AI Drafter 
TaxTMI 
TaxTMI 
TaxTMI 
1994 (11) TMI 438
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....he balance of loan as arrears of land revenue. Accordingly, the Corporation disbursed Rs. 18 lakhs to the Company in 1977 and Rs. 10 lakhs in 1978. In 1979, the Acetylene Gas Plant of the Company was commissioned. In 1980, the Corporation disbursed the balance of Rs. 2 lakhs to the company thus making the total payment of loan of Rs. 30 lakhs. In July 1981, the Oxygen Gas Plant of the Company was also commissioned. 2. The Company, however, made persistent defaults in repayment of the loan instalments with the result that the recovery certificate was issued against it under Section 3 of the U.P. Public Moneys (Recovery of Dues) Act. The Company challenged the said recovery proceedings before the High Court in W.P. No. 15648 of 1981 which, however, was withdrawn by it later. Thereafter on 30th November, 1981, the Company filed Company Petition No. 23 of 1981 under Sections 397 and 398 of the Companies Act in the High Court seeking removal of persons then in management on grave charges of manipulation of accounts, re- allotment of forfeited shares etc. 3. On 25th March, 1982, the State Government issued Office Memorandum enunciating a scheme for rehabilitation of sick units and ....
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.... the unit will be "marginally viable". 7. On these facts, the question raised by the Corporation in this appeal is whether the Corporation is obliged to invest a further sum of Rs. 1 crore in the establishment and whether even after such investment the unit will be viable or whether the Corporation should realise its loan from the sale of the assets of the Company. 8. As against the aforesaid case of the Corporation, the contention of the Company is that pursuant to the loan sanctioned by the Corporation, the Company imported two heavy-duty compressors from the U.S.A. and commissioned the Acetylene and Oxygen plants in 1979 and 1980 respectively. On account of the mismanagement of the majority group then dominating the management of the company, the present management which consisted of a minority of shareholders, had to institute proceedings in the High Court under Sections 397 and 398 of the Companies Act, and in Feburary 1984 the High Court under a compromise order got the shares of the then management transferred to the present management at the face value of Rs. 10/- per share. The equity capital invested by the present management, viz., D.P. Agrawal Group, therefore, be....
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.... all departments including the Corporation to stay their recovery proceedings till the final decision was taken on the rehabilitation. On 6th January, 1986, the Reserve Bank requested the Corporation to stay the recovery proceedings. 12. In spite of this and in spite of the fact that the matter concerning the rehabilitation of the unit was pending consideration before the State- Level- Inter Institutional Committee and the Corporation itself had granted deferment of the repayment of the loan to 1987 to be completed in 1996, the Corporation issued another recovery notice of 9th January, 1986. However, on 18th January, 1986, the Head Office of the Corporation advised its Allahabad branch to stay the recovery proceedings. On 2nd May, 1986, a meeting of the State- Level Inter-Institutional Committee convened by the Reserve Bank, was held and the representative of the Corporation informed the Committee that the Corporation had stayed the recovery proceedings against the Company and in consultation with the Canara Bank a proposal for rehabilitation of the Company had been forwarded to the IRBI. The Committee decided that the Reserve Bank will call a joint meeting of all the agencies t....
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....stitutional Committee held on 2nd May, 1986, an assurance was given by the representative of the Corporation that the recovery proceedings against the Company had been stayed, and, therefore, a decision was taken to call another meeting for the rehabilitation of the unit. Since, however, the Corporation had taken physical possession of the unit, no further action could be taken pursuant to that decision. The Reserve Bank in that letter also desired that the matter be taken up with the State Government so that the Government could intervene to stay the actions of the Corporation. By his letters of 29th August, 1986, the Director of Industries advised the Corporation to withdraw its action and allow the unit to run. 15. It was in these circumstances that the Company was forced to file the writ petition in the High Court on 1st August, 1986. The High Court had, by its impugned judgment, found that the action of the Corporation was very arbitrary and had directed it to restore the possession to the Company forthwith. It had also directed the IRBI to prepare rehabilitation package within four months of the restoration of the possession. 16. At the time the Corporation sealed the u....
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....y, 1988 according to which the unit was found viable. In this connection, the following passages from the said report are relied upon by the Company. "Resolved that the proposal contained in memorandum of IRBI No. 8793/88 dated 1.12.88 for sanction of Rupee term loan not exceeding Rs. 190 lakhs (Rupees one hundred and ninety lakhs only) to Naini Oxygen & Acetylene Gas Limited (NOAG) towards the cost of proposed modernisation-cum- rehabilitaiton scheme on the terms and conditions contained in Appendix of the memorandum, besides normal terms and conditions applicable to such loan from IRBI, be and is hereby approved." x x x "In the light of IRBI having submitted a report on the viability aspect of NOAG as elaborated earlier, the Hon'ble Supreme Court has directed IRBI to consider the report and intimate its decision to this court. UPFC sometime in August, 1986 had communicated earlier to the Company its intention, inter-alia, to follow the rehabilitation proposal approved by IRBI. In the discussion with Canara Bank it appeared that the Bank was favourably inclined to support rehabilitation proposal approved by IRBI. Meanwhile, market study undertaken by....
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....nt of loan from 1987 to 1996, what impelled it to issue the said recovery notice on 13th May, 1986 when admittedly as per the Corporation's offer, the payment of loan and interest from the Company was not due and when the entire matter of the rehabilitation of the Company was under active consideration; (iv) what impelled the Corporation on 13th June, 1986 to seal the unit and write to the customers not to pay the bills and not to return the cylinders of the Company; (v) when on 11th August, 1986, the Corporation had written to the Company agreeing to give it back the possession of the unit and to follow the rehabilitation proposal that would be prepared by the IRBI on the condition that the Directors of the Company would give personal guarantee for the payment of the liabilities and the Company had accepted the terms by it letter of 21st August, 1986 and when the Director of Industries had advised the Corporation on 12th August, 1986 to withdraw the recovery notice, why had the Corporation not handed over the possession of the unit to the Company; (vi) why had the Corporation not taken steps to repair the machines, in spite of the undertaking given to this Court and (vii) why ....