be required in respect of this scheme being obtained. 9.2 This scheme shall become effective on the date on which all the conditions referred to in clause 9.1 have been duly met/completed and such date shall be the effective date for the purposes of this scheme. 10. Effect of Non-Receipt of Approval/Sanctions : In case the scheme is not sanctioned by the High Court of Judicature at Bombay, or in the event any of the approval....
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....prox. 275.17 sq. meters of constructed mezzanine spare and located at 212, Marwah Industrial Estate, Saki Vihar Road, Saki Naka, Mumbai-400072 and bearing the particulars mentioned in Schedule II hereto. (c)The building owned by PPIL, through its partnership firm Neeldeep Plastics, located at D-306, TTC Industrial Area, MIDC, Turbhe, Navi Mumbai-400705 and bearing the particulars mentioned in Schedule III hereto. 3.3 Terms and conditions : 3.3.1 The Unsecured Creditors have agreed that the consideration referred to in clause 3.2 shall be in full and final settlement of all dues and liabilities of PPIL (and the guarantors) for the liabilities of PPIL towards the Unsecured Creditors. 3.3.2 The unsecured creditors have also agreed that the payment of the consideration referred to in clause 3.2 and the transfer envisaged in this scheme shall occur only after the AAIFR or such other forum or court has passed orders for; (a) merger of PPIL with Wanbury Limited; and (b) passed such other orders facilitating a complete transition of PPIL assets and ownership, free of encumbrances, to Wanbury, to the satisfaction of Wanbury and all approvals have been acquired from all parties, ....
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....a 584,182 General Insurance Corpn. of India 70,102 New India Assurance 81,786 United India Insurance 81,786 GIC Mutual Fund 233,673 LIC Housing Finance 116,836 Army Group Insurance Fund 233,673 ICICI Bank 623,907 Ind Bank Merchant Banking 467,346 Services Limited Abhyudaya Coop Bank Limited 53,044 Indusind Bank Ltd. 73,140 Total principal 15,002,966 4.2 In addition to the above the immovable assets referred to in clauses 3.2(b) and 3.2(c ) of the scheme valued for the purposes of this scheme, at Rs. 2,25,80,000 (Two crores twenty five lakhs eighty thousand only) shall also be part of the consideration payable in accordance with the provisions of this scheme, after the assets have been appropriately dealt with in accordance with the scheme of arrangement with the secured creditors under section 391 of Companies Act, 1956. 5. Method and Mode of paying consideration : 5.1 As full and final consideration and in full settlement of all dues, overdrafts, borrowings, interest payments, penalties, guarantees, equity conversion rights or other rights whatsoever, Wanbury would give to the unsecured cred....
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....fect to this clause. (c )Any fee and/or expenses/costs incurred by ARCIL/Wanbury/PPIL in relation to the said properties shall be deducted from the sale proceeds of the said properties. (d)The unsecured creditors shall if though necessary by then execute amongst themselves documents as required their agreement to the sale of the properties by ARCIL or make such other arrangement as they deem fit for the expeditious sale of the property and/or distribution of the consideration received from the sale thereof in the proportion mentioned in sub-clause 5.1.5(a). Wanbury and/or PPIL shall have no liability on these assets including taxes, costs and/or charges payable or incurred in respect of the properties or sale of these properties or the distribution of the proceeds therefrom to the unsecured creditors or the allocation and sale thereof to the unsecured creditors as the case may be and Wanbury/PPIL shall have no involvement or role in such agreement entered into between ARCIL and the other unsecured lenders and as such, on the effective date, the loans, dues and liabilities towards the unsecured creditors whether from PPIL, Wanbury and/or any of their associates, officers, empl....
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....s of the shareholders of Wanbury. (f )Approval and acceptance of an overall settlement including an order for merger, or other mode of acquisition of assets of PPIL by Wanbury or such scheme of PPIL by BIFR/AAIFR. (g )Filing and submission of any of the aforesaid orders of any forum with any agency/statutory body,as may be required, including the RoC and (h)All other sanctions and approvals as may be required in respect of this scheme being obtained. 9.2 This scheme shall become effective on the date on which all the conditions referred to in clause 9.1 have been duly met/completed and such date shall be the effective date for the purposes of this scheme. 10. Effect of non-Receipt of Approval/Sanctions : In case the scheme is not sanctioned by the High Court of Judicature at Bombay, or in the event any of the approvals or conditions enumerated in para 9.1 above not being obtained or complied, or for any other reason, the scheme cannot be implemented, the status quo of the unsecured creditors of PPIL shall be restored as if the scheme had not been proposed and all liabilities of PPIL towards the secured creditors and the rights of the unsecured creditors including ....
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....ority in number representing more than 3/4th in value. 11. Insofar as the meeting of the specified unsecured creditors is concerned, it is stated that the same was attended by 12 unsecured creditors of the petitioner-company through representatives. With the consent of all unsecured creditors present at the meeting all documents were taken as read and the scheme was put to vote. It is stated in the report of the chairperson that on scrutiny by the scrutinisers, 12 ballots representing value of Rs. 24,512 lakhs unsecured creditors were found in ballot box, eight ballots representing value of Rs. 20,027 lakhs unsecured creditors validly voted "For the Scheme", four ballots representing value of Rs. 4,485 lakhs unsecured creditors validly voted "Against the Scheme". It is stated that there was no invalid ballots and that the scheme was approved by majority of over 3/4th in value and in number. 12. The petitioner-company has thereafter approached this court by way of present petitions under section 391 of the Companies Act, 1956 for sanction with or without modification of the arrangement embodied in the respective schemes of arrangements and for declaration that the same is bind....
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....t is stated that UTI could not recover the said amount due to the pending proceedings under the Sick Industrial Companies (Special Provisions) Act, 1985, hereinafter referred to as "SICA" in respect of the petitioner-company. Insofar as the merits of the proposed scheme is concerned, according to the UTI it will not recover even the principal amount of Rs. 8 crores as the arrangement was of Rs. 3.3 crores approximately towards its dues which are amounting to Rs. 46 crores. The arrangement is by payment in the form of cash of 75.61 lakhs equity of Rs. 24 lakhs, NCDs Rs. 60 lakhs of Optional Fully Convertible Debentures (OFCDs) Rs. 144.02 lakhs. This amount would represent only 37.5 per cent of the principal amount of Rs. 8 crores with the result the UTI will have to suffer huge sacrifice which is not suitable to the business/regulatory requirements of the UTI. Besides the sacrifice of huge amount of repayment is spread over for long period of the NCDs and OFCDs. It is stated that the amount which will have to be sacrificed by the UTI is essentially the public money contributed by general public/ small investors. 15. It is then stated that UTI is a separate class of creditors as t....
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....company were allowed to pursue the present remedy before this court that would virtually render the proceedings before the AAIFR fate accompli. In any case, this court would be required to undertake the exercise of considering the sanction of only partial arrangement and not consider the entire gamut so as to formulate a comprehensive scheme, which can be done only by the Board under the provisions of SICA. It is then stated that the scheme as propounded provides that the sanction of the scheme by this court will be subject to the order to be passed by AAIFR, in such a case this court should be slow to entertain the relief claimed in the petition; for it will create a situation of inconsistent orders passed by two different forums. It was lastly contended that the petition makes no disclosure about any scheme of arrangement in relation to unsecured creditors as a whole or specified unsecured creditors. That however, has been made only after the objection was raised to the present scheme by the UTI. On the above arguments it was contended on behalf of the UTI that the petition should be dismissed and request of the petitioner-company for sanction of the proposed scheme of arrangemen....
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...., even in that case, the present Petition will have to be rejected unless the Petitioners were to elect one of the available two remedies. There is no substance even in this objection. The question of election of remedy would arise when both the remedies provide for same relief. That is not the case on hand. Besides, as mentioned by Justice S.U. Kamdar, the scheme of two enactments operate in different spheres, though not inconsistent with each other. If it is so, the question of electing one of the two remedy does not arise." (p. 371) 18. As mentioned earlier, the learned counsel for UTI had relied on the decision of Rajasthan High Court in case of Krishna Mills Ltd. (supra). That was a petition for winding up of the company under section 433(c) and 433(f) of the 1956 Act with further prayer for appointment of the Official Liquidator as the liquidator of the company. Indeed, wide observations have been made in paras 8 and 10 to 12 of this decision. The relevant portion of the said paras 8 and 10 to 12 as under : "8. ...It is, thus, clear that the 1985 Act is designed as a special statute for making efforts to protect the sick industrial companies from death. As far as possib....
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....e provisions contained in sections 16 to 19 read with section 25 of the 1985 Act are intended to save the corporate personality. For this reason also the non obstante clauses contained in sections 22(1) and 32(1) shall prevail." (p. 303) Relying on the above observations the learned counsel for the UTI would contend that once proceedings under the provisions of SICA are pending the jurisdiction of this court is completely excluded. It is not possible to accede to this submission. As is noted earlier similar contention has been considered by me in the case of Sharp Industries Ltd. (supra) and rejected. Besides, what is overlooked by the learned counsel is the conclusion recorded in para 25 of the said decision of the Rajasthan High Court which reads thus : "25. On the basis of the above discussion, it is held : (1) That the provisions of the 1985 Act are special provisions qua the Companies Act, 1956, and, therefore, the former shall prevail over the latter in case of inconsistency". (p. 308) The ultimate conclusion recorded in this decision is the correct statement of law which is consistent with the view taken by our High Court in the case of National Organic Chemical Ind....
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.... who has come forward to extend necessary financial aid so as to revive the petitioner-company. Viewed in this perspective, it is not as if the proceedings on hand are in any manner inconsistent either with the objects or the provisions of the SICA. 20. There is yet another formidable argument pressed into service on behalf of the petitioner-company. The learned counsel for the petitioner has invited my attention to the purport of section 18 of the SICA, which pertains to the scheme with respect to sick company providing for any one or more of the measures specified in sub-section (1) thereof. Assuming that the proposed scheme in relation to secured creditors was referable to one of the measures provided for in section 18(1) of the Act of 1985; even so, for the nature of the proposed scheme, it would require the secured creditors to give concession or make sacrifice of the outstanding dues. The named secured creditors are the Banks and Financial institutions referred to in sub-section (1) of section 19 of the Act of 1985. If it was sanction of a scheme simplicitor under section 18 of the Act undoubtedly by virtue of sub-section (8) of section 18 of the Act of 1985, the direction....
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....ason it stood in a different category. None of these submissions commend to me. The first grievance has been rightly countered by the petitioner-company by asserting that the petitioner-company cannot be blamed for not creating the said charge of UTI in the immovable properties for the simple reason that the other secured creditors did not consent for such charge being created in favour of UTI. Even the argument of UTI that the classification of secured and unsecured creditors is unrealistic, cannot be accepted. It is well established that such classification is permissible. It is not possible to accept the argument of UTI that they have been wrongly classified along with other 5 secured creditors specified in the scheme of secured creditors. There is no dispute that UTI had invested Rs. 600 lakhs in 18 per cent NCDs which are secured by mortgage of the immovable properties of the petitioner. The interest of UTI was the same as that of other five specified secured creditors. All these secured creditors were required to provide concession or sacrifice the outstanding dues receivable by them from the petitioner-company. They therefore formed a homogeneous class and have been rightly ....
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.... a sub-class would at all survive. It is then observed that unless a separate and different type of Scheme of Compromise is offered to a sub-class of a class of creditors or shareholders otherwise equally circumscribed by the class, no separate meeting of such sub-class of the main class of members or creditors is required to be convened...." (p. 375) 22. That takes me to the grievance of UTI that it is required to make huge sacrifice and would receive only upto 37.5 per cent of the principal amount in terms of the proposed scheme, which will not be suitable to its business/regulatory requirements. The fact that the investments made by UTI constitutes contribution by small investors from general public by itself cannot be the basis to interdict the proposed scheme. The other five secured creditors are also public undertakings such as Bank of India, Bank of Baroda, and Union Bank of India. Similar position applies to them. Nonetheless, it was their wisdom to accept the proposed scheme because the amount referred to in the proposed scheme was not only guaranteed as to be received in cash and by way of equity shares of Wanbury Limited, who has come forward to revive the company, th....
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....e next grievance of UTI that the proposal of repayment offer under the said scheme is spread over for a long period as a ground to refuse sanction of the scheme, also does not commend to me. The period specified for repayment is a package offered under the scheme. The secured creditors were, on implementation of the scheme, to get amounts in cash as well as equity shares of Wanbury Limited. Besides, the provision for the amount receivable out of the sale proceeds of immovable property would also become available to the secured creditors. Understood thus, the provision for repayment modalities spread over after sometime, cannot be the sole basis to reject the request to sanction the proposed scheme. 24. It was next contended that because of pending proceedings before the AAIFR it will be unjust and unfair for this court to interfere at the instance of the petitioner-company. This is so because in the proceedings before the AAIFR all the aspects of the matter can be considered and AAIFR will be in a better position to propound a comprehensive scheme which will protect the interest of all concerned, whereas the present scheme only represents or relates to the interest of the named ....
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....ition, that, however, is not non-disclosure of material facts relating to the company such as latest financial position of the company, last auditors report on the accounts of the company, pendency of any investigation proceedings in relation to the company under sections 235 to 251, within the meaning of proviso to section 391(2) of the Companies Act. If it is so, non disclosure of that fact cannot be a ground for dismissing the present petition. Inasmuch as, all the material facts required by section 391 are already notified in the petition and complied with. 26. Accordingly, insofar as the Company Petition No. 469 of 2005 is concerned, as there is no other objection which can be said to be fatal to the maintainability of the petition, same will have to be allowed in terms of prayer clauses (a) and (b). 27. That takes me to the second set of the petition which is in relation to the proposed scheme of arrangement regarding "specified unsecured creditors". In all 18 unsecured creditors are named as unsecured creditors for the purpose of this scheme. Even in relation to this petition, the Regional Director has filed affidavit opining that the scheme is not prejudicial to the i....
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....n respect of the petitioner-company being sick industrial company. This objector alleges that the petitioner-company has defrauded other unsecured creditors. Criminal prosecution is also pending against the petitioner-company and its directors under the provisions of Negotiable Instruments Act. It is alleged that Wanbury Limited was earlier known as Pearl Organics Limited. The petitioner-company has transferred its assets to the said Pearl Organics Ltd. so as to defraud its creditors. It is alleged that the promoters of the petitioner-company and Wanbury Limited have common promoters.The said Wanbury Limited is nothing but an alter ego of the petitioner-company. 29. The third objector is Budhriani Finance Ltd. who has caused to file an affidavit of the authorized person dated 19-9-2005. The substance of the objection is that the said objector had advanced finance to the petitioner company which has been defrauded. The objector has therefore filed company petition for winding up of the petitioner-company which is pending before this court being Company Petition No 175 of 1997 having admitted on 20-4-1998. It is stated that the petitioner-company has fraudulently not added the nam....
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....sion, reliance was placed on the decision in the case of Sakamari Steel & Alloys Ltd., In re [1981] 51 Comp. Cas. 266 (Bom.). 32. Before I deal with the arguments on merits of the proposed scheme, it will be necessary to advert to the preliminary objections raised on behalf of the petitioner about the locus of the three objectors who are not named as unsecured creditors in the proposed scheme. Relying on the decision of Gujarat High Court in the case of Gujarat Lease Financing Ltd., In re [2002] 50 CLA 150^1 (Guj.), it was contended that the said objectors- unsecured creditors have no locus standi to oppose the proposed scheme. In this decision similar objection regarding locus standi was considered. The court found that the concerned banks were not offering any compromise nor any of their legal rights were required to be waived by the banks. It was noted that the interest of concerned banks was not affected by the scheme. In this context the question of locus standi of banks was raised and answered against the banks. In my opinion, in the present case, however, the objectors are justified in contending that they have locus standi to appear in this case proceedings because they ....
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....court had rejected the objection of locus standi of creditors. The petitioner therein had argued that the creditor who was not affected at all has no right to object to the scheme of arrangement by way of an amalgamation. That, however, does not mean that the unspecified unsecured creditors were entitled to attend the meeting convened to consider the proposed scheme by the specified class of unsecured creditors. They may be, however, entitled to appear before this court when the proposed scheme is placed for sanction and argue that the class was not properly created or that they were unjustly kept out of the class of unsecured creditors in respect of which the proposed scheme was to be considered. It is also open to them to argue that their interest was adversely affected or is likely to be adversely affected. These aspects will have to be addressed by the court, if raised. 33. The grievance of the unspecified unsecured creditors in this case, however, is untenable. The material on record including affidavits filed by the petitioner-company make it amply clear that the proposed scheme in relation to the specified unsecured creditors was confined to the banks and financial instit....
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....oups within a class. Even if there are different groups within a class the interests of which are different from the rest of the class or who are to be treated differently in the scheme, such groups must be treated as separate classes for the purpose of the scheme. It will be useful to refer to the decision of the Division Bench of our High Court in the case of Darshana Praful Kenia v. Alstom Power India Ltd.^1 [2003] 116 Comp. Cas. 1 (Bom.). This court after considering the settled legal position has observed thus: "The cases which were cited before us do not give a comprehensive definition as to what constitutes a 'class' of members or creditors. It is a formidable difficulty to define as to what constitutes a class. Whether a particular group of members or creditors would form a class distinct from other members or creditors would largely depend on the facts and circumstances of each case, the Court being required to consider several factors. We would refrain from making an attempt to comprehensively define what constitutes a 'class'. We would however, so far as is necessary for the decision of this case, state the factors which would generally be taken into consideration by ....
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....in the case of shareholders, the court would not generally favour a further sub-classification other than equity shareholders and preference shareholders, there may be need for making a further sub-classification in the case of creditors of the company. Apart from the broad distinct classes like secured and unsecured creditors, there can be further sub-classes. In the case of secured creditors, some creditors may have sufficient security or specific assets or assets which are greater than the amount of their debt while others may have security of other specific asset or assets which are not sufficient to meet their credits. Some secured creditors may have a first charge, some may have a second or subse- quent charge. Some may have specific charge attached to a particular piece of property in existence on the date of creation of the charge and some may have only a floating charge hovering over and floating with the property intended to be affected, until it fastens on a specific property on happening of some event. It would depend upon the facts and circumstances of each case, whether there would be any need for further sub-classification even amongst the secured creditors. Amongst ....
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.... the reply affidavit that no assertion has been made that all 18 institutions are banking companies or financial institutions. Indeed, in the reply affidavits filed it is vaguely stated that there was no tangible basis to leave out objectors before this court from the said list. In response to the said reply affidavits, the petitioner-company has filed, rejoinder affidavits clearly asserting that the 18 institutions named as described unsecured creditors in the proposed scheme are clubbed together being banks and financial institutions and the proposed scheme was essentially for banks and financial institutions for which reason the objectors have been left out. 36. The learned counsel for the objectors have placed reliance on t he decision of Gujarat High Court in the case of Maneckchowk & Ahmedabad Mfg. Co. Ltd. [1970] 40 Comp. Cas. 819 . In this judgment at page 873 the test to be applied for creating class of creditors has been discussed with reference to the quotation from Buckley on the Companies Acts, 13th edition. It is not possible to suggest that other institutions can be equated with the banks and financial institutions. Reliance is also placed on the decision in the c....
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....made by the petitioner-company. No further material has been produced by the objectors to make good the allegations that the attempt is only to defraud the left out unsecured creditors. On the other hand, the proposed arrangement clearly provides that Wanbury Limited will infuse funds to revive the petitioner-company by bringing in cash of Rs. 150.03 lakhs. Besides, the sale proceeds with regard to the immovable property of the petitioner-company will be shared by the described unsecured creditors in specified quantity and manner provided in the scheme. The argument of the objectors that as they do not form part of the described unsecured creditors, their interest will be permanently prejudiced as the immovable assets will not be available for them for ever. This submission clearly overlooks that the immovable assets which are referred to in the proposed scheme are already mortgaged to banks and financial institutions. If the secured creditors were to proceed against the said immovable property including on winding up of the company, the unsecured creditors will not receive any amount whatsoever out of the sale proceeds as the claim of secured creditors would far exceed the value o....
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....ourt must not lightly ignore or set aside that decision. In Sidhpur Mills Co Ltd. In re, [1961] 2 GLR 681 Miabhoy, J. (as he then was), in this connection, observed as under: 'Therefore the scheme has not to be scrutinized by the court with that much care with which an expert will scrutinize it, nor will it approach it in a carping spirit with a view to pick holes in it. If the majority is acting in a bona fide and honest manner and in the interests of the class that it purports to represent, then, if the scheme is such as a fair minded person, reasonably acquainted with the facts of the case, as prevailing at the time when the scheme was sponsored and approved,can regard it as beneficial for those whom the majority seeks to represent, then, unless there are some strong and cogent grounds to show that the scheme was conceived, designed or calculated to cause injury to others, the court will ordinarily sanction it, rather than reject it.' This must be the approach of the court while examining the scheme and the court should, keeping in view all the aspects of the matter, prefer a living scheme to compulsorily liquidation bringing about and end to a company. Reference may be....
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.... stands Rs. 227.57 lakhs with further interest, at 25.25 per cent p.a. till realization as alleged. I say that in the meeting held on 11th day of June, 2005 the representative of the Indusind Bank Ltd, Mr. Fernandes has stated to the Hon'ble Chairman of the meeting that their claim is Rs. 90 lakhs, which has been recorded by the chairman's report dated 2nd day of July, 2005, while now the Bank is claiming in their affidavit, the said amount of Rs. 227.57 lakhs. These shows that Bank is now aware of the amount due and is merely speculating." 42. What flows from this affidavit is that in the proposed scheme the outstanding claim of respective described unsecured creditors is the principal amount outstanding "as on 31-7-2005". Insofar as the concerned objector is concerned, the amount mentioned in the books of account against its name represents principal amount outstanding on 31-7-2005 and there is no controversy with regard to that fact. There is force in the argument canvassed on behalf of the petitioner company that even if the amount due as claimed by the said objector was to be reckoned as Rs. 227.57 lakhs, for the purpose of computing the voting percentage in the scheme. The....
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....ned counsel for the petitioner stated that a separate scheme with regard to such left out unsecured creditors is being articulated and will be processed in accordance with law. There is no reason to doubt the correctness of the submission canvassed on behalf of the petitioner-company on the above terms. In other words, it is obvious that a separate scheme for the left out unsecured creditors will be processed in accordance with law. Indeed, the said scheme will be inter-dependent for the meaningful accomplishment of the objects of the rehabilitation and revival of the petitioner-company with the assistance of Wanbury Limited. It is not necessary for this court to dilate on the question as to whether such scheme will apply to other creditors or otherwise. Suffice it to observe that the scheme as proposed is fair and reasonable and makes humble attempt to overcome the losses suffered by the petitioner-company resulting in becoming a sick industrial company. If this attempt succeeds, the petitioner-company will be revived which will enure to the advantage of all concern. No fruitful purpose would be served if the petitioner-company is to be wound up, which is the only course available....