2010 (4) TMI 1178 - HC - Companies Law

Summary

Issues Involved:
1. Recalling of the winding-up order dated 3rd December 2003.
2. Acceptance of the revival scheme of the company.
3. Dispensation of the requirement of the meeting of the creditors of the company under liquidation for approval of the scheme.

Detailed Analysis:

1. Recalling of the Winding-Up Order:
The promoters of Sunstar Lubricants Ltd. filed CA No. 817/2009 and CA No. 1085/2009 under Sections 391(1) and 394 of the Companies Act, 1956, seeking to recall the winding-up order dated 3rd December 2003 and to accept the revival scheme. The company was originally incorporated on 19th December 1988 and faced financial difficulties due to market conditions and competition. Despite efforts to raise capital and propose rehabilitation schemes, the company's financial position deteriorated, leading to the BIFR recommending winding up under Section 20(1) of SICA. The court, after considering the records and hearing the parties, was satisfied that the net worth of the Company had substantially eroded, leading to the winding-up order.

2. Acceptance of the Revival Scheme:
The promoters identified an investor, M/s. IO Global Services Private Limited, to infuse necessary funds for paying off debts and reviving the company. Several one-time settlement (OTS) proposals were accepted by the secured creditors, including IFCI Ltd., State Bank of Indore, Canara Bank, and Andhra Bank. The promoters deposited significant amounts with the Official Liquidator to show their bona fides. The court noted that all secured creditors had been paid off, and the revival scheme aimed at paying unsecured creditors and statutory dues. The scheme detailed a financial plan for the next six years, projecting sufficient net profits to liquidate unsecured debts. The court found the scheme to be genuine, viable, and in the interest of equity and justice.

3. Dispensation of the Requirement of the Meeting of Creditors:
The promoters filed CA No. 1085/2009 seeking directions to dispense with the requirement of convening meetings of shareholders and creditors for approval of the revival scheme. The court noted that shareholders holding more than 75% of the total equity shares had given their consents/no objections in writing to the proposed scheme. The court referred to the principles laid down in Miheer H. Mafatlal vs. Mafatlal Industries Ltd., which emphasized that the court must ensure statutory compliance, fairness, and feasibility of the scheme. The court found that the scheme met these requirements and noted that no objections were raised by the Official Liquidator. The court emphasized that revival of the company was preferable to winding up, as it facilitated job creation and productive use of assets.

Conclusion:
The court allowed the applications, recalling the winding-up order dated 3rd December 2003, and approved the revival scheme of Sunstar Lubricants Limited subject to conditions ensuring payment of unsecured creditors and statutory dues. The requirement of convening meetings of shareholders and creditors was dispensed with, and the court directed the Official Liquidator to retain funds for settling dues and to seek further orders for adjustments or release of amounts. The court found the promoters' efforts to revive the company to be bona fide and in the interest of equity and justice.