TMI Blog1991 (11) TMI 213X X X X Extracts X X X X X X X X Extracts X X X X ..... 3 members of unsecured creditors, the value of their debt amounting to Rs. 36,85,539.09 as per the company's books of account as on March 31, 1981. The resolution put to vote at the said meeting was as follows : "Resolved that the compromise or arrangement proposed by India Meters Ltd., Madras-600 006, vide Company Application No. 370 of 1982 on the file of the High Court of Judicature, Tamil Nadu, and placed before the meeting and initialled for identification by the chairman be and is hereby approved." Some of the creditors sought clarification as to why the same scheme of compromise or arrangement proposed by the company, vide Company Application No. 242 of 1982 on the file of this court was presented once again to the unsecured creditors without any modification whatsoever. According to the chairman, it was explained to them that the scheme of compromise presented earlier was approved by the equity and preference shareholders and secured creditors at the meeting held on June 19, 1982. The unsecured creditors by value accepted the scheme. Since the required number of unsecured creditors did not accept, if the requirement of the Act was not satisfied, and the company moved ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ight from 11 a.m. the meeting went on till 9.15 p.m. After 5 p.m. representations were made to the chairman asking him to adjourn it and he refused to do the same. Number of unsecured creditors present till 5 p.m. who were aged and/or ill went away without exercising their valuable right to vote. . . the company employees by name Visweswaran, Devanathan and Sundararaman went to the residence of several number of unsecured creditors and threatened them that if they did not give proxy in their name, they would not be able to seek any money at all from the company. They canvassed for proxies and used all sorts of undue influence and coerced some people to give proxies in their names. I believe they obtained blank proxies also and used the same at the meeting to suit their convenience. Mrs. K. Saroja, Dr. K. Rajaram, Mrs. K. Savithiri and myself brought this fact to the notice of the chairman in writing. The chairman did not even feel bad about it and went on conducting the meeting as if nothing had ever happened." According to these unsecured creditors, proxies played havoc and played a role adverse to the interest of those who gave these proxies and listed as follows : "The follo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g of a third meeting of different classes of unsecured creditors alone would be in accordance with law. The unsecured creditors are : 1.Foreign collaborator whose debt has to be paid full. 2.Fixed deposit holders. 3.Loan receipt holders and hundi creditors. 4.Sundry creditors for goods supplied and services rendered. The scheme that has been approved is a long document ; it has something for the secured creditors, as well as employees besides unsecured creditors. So far as the secured creditors are concerned, it says, "1.That the full amount of interest due on secured creditors upto the effective date and all claims thereto be cancelled. 2.That upon the scheme being sanctioned by the court, the loans will be treated as follows from the effective date. ( a )That loan of Rs. 10.65 lakhs from Tamil Nadu Industrial Investment Corporation Limited will be retained as fresh loan which will carry interest at 8.5%. The loan amount will be paid in three annual instalments. ( b )The loan of Rs. 4.80 lakhs from Industrial Finance Corporation of India will carry interest at 8.5% and the loan amount will be paid in three annual instalments." In the category of unsecured credi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f such amounts to be paid to concerned creditors, without any interest, in two annual instalments commencing within one year from the effective date." Dealing with the objections, learned Shanmukham J. has said : "As regards unsecured creditors, in the first meeting held on June 17, 1982, under the presidentship of Mr. T. P. Nagarajan, IAS, two amendments were prepared but were lost because neither secured 75% of voting value of shares. Further, though the resolution as such secured the approval of the prescribed majority in value of the unsecured creditors, it failed to secure the required majority in the number of unsecured creditors. Therefore, the company was necessitated to come forward with C. A. No. 370 of 1982 for holding a fresh meeting of the unsecured creditors and the same was held on September 15, 1982, presided by Mr. T. P. Nagarajan. The meeting was attended either in person or by proxy by 363 unsecured creditors whose value of debt amounted to Rs. 36,85,539.09. Three amendments were moved, but were lost as none secured the required majority. Except few unsecured creditors who stoutly oppose this proceeding, there is no protest from any other quarter, inclusive ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... so very easily. But that is not the case here. On the other hand, as set out above, the actual voting is 193 carrying the value of Rs. 23,77,612.89. The other important factor which will go a long way to reject the objection is that if the company were to be wound up, none of the unsecured creditors will get a paisa. Indeed, I asked learned counsel for the objectors to prepare a working sheet and to point out that the unsecured creditors will stand in a better footing in the case of winding up than in the event of putting through the compromise. He had not done so. But, learned counsel for the petitioner had pointed out that, in the case of winding up, even the secured creditors could not be paid in full. Above all, the secured creditors are forgoing their claims for interest. It has to be pointed out at this stage that the company could not get any further benefit under the Tamil Nadu Relief Undertaking Special Provisions Act, 1969, for the company had the maximum term that is guaranteed under the Act, namely, ten years. It is common ground that it is going to expire by September 21, 1983. Above all, the secured creditors are forgoing their claims for interest, as shown in para ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the learned judge that survival of the industry alone was likely to ensure continuance of employment of a large number of employees and that if it functioned, it would benefit all and would cause injury to none. Any concern for the employees of the company and others, however, must always weigh favourably with the interest of the unsecured creditors amongst whom are fixed depositors who are not members of the company; but have invested their small savings to earn a small interest thereon to augment their income in future. If they lose and others also lose equitably, there may not be anything wrong. But then, if they lose more and others lose less, will it not cause discrimination ? Section 391 of the Companies Act has got a purpose. It says, "(1)Where a compromise or arrangement is proposed ( a )between a company and its creditors or any class of them; or ( b )between a company and its members of any class of them; the court may, on the application of the company or of any creditor or member of the company, or in the case of a company which is being wound up, of the liquidator, order a meeting of the creditors or class of creditors, or of the members or class of members, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hear appeals from the decisions of that court, or if more than one court is so empowered, to the court of inferior jurisdiction. The provisions of sub-sections (3) to (6) shall apply in relation to the appellate order and the appeal as they apply in relation to the original order and the application." Shanmukham J. had the advantage of the judgment in Manechchoich and Ahmedabad Mfg. Co. Ltd., In re [1970] 2 Comp LJ 300 ; [1970] 40 Comp Cas 819, 873 (Guj). It states : "It is always a moot question what constitutes a class. Buchley on the Companies Acts, 13th edition, page 406, has observed that it is a formidable difficulty to say what constitutes a 'class' of creditors. The creditors composing the different classes must have different interests. When one finds a different state of facts existing among different creditors which may differently affect their minds and their judgment, they must be divided into different classes, 'class' must be confined to those persons whose rights are not so dissimilar as to make it impossible for them to consult together with a view to their common interest (vide Sovereign Life Assurance Co. v. Dodd [1892] 2 QB 573 (CA)), speaking very ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uite possible and which would be worked out while considering the ground of attack that the scheme is not approved by a statutory majority in each class, it is not necessary to direct a separate meeting of preferential creditors and other unsecured creditors." It seems that the learned judge was not informed that there were objections to the clubbing of the fixed deposit holders with the sundry creditors for the goods supplied or sundry creditors for expenses as well as other loans and short-term loans. The interest of fixed deposit holders in retaining their deposits is not similar to a person who advanced loans on hundis or otherwise advanced money to the company for earning profits. Sundry creditors for goods supplied or for expenses, the quotation above will show, have been divided into two groups, one group of the Government employees and foreign collaborators and the other creditors in this category. Their separate number is nowhere available. While the Government employees and foreign collaborators are not affected, sundry creditors for expenses have been made to lose 80% of their claims. The court while resolving the voting pattern has overlooked a serious allegation that ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
