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TMI Blog1992 (12) TMI 195X X X X Extracts X X X X X X X X Extracts X X X X ..... ithin the meaning of section 433(e) of the Act. The respondent-company has preferred an appeal against the said order in O.S.A. No. 12 of 1987 (see Bellary Spinning and Weaving Co. Ltd. v. Syndicate Bank [1993] 76 Comp. Cas. 426 (Kar.)) which came to be dismissed. During the pendency of the appeal, this company application was filed by a shareholder and also the managing director of the said company. The prayer in the application is that the scheme of arrangement/compromise under section 391 of the Act, which is sponsored by the applicant is highly beneficial to the interest of creditors at large and that the scheme be put to vote to all class of creditors and necessary summons for direction to be given as to the issue and publication of notices and convening of meetings of both classes of creditors, viz., secured and unsecured. The prayer in the application reads as follows : "(1)Direct meetings to be called of the unsecured creditors, equity shareholders of the company, the Bellary Spinning and Weaving Company Limited, for the purpose of considering and, if thought fit, approving, with or without modification, a scheme of arrangement proposed to be made between the company and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dicate Bank, has, in its objection statement, inter alia, contended that the scheme has been propounded merely to delay the winding-up proceedings. A sum of Rs. 3,09,53,456.30 was due from the company in liquidation as on June 19, 1986, and the present liability of the company to the respondent-bank is more than Rs. 5 crores. The respondent-company is required to pay substantial amounts to private creditors towards certain statutory dues like KST, CST, provident fund, employees' State insurance, income-tax, etc. The dues of labour and staff also comes to a substantial amount. It is also due to KEB and other persons in huge amounts. The assets of the company in liquidation are not sufficient to meet its liabilities and the company is commercially insolvent. It is further averred that by order dated October 19, 1987/Novcmber 6, 1987, the company judge passed an order directing compulsory winding up of the company in liquidation against which an appeal in O.S.A. No. 12 of 1987 was preferred by the company represented by its managing director, the propounder of the present scheme. In the said appeal, this court afforded several opportunities to the management to run the industry with a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is liable to be rejected without calling for any meeting of the unsecured creditors or the members. Calling for the meeting will be nothing but a waste and will unnecessarily consume time and drag on the liquidation proceedings. If a meeting is called pursuant to the request of the propounder, the same will further delay the proceedings and this respondent and other creditors will suffer. The respondent-bank has stated that the scheme is liable to be rejected even without calling for the meetings. During the course of hearing, counsel Mr. Radhesh Prabhu for the respondent-bank informed the court that appeal O.S.A. No. 12 of 1987 preferred by the respondent-company was dismissed on March 1, 1991. The question is whether the request for convening a meeting to consider a scheme for the reconstruction of company should be allowed or is the court bound to convene the meeting contemplated under section 391, and objections, if any, can and should be considered at the meeting and later at the time of sanctioning of the scheme by the court. Rule 67 of the Companies (Court) Rules, 1959, no doubt, says that an application under section 391 for directions is to be made ex parte. But hearin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... res was due as on June 19, 1986, and the present liability of the company is more than Rs. 5 crores, the scheme has taken into account only Rs. 1.5 crores as full and final settlement of all dues. Further, it is pleaded, that the scheme does not give any details about the manner in which the funds are sought to be mobilised, but merely mentions the schedule of payment. The respondent further reiterates and states that it has considered the scheme of arrangement and is of the view that the scheme is not beneficial to the bank. The respondent-bank, the major secured creditor says the scheme is not agreeable to them. If the meeting is called, the respondent-bank, being the major secured creditor and when the scheme is not accepted by them, then calling of any meeting either of the unsecured or secured creditors will be nothing but a waste and unnecessarily consume time and drag, on the liquidation proceedings. Thus, it is submitted by the respondent-bank that it would be an exercise in futility to direct the convening of the meeting. On the merits, I am unable to accept that the applicant-propounder has made out a case for calling a meeting as required under section 391(1) of the Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ondent-company represented by the applicant pro-pounder preferred an appeal in O.S.A. No. 12 of 1987 and obtained an order of stay. The respondent-bank filed an application for vacating the order of stay, but it was allowed to continue up to January 9, 1989, subject to the appellant therein running the mill for three months initially and the appellant paying the amount of Rs. 10 lakhs to the respondent-bank before January 6, 1989. Since the said amount was not paid and the appellant (applicant-propounder) did not run the mill, the appellate court vacated the order of stay. The appellate court has observed, while rejecting LA. III for extension of stay, that "the conduct of the appellant has left an impression in our mind that it has no intention to make any payment. We have granted sufficient indulgence to the appellant to make some payment to the bank, but the appellant has failed to do so". I may also mention here that the appeal also came to be dismissed by the appellate court on March 1, 1991. In the said order it is observed that "we have pointed out earlier that no scheme has been presented even though the petition was pending for a long time, nor is any such scheme presented ..... X X X X Extracts X X X X X X X X Extracts X X X X
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