TaxTMI 
TaxTMI 
2014 (1) TMI 1640
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....Cement Limited :- i. I.A. No.828/2013 filed by one of the promoter of the Company under Section 466 of the Companies Act, 1956 read with Rule 9 of the Companies (Court) Rules, 1959 for permanent stay of the winding up proceedings. ii. I.A. Nos.1621/2013, 1622/2013, 1868/2013, 1869/2013, 1870/2013, 1872/2013, 1873/2013, 1946/2013, 4656/2013, 4657/2013, 4655/2013, 5940/2013, 5943/2013, 5942/2013, 5944/2013, 5945/2013, 5941/2013, 7126/2013 and 7508/2013 filed by the ex workers of the Company in liquidation under Rule 9 of the Companies (Court) Rules, 1959 for directions to the Official Liquidator to settle their dues and to release the payment. iii. I.A. No.4837/2013, 4973/2013 and 4974/2013 filed by some of the workers under Rule 9 of the Companies (Court) Rules, 1959 to issue appropriate directions for accepting, approving, signing, settling and releasing the claims of the applicant workers for provident fund. iv. I.A. No.6303/2013 filed by the M.P. Paschim Kshetra Vidyut Vitran Company Limited (MPPKVVCL) for direction to the Official Liquidator to settle the dues of the applicant and to release the payment. 4/ In brief, the Company in liquidation i.e. Dhar Cement Lim....
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....n proceedings by exercising the power under Section 466 of the Companies Act. The same promoter has also filed a separate petition being Company Petition No.21/2013 under Section 391 to 394 of the Companies Act to sanction Scheme of Arrangement and Reconstruction of the Company in Liquidation with a view to revive the said company. He is one of the promoter and ex Managing Director having 27% major shareholding in the Company in liquidation and is a contributory under Section 428 of the Companies Act. The stand of the applicant based upon the judgments of the Delhi High Court in the matter of A.K. Mishra and Another Vs. Wearwell Cycle Co. (India) Ltd. reported in 1993(78) Comp. Cases 252 (Del), in the matter of National Steel & General Mills Vs. Official Liquidator reported in 1990(69) Comp. Cases 416 (Del), in the matter of Rajdhani Grains & Jaggery Exchange Limited, In Re reported in 1983(54) Comp. Cases 166 (Del), judgment of the Madras High Court in the matter of N.A.P. Alagiri Raja and Company Vs. N. Guruswamy and others reported in 1989(65) Comp. Cases 758 (Mad), judgment of Punjab & Hariana High Court in the matter of M.M. Sehgal Vs. Sehgal Papers Limited reported in 1986(60....
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.... the real purpose underlying the scheme for reconstruction and revival is bonafide and the scheme is just, fair, reasonable and in public interest. It is also undisputed that while choosing between revival of the Company and its winding up, the Court normally leans in favour of revival of the Company and normally attempt is made to ensure revival of the Company rather than dissolving it. 7/ The Supreme Court in the matter of Meghal Homes (P) Ltd. Vs. Shree Niwas Girni K.K. Samiti and others reported in 2007(7) SCC 753 while considering the similar issue, has held that :- "33. The argument that Section 391 would not apply to a company which has already been ordered to be wound up, cannot be accepted in view of the language of Section 391(1) of the Act, which speaks of a company which is being wound up. If we substitute the definition in Section 390(a) of the Act, this would mean a company liable to be wound up and which is being wound up. It also does not appear to be necessary to restrict the scope of that provision considering the purpose for which it is enacted, namely, the revival of a company including a company that is liable to be wound up or is being wound up and norma....
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....n 481 of the Act, being passed. But, nothing stands in the way of the Company Court, before the ultimate step is taken or before the assets are disposed of, to accept a scheme or proposal for revival of the Company. In that context, the court has necessarily to see whether the scheme contemplates revival of the business of the company, makes provisions for paying off creditors or for satisfying their claims as agreed to by them and for meeting the liability of the workers in terms of Section 529 and Section 529-A of the Act. Of course, the court has to see to the bona fides of the scheme and to ensure that what is put forward is not a ruse to dispose of the assets of the company in liquidation. 48.******************************* 49.******************************* 50.******************************* 51.******************************* 52. We cannot understand the decision in Miheer H. Mafatlal Vs. Mafatlal Industries Ltd. [(1997) 1 SCC 579] as standing in the way of understanding the scope of the provisions of the Act in the above manner. We are therefore satisfied that the Company Court was bound to consider whether the liquidation was liable to be stayed for a period ....
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....hich have come to be established over a period of time though series of judgments that whenever choice is available to the court between revival of the company and its winding up, the court must as far as possible lean in favour of revival of the company. However, that does not mean that whenever a scheme for revival is filed, the court has to automatically and routinely sanction the same. It is also the duty of the court to satisfy itself that the scheme is genuine and bona fide. The court has also to satisfy about the feasibility, completeness and workability of the scheme. The court does not function as a mere rubber stamp or post office and it is incumbent upon the court to be satisfied prima facie about the genuineness of the scheme. If the scheme is intended to be a cloak to achieve some other purpose rather than projected purpose of the revival of the scheme, it would be unfair to the creditors and other persons if such scheme is sanctioned and propounders are allowed to achieve their oblique purpose. In Re.: Saroj G. Poddar, (1996) 22 C.L.A.200, the court refused to sanction the proposed scheme after it was found that the entire exercise undertaken by the sponsor with the s....
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....to be kept in view. It is the commercial wisdom of the parties to the scheme who have taken an informed decision about the usefulness and propriety of the scheme by supporting it by the requisite majority vote that has to be kept in view by the Court. The Court certainly would not act as a court of appeal and sit in judgment over the informed view of the parties concerned to the compromise as the scheme would be in the realm of corporate and commercial wisdom of the parties concerned. The Court has neither the expertise nor the jurisdiction to delve deep into the commercial wisdom exercised by the creditors and members of the company who have ratified the Scheme by the requisite majority. Consequently the Company Court's jurisdiction to that extent is peripheral and supervisory and not appellate. The Court acts like an umpire in a game of cricket who has to see that both the teams play their game according to the rules and do not overstep the limits. But subject to that how best the game is to be played is left to the players and not to the umpire. The supervisory jurisdiction of the Company Court can also be culled out from the provisions of Section 392 of the Act which reads ....
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.... Courts and this Court as well as by the courts in England which had also occasion to consider schemes under pari materia English Company Law. We will briefly refer to the relevant decisions on the point. But before we do so we may also usefully refer to the observations found in the oft-quoted passage in Buckley on the Companies Act, 14th Edn. They are as under : "In exercising its power of sanction the court will see, first that the provisions of the statute have been complied with, second, that the class was fairly represented by those who attended the meeting and that the statutory majority are acting bona fide and are not coercing the minority in order to promote interest adverse to those of the class whom they purport to represent, and thirdly, that the arrangement is such as an intelligent and honest man, a member of the class concerned and acting in respect of his interest, might reasonably approve. The court does not sit merely to see that the majority are acting bona fide and thereupon to register the decision of the meeting, but at the same time, the court will be slow to differ from the meeting, unless either the class has not been properly consulted, or the meeti....
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....stances the court may take into consideration I will not attempt to forecast." In Anglo-Continental Supply Co. Ltd. [(1922) 2 Ch 723 : 91 LJ Ch 658] Ashtury, J., a century later reiterated the very same prepositions as under: "Before giving its sanction to a scheme of arrangement the court will see firstly that the provisions of the statute have been complied with; secondly that the class was fairly represented by those who attended the meeting and that the statutory majority are acting bona fide and are not coercing the minority in order to promote interests adverse to those of the class whom they purport to represent; and, thirdly, that the arrangement is such as a man of business would reasonably approve." The learned Single Judge of the Calcutta High Court in the case of Mankam Investments Ltd., [(1995) 4 Comp LJ 330 (Cal)] relying on a catena of decisions of the English courts and Indian High Courts observed as under on the power and jurisdiction of the Company Court which is called upon to sanction a scheme of merger and amalgamation of companies: "It is a matter for the shareholders to consider commercially whether amalgamation or merger is beneficial or not. The....
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.... employees was protected but it has to ensure that merger shall not result in impeding promotion of industry or shall obstruct growth of national economy. Liberalised economic policy is to achieve this goal. The merger, therefore, should not be contrary to this objective. Reliance on English decisions Hoare & Co. Ltds. [1933 All ER Rep 105, Ch D] and Bugle Press Ltd. [1961 Ch 270 : (1960) 1 All ER 768 : (1960) 2 WLR 658] that the power of the court is to be satisfied only whether the provisions of the Act have been complied with or that the class or classes were fully represented and the arrangement was such as a man of business would reasonably approve between two private companies may be correct and may normally be adhered to but when the merger is with a subsidiary of a foreign company then economic interest of the country may have to be given precedence. The jurisdiction of the court in this regard is comprehensive." Sen, J., speaking for himself and Venkatachaliah, C.J., also towed the line indicated by Sahai, J., about the jurisdiction of the Company Court while sanctioning the scheme and made the following pertinent observations: (SCC p. 528, para 84) "An argument was ....
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.... for approving the scheme in question. That the majority decision of the concerned class of voters is just and fair to the class as a whole so as to legitimately bind even the dissenting members of that class. 4. That all necessary material indicated by Section 393(1)(a) is placed before the voters at the meetings concerned as contemplated by Section 391 sub-section (1). 5. That all the requisite material contemplated by the proviso of sub-section (2) of Section 391 of the Act is placed before the Court by the applicant concerned seeking sanction for such a scheme and the Court gets satisfied about the same. 6. That the proposed scheme of compromise and arrangement is not found to be violative of any provision of law and is not contrary to public policy. For ascertaining the real purpose underlying the scheme with a view to be satisfied on this aspect, the Court, if necessary, can pierce the veil of apparent corporate purpose underlying the scheme and can judiciously X-ray the same. 7. That the Company Court has also to satisfy itself that members or class of members of creditors or class of creditors, as the case may be, were acting bona fide and in good faith and were....
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....rs had given the No Dues Certificate. This Court on 27.2.2013 had directed the meeting of the shareholders as well as the unsecured creditors and had also appointed the Chairman/Alternate Chairman for convening the meeting and directed the advertisement in accordance with law. The Chairman appointed by this Court, had submitted the report dated 9.4.2013 stating that meeting of the equity shareholders and the unsecured creditors was held as per the direction of this Court, and the shareholders as well as the unsecured creditors had unanimously approved the proposed scheme. 13/ This Court, vide order dated 27.2.2013, had stayed the winding up proceedings of the Company in Company Petition No.17/2002. 14/ In the present Company Petition No.21/2013 under Section 394 of the Act, this Court on 17.4.2013 had issued notice to the Registrar of Companies, Madhya Pradesh & Chhattisgarh - Gwalior, Regional Director, Western Region - Ahmedabad and to the Official Liquidator. Petitioner was also directed to advertise the petition in accordance with the Rules in the Official Gazette of the State and two daily newspapers having circulation in the city of Indore namely Naiduniya (Hindi) and F....
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....tions were served with the notice of the meeting with the shareholders, as per the direction of this Court. iv. In paragraph 2(d) the Regional Director has stated that the petitioner should be directed to follow all the procedure as may be required by the appropriate authorities of the Mining Department etc. on the payment of fee, if any, for renewal of licence, other approvals and permissions in the name of the Company on sanction of the Scheme. In this regard, the petitioner has stated in the affidavit dated 7.8.2013 that all applications for necessary approval, licence and permissions will be submitted to the concerned authorities immediately on sanction of the Scheme of Arrangement and Reconstruction, and the petitioner has undertaken to follow the prescribed procedure in this regard. v. In paragraph 2(e) the Regional Director has raised an objection that in the project report, various calculations are not certified by any professional, therefore, the petitioner be directed to place on record the certified copy of the project report. The petitioner along with the affidavit dated 7.8.2013 has placed on record the project report of revival of Dhar Cement Limited duly ....
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....ed a Claim Committee and has issued suitable directions to safeguard the interest of the workers. ix. In paragraph 2(i) the Regional Director has raised objection relating to the claim of the ex workers, but in this regard the suitable directions relating to constitution of the Claim Committee and adjudication of their claims have been issued in the later part of this order. x. In paragraph 2(j) the Regional Director has objected to unilateral condition of withdrawal of the scheme as contained in paragraph 1.7 part D of the Scheme. In this regard, the petitioner has pointed out that the said objection of the Regional Director is based upon the apprehension, which is unfounded because the petitioner has already entered into one time settlement with the secured creditors and repaid their dues unconditionally amounting to Rs. 6 Crorers and if the petitioner withdraws from the Scheme, then he would suffer the loss of said amount. It has further been pointed out that the successful operation of the Plant is subject to the various sanction, approvals and permissions from the State Government in accordance with the Industrial Policy of the State, which may varie with the change i....
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.... other objection. The report of the Official Liquidator discloses that the petitioner in compliance of the order of this Court dated 27.2.2013, has deposited a sum of Rs. 37,87,550/- on 12.3.2013. It has further been stated by the Official Liquidator that no claim has been received from any unsecured creditors of the Company and that the Official Liquidator has not received any complaint against the proposed Scheme of Arrangement and Reconstruction from any person or party interested in the Scheme in any manner. It has further been expressed by the O.L. that except for the above objections, the affairs of the Company have not been conducted in a manner prejudicial to the interest of its members, creditors or to public interest. 19/ The Official Liquidator has sought a direction to the petitioner to deposit a sum of Rs. 1,20,507/- incurred by the O.L. towards security expenses to safeguard the assets of the petitioner-Company from 1.3.2013 to 31.5.2013. The petitioner has undertaken to pay the same immediately on sanction of the Scheme. The O.L. has also prayed for a direction to the promoters/contributors not to sale the immovable properties (land, building, plant and machinery)....
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.... does not take into confidence the workers and Paragraph 4.2 and 1.7 of the Scheme relating to the workers is vague. Learned counsel appearing for the promoter/contributory has submitted that he is ready to settle the pending dues of all the workers, for which a Claim Committee may be constituted by this Court. He has further submitted that whatever claim is settled by the Claim Committee, the promoter/contributory before this court will accept it without any objection and will pay the same to the workers within a time bound period. He has also submitted that all the willing ex workers of the Company in liquidation will be given employment on revival of the Company and he has agreed to deposit a part of the claim of 19 workers with the official liquidator to show his bonafide. 24/ Counsel for the workers responding to the above submission of the counsel for the promoter/contributory has submitted that once the winding up proceedings are permanently stayed, then the workers will have no avenue to ventilate their grievance against the adjudication of claim by the Claim Committee, therefore, the winding up petition be kept pending for the said limited purpose. 25/ Having heard t....
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....appropriate application in Company Petition No.17/2002. vii. All the expenses incurred by the O.L. for inviting the claim and the expenses of the Claim Committee will be borne by the promoter/contributory present before this Court. viii. The I.A. Nos.1621/2013, 1622/2013, 1868/2013, 1869/2013, 1870/2013, 1872/2013, 1873/2013, 1946/2013, 4656/2013, 4657/2013, 4655/2013, 5940/2013, 5943/2013, 5942/2013, 5944/2013, 5945/2013, 5941/2013, 7126/2013 and 7508/2013 are accordingly disposed of. 26/ So far as I.A. No.4837/2013, 4973/2013 and 4974/2013 are concerned, it has been fairly agreed by the official liquidator that he will have no objection in signing the application of these applicants for the purpose of provident fund dues. After this order, their applications can also be verified and signed by the competent person on behalf of the Company. The I.A. Nos.4837/2013, 4973/2013 and 4974/2013 are accordingly disposed of. 27/ So far as the I.A. No.6303/2013 is concerned, it is an I.A. filed by the Electricity Board claiming arrears of electricity charges from the Company in liquidation. Counsel for the applicant-promoter/contributory has fairly stated before this Court that thes....