TMI Blog1979 (7) TMI 181X X X X Extracts X X X X X X X X Extracts X X X X ..... o. 171 of 1979 is that separate meetings of the equity and preference shareholders of the Bharat Vijay Mills Ltd. be convened for the purpose of considering and, if thought fit, approving with or without modification, the scheme of amalgamation, arrangement and compromise proposed to be made between the company, its members and creditors and the Bharat Vijay Mills Co. Ltd. Incidental prayers with regard to the manner of convening, holding and conducting the said meetings, publication of notice and advertisement of such meetings, appointment of chairman to preside over such meetings and submission of the report of the chairman to the court have also been made in each of the applications. Before issuing necessary directions as prayed for in each of these applications, it has become necessary to consider two questions: first, whether a time limit should be fixed for entertaining hereafter any application under section 391(1) of the Act which might be made by any party who is interested in proposing a scheme of amalgamation, arrangement and compromise between the company, its members and creditors and any other company and, secondly, whether a condition should be imposed upon the pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9 of 1979 on February 28, 1979, to wind up the company. On February 26, 1979, the petitioning-creditor moved Company Application No. 85 of 1979 for appointment of the official liquidator as provisional liquidator. By an order made on April 10/11, 1979, by this court, the official liquidator was appointed as provisional liquidator of the company with certain specified powers. One of the powers given to the provisional liquidator was to explore the possibility of and to make all endeavour to restart the business of the company. Subsequently, by an order dated May 9, 1979, passed in Company Application No. 187 of 1979, the provisional liquidator was directed to pay the arrears of wages for the month of November, 1978, to the employees of the company who were not employed in a managerial capacity and whose total emoluments did not exceed Rs. 1,000 per month at the relevant time out of the funds made available to him for the purpose by the Bank of Baroda who is one of the secured creditors of the company. After the aforesaid Order dated April 10/11, 1979, was made, the three applicants herein have proposed their respective schemes of amalgamation, arrangement and compromise. There is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rms. The procedure, which the law has laid down for the consideration and approval of such schemes by different classes and for the ultimate sanction of any of such schemes by the court, is a fairly protracted and time-consuming one. In the case of a company which has stopped its business and whose losses arc mounting up and plant and machinery are deteriorating day by day, it would not, therefore, be in the interest of the company itself to allow scheme after scheme to be sponsored ad infinitum. Adoption of such a course might defeat the very purpose of devising a living workable scheme, namely, providing early relief and infusing life into a sick unit which otherwise would have to be wound up resulting in its civil death. Protracted proceedings would not also be in public interest. Loss of production is a national loss. It also affects public exchequer by loss of revenue. Continued unemployment, apart from the untold misery which it would inevitably impose upon workmen for no fault of theirs, might lead to industrial unrest in the locality giving rise in its wake to myriad problems. Individual rights have, therefore, to be balanced against collective rights and also against pub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for payment of any interest to the workmen on the arrears of their wages. The workmen, therefore, suffer on all fronts by continued closure of the mill. Apart from these considerations, however, the factor which the court considers most relevant and material for the purposes of imposition of date-line is that all the three proposed schemes are made expressly subject to certain conditions in order to become operative. One of the conditions which is common to all the three schemes is the declaration of the Central Govt. under section 72A of the I.T. Act to the effect that the accumulated loss and unabsorbed depreciation of the company, which under each scheme is the amalgamating company, shall be deemed to the loss, or, as the case may be, allowance for depreciation of the amalgamated company and that the other provisions of the I.T. Act relating to set-off and carry forward of losses and allowance for depreciation shall apply accordingly. Indeed, the benefit of carry forward and set-off of accumulated loss and unabsorbed depreciation allowance is one of the strongest motivating factors which in these days brings forth schemes for amalgamation, arrangement and compromise and it would ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... larger public interest. In my opinion, therefore, a reasonable time-limit is required to be imposed in the instant case beyond which the court would refuse to make orders under section 391(1) in respect of any new scheme of amalgamation, arrangement or compromise in respect of the company. In order to ensure that no intending proposer of such a scheme is put to a disadvantage, it would be necessary to give an advance public intimation of the court's decision in this behalf to all intending proposers. This could be achieved by directing the provisional liquidator to publish an advertisement in English and Gujarati newspapers having wide circulation. The question then is as to what such a reasonable time-limit is on the facts and in the circumstances of the case. It appears to me, having regard to the fact (1) that the manufacturing unit of the company is closed since February, 1979, (2) that an order has been made in April, 1979, appointing the official liquidator as the provisional liquidator, (3) that an advertisement was published by the provisional liquidator in "Times of India" on May 12, 1979, "Sunday Standard" on May 13, 1979, "Gujarat Sama-char" on May 12, 1979, and "Sand ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... obtain the requisite approval, consent or sanction within such time limit, the schemes would not be considered for sanction under section 391(2). All that has been stated above while considering the first question is relevant in the context of this question as well. Those very reasons can be legitimately pressed into service in the matter of imposition of such a condition. The court cannot, in the larger interests of all concerned, allow itself to be placed in a situation where it has to helplessly watch the proposers of schemes after schemes making each scheme conditional upon the obtaining of such approvals, consents, declarations and sanctions in their own interest and thereby indefinitely stalling the process of reconstruction of the company and restarting of its manufacturing unit. If the proposer incorporates any such pre-condition in the scheme, the court can legitimately impose upon him a counter-condition that an order under section 391(1) will be made and sanction under section 391(2) will be accorded on the condition that he on his part obtains the necessary approvals, consents, declarations and sanctions within a reasonable time-limit fixed by the court. It is true tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s the Central Govt., the requisite approval, consent, declaration or sanction under the relevant provisions of the statute or statutes such as the I.T. Act, 1961, the M.R.T.P. Act, 1969, etc., on or before February 28, 1980. In the advertisement which has been directed to be issued by the provisional liquidator, intimation about the court's decision to impose such a condition must also be given. Before parting with the case, it should be mentioned that all the parties appearing herein were agreed on the question of the court's power to impose time-limits as aforesaid and the desirability of imposing such time-limits in the instant case. Some of them were of the opinion, however, that the court should reserve to itself the power to relax the time limits on such terms and conditions as it might think fit to impose. Having given an anxious thought to the advisability of making such a broad reservation, I have reached the conclusion that such reservation, if any, might, in all probability, defeat the very object behind the imposition of time-limits. I shall, however, reserve to the court the power to relax both the aforesaid time-limits only in two cases; first, to meet with cases of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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