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TMI Blog1998 (10) TMI 399X X X X Extracts X X X X X X X X Extracts X X X X ..... ng are also overdue. However, the company has now worked out a turn-around strategy in order to overcome the prevailing critical liquidity problems and also pay off its creditors through a scheme of compromise and arrangement between the company and its creditors as also the shareholders which is at Annexure B to the application. 3. The company has entered into an understanding for a joint venture proposal with one NRI group which will invest to the tune of Rs. 10 crores. According to the company, it is discussing with few banks for its working capital requirement to the tune of Rs. 10 - 12 crores. The company also proposes to sell off its office building at a good price. 4. The Scheme sets out the various details including the provision for payment of dues of unsecured creditors and trade creditors. The provi- sion for trade creditors is as under: Trade Creditors : This item represents the outstanding balance in respect of goods/services supplied by various parties to MIL. (a)The outstanding principal amount, as on the effective date, in respect of trade creditors is proposed to be repaid as under : (i)The trade creditors whose outstanding principal amount as on the effective ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n Narmada Electronics Ltd. 7,86,529 4. Petrochem Indst. Ltd. 15,53,261 5. Century Textiles & Industries Ltd. 27,49,760 Sr. No. Name of the party Amount 6. Coimbatore Lakshmi Investment & Fin. Co. Ltd. 28,56,475 7. Lubrizol India Ltd. 91,35,000 8. A.T.O. (I) Ltd. 1,42,030 9. M.P. Parikh Finstocks 6,25,000 10. ITC Classic Finance Ltd. 2,18,83,669 11. Hindustan Petroleum Corp. Ltd. 2,97,42,392 12. Mid India Ind. Ltd. 25,00,000 13. Jeth Jaccques Taru Lalwani 1,52,61,651 14. Radico Khaitan Ltd. 55,00,000 15. Carborundum Universal 15,00,000 16. Vigro Frozen Foods (P.) Ltd. 35,00,000 17. Monsanto Manufacturers (P.) Ltd. 50,00,000 18. Chitra Publicity Ltd. 3,13,839 10,29,38,983 6. In the affidavit-in-reply on the question of bona fides it is pointed out that the conduct of the applicant-company has been such that the applicant-company cannot be trusted with any Scheme. The Court's attention is invi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e share capital of the company as on 31-3-1998 is of Rs. 6,274.38 lakhs and reserves and surplus as on that date is of Rs. 1,838.57 lakhs. The total of these two amounts would come to Rs. 8,111.95 lakhs. As per Annexure C being Schedule to provisional balance sheet to unsecured loans as on 31-3-1998 the total amount of unsecured loans is of Rs. 20,92,50,427.99. 7.3 It is further stated that the company has stated on page 17 under the head 'shareholders' that the company had declared a dividend of Rs. 93,54,319 during the financial year 1994-95. However, the company has paid the dividend of Rs. 3,3 5,029 only. The balance amount of dividend amounting to Rs. 90,19,290, though declared, could not be paid by the company due to the liquidity problems. Once the dividend is declared at the annual general meeting it becomes a debt due to the shareholders and the company has to pay the amount of dividend within the stipulated period as contained in section 205 of the Act and by not paying the same, the applicant-company has committed an offence under section 207 of the Act. It is only with a view to get rid of this provision the company has now proposed in the present Scheme that the resol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are produced. 9.1 Mr. Soparkar has strongly relied upon the provisions of rule 67 of the Companies (Court) Rules, 1959 to contend that the directions for conven-ing meetings of the creditors and the shareholders can be sought even ex parte and, therefore, the petitioning creditors are not entitled to any audience at this stage. Whatever objections they have can be raised at the time when the Scheme is discussed at the meeting of the unsecured creditors. Apart from the opportunity that they will get at the meeting of the creditors, even thereafter there will be public advertisement and at the hearing of the application for sanctioning of the Scheme the petitioning creditors will have an opportunity of being heard by this Court. 9.2 Mr. Soparkar has further submitted that in view of the judgment of the Supreme Court in the case of Mihir H. Mafatlal v. Mafatlal Industries, AIR 1997 SC 506 even at the final hearing of the proceedings under section 391 of the Act where the Court is to decide whether to sanction the Scheme or not, the role of the Court is very limited. The Court is not to sit in appeal over the wisdom of the shareholders and the creditors. The role of the Court is conf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ITC Classic Finance and in view of the fact that out of the unsecured creditors to the tune of Rs. 20.90 crores, unsecured creditors to the tune of Rs. 10.29 crores have not only filed winding up petitions but are also opposing the proposed Scheme this does appear to be a fit case for granting the prayer made by the applicant-company for convening the meetings of the creditors and the shareholders of the applicant-company. 13 The Court has considered the submissions that as per the decision of the Supreme Court in Mihir H. Mafatlal 's case (supra) the Court has to play a very limited role but the ratio of the said decision is required to be appreciated in the context of the controversy involved in that case, where the challenge made by the shareholder was to the share exchange ratio fixed in the Scheme of Amalgamation and the Apex Court had held that if substantial majority of the shareholders and the creditors have ap- proved the scheme it was not for the Court to sit in appeal over their wisdom. In the instant case, however, the Court is not concerned with any such controversy and the basic question is whether the Court should allow the company to convene meeting of the sharehol ..... X X X X Extracts X X X X X X X X Extracts X X X X
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