TaxTMI 
TaxTMI 
2017 (7) TMI 226
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.... other shareholder is M/s. Allgemeine Elektricitats - Gesellschaft Aktiengesellschaft, now known as 'EHG Elektoholding GmbH (EHG) ('German Company' for short) which held 9.72% of its shareholding. 4. The reasons stated in the said application and as canvassed before this Court by Mr. K.G.Raghavan, learned senior counsel appearing for the applicant-State of Karnataka are that after passing of the said winding up order on 03.08.2004, in the process of winding up, upon the sale of some of the assets of the Company, now the process of paying back all the secured and unsecured creditors including the workmen has been completed and all the secured and unsecured creditors have been fully paid to their satisfaction, barring the claim of a miniscule few of the ex-workmen, whose writ petitions were pending in this Court for their claim for enhanced salary and wages and who are now represented by Mr. Rajesh, the learned counsel for the workmen. The major asset of the Company being the huge chunk of land of about 221.125 acres of land situated in the prime location of the city of Bangalore, and out of which, after sale/acquisition of some part of it along with other assets, now 11....
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....he property during 1959 for the purpose of establishing of New Government Electrical Factory (NGEF), subsequent to which the same was transferred in to the Company in liquidation. Presently, the land measures 119.665 acres and is situated in the heart of the city. Further, by having integrated transport project in the adjacent land by BMTC, KSRTC and the Metro pursuant to acquisition of land which belong to the Company, there is an escalation in the value of the properties. The remaining land can be better utilized by the Applicant for implementation of infrastructure projects in public interest" Paras 7 and 8 of the OLR No.85/2017 are also quoted below: "7. That relying on the Affidavit filed by the Special Land Acquisition Officer before this Court it appears that an extent of land measuring 50.36 acres belonging to the Company (in Liqn.,) was acquired by Bangalore Metro Rail Corporation Limited under the land acquisition proceedings and a total compensation for a sum of Rs. 116,32,62,740/- was allowed and till date they have transferred only a sum of Rs. 59,50,52,640/- to the Company (in Liqn.,) and the balance payable is Rs. 67,15,52,335/-. In this regard, an application bef....
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....tay or recall of the winding up order. The only objection put forth before this Court is by the minority shareholder-the German Company (EHG) represented by learned counsel, Mr. R.V.S. Naik, who vehemently opposed the recall of the winding up order on the ground that Section 466 of the Companies Act, 1956, does not provide for any such recall of the winding up order by this Court and even for staying the winding up process under Section 466, there are no circumstances calling for such an order by this Court. 11. The learned counsel for the German Company Mr. Naik has placed strong reliance on the decision of the Hon'ble Supreme Court in the case of Meghal Homes (P.) Ltd. v. Shree Niwas Girni K.K. Samiti [2007] 78 SCL 482, paragraphs 46 to 52 thereof and submitted that unless a proper scheme for revival is placed before the Court for consideration, no such revival can be permitted or ordered in the present case. Paras 46 to 52 are quoted below:- "46. We may straightway notice that this Court did not have occasion to consider whether any additional tests have to be satisfied when the Company concerned is in liquidation and a compromise or arrangement in respect of it is propos....
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....tter occasion to keep in focus the suggestions earlier made. 49. It was argued before us on behalf of the appellant that Sections 391 to 394A were procedural provisions and when once a Company was under liquidation, the Chapter dealing with winding up applied and the only provision or substantive provision conferring power of stopping the winding up was conferred on the court by Section 466 of the Act, and unless the court is satisfied that the Company is being taken out of liquidation by way of revival and that it will sub-serve public interest and will conform to commercial morality, the court cannot accept a scheme proposed under Section 391 of the Act. The argument on the side of the respondents is that Section 391 is a self-contained code and read with Section 392 of the Act, which was peculiar to our Act, it was clear that a Company Court could approve, independently of Section 466 of the Act, a scheme and could take the Company out of liquidation and even pass an order of stay in terms of Section 391 read with Section 392 of the Act. Section 466 of the Act was not attracted when a scheme approved by the shareholders, creditors, members of the Company and so on was put forw....
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.... comes to the latter conclusion, then it is the duty of the court in which the properties are vested on liquidation, to dispose of the properties, realise the assets and distribute the same in accordance with law. The principles as highlighted above are precisely what this Court intends to follow in the present case. But the facts in that case were very different from the facts of the present case. In that case, a private Textile Mill was purportedly sought to be revived through sale of its land to another Private Company in Mumbai and the Court found that the proposed revival Scheme was a ruse to dispose of the land of the Company, while the creditors and workers were not yet paid off and a vague proposal for re-employment of the workers was given in the Scheme under Section 391 of the Act. While in the present case, the State Government, a majority shareholder wants to utilize the land of the Company - NGEF Ltd., only for public purposes. The conclusions therefore are bound to be different." 12. Taking the Court to the history of the proceedings in the present case, after winding up order was passed, he drew the attention of the Court, particularly, towards the order passed by....
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....everal judgments, inter alia, also the judgment of the learned Single Judge of this Court in the case of G.T. Swamy v. Goodluck Agencies [1990] 69 Comp. Case 819 (Kar.), wherein this Court referring to two previous Supreme Court decisions, in the case of Sudarshan Chits v. Sukumara Pillai AIR 1984 SC 1579 and M.L. Chopra v. Rai Bahadur AIR 1962 SC 527 held that the power to recall the winding up order is clearly traceable to Rules 6 and 9 of the Companies (Court) Rules. He submitted that in the present case, the winding up order dated 03/08/2004 either deserves to be permanently stayed and assets of the company deserve to be handed back to the Company or the said winding up order deserves to be recalled and the Company be allowed to utilize the assets of the Company for public purposes only, in either of the case. 14. Having considered the rival submissions made at the bar and upon perusal of the record, this Court is satisfied that it is a fit case where the winding up order dated 03.08.2004 passed by this Court deserves to be stayed permanently at this stage and the respondent-Company NGEF deserves to be allowed to revive and the assets of the Company may be handed over back to ....
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.... Company Court and the Official Liquidator attached with the Court executes the winding up orders passed by the Company Court. There is no compulsion in law that the winding up order must finally culminate into a Dissolution order in all the cases. If during the process of winding up, the sale of some assets are enough to pay off all the secured and unsecured liabilities of the Company, as in the present case, and the Company is still left with surplus assets, it can certainly apply to the Court for staying the winding up process permanently or for recall of the winding up order and revival of the Company. 17. It is true that there is no specific provision for taking a 'U turn' after the winding up order is passed under the provisions of the Companies Act, 1956 and to recall the winding up order, but at the same time, it is equally true that there is no prohibition either for the same. It absolutely depends upon the facts and circumstances of each case and the revival of the Company which was ordered to be wound up is not only not prohibited but certainly deserves to be encouraged in appropriate cases, either by recall of the winding up order or even by permanently staying....
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....ar as applicable, shall apply to all proceedings under the Act and these Rules. The Registrar may decline to accept any document which is presented otherwise than in accordance with these Rules or the practice and procedure of the Court. Rule 9. Inherent powers of Court.- Nothing in these Rules shall be deemed to limit or otherwise affect the inherent powers of the Court to give such directions or pass such orders as may be necessary for the ends of justice or to prevent abuse of the process of the Court". 20. Section 466 of the Act empowers the Court to stay all proceedings in relation to the winding up altogether or for a limited time on such terms and conditions as the Court deems fit, if after making of a winding up order, on an application filed by the Official Liquidator or by any Creditor or Contributory (shareholder), the Court is satisfied that such winding up proceedings deserve to be so stayed. This power is obviously to enable the Court to stop the further winding up process and not necessarily take it to the point of 'no return', namely to the stage of dissolution of the Company itself. This provision does not specifically deal with a situation of reversal o....
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....uper Speciality Public Hospitals or AIIMS Institutions, Gardens or other Educational Institutions, etc. only. The sub-serving of the public purpose and public interest at the hands of the State Government, the 90% shareholder of this Government Company can be presumed also from the averments and Undertaking of the State and there is no contra material placed before this Court to draw any adverse inference against the applicant State of Karnataka that it will not abide by its aforesaid undertaking specially under the close supervision by this Court and the cause of public will not be served, if such revival is ordered upon the recall or stay of such winding up order. Therefore, the judgment relied upon by the learned counsel for the German Company is not applicable to the facts of the present case. Moreover, a shareholder of the Company cannot insist upon the winding up process to be completed till the stage of Dissolution of Company to fetch its dividends or returns as a contributory from the sale of all the assets of the Company. The said German Company, which was in negotiations with the State Government for buying back its 10% minority share holding may still have the option to ....
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.... necessary directions to the Provisional Liquidator to take recourse to Section 446(2) of the Act. Relying upon the decision of the Hon'ble Supreme Court in the case of National Textile Workers Union v. P.R. Ramakrishnan AIR 1983 SC 75, the learned Single Judge of this Court in the case of G.T. Swamy (supra) held in paragraph 17 of the judgment that the power of the Company Court to recall the winding up order is recognized by the Supreme Court in the aforesaid judgment but the exercise of such power is dependent on the facts and circumstances of each case. Para.17 of the judgment is quoted below: "17. I have no doubt in my mind that regard being had to the provisions of Rules 6 and 9 of the Rules framed by the Supreme Court in exercise of the powers under Section 643 of the Act, the power of Company Court to recall the winding up order is recognized by the Supreme Court in the aforesaid two decisions. But the exertion of that power is dependent on the facts and circumstances of each case. Perhaps, consideration which are relevant in regard to an order of winding up under Section 433(e) may not be relevant for an order of winding up under the 'just and equitable' clau....
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....e application of the liquidator or any creditor or contributory, to stay winding up proceedings at any time (S.256(1). A copy of any such order must be sent by the Company, or otherwise as the Court may prescribe, to the Registrar of Companies (S.256(3). In exercising its discretion under this Section the Court will consider the interests of commercial morality and not merely the wishes of creditors, eg., if there appear to be irregularities requiring investigation to continue." 29. William on Bankruptcy says as follows:- "The mere fact that all the creditors consent will no longer entitle the debtor to have the bankruptcy annulled; and where the debts are not paid in full and the adjudication was properly made in the first instance, the Court cannot annul except under a scheme under Section 21 (vide supra), or an arrangement is proposed which amounts in substance to such a Scheme, even though not complying with the formalities of that Section. Even where the debts have been paid in full, the Court has a discretion to refuse to annul, and may refuse an annulment on the ground of the bankrupt's misconduct, e.g., concealment of assets; a second application to annul may, howeve....
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.... must not deny the statute. Unpalatable statute law may not be disregarded or rejected, merely because it is unpalatable. Only if a just result can be achieved without violating the legislative purpose of the statute may the Judge select the construction which best suits his idea of what justice requires. Further in our system the rule "stare decisis" applies as firmly to statute law as it does to the formulation of common law and equitable principles. And the keystone of "stare decisis" is loyalty throughout the system to the decision of the Court of Appeal and this House. The Court of Appeal may not overrule a House of Lords decision; and only in the exceptional circumstances set out in the practice statement of July 1, 1966 (Practice Statement (Judicial Precedent) 1 W.L.R. 1234), will this House refuse to follow its own previous decisions." 31. In the case of Dilip B. Sethi v. Official Liquidator of Alang Industrial Gases Ltd. [2012] 171 Comp. Cas. 1231 (Guj.), the Gujarat High Court has held as under: "33. In view of the provision under the said rule 6 of the Rules, the power available under section 151 of the Code would be available to the court. A conjoint reading of the p....
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....is in a state of suspended animation. The fact that the Appellate Bench directed that pending implementation of the scheme as sanctioned by the High Court, the winding up order will be kept in abeyance itself without anything more shows that the order was neither cancelled nor recalled nor revoked or set aside. It continued to exist but was inoperative. Any default on the part of the company in carrying out its obligation under the scheme by itself without anything more would revive the winding up order. Therefore, the winding up order was effectively subsisting but inoperative for the time being, having all the potentiality of being rejuvenated or being brought back to life. Now, if the winding up order was merely held in abeyance, i.e., if it was not operative for the time being, but had not ceased to exist, the winding up proceedings are in fact pending and the court which made the winding up order would be the court which is winding up the company. It is now well-settled that a winding up order once made can be revoked or recalled but till it is revoked or recalled, it continues to subsist. That is the situation in this case. If the winding up order is subsisting, the court w....
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....ction 466 of the Act at this stage, Section 466 of the Act provides for a platform to the Company Court to not only permanently or temporarily suspend the winding up process but to permit the Company to revive either its running business to utilize its assets which are free from the charge of the creditors and workers' liability or are likely to be free from it charge soon, if the Company has made adequate arrangements for the same. 35. This Court is conscious of the fact that a big chunk of Government land which is presently in the custodia legis of the Official Liquidator if not properly safeguarded and utilized for the pressing public needs on the other hand may lead to even encroachments by unauthorized people on such public land, further engulfing the Government and the public authorities in a chain of litigations. Therefore, it is always appropriate and suitable if the idle immovable property of the Government Company like big chunk of land, as is available in the present case, is best utilized for the larger public interest and therefore this Court does not see any impediment or valid objection against such revival of the Company and restoring the assets of the Company ....
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..../2015 is allowed and the winding up order dated 03/08/2004 passed by a co-ordinate bench of this Court is stayed or sisted and kept in suspension sine-die and the recommendation of the BIFR dated 02/08/2002 forwarded to this Court for winding up of the Company is also stayed permanently subject to the further orders of this Court. 40. The Official Liquidator may now take steps to handover the assets and records of the Company with the Status Report as soon as he is informed about the constitution of the Board of Directors by the Applicant - State of Karnataka, with the approval of this Court. 41. This Court would remain in de jure seisin of the assets of the Company and monitor the implementation of aforesaid Undertaking of the applicant - State, which forms the basis of this order of stay of the winding up of NGEF Limited and as undertaken by the learned Senior Counsel for the Applicant - State of Karnataka also, and fairly so, the Applicant - State of Karnataka will submit the Quarterly Reports of the implementation and progress of the utilization of the land and other assets of the Company for the public purpose as undertaken before this Court and as indicated in the aforement....