TMI Blog2009 (3) TMI 579X X X X Extracts X X X X X X X X Extracts X X X X ..... nd the observations of the arbitrator or the Official Liquidator in that regard shall stand vacated. The amounts as detailed above from out of the amounts in deposit with OL and for any deficiency, the petitioners shall become liable to pay the respective amounts forthwith with interest at 12 per cent p.a from the date of this order till date of payment. There shall be a charge on the remaining asset of the company for the amount that is due and payable. - C.P. NOS. 51 & 296 OF 2006 (O&M) C.A. NOS. 482 OF 2006, 740 OF 2007, 400, 454 & 521-522 OF 2008 - - - Dated:- 19-3-2009 - K. KANNAN, J. Anand Chhibbar, Ranjit Chawla and Rakesh Kumar for the Petitioner. Ms. Sangeeta Dhanda for HSEB. Chetan Mittal, Deepak Suri and Gaurav Kathuria for the Auction Purchaser. R.K. Battas, S.K. Batish, Kamal Sehgal and H.R. Bhardwaj for HSIIDC. Neeraj Khanna Advocate for the Official Liquidator. B.B. Bagga Advocate for SBI. Puneet Gupta and Aalok Jain Advocate for HFC. JUDGMENT I. Petition for revival and the principal objectors 1. The company which was ordered to be wound up in Company Petition No. 31 of 1995 is sought to be revived through ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nit No. 1. The company had another unit at plot No. 142, Sector 24, Faridabad being unit No. 2. The company started its commercial production in the year 1972-73 but failed due to severe financial constraints. The factory was closed on 27-4-1985 and the company approached the BIFR for rehabilitation under the provisions of the Sick Industrial Companies (Special Provisions) Act, 1985. The reference was registered and after hearing IRBI was appointed as an operating agency. The initial parleys for rehabilitation did not work and ultimately the BIFR recommended for winding up of the company on the ground that the company had become economically and commercially non-viable. The company resisted the direction for winding up by preferring an appeal under Sick Industrial Companies (Special Provisions) Act, 1985 (SICA) filed a writ petition before the High Court and all their attempts to stall the winding up failed. The High Court passed the winding up order in C.P. No. 31 of 1995 on 24-2-1995 and the Official Liquidator attached to the Court was appointed as the Liquidator for DSECL. 3. Consequent upon the order issued by the Court, the Official Liquidator took possession of the facto ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r out-stripped the assets had changed by the considerable increase in valuation of the immovable assets of the company. ( b )On a proper reckoning of all the debts due by the company if the claims of creditors had to be reviewed on One Time Settlement basis, it was possible to liquidate all the debts and still save the valuable assets of the company from being sold. ( c )The petitioner No. 7, a financier and co-promoter was willing to fund the company-in-liquidation and its liabilities and the creditors who were only looking for repayment of the debts had expressed willingness for the respective offers of OTS, which was beneficial to the company. ( d )The promoters of Dabriwala had long standing relations with Sanjiv Gulati, the Managing Director of Gulati Industrial Fabrication Private Limited having its industrial shed at Plot No. 262-M, Sector 24, Faridabad which was near to Plot No. 142 and they were willing to assist the company to make upfront payments to all the creditors by following the OTS policies floated by public financial institutions. ( e )As a necessary quid pro quo the Ex-Directors of the company were willing to cede major shareholding with Mr. Sanjay Gul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... interest and dispose of the property by private negotiations to another person. The objection comes through the fact that the plant and machinery situate in plot No. 136, Sector 24, Faridabad had already been sold for Rs. 4.10 crores by Official Liquidator and what remained was only Plot No. 142, Sector 24, Faridabad which it had purchased. There was no more industrial activity in Plot No. 142, Sector 24 to revive the company. It is also objected by the purchaser that none of the provisions contained under sections 391, 392 and 394 have been followed for taking action for revival of the company. The application filed by the Ex-Directors suffers from not following the pre-requisites laid down under the Companies Act under the relevant provisions which could not be treated as empty formalities to be thrown to winds at its whims. Electricity Board s objections 8. The Dakshin Haryana Bijli Vitran Nigam Limited (hereinafter referred to as "Electricity Board") has its objections in the shape of claims against the company-in-liquidation which, according to it, has been wrongly adjudicated by the Official Liquidator. The complaint of Electricity Board is that the company did not p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to have considered the said claim in its proper perspective. The response of the Ex-Directors of the Company to the claim of the Electricity Board is that there was no default in the payment of the energy charges and, hence, no amount as claimed by the Electricity Board was payable. Further the Award of the Arbitrator itself has become a rule of the Court and, therefore, it was not possible for the Electricity Board to set up its claim for any amount more than that what was adjudicated. M/s. Saket Steels decretal claims 9. M/s. Saket Steels Limited had acquired a decree in a suit for specific performance against the company-in-liquidation before the Additional Civil Judge (Sr. Divn.), Faridabad on 19-4-1996. It was an ex parte decree arbitrarily passed the order of liquidation which was made on 24-12-1985. The contention on behalf of the decree-holder is that facts of the matter before the Company Court had themselves not been apprised to the Civil Court before the passing of the decree. The decree is not illegal or void but at best voidable at the instance of the company and the same having not been set aside, the decree-holder was entitled to have the decree directed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the company, he ought to have been associated with the auction proceedings, which was not done". This was stated in the context of the power of the Recovery Officer under the RDB Act. In confirming the sale, the Recovery Officer was acting beyond his own powers. Harihar Nath v. State Bank of India [2006] 67 SCL 234 (SC) states the effect of section 22 of SICA and section 446 of the Companies Act is that an order of winding up casts a duty or obligation on the person who has sued the company to obtain the leave of the Court to proceed with his suit. The right to apply for leave accrues not because of the order of winding up but because the suit or proceeding is stayed; so long as the suit or proceeding remains stayed an application for leave can always be filed. The Hon ble Supreme Court was setting out the law in the context of law of limitation for seeking the leave and held that the right to apply for grant of leave under section 446(1) accrued every moment the suit remained stayed. According to it, the decree by the Civil Court granting specific performance had been made when the suit remained stayed by virtue of operation of section 22 of the SICA and when an order of wind ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thout leave of the Court under the said section, the decree is not binding on the Official Liquidator. The Division Bench observed that the matter has to be taken only to the winding up Court for further action and an observation was made by the Executing Court regarding the nature of decree or its executability should be taken as having no effect. Loil Continental Foods Ltd. v. Punjab Wireless Systems Ltd. (in liqn.) [2008] 143 Comp. Cas. 619 (Punj. Har.), a learned Judge of this Court examined at length the purported applicability of section 446 of the Companies Act vis-a-vis the various special statutes making provisions for recovery of debts. It held that even an order of attachment made by a Court during the subsistence of proceedings before the Company Court without leave of the Court would be considered as against the terms of the mandate of section 537 and as such void and does not exist in the eye of law. Kerala State Financial Enterprises Ltd. v. Official Liquidator, High Court of Kerala [2006] 72 SCL 130 (SC) examined the over-riding effect of SICA where the company, which was engaged in financial activities, was proceeded with under the State Financial Cor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of 2006 for confirmation and although not a secured or unsecured creditor or even a shareholder of the company, being one of the highest bidders was interested in the assets of company-in-liquidation. Learned Senior Counsel appearing on behalf of the purchaser relies on the decision in Meghal Homes (P.) Ltd. v. Shree Niwas Girni K.K. Samiti [2007] 7 SCC 753 1 which states that "while the court will not sit in appeal over the commercial wisdom of the shareholders, in determining whether winding up should be stayed temporarily or permanently, it will certainly consider whether the scheme genuinely contemplates revival of the whole or a part of the business of the company, makes provisions for paying off creditors or for satisfying their claims as agreed to by them and for meeting the liability of workers under sections 529 and 529A of the Companies Act. Court has to see bona fides of the scheme and to ensure that the scheme that is put forward is not a ruse to dispose of the assets of the company-in-liquidation, and whether such a proposal satisfies the elements of public interest and commercial morality. If the Court finds the scheme to be a ruse to dispose of the assets by a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is the antithesis of development. Any programme of action that makes way for development will have to be therefore preferred to a fold-up operation. IX. The answers to the objection by purchaser held by OL 15. The answer is to be found in the context of what the Hon ble Supreme Court has laid down that if the proposal is merely a ruse to dispose of the assets, it has to be seen whether it satisfies the public interest and commercial morality. The Hon ble Supreme Court was actually dealing with the case where in a meeting convened to draw up a scheme, it had not really contemplated a revival of the company but a scheme to dispose of the company s assets which had vested in the Official Liquidator. The company-in-liquidation was a mill which had employed large number of workers. Several claims of the creditors had to be satisfied. A property that had become vested with the Official Liquidator, as conceived by the Company Court was that it ought not to be allowed to go back to the company for the sale of its assets but if at all the sale should be done only through the Official Liquidator which could secure the best price. This order of the Court had been challenged by the maj ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6 has been taken at the instance of M/s. Saket Steels Limited, which has obtained an ex parte decree on 19-4-1996 in the Court of Additional Civil Judge (Senior Division), Faridabad, admittedly, after the company was ordered to be wound up on 24-12-1995. The claim by the applicants is on the basis that the pendency of proceeding before the Company Court was not known to the petitioner and the institution of the suit itself was not invalid since it was made on 16-7-1990, when there was not any action for winding up ever in contemplation. The learned Senior Counsel appearing on behalf of the decree-holder relied on the decision of the Hon ble Supreme Court in Indian Bank v. Official Liquidator. Chemmeens Exports (P.) Ltd. [1998] 5 SCC 401 1 to the effect that a decree granted by a competent Civil Court even after the order of winding up could not be treated as void. The only legal requirement under section 446, according to him, is that he shall have to secure permission from the Court to put the decree in execution in the manner contemplated by a decision of the Hon ble Supreme Court in State of J K v. UCO Bank 2005 (10) SC 331. According to him, the position of a decree- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... loans or advance granted to the industrial company." A suit for specific performance does not fall within any of the specific instances set forth under section 22. The several decisions, which the learned counsel appearing for the Ex-Directors of the company has referred, I am not reproducing here, for, I am convinced that a suit for specific performance is not one that will fall to be attracted by the bar contained under section 22 of SICA. Learned counsel appearing for the Official Liquidator adds a second string bow, as it were, when he refers to section 537 of the Companies Act, which reads : "where any company is being wound up by the Tribunal (Court); ( a ) any attachment, distress or execution put in force, without leave of the Tribunal, against the estate or effects of the company, after the commencement of the winding up; or ( b ) any sale held, without leave of the Tribunal, of any of the properties or effects of the company after such commencement, shall be void." Learned counsel refers to decision of this Court Haryana Financial Corpn. v. Dev Papers (P.) Ltd. (in liquidation) passed in [C.A. No. 14 of 2007 in C.P. No. 197 of 1999 on 11-12-2008] where this Court hel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efore the Subordinate Court (Senior Division) and pending in that Court at the time when the order of winding up was made. The effect of pendency of a proceeding in appeal in the High Court or Hon ble Supreme Court was predominantly the issue before the Hon ble Supreme Court in Indian Bank s case ( supra ) where the suit had been filed for recovery of debt with the leave of the Company Court. The case was defended by the Official Liquidator on a plea that a particular charge which the bank was seeking to enforce had not been registered under section 125 of the Companies Act. A preliminary decree was, however, passed and it was allowed to become final by the Official Liquidator by not filing any appeal. It was under such circumstances that the Court said that preliminary decree was not rendered void or inoperative. In this case, the Official Liquidator had not been made a party and the decision had not been rendered in his presence. Harihar Nath s case ( supra ) cited by the counsel for the decree-holder does not still avail to the decree-holder since the point in issue in that case was the limitation period applicable to proceedings being sought to be initiated with leave under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... may be, such benefit to that party or to make compensation for it; ( b )that the agreement sought to be enforced against him in the suit is void by reason of his not having been competent to contract under section 11 of the Indian Contract Act, 1872 (9 of 1872), the Court may, if the defendant has received any benefit under the agreement from the other party, require him to restore, so far as may be, such benefit to that party, to the extent to which he or his estate has benefited thereby. It is seen from the averments in the petition that M/s. Saket Steels Limited had entered into an agreement to purchase the property for Rs. 8,50,000 on 14-7-1987 and the company had paid an advance of Rs. 50,000 and had made payment of further sum of Rs. 1,00,000 on 28-9-1987. The company shall be liable to repay the amounts from the respective dates when the amount was paid namely on 14-7-1987 and 28-9-1987 of Rs. 50,000 and Rs. 1,00,000 at the rate of 12 per cent per annum till the date of payment. This amount as determined shall constitute a charge on the assets of the company. XI. Regarding objections by the Electricity Board 20. Objections of the Electricity Board comes under two ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lenge to the Senior Sub Judge Court before which the award was challenged or to the District Court before which an appeal had been filed. It may have been possible for the Electricity Board to seek for expunction of any observation relating to energy charges as either payable or not payable as not binding in view of the fact that it was not the subject of arbitral dispute. It would be impermissible for the Electricity Board to contend that Arbitrator could have passed an Award also for the energy charges. I affirm the report of the Official Liquidator determining the amount of Rs. 6.61 lakhs as payable to be valid and any observation either in the Arbitrator s Award or in the successive tiers of adjudicatory bodies relating to energy charges shall stand vacated. If the Electricity Board has any independent claim to make with reference to energy charges, it shall be open to them to resort to such action if at all admissible in law. I, however, direct that the amount of Rs. 6.61 lakhs as determined by the Award and adjudicated before the Official Liquidator alone is required to be paid as constituting the demand charges lawfully payable by the company, which includes interest up to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs. 15,89,765 Rs. 15,89,765 Haryana State Electricity Board/Dakshin Haryana Bijli Vitran Nigam Limited. Rs. 85,20,844 Rs. 6,61,000 25. That the fund available with the office of the Official Liquidator in the account of the company (in liquidation) is as under: Funds Available as on 31-3-2008 Rs. 75,37,054 (including FDRs) 26. That out of the funds available with the office i.e., Rs. 75,37,054, OL has to make payment of following liquidation expenses: S. No. Liquidation Expenses Amount of Rs. 1. Preliminary Expenses received from the HFC SBI Rs. 10,000 each. Rs. 20,000 2. Ad hoc Advance received from the Central Government Rs. 41,000 3. Official Liquidator Commission under account Head 104 Rs. 6,57,992 4. Advertisement expenses due to the advertisement agency namely M/s. Nikita Media Services Rs. 1,78,555 5. Valuation expenses Rs. 79,249 6. Professional fees of Chartered Accountant Rs. 44,944 Total Rs. 10,21,740 27. That in addition to the ab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dged by this Court in the petition itself taking into note of the objections of the claimants that have been found referred in the report of the Official Liquidator. There shall be no further necessity for calling any meetings of such Directors. All the secured creditors claims have been satisfied except the HFC and the claims have also been adjudicated by the Official Liquidator. There could be, therefore, no specific direction for convening of any meeting of secured creditors. The claims of other persons who are affected by the decision have also been adjudicated in this case. XIV. Final Disposition In sum, the dispensation of this Court as regards the various claimants is as follows: ( i )The petition for revival is ordered as prayed for; ( ii )5th respondent, M/s. Saket Steels (P.) Ltd. shall be entitled to be paid Rs. 1,00,000 and Rs. 50,000 with interest @ 12 per cent from the respective dates when the amounts were received by the company. ( iii )The application for confirmation of the sale in favour of M/s. Freshness Coatings (P.) Ltd. is disallowed but M/s. Freshness Coatings (P.) Ltd. shall have a right of refund of the amount, which is deposited in Court and ..... X X X X Extracts X X X X X X X X Extracts X X X X
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