9911796707
TMI Blog2005 (1) TMI 407X X X X Extracts X X X X X X X X Extracts X X X X ..... ripherals, modules, instruments, hardware, software and systems. After successful beginning, on account of various reasons beyond the control of the management, the company suffered heavy financial losses. The main reason for such financial losses was the failure of the Eastern block market and setback suffered by the hardware industries in the country. As a result thereof, the Company closed down its business activities on 31-3-1994 and by an order dated 17-4-1997 passed by this Court in Company Petition No. 97/1995, the Company was ordered to be wound up. Since then the Official Liquidator attached to this Court has taken over the charge of the assets of the Company. 3. Some times in the year 2001, the petitioners felt that if the winding up operations of the Company were continued, the Creditors were not likely to receive anything and as against that, there was a possibility of revival of the Company for the benefit of such Creditors and shareholders of the Company and in this view of the matter, the scheme of compromise and/or arrangement was being proposed by the sponsors with the objective of revival of the company and for repayment of a part of the dues of the Creditors of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ory Creditors of the Company was attended by none in person or through Proxies. 8. The meeting of the Creditors for Goods and Expenses of the Company was attended by Secured Creditors in person and through Proxies and the total value of their debts was Rs. 71,21,946. All the eight Creditors have voted in favour of the Resolution and thus the Resolution approving the scheme of compromise was carried unanimously. 9. The Scheme proposed by the sponsors was divided into several parts. I. Part I deals with Loan Creditors As per the modified scheme, it was proposed that the total liability of the Company payable to the Loan Creditors shall be settled in full and final in the following manner:- (i)The amount payable as on 31-3-1997 to each of the Loan Creditors shall be settled under the Scheme. Interest, including penalty interest, penalty or any other amount allegedly debited in the loan account or payable in respect of any period after 1-4-1997 shall be ignored and treated to have been settled with the settlement of the amount payable as on 31-3-1997. The amount payable as on 31-3-1997 shall be determined in the manner and order prescribed below:- (a)In case the Loan Creditor has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ditors shall be settled in full and final in the following manner;- (i) The amount payable as on 31-3-1997 to each of the Secured Creditor shall be settled under the Scheme. Interest, including penalty interest, penalty or any other amount allegedly debited in the loan account or payable in respect of any period after 1-4-1997 shall be ignored and treated to have been settled with the settlement of the amount payable as on 31-3-1997. The amount payable as on 31-3-1997 shall be determined in the manner and order prescribed below:- (a)In case the Secured Creditor has filed any suit before March 31, 1997 for the recovery, value of the suit; or (b) Amount agreed between the Loan Creditor and the Company on a contractual basis subject to any compromise or settlement entered into upto 31-3-1997 + (plus) interest at document rate on the outstanding amount, if any; or (c)If the amount cannot be determined either under clause (a) or clause (b), the same shall be determined on the basis of the amount recorded in the Books of Account of the concerned Loan Creditor. (ii)the amount so calculated shall be at the option of the Secured Creditor paid over/discharged to each of the Secured Cred ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er shall then be payable by the Company and/or any of the guarantors to the Secured Creditors. (v) In the event there being a dispute between the parties as regards the correct amount payable by the Company to the Secured Creditors, the same shall be referred to the Auditors of the Company whose decision shall be final. III. Part III deals with Creditors for Goods and Expenses 11. The amount payable to the creditors for goods and expenses shall be settled:- (i)by making a payment of 1 per cent of the outstanding amount on the basis of the books of account of the company as on 31-3-1997. (ii)In the event there being a dispute between the parties as regards the correct amount payable by the Company to the Creditors, the same shall be referred to the Auditors of the Company whose decision shall be final. IV. Part IV deals with Statutory Creditors 12. In view of the fact that the company has remained closed from 31-3-1994 till the date of filing petition, various litigations as also assessments and other proceedings have remained unattended. In view of this, it is proposed to settle the liability payable to the statutory creditors in the following manner:- (i) The company shall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n ('GIDC'). GIDC be directed to execute in favour of the company a lease deed in respect of the said property. (vi) The company shall be permitted to revive the pending application to the Government of Gujarat for subsidy in respect of Investments made and also subsidy for interest paid thereon. The subsidy granted by the Government of Gujarat may be set off against the Sales Tax liability of the company. (vii)On the company being revived pursuant to the sanction of the scheme, Apurva Parekh shall be considered as the Managing Director with authority/power to constitute a new board of Directors for carrying out the day-to-day affairs of the company. (viii)On the scheme being sanctioned, the Official Liquidator, High Court of Gujarat shall cease to be the Official Liquidator of the company. The Official Liquidator shall hand over to the sponsors of the scheme or their duly authorised representative all papers, books and records of the company that may be in his possession or custody and also hand over possession of all the properties of the company moveable or immoveable as may be in his possession or custody. 14. In the above background of the matter, the petitioners have praye ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the objector. He has further submitted that the petitioner No. 1, in the aforesaid proceedings has filed an affidavit on 27-4-2001 wherein notices alleged to have been sent to the Creditors by Certificate of posting have been annexed. The address to which the alleged notices claimed to have been sent to the objector was that of 163 Backbay Reclamation, Mumbai-400 020. This Court in Company Application No. 112/2001 has directed the sponsor to send the notices to the last known address of the Creditors. The petitioners were aware that the Regd. office of the objector has been changed in view of the fact that the objector has filed a suit before the Debts Recovery Tribunal against the company in liquidation, and also against the petitioner No. 1. In the said suit, the present address of the objector was mentioned. Though the petitioners are well aware about the change in address of the objector, they have purposedly addressed the alleged notices to the old address of the objector only with a view to ensure that the objector did not remain present at the time of meeting, or to see that the objector did not see to come in the way of the petitioners who by the present petition sough ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has been constituted wrongly only for the purpose to ensure that the sponsor in the meetings got an illegal statutory majority. He has further submitted that the value as taken by the sponsor for the purpose of the meeting of the Secured Creditors was wrongly mentioned only to ensure that the sponsor garners illegal statutory majority. For the purpose of the Scheme of compromise, sponsor has taken 31-3-1997 as the cut-off date for the purpose of verifying the dues and the compromise to be offered thereof. The petitioners have not offered any scheme in respect of the dues after 31-3-1997. He has further submitted that for the purpose of calculating the votes in the meeting, no such cut-off date i.e., 31-3-1997 can be taken into consideration as sought to be done by the petitioners. 18. Mr. Sandeep Singhi has submitted that there was no proper quorum for convening the meeting and hence, this Court has no jurisdiction to entertain this petition. He has submitted that as per the order dated 4-4-2001 passed by this Court in Company Application No. 112 of 2001, the quorum for the meeting was to be of two persons either present in person or through proxies. So far as the meeting of secu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ipherals Limited. It was just four days before the adjourned meeting that the alleged hypothecation Deed came to be executed in favour of Pankaj Vijay & Co. and Shri Ranchhodrai Traders as claimed. In the adjourned meeting, ICICI, GIIC and GSFC voted against the Scheme of amalgamation. However, Bank of India voted in favour of the scheme of amalgamation and along with Bank of India Pankaj Vijay & Co. and Shri Ranchhodrai Traders have also voted in the meeting in favour of the scheme by claiming themselves to be the secured creditors of the Essen Peripherals Limited. From these facts, it appears that both Pankaj Vijay & Co. and Shri Ranchhodrai Traders illegally by claiming themselves to be the secured creditors helped Essen Peripherals Limited to garner logical majority, knowing fully well that they were not and were never secured creditors of Essen Peripherals Limited. From 18-5-1992, neither Shri Ranchhodrai Traders nor Pankaj Vijay & Co. have been paid their alleged debt either by Essen Peripherals Limited or by Essen Computer Limited. Admittedly, on the date of winding up of the Essen Computers Limited, the alleged debt of Shri Ranchhodrai Traders were time barred and, therefor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Company in liquidation, including the peti-tioners. 20. Mr. Singhi has further submitted that neither in the Company Application nor in the Company Petition, it has been disclosed about the particulars of pending criminal action against the Promoters or the erstwhile Directors of the Company. Further, no details have also been provided in respect of the suits instituted against the Promoters and the Directors of the Company in liquidation. No details of the petitioner No. 1 and petitioner No. 2 have been given in respect of their financial capacity to revive the company in liquidation. No rehabilitation plan has been provided in the Scheme. No details as stated above are mentioned in the Explanatory Statement under section 393 of the Companies Act, 1956 which is alleged to have been circulated by the petitioners to the Creditors of the Company in liquidation. The interest of the erstwhile Directors, including the petitioners in proposing the present Scheme is also not mentioned. The petitioner No. 2 is a loss making company. Had the said facts been mentioned at the time of hearing of the Company application, this Court could have rejected the Scheme as the same lacks bona fid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proceedings under section 543 of the Act against the Ex-Directors/Officers of the Company. For the purpose of misfeasance proceedings, as per the directions given by this Court, a Chartered Accountant has been appointed to scrutinise the Books of Account and other records. However, since the Ex-Directors/Officers have not handed over relevant and important books of Account and records, the investigation by the Chartered Accountant was held up. No cogent reason has also been given by the Ex-Directors/Officers of the Company, including the petitioner/Sponsor of the Scheme, for not making available the Company's important Books of Account and other papers. M/s. Mukund and Rohit, Chartered Accountants have submitted their misfeasance Report dated 19-4-2001. In the said Report, it was stated that the report was based on the records available with the office of the Regional Director, Mumbai. In the said report it was also stated that for giving their final conclusion, they require records from the Ex-Directors/Officers of the Company. The Official Liquidator has produced the misfeasance Report dated 19-4-2001 along with his preliminary report. Some of the major irregularities and findin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the day to day affairs of the Company. The Managing Director of a Company has first to be a Director of the Company and the power to appoint a Director of a Company is a statutory prerogative of shareholders of a company under section 255 of the Act. Such prerogative power and right of the shareholders of the Company are sought to be taken away by the proposed Scheme and that too without convening a meeting of the shareholders of the Company and without obtaining their consent. 25. Mr. Shah has further submitted that the Scheme proposes to issue Zero Interest Fully Convertible Debentures to Secured Creditors to be converted into equity shares and the said equity shares shall rank pari passu with the old existing equity shares. This also affects the right of shareholders of the Company and without their meeting and consent, fully convertible Debentures cannot be issued and cannot be converted into equity shares ranking pari passu with the old equity shares. A meeting of the shareholders of the Company is, therefore, required to be convened and unless the shareholders approve the present Scheme, it cannot be sanctioned or approved. 26. Mr. Shah has further submitted that a Scheme e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Scheme envisages that GIDC should be directed to execute in favour of the Company a Lease Deed in respect of the property situated at A/10, GIDC Electronic Complex, Gandhinagar. Without the consent and approval of GIDC, a Scheme with such a term affecting its interest cannot be approved or sanctioned. The Scheme seeks certain reliefs from the Government of Gujarat in respect of subsidy regarding investments. Without the consent and approval of the Government of Gujarat, a Scheme with such a term cannot be sanctioned or approved. 29. Mr. shah has further submitted that one of the provisions contained in the Scheme was that on finalisation and approval of the Scheme by this Court, the liabilities of the guarantors stood discharged. Section 391 does not contemplate such a situation. Even otherwise, the proposed Scheme is also in violation of the provisions contained in section 393 of the Act as some of the Directors were the guarantors and their interest was not disclosed in the explanatory statement. He has further submitted that as per the provisions contained in Rule 79 of the Rules, the Company or its liquidator, as the case may be, shall within seven days of the filing o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the salary with allowance and incidental benefits to the applicants - employees from 20-7-1993 till the final disposal of the said references. He has, therefore, submitted that these five persons were entitled to claim amount under the references from the Company, but the same has not been provided for in the Scheme. He has, therefore, submitted that the present Scheme proposed by the Sponsors does not deserve for sanction or approval of this Court. 31. One Mr. Shailesh Prabhudas Mehta has also filed his objections against the proposed Scheme. It is his grievance that though he was holding the shares of the Company, the said shares were not deliberately registered in his name. The shares were lodged three times for transfer with the Company and they were still not registered in his name. It is the grievance of Mr. Mehta against the scheme that the said Scheme was in violation of the guidelines issued by Reserve Bank of India on 27-7-2000. As per the guidelines of R.B.I., public sector bank and financial institution should take minimum of 100 per cent amount due and payable to them when such account is classified as non-performing assets (NPA). In the present case, the Company ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... total amount outstanding towards Unsecured Creditors are shown as Rs. 28 crores whereas the actual outstanding amount of Unsecured Creditors comes to around Rs. 44 crores. There is also discrepancy with regard to the debt of the Secured Creditors of Bank of India as well as State Bank of India shown in the statement of affairs and the statements produced before this Court. The petitioners have wrongly classified the dues of the LIC and UTI towards the non-convertible debentures. According to the balance-sheet of the Company in liquidation for the years 1988-89 and 1989-90, the said amount was shown as secured debentures. The petitioners have omitted certain Creditors of the Company from the Scheme, namely, LIC Mutual Fund, State Bank of India Mutual Fund, Canara Bank Mutual Fund and Bank of India Mutual Fund who are the Creditors for the interest amount. In the Scheme, there is a proposal to give Zero Interest Fully Convertible Debentures to the Secured or Unsecured Creditors. However, such debentures cannot be issued without permission of the shareholders, stock exchange and SEBI. There is also an alternative Scheme of allotting Zero Interest Non-Convertible Debentures. This can a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r alone is entitled to receive the dividends, notwithstanding that he has already parted with his interest in the shares. However, on the transfer of shares, the transferee becomes the owner of the beneficial interest, though the legal title continues with the transferor. The relationship of Trustee and 'cestui que trust' is established and the transferor is bound to comply with all reasonable directions that the transferee may give. He also becomes a trustee of the dividends as also of the right to vote. The right of the transferee 'to get on the register' must be exercised with due diligence and the principles of equity which makes the transferor a constructive trustee does not extend to a case where a transferee takes no active interest 'to get on the register'. 35. Ms. Raval has further submitted that the scheme proposed by the petitioners are contrary to the provisions contained in the Securities Contract (Regulation) Act, 1956. It is also contrary to the provisions contained in the listing agreement, more particularly, the provisions contained in clause 19(a), clauses 23, 24(a), ( b), (c), 31(e) and 36. The petitioners have not complied at all the statutory requirements for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orders to ensure that the industry is put back on its wheels and starts production within a time-frame. A court will be overstepping the limits of its jurisdiction if it permits the sale of surplus land without complying with requirements for such a sanction. 37. Considering all the aforesaid issues, it is strongly urged that the Scheme may not be sanctioned by this Court as it is contrary to the Provisions of the Act and also contrary to the larger public interest. 38. Unit Trust of India has filed objections against the proposed Scheme of compromise and/or arrangement. Mr. K.I. Shah, learned advocate appearing for the UTI has relied on the said objections. He has submitted that notice for convening the meeting was received by UTI on 10-5-2001 for attending the meeting of the Creditors whereas the meeting was held on 7-5-2001. He has, therefore, submitted that the said conduct of the petitioners is not bona fide. The UTI was not satisfied with the details of the Scheme as provided for approval of the Company and, therefore, the Court has to see that there is no risk in implementing the Scheme of the Company. Pursuant to the Scheme, the petitioners have already disclosed their in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tated that LIC is entitled to recover Rs. 3,98,20,007 as on 1-1-2002 relating to Non-Convertible Debentures. Notice was not served on LIC for attending any meeting of the Creditors. The conduct of the petitioners is, therefore, not genuine and bona fide. The petitioners have not complied with the requirements of the Provisions contained in sections 391 and 394 of the Companies Act. The petitioners have also not disclosed all the material facts relating to the Company, namely, Accounts of the company, Auditor's Report, details of any legal proceedings against the Company and the latest financial position of the Company. It is also stated that LIC did not agree to the disposal of the assets of the Company under the said Scheme. If for revival of the Company, assets are required to be sold, then there is no need to revive the Company. If the repayment of dues of the Creditors is required to be paid out of the sale proceeds of the assets of the Company, then such things would be done through Official Liquidator and not through the petitioners. The petitioners have wrongly classified the dues of LIC towards Non-Convertible Debentures. The amount was obtained from them on an assurance th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... if any, on revival of the Company and revocation of the winding up order. To make provisions regarding employees, therefore, becomes significance as the employees would be necessary for post revival functioning/working of the Company. The Scheme does not envisage anything about the post-revival plans/projections/reforms of funds and hence, except settlement of dues of Creditors by issuing Convertible and Non-Convertible Debentures and payments in cash, there is nothing in the Scheme. The Scheme provides that shares of the Company will be relisted on the Stock Exchange without insisting for completion of procedural formalities. This cannot be enforced upon concerned authorities in a Scheme under section 391 without hearing the concerned authorities. In para 16 of the petition, it is averred that no investigation proceedings under sections 235 to 251 of the Act are pending. However, the Registrar of Companies has filed prosecution for violation of sections 314, 211, 209, 297, 73, 113 and 301 of the Act. Objection was also raised to the effect that full balance-sheet was not filed alongwith the Scheme. From the Chairman's Report dated 7-5-2001, it appears that Bank of India and State ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n passed by requisite majority as required under the Provisions of Companies Act. The Sponsors had not come with clean hands and they are guilty of suppressio veri and suggestio falsi. Even otherwise, the Sponsors and the Directors are guilty of committing various acts of omission and/or commission by acting de horse the provisions of the Act and have not made full disclosure of true and correct figures. 45. It is further stated that the entire exercise of convening the meeting and discussing the proposed Scheme undertaken by the Sponsors by simultaneously acting as Chairman is illegal. The Chairman having voted in the said meeting as a Creditor per se shows that he has interest in the Scheme and thereby was disqualified to act as the Chairman. The State Bank of India had set up its GIDC Electronic Estate Branch at Gandhinagar for the sole object of promoting Electronic Industries in the State of Gujarat by lending public money to the electronic Industries. Thus, the State Bank of India cannot be expected to give loan and then write it off as a bad debt and ultimately to go out of the business. The Bank has to recover the amounts due so that fresh loans can be given. If Banks are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to withdraw the suit proceedings being O.A. Nos. 47/1997 and 128/1997 filed against Essen Computers Limited (In liquidation) and other guarantors pending before the Debts Recovery Tribunal, Ahmedabad. 48. In support of the Scheme, affidavit of one Mr. Pankaj Bihari Shah, proprietor of Shri Ranchhodrai Traders was filed on 18-3-2004. It is stated in the said affidavit that pursuant to the order passed by this Court on 12-4-2001 in Company Application No. 112/2001, separate meetings of the Loan Creditors, Secured Creditors, Statutory Creditors and Creditors for Goods and Expenses of the Essen Computers Limited (In liquidation) were conducted at the Sports Authority of India Complex, Gandhinagar on 7-5-2001. Shri Ranchhodrai Traders received notice dated 12-4-2001 from the Sponsors inclusive therewith a package of the Scheme of a compromise and arrangement informing of the date and venue fixed for the meeting. The said meeting was attended by Shri Prabodh Chavda on behalf of Shri Ranchhodrai Traders. It is further stated that at the said meeting, the Scheme of revival and compromise was read out and explained by the Chairman of the said meetings to those persons at the respective mee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... jected to the Scheme, the Scheme still have had the support of Creditors having value of Rs. 12.60 crores i.e. 84.96 per cent in favour and Rs. 2.23 crores i.e. 15.04 per cent against the Resolution. With regard to classification of UTI/LIC as to whether they are secured or unsecured creditors, Mr. Soparkar has submitted that though ICICI is not concerned about it, it is only for the court's satisfaction that no illegality or irregularity has been committed by the Sponsors. UTI/LIC had never seriously been able to persuade GIIC/GSFC who were the only institutions who had charge on all fixed assets other than specific equipment charge as held by ICICI, to cede pari passu charge in their favour and hence, the NCDs so issued, continue to remain unsecured. The same was clearly reflected in the statement of affairs as of April 1997 and can also be verified from a report from qualified Company Secretary confirming that no charge has ever been created in favour of UTI/LIC during the history of the Company. With regard to the petitioner No. 2 i.e. EFIL, he has submitted that it has bought over the debt from GSFC due from Essen Computers Limited. Based on the well established principle, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ditors such as Banks were willing to revive the Company based on their understanding of the Company's ability to repay and they would receive over Rs. 3.50 crores in cash as per the proposed scheme, on revival. Over and above this Banks and Financial Institutions would hold 40 lakhs shares in the Company. The revived company would make good to the economic, social and human status of the Society and about 10,000 shareholders would get their due return from the Company. He has, therefore, submitted that there is no reason for objecting the scheme on any count. 53. With regard to the objection raised by Official Liquidator, the petitioners have filed their affidavit on 22-11-2001. Based on this affidavit, Mr. Soparkar has submitted that the Official Liquidator has no authority to raise any objections and/or file the report as the Official Liquidator has no locus standi in the subject-matter of the petition which pertains to scheme of comprise. The petition does not pertain to any amalgamation proceedings. On this ground alone, the report filed by the Official Liquidator containing his objection is required to be ignored/overruled. At the time of taking possession of the assets of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al requirements should be dispensed with because before liquidation, the shares of the Company were listed and by resorting to listing, no authority would suffer. The date of 1-4-1994 was selected because on and from that date, the Company ceased to function. Though the winding up order was passed on 17-4-1997, nothing has been done and no significant activity has been carried out during the period from 1-4-1994 to 17-4-1994. It is for this reason that the date of 1-4-1994 was selected. 56. With regard to the objections raised by Shri Shailesh Mehta, the petitioners have filed their affidavit on 12-12-2001. Based on this affidavit, Mr. Soparkar has submitted that Mr. Mehta has no authority to raise any objection and/or to file any affidavit as he has no locus standi in the subject-matter of the petition which pertains to a scheme of compromise Mr. Mehta is neither a shareholder nor a creditor of the company in liquidation and on this ground alone, the affidavit filed by Mr. Mehta containing his objections is required to be ignored/overruled. 57. With regard to non-transfer of shares of Mr. Mehta, Mr. Soparkar has submitted that for proper transfer to be effected, Mr. Mehta has to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... heme for the sake of objection. That the petitioners' reply to the objections raised by UTI is equally applicable to the objections raised by LIC and hence, the same are not repeated here. 60. After having heard the learned advocates appearing for the respective parties and after having considered their pleadings as found in their applications, objections, affidavits and counter-affidavits and after having perused the papers and documents produced therewith as well as after having given my anxious thoughts to the relevant statutory provisions and the authorities cited during the course of hearing which lasted for good number of days, the Court is of the view that the petition deserves to be dismissed with exemplary cost. 61. The brief summary of the objections filed by various parties against the scheme of compromise and arrangement as submitted by Mr. Soparkar is classified in four broad categories. 62. The first category of the objections is that the scheme is not required to be sanctioned because there were procedural lapses at the meeting stage. Such lapses are that the notices of the meetings were not served on various creditors of the Company, the persons who actually desp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of the scheme proceedings. 66. While dealing with all these four categories of objections, Mr. Soparkar has made very strenuous efforts to satisfy the Court that none of the objections is sustainable and the scheme deserves to be sanctioned. In this process, Mr. Soparkar has referred to various statutory provisions and also referred to judgments of this Court as well as of the Hon'ble Supreme Court. While meeting with each of the objections raised, Mr. Soparkar has submitted that all these objections which are raised to the scheme proceedings are motivated and they are contrary to the provisions of law and against settled legal propositions. In support of these submissions, he has cited various authorities before the Court and based on his submissions as well as the authorities cited before the Court, he has requested the Court that all these objections should be overruled, not only on law but also on the ground that they are not germane from the facts of the case. 67. It is true that some of the objections which are raised may not have legal force behind them and only on the basis of those objections, the Court cannot refuse to grant its approval to the scheme. But at the same ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he same class whom they purported to represent. (8)That the scheme as a whole is also found to be just, fair and reasonable from the point of view of prudent men of business taking a commercial decision beneficial to the class represented by them for whom the scheme is meant. (9)Once the aforesaid broad parameters about the requirements of a scheme for getting sanction of the Court are found to have been met, the Court will have no further jurisdiction to sit in appeal over the commercial wisdom of the majority of the class of persons who with their open eyes have given their approval to the scheme even if in the view of the Court there could be a better scheme for the company and its members or creditors for whom the scheme is framed. The court cannot refuse to sanction such a scheme on that ground as it would otherwise amount to the court exercising appellate jurisdiction over the scheme rather than its supervisory jurisdiction. 68. After enumerating the aforesaid 9 parameters, the Hon'ble Supreme Court has further observed that the said parameters of the scope and ambit of the jurisdiction of the company court which is called upon to sanction a scheme of compromise and arrang ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bout production of these requisite materials before the Court. 69. It is rather shocking and surprising that while seeking the order from this Court for appointment of Chairman of the meeting, the petitioner No. 1 has not disclosed the material fact before the Court that he is the debtor of the Company and he is going to cast his vote being one of the Creditors of the Company and he is also one of the beneficiaries under the scheme. Since he being the Judge of his own cause was not entitled to be appointed as the Chairman of the meeting and report submitted by him before the Court cannot be considered to be trustworthy. Looking to the other terms incorporated in the Scheme, it is difficult to hold that the said scheme of compromise and arrangement is not violative of any provisions of law and is not contrary to public policy. The petitioners have asked for re-listing of shares on the Stock Exchange without making any compliance with the procedural formalities. The petitioners have also asked for dropping of penal actions that were taken against the company or its promoters or the Board of Directors. They have also sought for the discharge of guarantors from their personal liabilit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the employees or even with regard to the future employment. It is nowhere found in the scheme as to how the business would be carried out after getting sanction from this Court. The Court is, therefore, of the view that the scheme is proposed only with a view to dispose off the assets of the Company and to get relieved the promoters and Ex-Directors of the Company from their personal liabilities. Since the broad parameters laid down by the Hon'ble Supreme Court about the requirement of scheme for getting sanction of the Court are not found to have been met, the Court has no other alternative but to refuse to grant its approval and in such a situation, if the scheme is not approved by the Court, it cannot be said that the Court is sitting in appeal over the commercial wisdom of the majority of the class of persons who with their open eyes have given their approval. It is needless to state that the Court will refuse to put its seal of approval if the purpose of the scheme is not bona fide and is intended merely to seal the misdeeds of the ex-Directors or is otherwise inequitable. The scheme proposed by the petitioners appears to be a conditional scheme and the Court found that the co ..... X X X X Extracts X X X X X X X X Extracts X X X X
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