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2013 (5) TMI 657 - HC - Companies LawCompromise and arrangement - whether while sanctioning the Scheme proposed by the appellants/ propounders the Sugar Development Fund (SDF), a Government Company shall remain outside the Scheme - appellant-company registered as a sick company before the BIFR winding up of the company was recommended & during the pendency of the winding up petition promulgated a scheme for its revival - Held that:- SDF in terms of its extant rules could not restructure its debts it was legally not permissible the SDF is also a Government company and in fact, a clear and categorical statement had been recorded in the order dated 31-3-2006 which was to the effect that the Government companies which included the SDF would not be a part of the Scheme. The further submission being that this order is even otherwise not the subject matter of challenge what has been challenged before the Court is only the order dated 31-3-2006. Record shows that IFCI (Nodal Agency of SDF) did not have the requisite authority to cast its vote on behalf of the SDF and had, thus, been precluded from casting its vote. It has wrongly been recorded in the report dated 22-7-2005 that the SDF has voted in favour of the Scheme. The submission of the appellant that a 3/4th majority of the secured creditors had voted in favour of the Scheme is, thus, incorrect. Section 392 envisages a situation of 3/4th majority of the creditors present and voting. The SDF was neither present nor did it vote. This is substantiated from the record. Company Application had enlisted the list of secured creditors computing their liability. An amount of Rs. 182 lakhs had been shown as due to the IDBI. A sum of Rs. 149.60 lakhs was due to the IIBI. This is mentioned in the proposed scheme of arrangement itself. Submission of the appellant that 75 per cent of the secured creditors had voted in favour of the Scheme is, thus, an incorrect fact. The language of sections 391 and 393 makes it abundantly clear that when the company Court is called upon to sanction a Scheme it is in fact the duty of the Court to go through the proposed Scheme carefully and find out whether all the provisions of law and directions of the Court as to the conduct of meetings have been complied with and whether Scheme is in the interest of the Company as well that of its creditors and only then it should be given effect to. The order dated 31-3-2006 had noted that the promoters of the Scheme had in fact pointed out that the loans of the Central Government should be kept outside the scope of the Scheme and their claim could be apportioned. While expressing its reservation to the proposed Scheme, the Single Judge had however noted that it could in no manner be presumed that the Central Government had agreed to entirely waive off its custodian loan of Rs. 5461.10 lakhs to nil or to reduce SDF loan (also a Government loan) from Rs. 728.60 lakhs to Rs. 182.15 lakhs. Both these loans being Central Government loans were permitted to be treated as outside the Scheme. The different parameters for settlement with the IDBI and IIBI by paying of 40 per cent of their total dues whereas the Government dues of which the custodian loan was sought to be reduced to nil and the SDF loan being reduced to 25 per cent of its principal was also noted. These distinct parameters applied qua different secured creditors was against fairness. Accordingly, on the specific request of the promoters, a concession was granted and the Government loans which included not only the custodian loan but also the SDF loan were kept outside the Scheme. The scheme of arrangement, was in fact sanctioned only to benefit the class of unsecured creditors and the employees as apart from the OTS settlement with the IDBI and IIBI, the Scheme envisaged payment to the said persons. The Company Judge had noted that in the eventuality that the Scheme is not sanctioned there could be no other alternate but to wind up the company because the dues of the Company were enormous. Thus SDF loan also being a Government loan, both the custodian loan and the SDF were to be excluded from the purview of the Scheme. The Company Judge has ample power to pass such an order.
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