TMI Blog2003 (1) TMI 515X X X X Extracts X X X X X X X X Extracts X X X X ..... rred before the AAIFR against the Board s opinion and an application for stay was also moved and on that ground, time was prayed for and same was granted by this Court. 2. While expressing its opinion, the Board has observed that the accumulated losses, as seen from the audited accounts for 1997-98, have further increased by Rs. 141.25 lakhs and that no viable or credible proposal had emerged till date despite further opportunities given to all concerned. The Board has further observed that the promoters were neither serious nor resourceful enough to revive the company which had been before the Board for about 12 years. A package for revival in terms of section 17(2) of the Act and the subsequent scheme sanctioned by the Board under section 18(4) of the Act could not also revive the company. As there was no rehabilitation proposal with means of finance fully tied up, for consideration of the Board despite ample opportunities having been given to all concerned, the Bench confirmed its prima facie opinion that the sick industrial company-M/s. Hathising Manufacturing Co. Ltd. was not likely to make its net worth exceed its accumulated losses within a reasonable time while meetin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e same period. It is in this background that all these matters namely; one company petition and two special civil applications are placed for hearing before this Court. 5. As far as Company Petition No. 106/1999 is concerned, several orders were passed by this court from time to time on different proposals given by the petitioner-company and on payment of certain amounts to the secured creditors. On 11-10-2000, this Court has directed the petitioner-company to deposit some amount to test the bona fide of the company so as to consider the scheme proposed by the petitioner. Accordingly, this court has directed the petitioner-company on 20-10-2000, after hearing the submissions at length, to deposit Rs. 15 lakhs before the next date of hearing i.e. 8-11-2000. The petitioner-company miserably failed to adhere to the direction given by this court on 3-5-2001. This Court has directed the company to pay Rs. 5 lakhs on 14-5-2001, next Rs. 5 lakhs on 24-5-2001 and remaining Rs. 5 lakhs on 24-5-2001. On 18-6-2001, the petitioner-company requested for time to forward fresh proposal for settlement. On 25-6-2001, the court granted time to put proposal for settlement within 10 days or to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come viable in future, and; ( iii ) it is just and equitable that the company should be would up. The first two conditions are in respect of the financial position of the company, however, the third condition brings within its sweep several other aspects which are to be weighed with the Board while forming an opinion that it is just and equitable to wind up the company. Mr. Soparkar has further submitted that the word "just and equitable" used in that section stand all together on a different footing and they are not used as a result or consequences of the financial break-down of the sick industrial company. These words cast an obligation on the Board to from its opinion after taking into consideration all the relevant facts and circumstances of the case and not merely on the basis that the company is unable to make its net worth exceed accumulated losses within a reasonable time and that the company is not able to be viable in near future. Even if these two conditions are satisfied, but the court is of the view that looking to the workers interest, social obligation or other relevant factors, it is not just and equitable to wind up the company, in that case, the Board is not supp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o account the opinion of the Board forwarded to it under sub-section (1) and is not abdicate its own function of determining the question of winding up. 9. Mr. Soparkar has further relied on the decision of this Court in the case of Board for Industrial Financial Reconstruction v. Unity Steels Ltd. [2002] 109 Comp. Cas. 236, wherein it is held as under : "When section 20 of the Sick Industrial Companies (Special Provisions) Act, 1985 provides for tendering of the opinion of the Board for Industrial and Financial Reconstruction for winding up of a sick industrial company, it would necessarily mean that the High Court to whom such an opinion is tendered will be required to follow the procedure with regard to admission of a petition registered as a result of such an opinion tendered under section 20 of the Sick Industrial Companies (Special Provisions) Act. Otherwise, the role of the High Court would be that of a rubber stamp upon the receipt of the opinion of the BIFR. Section 20(2) of the Sick Industrial Companies (Special Provisions) Act has to be construed to mean that the High Court in deciding the question of winding up of the company has to take into account the opi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... [1986] 59 Comp. Cas. 183, wherein it is held that : "Even if there are huge debts, secured as well as unsecured, which, as a matters stand, are far beyond the means of the company, whose winding up is sought, to meet, the company court will exercise a sound discretion in deciding whether to wind up the company or not and in doing so consider many relevant factors. It may be that despite the inability to pay its debts, a company has still prospects of coming back to life and if the court is told of any specific proposal, which in the opinion of the court is likely to materialise, the court will be inclined to give a chance to resurrect the company. It should be the policy of the court to attempt to revive though at the moment the company may not be solvent and may not be able to meet its obligations to its creditors. But this should be done only if it is shown that there is reasonable prospect for resurrection and survival. It may be easy for a court when once it is shown that the company is unable to pay its debts to bury it deep and distribute whatever is available as distributable surplus. But it is the duty of the court to welcome revival rather than affirm the death of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e business or an industry or an entrepreneurship, and in turn, resulting into loss of employment to the several employees and loss of production and effect on the larger interest of the society. (2)Winding up of a company, as such, is nothing but a commercial death or insolvency, and therefore, the Company Court is obliged to take into consideration not only the temporary inability, or disability to make the payment of debts, but the entire status and position of the company in the market. (3)Though, ordinarily, an unpaid creditor may aspire for an order of winding up, then " ex debito justiciae " rule is not of inflexible mandate, but is, as such a matter of discretion of the Court. (4)Section 433 is also indicative of the fact that even if one or more grounds mentioned in section 433 exist, it is not obligatory for the Court to make an order of winding up. The court has discretionary power. The Court must in each case exercise its discretion in deciding whether in the circumstances of the case, it would be in the interest of justice to wind up the company. It is a well-known rule of prudence that even in case where indebtedness to the petitioning person is undisputed, the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n if this Court is not inclined to accept his submission, the matter may be remanded to BIFR for considering the issue regarding just and equitable clause contained in section 20(1) of the Act as both the authorities have miserably failed to consider this aspect of the matter. 16. So far as Special Civil Application No. 9330 of 2000 filed by TLA is concerned, Mr. D.S. Vasavada ld. advocate appearing for the petitioner submits that the order passed by the BIFR as well as AAIFR are absolutely illegal, arbitrary and in contravention of Articles 14 and 21 of the Constitution of India. He has further submitted that both the authorities have acted contrary to the judgment delivered by this Court in the case of Textile Labour Association v. State of Gujarat [1995] 1 GLH 12, wherein it is held that in view of the express language of Article 21 of the Constitution of India, it is clear that the said Article is not restricted for enforcement against the State only and Art. 226 also provides for issuing writ under Art. 226 of the Constitution for enforcement of Fundamental Rights to any person who need not be an authority of the State and it can be a private party. The Court has furth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r, in spite of these concessions, the petitioner-company s performance remained dismal and it defaulted in repayment of the assistance provided even as per the revised schedules. It is further submitted that the IDBI was appointed as operating agency under section 17(3) of the Sick Industrial Companies (Special Provisions) Act, 1985 to examine the viability and prepare a scheme for rehabilitation of the company. Thereafter, the rehabilitation package was worked out, inter alia, envisaging a One Time Settlement of dues of the financial institutions. The said Scheme was sanctioned by the BIFR on 26-4-1996, however, the company could not implement the said scheme and it was declared as failed by the BIFR vide its minutes dated 18-2-1998. It is further submitted that another scheme proposed by the financial institutions has also failed and ultimately the BIFR concluded in clear term that the promoters were neither serious nor resourceful to revive the company and gave a prima facie opinion for winding up the affairs of the company at its meeting held on 29-6-1998. Even thereafter, one more opportunity was given to the company to present a viable scheme vide its order dated 10-9 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... petitioner, it should go on and on, whereas according to the opp. parties it can go on up to a particular stage and no further. Indeed, keeping in mind the intention of the Legislature a unit should be assisted up to a point and up to a particular limit but further assistance or rehabilitation has to be stopped at a point of time and this is a question that can best be determined by those who understand the problems - those who possess expertise in the field. In the case at hand, the Board after taking all aspects into consideration has come to a prima facie opinion that it is not feasible to revive or rehabilitate the company. It was, therefore, prima facie of the opinion that it would be just and equitable to wind up the sick industrial company as the promoters are not in a position to garner the funds required for financing the cost of the scheme framed under section 18 of the Act. The order has been passed after taking all relevant aspects that need to be considered in the matter like the one at hand. 21. Mr. Singhi has further relied on the decision of this Court in the case of Board Opinion v. Rajprakash Spg. Mills Ltd. [2000] 102 Comp. Cas. 276, wherein this Cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itors running into crores of rupees remained outstanding. These workers could be re-employed by the new management provided the running concern was taken over. ( iii )That no purpose would be served by remanding the matter to the BIFR for passing a fresh order on reconsideration especially when the secured creditors who were a class by themselves present in the court were objecting per se to sanction of the scheme. 23. I have heard the ld. advocates appearing for the respective parties and I have also gone through the orders passed by the authorities below and the pleadings of the parties. It is true that the opinion expressed by BIFR is not binding to this court and the court has to take an independent decision after evaluating the facts placed before it as well as after considering the reasons given and conclusion drawn by the authorities below while recommending the winding up of the sick industrial company. However, looking to the facts of the present case, the court is of the view that the orders passed by the authorities below cannot be considered to be in violation of the provisions contained in section 20(1) of the Act. As observed earlier, section 20(1) contains th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) while accepting the Board opinion. This court is in complete agreement with the reasonings given in these two decisions and based on this, accepts the opinion given by the Board with regard to the winding up of the company. 24. In the light of the aforesaid discussion, both the special civil applications are dismissed. However, this Court is not inclined to pass winding up order straightway as before passing the order, the legal formalities are to be observed. Considering the provision contained in the Companies Act, 1956, this Court is admitting Company Petition No. 106/1999 and pass the order with regard to the publication of the advertisement in the two newspapers, one in English Daily namely "Indian Express", Ahmedabad Edition and other Gujarati Daily namely "Jansatta-Loksatta", Ahmedabad Edition. The final hearing of this petition is fixed on 26-2-2003. 25. The IDBI is directed to publish the advertisement with regard to the admission and final hearing of the petition on 26-2-2003. Before parting with this judgment, it is necessary to clarify that the court has not straight-way passed the order of winding up though in the given facts and circumstances of the case, s ..... X X X X Extracts X X X X X X X X Extracts X X X X
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