AI Drafter 
TaxTMI 
TaxTMI 
TaxTMI 
2017 (11) TMI 785
X X X X Extracts X X X X
X X X X Extracts X X X X
....ers and 77% of shares are held by general public and only 23% of shares are held by the promoters. Respondent No.2 is a Corporation incorporated as limited company wherein 100% shares are owned by the State of Madhya Pradesh. Respondent No.2 has been incorporated with an object to promote the industrial growth in the State of Madhya Pradesh. Respondent No.2, thus, falls within the definition of "State" as per Article 12 of the Constitution of India and, therefore, amenable to the writ jurisdiction of this Court. 3. Respondent No.2 in the year 1998 floated an Inter Corporate Deposit (ICD) Scheme to help the various companies situated in the State of Madhya Pradesh. Respondent No.2 granted ICDs to about 50 companies in the State of Madhya Pradesh and out of which 30 companies defaulted in repaying the deposit. In order to resolve and recover the loss, respondent No.2 floated an OTS policy (One time settlement) in the year 2007. OTS policy granted an opportunity to the borrower to pay back the amount along with predetermined interest. Due to an overall depression in the business and especially change in the excise policy for liquor, the industries in the State of Madhya Pradesh wer....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d 17/04/2012. 5. Respondent No.2 filed winding up petition before the Delhi High Court in the year 2008 against the petitioner company. The said writ petition was registered as Company Petition No.198/2008. The petitioner-company contested the said winding up petition and has deposited amount of Rs. 50 lakh as per the order dated 02/12/2011 passed by the Delhi High Court. 6. Vide letter dated10/14.05.2012 MPSIDC indicated to the petitioner that OTS is acceptable for an amount of Rs. 7.74 crore along Rs. 17.12 lakh as recoverable expenses. However, as it is evident from the order dated 16/07/2012 passed by the Delhi High Court, the submission of the petitioner was that the amount of Rs. 75 lakh already paid by the petitioner during pendency of the winding up petition, be adjusted against the principal amount as done in the case of other borrowers. However, the respondents failed to consider the reasonable request of the petitioner in adjusting the said amount against the principal amount which ultimately resulted in passing of winding up order on the basis of allegedly admitted amount of Rs. 10.97 crore as per the balance sheet of the petitioner-company vide order dated 03/05/....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e said order by way of filing amendment application. 9. Respondent No.2 has filed reply and stated that the petitioner-company is in persistent default of the due amounts and, in fact, no cause of action arose in filing the writ petition and no statutory provision is being violated so as to enable the petitioner in seeking the relief in the writ petition in exercise of extraordinary writ jurisdiction of this Court under Article 226 of the Constitution of India. It has been submitted that respondent No.2 sanctioned and disbursed a sum of Rs.one crore by way of financial assistant in the form of ICD to the petitione4r-company. In consideration thereof, the petitioner-company executed a demand promissory note and a corporate guarantee in favour of respondent No.2. The due date of repayment was 21st March, 2001. Respondent No.2 thereafter sanctioned and further disbursed Rs.two crore in favour of the petitioner-company again by way of ICD for which the petitioner-company executed a demand promissory note and corporate guarantee. The date for repayment was 6th February, 2002. The third promissory note was issued on 9th August, 1999 in the sum of Rs.one lakh. Accordingly ICDs were iss....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ve. No statutory provision is shown by the petitioner to establish that respondent No.2 is bound in terms of law to settle the dues as per the petitioner's proposal. 12. Learned senior counsel for the petitioner argued that the petitioner-company has obtained financial assistance from respondent No.2 and for repayment of the same, issued post dated cheques and there is no personal guarantee or mortgage of any kind which is given in favour of respondent No.2 and as such respondent No.2 is an unsecured creditor. Respondent No.1-State of Madhya Pradesh framed one time settlement policy. The said policy is not a general policy which may be either adopted or followed by other financial institutions. Respondent No.2 vide letter dated 11/07/2007 offered petitioner -company to submit proposal for one time settlement. The petitioner submitted its proposal which was not accepted by respondent No.2 saying that it is not in accordance with the OTS policy. However, the corporation by the said letter informed that under the OTS policy, an amount of Rs. 798.96 crores is payable which may be paid within 15 days subject to reconciliation. In the meanwhile, respondent No.2 filed a company pet....
X X X X Extracts X X X X
X X X X Extracts X X X X
....at by pursuing liquidation proceeding, the respondent No.2 may be get more amount than payable under the OTS policy. The said reason given by the respondents for not accepting his proposal is illegal and arbitrary. He also submits that pursuant to the winding up order, the assets of the company has to be taken over by the liquidator and has to be sold for the purpose of payment of loan. The claim should be submitted before the liquidator after publication and decision on those claims itself is a lengthy and cumbersome proceeding. Once the official liquidator reaches to the stage of distributing the sale proceeds, then first the amount is to be paid under Section 326 of the Act which is an overriding payment. If any amount is left thereafter the payments will be made to the preferential claimants under Section 327 of the Act and it is only thereafter the claim of the unsecured creditor like respondent No.2 would be considered on pari pasu basis. There are huge amounts for payment to the secured creditors as well as statutory dues and there is more than a surety that in liquidation proceeding, nothing would be left after the payment of secured creditor and statutory dues and responde....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ng it to contribute to the public exchequer by paying huge amount of taxes which runs into more than one crore per year. However, if the hostile attitude of respondent No.2 is continued, then it would result into unemployment, closure of ancillary industry causing severe loss to the public exchequer. In the liquidation proceedings, there are all chances that respondent No.2 may not get a single penny. In light of the aforesaid submissions, learned senior counsel for the petitioner submits that the present writ petition may be allowed and the decision dated 20/06/2017 may be set aside. 16. Learned counsel for the respondent No.2 argued that the process of settlement of amount, as per OTS policy, has already been taken up on previous occasions before the Delhi High Court and the Hon'ble Supreme Court. All possibilities of settlement have resulted in failure. Settlement process has been undertaken right from 2007 to 20/06/2017. As per clause-1 of OTS Policy, the respondent No.2 is empowered to reject the proposal of settlement of amounts without giving any reason, in case statutory mechanism is available for securing the due amounts. In the aforesaid backdrop, respondent No.2 i....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... reveals that respondent NO.2 has extended the facility of ICD to the petitioner of the different amount. The petitioner-company could not repay the said amount to respondent No.2- Corporation in time. Respondent No.1/State has framed one time settlement policy. As per the said policy, the petitionercompany has offered his proposal for one time settlement. The said proposal was not accepted by respondent No.2 saying it is not in accordance with the OTS policy. On 02/05/2008 respondent No.2-Corporation filed a company petition before the Delhi High Court for winding up of the company on account of non-payment of dues. During pendency of the company petition, offer was again made to settlement the dues under the OTS policy, but, finally it failed as respondent No.2 refused to adjust the amount of Rs. 50 lakh which was paid to respondent No.2 by the petitionercompany. Thereafter the Delhi High Court passed an order for winding up of the company on 03/05/2013 in which in para-25 to 32 has held as under : "25. From the correspondence, it appears that SDBL was unmindful of the fact that it was for MPSIDC to determine, on the basis of the offer made by SDBL, what the OTS amount s....
X X X X Extracts X X X X
X X X X Extracts X X X X
....arch, 2010 there is an admitted liability of Rs. 10,97,70,329. The OTS amount payable by SDBL was far less than the said amount. Despite numerous opportunities, SDBL was not made payment of the OTS amount to MPSIDC till date. The order passed by this Court on 30th March, 2012 noted that "While this Court was in the midst of dictating the order" for provisionally winding up SDBL, its representative stated that SDBL "shall immediately meet the officers of the Petitioner corporation and repay the entire amount that is due and payable to the Petitioner Corporation within three weeks. More than a year has passed since then. There had been numerous opportunities available to SDBL to comply with the requirements of OTS amount offered by MPSIDC. Even as late as 25th April 2013 MPSIDC gave yet another chance to SDBL to pay Rs. 7,52,66,77 after forgoing Rs. 25 lakhs out of the OTS amount of Rs. 7,77,66,667. Instead, SDBL has been consistently haggling what the OTS amount should be and its stand has been demonstrably untenable. With SDBL failing to meet the deadlines for paying the OTS amount repeatedly, the OTS no longer holds good as far as MPSIDC is concerned. 28. In the circumsta....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t one more opportunity to SDBL to pay to MPSDIC the admitted liability as shown in its balance sheet as on 31st March 2010, minus the payments made by SDBL to MPSIDC thereafter, together with interest up-to-date within a period of six weeks from today. Accordingly this order is kept in abeyance for a period of six weeks from today. If the payment as directed above is made by SDBL to MPSIDC within six weeks, then the present petition will be disposed of leaving it open to MPSIDC to institute other appropriate proceedings in accordance with law to recover the balance amount claimed by it. If such payment is not made to MPSIDC within six weeks then this order, and in particular para 29 to 31 above, will become immediately operational. MPSIDC will immediately inform the OL and the OL will proceed to take steps in terms of paras 29 to 31 of this order. In that even, a compliance report shall be filed by the OL before the next date of hearing." 19. The Delhi High Court in its order after exploring the possibilities of settling the dues as per OTS policy was of the view that the settlement is not possible on account of the fact that already numerous opportunities was made available to ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....arly, this Court in the case of M/s Som Distilleries Limited Vs. The State of Madhya Pradesh, reported in 2014 SCC Online M.P. 3020, vide order dated 09/04/2014 in para-15 has held that the Corporation cannot be forced to accept the offer of amount which, according to them, is not as per the OTS Scheme of 2007. In the present case, the Corporation has rejected the application submitted by the petitioner for OTS on the ground that the same is not as per the scheme. The judgments relied upon by learned counsel for the petitioner are distinguishable on the facts and, therefore, they are not relied on while passing the order. 22. Section 446 of the Companies Act provides that the suits stayed on winding up order. Section 446 reads as under : "446. Suits stayed on winding up order.- (1) When a winding up order has been made or the Official Liquidator has been appointed as provisional liquidator, no suit or other legal proceeding shall be commenced, or if pending at the date of winding up order, shall be proceeded with against the company, except by leave of the (Tribunal) and subject to such terms as the (Tribunal) may impose. (2) [The Tribunal] shall, notwithstandi....