TaxTMI 
TaxTMI 
2007 (10) TMI 406
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....s the Operating Agency under section 17(3), that the scheme for rehabilitation was sanctioned vide order dated 12-1-1994, that the progress of its implementation was last reviewed at the hearing held on 15-10-1999 when the operating agency had informed that M/s. C.P.L. could not be revived within RBI parameters and that the operating agency was asked to submit a revised rehabilitation proposal based on one time settlement of the dues of financial institutions. The BIFR also noted that the performance of the company was much below the projected levels, that by 12-9-1999 its networth had become negative by Rs. 198 lakhs, that, on account of the company's failure to come up with a comprehensive revival proposal with firm tie-up of funds, the sanctioned scheme had failed that the operative agency was directed to explore chances of change in management, that two proposals were received which envisaged further working capital assistance of Rs. 1.5 crores and, since State Bank of India was not willing to take further exposure in the company, both these offers were found unacceptable. In its order dated 31-7-2001 the Bench of the BIFR formed a prima facie opinion that the company be wound ....
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....ed by the erstwhile Managing Director of M/s. C.P.L. seeking recall of the order dated 5-6-2006, for discharge of the Provisional Liquidator and for a consequential direction that the management of the company be handed over to the former Board of Directors of the Company represented by its Ex-Managing Director. In the affidavit, filed in support of the Company Application, it is stated that, while the reference of the BIFR recommending winding up of the company was pending before this Court, the erstwhile management of M/s. C.P.L. had reached an one time settlement of their outstanding dues with the three secured creditors, i.e., APSFC, APIDC and SBI. It is stated that, in terms of the settlement, the former management had raised the required finance, paid all the secured creditors and had obtained letters to that effect, that in addition they had settled the claims of 36 workmen and had paid their legal dues which were received and accepted by the workmen in September, 2005, that the settlement was reported to the Labour Court II, Hyderabad, in M.P. No. 18 of 2003, that a portion of the outstanding dues of the commercial taxes department was also settled on payment of Rs. 7.50 la....
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.... settlement, that negotiations were in progress and that M/s. Daram Rosen Private Limited, Daman was no longer functioning. It is stated that among the other unsecured creditors included loans given by the erstwhile Managing Director, his family members, his other concerns and the remuneration due to him, that these dues aggregating to Rs. 29.34 lakhs would be converted into equity once the operations of the company were revived, that the company had shown Rs. 7,51,820, received as incentive from the Director of Industries, Sangareddy, Medak District, in the list of unsecured creditors and that the same would continue once operations of the company were revived, that the company owed Rs. 32,500 to the auditors to repay which steps were being taken, that the remaining eight unsecured creditors had lent Rs. 1,30.07 lakhs to the company to enable it to pay the secured creditors in terms of the one-time settlement reached with them and that four creditors to whom Rs. 103.14 was due, had given their affidavits of willingness to receive the amount or in the alternative to have the loan converted into equity after the company was revived. It is stated that the company has 12 shareholders,....
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....ers for admission of the petition and fixing a date for the hearing thereof and for directions as to the advertisements to be published and the persons, if any, upon whom copies of the petition are to be served. Under Rule 96 the Judge may, if he thinks fit, direct notice to be given to the company before giving directions as to the advertisement of the petition. Under Rule 98, every contributory or creditor of the company shall be entitled to be furnished by the petitioner, or by his advocate, a copy of the petition, within 24 hours of his requiring the same, on payment of the prescribed charges. Rule 99 relates to advertisement of the petition and, thereunder, subject to any directions of the Court, the petition shall be advertised in Form No. 48 within the time and in the manner provided by Rule 24. Under Rule 24(1), where any petition is required to be advertised it shall, unless the Judge otherwise orders, or the rules otherwise provide, be advertised, not less than fourteen days before the date fixed for hearing, in one issue of the Official Gazette of the State, and in one issue each of a daily newspaper in the english language and a daily newspaper in the regional language ....
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....ibutories, creditors and others are entitled to file their affidavits in opposition to the petition for winding up. 13. Section 20 of the Sick Industrial Companies (Special Provisions) Act, 1985 ('SICA') relates to winding up of a sick industrial company and reads as under : "(1)where the Board, after making inquiry under section 16 and after consideration of all the relevant facts and circumstances and after giving an opportunity of being heard to all concerned parties, is of opinion that the sick industrial company is not likely to make its net worth exceed the accumulated losses within a reasonable time while meeting all its financial obligations and that the company as a result thereof is not likely to become viable in future and that it is just and equitable that the company should be wound up, it may record and forward its opinion to the concerned High Court. (2)The High Court shall, on the basis of the opinion of the Board, order winding up of the sick industrial company and may proceed and cause to proceed with the winding up of the Sick Industrial Company in accordance with the provisions of the Companies Act, 1956. (3)For the purpose of winding up of the sick ....
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....ance with the provisions of the Companies Act and the Rules made thereunder. (J.M. Malhotra v. Union of India [1997] 89 Comp. Cas. 600 (Mad.), Loharu Steel Industries Ltd. v. D.C.M. Ltd. [2001] 107 Comp. Cas. 353 (Kar.). 17. The very fact that, under section 20(2) of SICA, the High Court is required to proceed with the winding up in accordance with the provisions of the Companies Act, 1956 would necessitate the conclusion that the High Court, even after receipt of the opinion of BIFR, still has the discretion under section 433 of the Companies Act, read with section 443 thereof, either to order or to refuse winding up of the Company. As noted above, section 439 of the Companies Act permits an application for winding of a company to be made by the company itself, its creditors, its contributories or by the Registrar of Companies. Except for the aforesaid, none other can file an application. What sub-sections (1) and (2) of section 20 of SICA, in effect, dispense with are the requirements of section 439 for the purpose of initiating proceedings for winding up of the company under Part VII, Chapter II of the Companies Act. Proceeding for winding up shall have to be conducted, after....
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....9. However, in Eastern Paper Mills Ltd. v. Board for Industrial and Financial Reconstruction [2002] 109 Comp. Cas. 1065 , another Division Bench of the Calcutta High Court held:- "In the instant case, as noticed above, though the company was heard in the matter presumably upon notice having been given, the winding up petition was not admitted nor direction for advertisement, was issued. Instead, an order of winding up has been passed, based solely upon the opinion of BIFR/AAIFR. There has, thus, been breach of the provisions of rule 96 of the Companies (Court) Rules, 1959." "...Upon receipt of the opinion of the BIFR/AAIFR the learned company judge in accordance with the practice obtaining in this High Court, rightly in our opinion, gave notice to the company and also an opportunity of hearing was afforded to the company after it had filed its affidavit-in-opposition. The learned company judge ought to have thereafter formed the, prima facie opinion and directed admission of the petition and advertisement thereof in newspapers. It is only after advertisements are published, as held by the Division Bench in Khaitan Paper Machine Ltd. v. Wires and Fabrics (S.A.) Ltd. (A.C.C. No....
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....tion and Jansatta Gujarati edition. The operating agency, namely IFCI. will see to the advertisements being published. Such advertisements shall be published on or before 12-8-1999, stating herein the date of final hearing to be 9-9-1999. Notice shall also be published in the Government Gazette. The matter is fixed for final hearing accordingly on 9-9-1999. It will be open to any of the petitioning creditors in other petitions to issue public advertisements in case the operating agency fails to issue public advertisements after obtaining necessary orders in that respect and in such eventuality the date of final hearing might have to be changed........" [Emphasis supplied] (pp. 243, 246) 21. Following the judgment of the Calcutta High Court in Eastern Paper Mills Ltd.'s case (supra), a Division Bench of this Court in A. Rama Goud v. Omnitrode Aditya Electrodes (P.) Ltd. (In Liquidation) [2004] 118 Comp. Cas. 154^1 opined:- "... Such opinion can only form the basis for proceedings to be continued against the sick industrial company for purposes of winding up. Further proceedings ought to be conducted by the company court in accordance with the Companies Act and the Companies....
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....ules made thereunder, place any restriction on the grounds of opposition to an order of winding up. After an advertisement, as required under Rule 99 read with Rule 24 of the Company (Court) Rules, 1959, is issued it is always open to a creditor or a contributory to bring to the notice of the Company Court events subsequent to receipt of the opinion of the BIFR and plead that, in the light of these subsequent events, the opinion and recommendation of the BIFR should not be accepted and that the Company should not be wound up. On the basis of the affidavits filed in opposition and the evidence on record, either oral or documentary or both, the Company Court would have the power and the jurisdiction to examine these subsequent events during the course of hearing of the winding up proceedings and decide whether or not the company should be wound up. 23. It is not even the case of the ex-management of M/s. C.P.L. that the opinion of the B.I.F.R. is erroneous. The submission, on the other hand, is that while the opinion of the B.I.F.R. may be justified on the facts as existed then, events subsequent thereto would necessitate this Court to refrain from exercising its discretionary jur....