TMI Blog1993 (2) TMI 269X X X X Extracts X X X X X X X X Extracts X X X X ..... nt due from the company within three months of the date of commencement of the production in full and final settlement of their dues or to accept payment of the full amount due and payable from the company without interest in four equal instalments of 25 per cent. each payable as under: ( i )25 per cent. payable within three months of the commencement of production; ( ii )25 per cent. payable within 12 months after the first instalment; ( iii )25 per cent. payable within 12 months after the second instalment; ( iv )25 per cent. payable within 12 months after the third instalment." The order of this court also stated that these directions were reasonable and they shall form part of the scheme. In view of the order approving the scheme, the winding-up proceedings were permanently stayed and the company was taken out of liquidation proceedings. All contracts entered into by the company prior to the order of winding-up except those dealt with in the order of the court sanctioning the scheme, were discharged. There is no dispute that the respondents in these appeals were the unsecured creditors. They had to be paid 50 per cent. of their debt under the scheme and the said payme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any judge held that the company having failed to make the payment in terms of the scheme, is not entitled to take shelter under the said scheme. The claim now made against the company goes out of the scheme and, therefore, denial of interest under the scheme is not relevant. If was further held that the company was the purchaser of goods from the creditors and, therefore, it was liable to pay interest under the provisions of the Sale of Goods Act. The said principle could be attracted by way of equity and consequently a direction was issued to pay interest from the date of the application. The learned company judge also held that the company failed to point out the scheme approved by the Central Government and as to how under the said scheme the company is not liable to pay any interest. Sri A.G. Holla, learned counsel for the appellant-company, reiterated the contentions advanced before the learned company judge. In support of the first contention, a decision of the Calcutta High Court in Krishna Nath Sen v. Dinajpur Loan Office Ltd. [1938] 8 Comp. Cas. 152 ; AIR 1938 Cal 337 was cited. A Bench of the Calcutta High Court held that a scheme of arrangement sanctioned by the co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eme of arrangement pronounced during the pendency of proceedings to wind up a company is an alternative mode of liquidation which the law allows the statutory majority of creditors to substitute for the pending winding up in the same way as the Law of Bankruptcy allows the creditors of an insolvent to substitute for the statutory liquidation of his affairs an arrangement or a composition arrived at on a common understanding or agreement between the insolvent and his creditors. A scheme successfully put through will discharge the company of all its liabilities existing on the date of winding up in the same way as distribution of its assets by the winding up court extinguishes those liabilities. On the presentation of a petition to wind up a company, the court has the power to order stay of all proceedings instituted against the company for the recovery of debts due by it or for the enforcement of its liabilities. When an order to wind up a company is actually made, the order itself operates as stay of all such proceedings and confines the enforcement of all liabilities of the company to the proceedings in the winding up. Because a scheme propounded in the course of winding up is an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court has observed as follows: "Parliament has, in its wisdom, conferred a power of wide amplitude on the High Court in India to provide for its continuous supervision of the carrying out of compromise and/or arrangement and also the consequential power to make the supervision effective by removing the hitches, obstacles or impediments in the working of compromise or arrangement by conferring power to give such directions in regard to any matter or for making such modification in the compromise or arrangement as it may consider necessary for the proper working of the compromise and/or arrangement." In Sudarsan Chits ( I. ) Ltd. V.G. Sukumaran Pillai, AIR 1984 SC 1579, 1583 ; [1985] 58 Comp. Cas. 633, 641 ; the Supreme Court has pointed out that 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. The proceedings before us commenced with an application under section 392 of the Act. The relevant part of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... accept the contention that the interest is not payable for the period when there was a moratorium under the Karnataka Act. Section 5 of the said Act states that the liabilities of the sick industry are suspended during the period in question. However, when the notification ceases to have any effect, any right, privilege, obligation or liability so suspended or modified shall revive and be enforceable as if the notification had never been issued. Full effect should be given to the words used in section 5( a ) of the Karnataka Act. When the notification applying the Act ceases to have any effect, the liability of the sick industry is enforceable as if the notification had never been issued. In other words, the eclipse is removed and liability with all its vigour be fully operative. If the notification had never been issued, the liability of the company would have been there from the very beginning. That fact cannot be ignored by the court while interpreting section 5 of the Karnataka Act. If so, when the liability is sought to be enforced, it will have to be held that the liability existed all along, but its enforcement only was postponed. The only question that survives, therefore ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
