TaxTMI 
TaxTMI 
2010 (4) TMI 1178
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....ion entrepreneurs Sh. Uday Singh and Sh. Ashok Bahadur. At the time of incorporation, the company had the following promoter directors :- (i) Sh. Uday Singh (ii) Sh. Ashok Bahadur (iii) Sh. Naveen Chopra 4. The company was engaged in the development of various grades of automobile coolants to become the original equipment manufacturer and supplier to various auto manufacturers which included Maruti, Telco, Ashok Leyland, Escorts. Originally the industrial activity was commenced in rented premises in Udyog Vihar, Gurgaon. The company thereafter decided to expand its manufacturing activity to the complimentary fields of engine oils, brake fluid and other auto care products for which there were few competitors in the country. It even had a collaboration with M/s Liqui Moily of Germany. The company set up its lubricating oils manufacturing unit in the industrial estate of Dharuhera, Haryana and also relocated its coolants manufacturing unit there. This project envisaged a capital lay out of Rs. 2550.00 lakhs (including Rs. 500 lakhs as additional margin working capital). 5. On account of primary market weakness ....
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....ection 15(1) of Sick Industrial Companies (Special Provisions) Act, 1985 (SICA) and the Company was registered as a sick company vide the order dated 11th May, 1999. 9. The IFCI Ltd. was appointed as the Operating Agency under section 17(3) of the SICA to prepare a draft rehabilitation scheme (DRS) of the company based on a proposal to be submitted by the company. However, despite repeated opportunities, the BIFR found that the scheme proposed by the company was not as per RBI guidelines and the company was unable to put forth a viable revised proposal. Consequently, by an order passed on 4th May, 2000, the BIFR directed the IFCI to issue an advertisement for change of management of the company. 10. The company preferred an appeal before the Appellate Authority, Industrial & Financial Reconstruction (for short 'AAIFR') against the order dated 4th May, 2000 of the BIFR. Despite opportunities given by the appellate authority as well, no viable proposal could be propounded by the promoters for rehabilitation of the company on a one time settlement basis because of limited resources. 11. The banks and financial institutions appear to have been opposed....
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....as the secured creditors of the company are concerned, they were all recommending winding up of the company. The proposals previously submitted had been found to be unacceptable to the secured creditors and potentially not viable. 15. Consequently, the Board for Industrial and Financial Reconstruction expressed an opinion under Section 20(1) of Sick Industrial Companies (Special Provisions) Act, 1985 on 5th March, 2002 that M/s. Sunstar Lubricants Limited, was a sick company and it would be just, equitable and in public interest to wind it up. 16. The recommendation of the BIFR to this court was registered as Company Petition No. 154/2002. After considering the records, the opinion expressed by BIFR and on hearing the parties, the court was satisfied that the net worth of the Company had been substantially eroded and there was no real possibility of any revival or rehabilitation of the Company and it would also not be possible for the company to effectively exceed its net worth within a reasonable time. Accordingly, vide an order dated 3rd December, 2003, the Company was ordered to be wound up; and the Official Liquidator attached to this court w....
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....vember, 2006 whereby it agreed to accept a total sum of Rs. 14.15 crores in full and final settlement of all its claims against the Company. 21. The applicant has also stated on record that even prior to the winding up order on 3rd December, 2003, the promoters (who were also guarantors of the loan), had effected the settlement with the Standard Chartered Bank and the Hongkong and Shanghai Banking Corporation Limited (also two secured creditors of the company) in the year 2002 and cleared the entire outstanding dues to these creditors in full and final settlement of their claims. 22. In this background, vide the order dated 30th November, 2006 passed in CA 1390/2006 in these proceedings filed by the promoters of the Company, this court cancelled further auction proceedings with respect to the assets of the Company and directed the promoters of the Company to deposit a sum of Rs. 6,93,482/-, being the proportionate expenditure incurred by the Official Liquidator for publication of citations & sale proclamation and security charges, etc. w.e.f. 1st December, 2006 onwards. The Court also directed the promoters to deposit a further sum of Rs. 50,00,000/- with the Official Liquida....
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....e sale of the properties belonging to the company (in liqn.) at Village Kapasehra, Teshil Mehrauli, New Delhi; Land located at NH-8, Delhi-Jaipur Highway, Daruhera, District Rewari; SAS House (1st Floor), Sapro Marg, Lucknow; and a Suite at 10, Hailey Road, New Delhi. A direction was also sought to the OL to release a sum of Rs. 32.50 lacs in favour of the State Bank of Indore out of the funds submitted by the applicant with the Official Liquidator. 29. Vide order dated 11th December, 2007, the Official Liquidator was directed to take steps for the sale of the said properties in consultation with the secured creditors. The Official Liquidator was further directed to invite claims from the workers as well as the secured creditors. Pursuant to the said directions, claims were invited by publication in 'Times of India' (English) and 'Nav Bharat Times' (Hindi). 30. Vide order dated 25th February, 2008, the properties belonging to the Company and possessed by the Official Liquidator were put to auction. The properties mentioned in Para 14 above, except at Sl. No. (i), were auctioned by the court and the total value realized wa....
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....cs to the Canara Bank from the fund available in the account of the Company. 35. The Official Liquidator has filed a report dated 16th February, 2009 on record confirming that other than the land at Village Narsinghpur, Gurgaon, all assets of the company stood valued and already auctioned. It is further confirmed that all secured creditors of the company stand paid and that there are no secured creditors. 36. Despite repeated publications at various stages of the proceedings noticed above, claims of only four preferential and other creditors were received by the Official Liquidator which have been detailed herein-above. The claim of the provident fund department stands admitted by the Official Liquidator for Rs. 14,81,264/-. The claims of the other creditors were disputed by the ex-management and were stated to be sub-judice. It is observed in this report that the ex-management in their statement of affairs had disclosed claims of ESI, PF, Sales Tax and Income Tax (TDS) and some other unsecured creditors. 37. Vide CA No. 263/2009, it was contended by Mr. Ashok Bahadur, propounder of the Scheme, that an amount of Rs. 1,81,95,769/- w....
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....the court; and (iv) The Official Liquidator shall inventorize the available records of the company and hand over the same to the authorized representative of the company. 40. The promoter director also moved two applications, viz. CA No. 817/2009 dated 25th May, 2009 placing a scheme for revival for approval & CA No. 1085/2009 dated 25th August, 2009 seeking directions of this court to dispense with the requirement of convening the meetings of the shareholders and creditors of the Company and to accept the revival Scheme on the ground that the secured creditors of the Company have already been paid off and that the shareholders, constituting more than 75% of the total paid up capital of the Company, have accorded their consents & no objections to the Revival Scheme. It is further claimed that no proceedings under Section 235 to 251 of the Companies Act, 1956 are pending against the Company, and that no proceedings under Section 397 and 398 of the Companies Act, 1956 have ever been launched against the Company. 41. Learned counsel for the applicant has further drawn my attention to the signed consent to the proposed Scheme of Revival of the twelve sharehol....
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.... under scrutiny and that all the statutory authorities have to submit the necessary Form No. 66 and without which no payment can be released to them. So far as the claim of the Sales Tax Authority, Rewari is concerned, a perusal of the orders passed by the Jt. Excise & Taxation Commissioner, Faridabad shows that the assessment orders have been set aside as they were passed ex-parte and the matter stands remanded to the Assessing Authority for reassessment within a time bound manner. Nothing is placed on record to show whether the reassessment orders have been passed by the Assessing Authority or not and whether the same are acceptable to the propounders of the Scheme. So far as the remaining statutory claims are concerned, the Official Liquidator has informed the concerned authorities to file the requisite Form No. 66 to enable finalization of admitted claims. 45. Learned counsel for the applicant has thus submitted that some of the provisions of the Scheme with regard to clearing of the dues payable to the secured creditors already stand implemented. 46. So far as the unsecured creditors are concerned, it is submitted that the Company had the followin....
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....avour of the general public, shareholders, employees, public financial institutions and banks who have provided financial assistance to the Company and that the sanction of the Scheme would enable the Company to honour its commitments. Ms. Arora has further submitted that the Company under liquidation was a leading manufacturer of automobile coolants, lubricating oils and other related products and was an original equipment supplier to Maruti Udyog Limited, Ashok Leyland etc. and enjoys strong goodwill throughout India. Learned counsel submits that the Company continues to possess the technical know-how, expertise and the goodwill for manufacturing the automobile coolants, lubricating oils and other related products which has an ever growing demand. The submission is that if the Scheme of Revival is approved, the Company would not commence its own production at its factory for at least three to four years but will use the surplus blending facilities of other manufacturers to blend the lubricant by paying a nominal charge as it suits the promoters more now as they are starved of cash and that this practice of using other facilities to manufacture lubricant is prevalent w....
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....editors as well as the statutory dues in accordance with the conditions stipulated in the Revival Scheme. The Revival Scheme provides that in terms of the the financial plan for next six years i.e. w.e.f. 2008 to 2013, the company will be able to earn a Net Profit of Rs. 501.32 lacs, which would be sufficient to liquidate the unsecured debt of Rs. 307 lacs, if at all it is held to be payable. The Scheme details the process by which the promoters of the Company will raise funds for revival of the Company. A large number of steps pursuant to the Scheme filed in court already stand taken. The immovable assets of the Company, except land & building at plot on NH-8, Narsingpur, Manesar, DelhiJaipur Highway (Haryana), were auctioned and the claims of the secured creditors have already been settled. There is an amount of Rs. 1,85,72,407.96 lying in the account of the company and even after paying the statutory dues and the claim of the unsecured creditor, M/s. Pearl Polymer Limited, an amount of more than Rs. 1.25 crores will still be available in the account of the company. The other three unsecured creditors, as mentioned in the Revival Scheme, have not filed the....
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....hole is also found to be just, fair and reasonable from the point of view of prudent men of business taking a commercial decision beneficial to the class represented by them for whom the scheme is meant. 9. Once the aforesaid broad parameters about the requirements of a scheme for getting sanction of the Court are found to have been met, the Court will have no further jurisdiction to sit in appeal over the commercial wisdom of the majority of the class of persons who with their open eyes have given their approval to the scheme even if in the view of the Court there would be a better scheme for the company and its members or creditors for whom the scheme is framed. The Court cannot refuse to sanction such a scheme on that ground as it would otherwise amount to the Court exercising appellate jurisdiction over the scheme rather than its supervisory jurisdiction." 54. It has been repeatedly held that whenever option is available between revival of the company and its winding up, courts must as far as possible lean in favour of the company. The same facilitates creation of the prospect of generating jobs and putting the assets of the company in productive use as against thei....
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...., the court refused to sanction the proposed scheme after it was found that .the entire exercise undertaken by the sponsor with the support of the workers union was intended to acquire the land of the company for its exploitation. The court also found that the scheme was not genuine but patently fraudulent as it had been evolved as a cloak to cover the misdeeds of the directors to avoid misfeasance proceedings against them." These principles were reiterated by this court in the judgment MANU/DE/0864/2005 : 123 (2005) DLT 45 in Re: Soldier United Motor Tpt. Co. Ltd. AND Sh. S.N. Bhalla Vs. Soldier United Motor Tpt. Co. Ltd. 57. It has also been held that so long as a Scheme is bonafide and is not intended to shift misdeeds of ex-directors or is otherwise equitable, the court would put its seal of approval on any proposal which is fair and reasonable and propounded in good faith. [Ref: (1996) 22 Corporate LA 200 Re: Saroj G Poddar]. The Bombay High Court in the judgment reported at MANU/MH/0509/2005 : [2005] 127 CompCas 752(Bom) Shree Niwas Girni Kamgar Kruti Samiti Vs. Rangnath Basudev Somani in para 29 observed as follows :- "29.&n....