TaxTMI 
TaxTMI 
2008 (3) TMI 483
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....State of Gujarat has prayed for appropriate order or direction directing the Official Liquidator attached to this Court to transfer and hand over all immovable assets and properties belonging to and owned by GSTC in respect of its units, namely, Priyalaxmi Mills, Vadodara, particularly land admeasuring 64192 Sq.Mtrs., bearing City Survey Nos. 586 and 609 and all immovable assets and properties belonging to and owned by the GSTC in respect of the unit, viz. Monogram Mills Rakhial Char Rasta, Ahmedabad City, including land admeasuring about 1,47,034 Sq.Mtrs., to the applicant State Government free from all encumbrances, liabilities and charges under section 457(1)(e) of the Companies Act, 1956. The applicant-State of Gujarat has also prayed for the appropriate direction and/or order directing the Official Liquidator to give set off against the amount already paid by the Government which the Official Liquidator owes to the State Government to the tune of Rs. 826.79 crores for discharging the liabilities towards all the dues of the Gujarat State Textile Corporation (in liquidation). 4. In Company Application No. 562 of 2007 an affidavit is filed by Shri Rajesh Kantilal Shah - Dy. Se....
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....the BIFR to this Court under section 20 of the Sick Industrial Companies (Special Provisions) Act, 1985 for winding up of GSTC. This opinion was registered as Company-Petition No. 205 of 1996 and after hearing the parties, this Court vide its order dated 6-2-1997 had passed an order to wind up the GSTC and the Official Liquidator attached to this Court was appointed to take charge of all the assets and properties of GSTC including possession thereof and the Gujarat Industrial Development Corporation (GIDC) was appointed as an agent of Official Liquidator under section 457(2)(v) of the Companies Act, 1956 for the purpose of preservation, protection and disposal of the property and the said agent, the GIDC is to act under the instructions of the Official Liquidator. 7. So far as Priyalaxmi Mills, Vadodara is concerned, a report of the Chartered Accountant - M/s. Suketu Trivedi & Co., was obtained on 22-6-2007 in relation to the liabilities and other issues on the take over of Priyalaxmi Mills, Vadodara, which contains certain facts relevant to this application and hence reproduced as under:- (i)Shri Keshariya Investment Ltd., purchased Textile Undertaking - Priyalaxmi Mills Ltd....
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.... is filed before this Court by the Directors of Company under winding up on 6-5-1997. The liabilities are for the period between 1-1-1986 and 5-2-1997 when the order for winding up was passed. Secured Creditors : There are no secured creditors having any charge registered with the Registrar of Companies between the period from 1-1-1986 till 6-2-1997. In the statement of affairs secured dues of Gujarat Electricity Board (GEB) are relating to the energy charges and to the extent of security deposit lodged with GEB. The security deposit is against electricity bills and cannot confer any right to the GEB over any asset of the undertaking except appropriation of outstanding dues against such deposit. The total outstanding dues of GEB are shown to be Rs. 15,34,908. The amount lodged as security deposit is Rs. 1,14,840. The GEB appropriated the said deposit and, therefore, the amount due is unsecured debt of Rs. 14,20,068. The State Government has negotiated with the various companies of the Ex.GEB and has stated in their communication dated 9-10-2007 to the effect that only the amount payable to the Board is Rs. 14,20,000 in respect of this mill and the company does not object t....
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....,180 11. Gujarat Industrial Investment Corporation (GIIC) has given no due certificate by letter dated 8-10-2007 so as to enable the State Government to approach this Court for return of the assets of Priyalaxmi Mills. The dues of CCI and BRPL have been settled and paid vide G.R. dated 16-10-2006 & 21-12-2006 respectively. The settlement with ONGC and Maharashtra Cotton Growers Federation are underway. Relevant correspondence entered into between these parties are placed on the record of this application. 12. In view of the aforesaid details, the amount remains due and payable as identified in the Statement of Affairs is as under:- (a) ONGC Rs. 1,67,58,258 (b) Workers dues Rs. 6,15,461 (c) Dues of Maharashtra Cotton Growers Ltd. Rs. 47,94,336 (d) Other creditors Rs. 28,95,210 13. So far as Monogram Mill is concerned, it is located at Rakhial Char Rasta in Ahmedabad City. The Mill was established on various plots of land taken on lease bearing Survey Nos. 245 to 253. Manilal Mulchand obtained all the plots of different survey numbers except land of Survey No. 252 on permanent lease. The land of Survey No. 245 was taken on permanent lease ....
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.... up on 6-2-1997 is post-liquidation period. Thus, various stages of life tenure of the Mill can be summarized as under:- A Pre-Nationalization period Prior to the closure of Mills in October, 1982 and thereafter till nationalization on 8-11-1985. B Post-Nationalization Period Subsequent to nationalization on 8-11-1985 till its winding up on 6-2-1997. C Post-Liquidation Period Period subsequent to liquidation on 6-2-1997. 16. With regard to liabilities of pre-nationalisation period, compensation was fixed for each undertaking under the said Ordinance No. 18 of 1985 and liabilities prior to the appointed day i.e., 8-11-1985 were to be discharged out of the said compensation by Commissioner of Payments appointed under the Gujarat Closed Textile Undertakings (Nationalization Act, 1986 - Gujarat Act 10 of 1986) Act in order of the priorities laid down in the Act. The liabilities created during the post-nationalization period and remaining outstanding as on 6-2-1997 as well as the liabilities created by the Official Liquidator since 6-2-1997 and remaining outstanding till the date are to be discharged, out of the assets of the undertaking by the Official Liq....
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....te Government alone. C. Unsecured Creditors - List: E The break up of unsecured creditors listed in List: E of the Statement of Affairs as on 6-2-1997 drawn from the Audited Books of Account of GSTC, is as under:- Dues relating to State Government : Ahmedabad Municipal Corporation - interest 41,72,373 Gujarat Industrial Investment Corporation (GIIC) 76,000 Gujarat Mineral Development Corporation 8,067 Sub Total (a) 42,56,440 Dues discharged by State Government : (Covered under State Govt. Guarantee or otherwise) Cotton Corp. of India (CCI) 1,35,16,002 Torrent Power Ltd., AEC 85,73,657 Sub Total (b) 2,20,89,659 Other Creditors (including deposits and other old unclaimed balances) Maharashtra Cotton Growers Federation 19,73,559 Gujarat Lease Finance Ltd. 1,563 Others 13,63,073 Majoor Mahajan Sangh 1,70,728 Sub Total (c) 36,18,285 Total (a + b + c ) 2,99,64,384 18. It is further stated that dues of CCI which were covered under State Government, have, already been paid at an agreed amount. In addition to that, the dues of net of securit....
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....nt has discharged almost entire liability of the Company in liquidation and still an ongoing process is initiated by the State Government to discharge the dues of remaining outside creditors. The State Government has undertaken to settle dues relating to State Government directly with respective department and respective institution. On the date of passing of the winding up order by this Court, balance with Bank of Monogram Mills was Rs. 72,557 only. Official Liquidator sold the plant and machineries of the Mills in the year 1999 at a consideration of Rs. 445 lakhs. The Sale Committee constituted for the liquidation proceedings had invited offers for sale of buildings of the Mills and the highest offer of Rs. 400 lakhs is under process of approval by this Court. The said amount which realized together with principal amount of Rs. 445 lakhs already realized by sale of plant and machineries of the Mills in the year 1999 will be more than sufficient to discharge entire liabilities of the Mills stated in the Statement of Affairs. As per the available information, sizable balance approximately to the tune of more than Rs. 5,000 lakhs is available with Official Liquidator for GSTC as a w....
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.... land admeasuring 64,192 and 1,47,034 Sq.Mtrs., respectively as a creditor and as a sole contributory of the Company. He has further submitted that the Official Liquidator has sufficient funds in the account of GSTC which would be sufficient to discharge the liabilities of other remaining unsecured creditors, if any, and if there is any deficit in repayment of dues of the aforesaid creditors, the State Government shall make good the shortfall, if any. 25. Mr. Shelat has further submitted that ever since the winding up order has been passed the Official Liquidator has not taken any steps and thereupon the State Government itself has undertaken the task of discharging the dues, as the State Government was in need of surplus assets of the said Companies. The State Government is, therefore, now major creditor of the Company as well as the sole shareholder, as all the equity shares of GSTC are held by the State Government only. 26. Mr. Shelat has further submitted that the State Government has decided to set up an Information Technology Park in the land admeasuring 64,192 Sq.Mtrs. of Priyalaxmi and Health Institute in the land admeasuring 1,47,034 Sq.Mtrs., of Monogram Mills. It i....
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....following the procedure prescribed under the Companies (Court) Rules, 1959. The reliefs sought for by the applicant shall cause failure of the Official Liquidator in discharging his statutory duties and functions, unless the winding up order is revoked, stayed or recalled and the Official Liquidator is discharged, on an appropriate application seeking that relief. He has, therefore, submitted that the application deserves to be rejected. 29. Mr. Mehta further submitted that for the purpose of making proper submissions with respect to the submissions of the applicant claiming to be the only creditor of the company, it is necessary to ascertain claims against the company by inviting claims through advertisement in newspapers and adjudication thereof in accordance with the provisions of the Companies (Court) Rules, 1959 and classification of the claims and creditors in terms of sections 529, 529A and 530 of the Companies Act, 1956. He has further submitted that, in case it is found, after inviting claims through newspapers advertisement, that there are no secured creditors or workers ranking pari passu under section 529A of the Companies Act, 1956, the statutory claims against the ....
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....ort of the Official Liquidator. Mr. Shelat in rejoinder submitted that the Company is owned by the State Government and hence it had full financial backing of State Government. Till its winding up order, it was fully capable of discharging its debts. This fact is substantiated with the fact that immediately before its winding up order passed on 6-2-1997, GSTC had disbursed during October to December, 1996 Rs. 218.10 crores to all most all the employees towards liberal terminal benefits. Thus, on the date of winding up order, GSTC had no employees except two directors who were from the State Government on deputation and some employees, less than 20 in number, who did not opt for retirement. GSTC had given few crore rupees by way of bank balance to Official Liquidator while handing over possession of assets in pursuance to the winding up order. Thus, GSTC was operationally a non-viable company but not financially insolvent. Hence, at the point of winding up order and as on today even, the aggregate value of assets of GSTC is many times more than the outstanding liabilities. 33. Mr. Shelat has further submitted that the Official Liquidator has sought ten weeks time for proper submi....
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....is no strait jacket formula prescribed under the law for which respondent sought strict compliance. In the instant case, almost entire assets available with OL at present, both in terms of liquid asset and movable and immovable assets are surplus assets. After 11 years of winding up order and handover of sizable amount by way of bank balance to OL in pursuance of winding up order as well as realization of sizable amount by way of sale of part of the assets since winding up, not a single creditor including secured creditors are paid by OL. Since winding up, no payments are made by OL other than payments to workers in pursuance of Court orders, expenses and his own commission. On the other hand, since winding up, State Government has made payments to all secured as well as some of the Institutional unsecured creditors like Cotton Corporation of India, Bogaigaon Refinery and Torrent Power. In case of remaining institutional unsecured creditors, the process of determination of dues is ongoing and after settlement of dues of remaining institutions under category of unsecured creditors, there will remain unclaimed old balances and State Government's own dues. Thus, the assets presently r....
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....to claim possession of assets on pick and choose basis. 37. Mr. Shelat further submitted that the details of outstanding liabilities are given in Statement of Affairs as on 6-2-1997, which are available with OL and lying in his office for the last about 11 years. However, OL has so far not looked at that nor made payment to a single creditor out of that in spite of available funds. On account of failure of OL in discharge of statutory duties, the assets, have remained idle and unutilized for about 11 years. In order to overcome the situation, State Government directly settled the dues of all the secured creditors and commenced the process of settlement of all institutional unsecured creditors. Thus, thereafter, the remaining dues will consist of old unclaimed credit balances and State Government's own dues. He has, therefore, submitted that looking to the facts and circumstances and in view of the factual aspects, the contention of OL to invite the claims is absolutely unwarranted and contrary to the facts of the case. 38. He has further submitted that there are no dues of secured creditors nor there are any workers dues other than sub-judice matters. As far as dues relating ....
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....Agent of OL. The demolition process in case of other units has so far been supervised by staff of GIDC working in Textile Cell of GIDC and not by staff of OL office. Hence, in case of grant of possession of assets to State Government, still the work of demolition will be supervised by the same staff of GIDC from Textile Cell of GIDC. The grant of possession of asset sought under the present application will neither in way result into obstruction to demolition work nor demolition contractor but will help the State Government to prepare and finalize the plans, drawings, designs and approval of the projects simultaneously with the demolition work and will make possible the implementation of the project immediately upon completion of demolition work. 42. Mr. Shelat has further submitted that the Company Application No. 250 of 2006 was filed by the State Government for taking over possession of the assets of Sarangpur Cotton Mills and Silver Cotton Mills. The said application was decided in favour of the State Government vide order dated 17-7-2006 and the possession of the assets of Mills were handed over to the State Government for public purposes. He has, therefore, submitted that ....
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....etween themselves and distribute the surplus amongst the persons entitled thereto. There is no dispute about the fact that the liabilities of secured creditors and workers of both the units of GSTC are almost settled by the State Government. There is adequate balance lying with the Official Liquidator to take care of and to satisfy the liabilities of remaining unsecured creditors, if any. The State Government has not only entered in the shoe of the secured creditor and becomes the secured creditor, but it is also the only shareholder/contributory. The Court is, therefore, of the view that there is no inhibition on the jurisdiction of this Court to entertain, decide and grant relief in these two applications preferred by the State Government being a secured creditor and sole contributory. These applications are certainly with respect to exercise or proposed exercise of any of the powers by the Liquidator under section 457(1) or (2) of the Act. 46. Earlier, the State Government has filed Company Application No. 237 of 2004 and Company Application No. 250 of 2006 for taking over possession of the assets of New Jahangir Vakil Mills, Bhavnagar and Sarangpur Cotton Mills as well as Si....