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TMI Blog2009 (2) TMI 472X X X X Extracts X X X X X X X X Extracts X X X X ..... lly the transferee companies. 3. Before the court proceeds to consider the issue regarding sanction of the scheme, it is necessary to have a close look at the historical background of the company in liquidation. 4. The company was established in the year 1974 at Vatva, Ahmedabad and it started its operations at a very small level with one refining Mill. In the year 1995, the company decided to modernise, extend and diversify into other projects at an estimated cost of Rs. 200 crores. The company decided to have two locations, one at Mardia Nagar, District Surendranagar and second at Changodar, near Ahmedabad for the projects of expansion of steel producing activities and production of industrial gases at Mardia Nagar and for the production of aluminum foil and plexiglas glass at Changodar. At Mardia Nagar, the company proposed to set up an oxygen plant having capacity of 120 MT per day with liquid argon system plant. At Changodar, the company proposed to set up an imported plant for manufacturing aluminum foil with a capacity of 1,400 MT p.a. manufacturing facilities for plexiglas with a capacity of 5,000 MT p.a. was also planned at the same site. The company had enjoyed leadersh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... However, the same could not be implemented as it could not get the sanction of this court for want of requisite statutory majority of the creditors. Hence, this court vide its order dated September 18, 2006, directed the official liquidator to have a fresh valuation of properties of the company and to invite fresh tenders for the auction to be completed by January, 2007. Advertisements were issued inviting tenders and auction took place on January 23, 2007 and June 13, 2007, aggregating the total bidding amount of Rs. 63.67 crores. 7. The ex-promoters of the company once again proposed the scheme of revival/restructure of the company vide Company Application No. 557 of 2006 to this court. This court vide its order dated January 22, 2007, ordered for convening a meeting of secured creditors, unsecured creditors and shareholders of the company on March 10, 2007 and also directed the official liquidator to proceed further for the auction of the property, but the auctions were not to be finalised by the official liquidator with a view to see that the irreversible situation may not arise or new equities may not be created in the event the court considers the question for according sanc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the purpose of considering and if thought fit, approving with or without modifications, the said arrangement and also appointing the chairman of the meetings and directed the chairman to report results thereof to this court. The notices of the meetings were sent individually to all the unsecured creditors, equity shareholders and secured creditors, as required by the order together with the copy of the scheme of arrangement and the explanatory statement required under section 393 of the Act and a form of proxy. The notice of the meetings was also advertised as directed by the said order in The New Indian Express English daily and fansatta Loksatta Gujarati daily both Ahmedabad editions of September 4, 2008. On September 29, 2008, the said meetings of the unsecured creditors, equity shareholders and secured creditors of the company were duly convened in accordance with the said order and the chairman has reported results of the meetings to this court. The meeting of the unsecured creditors was attended to by 39 unsecured creditors entitled together to Rs. 9,25,29,202.28. Out of the 39 votes cast, one was found to be invalid and remaining 38 unsecured creditors have voted in favour o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... placed on the record of this petition along with the affidavit of publication dated November 10, 2008. 15. Pursuant to the notice issued on the official liquidator, he filed his report dated November 25, 2008. Ms. Amee Yajnik, learned advocate appearing for the official liquidator has submitted that the scheme as proposed does not contain any provision for settlement or payment of statutory preferential claims of the Government like the income-tax, sales tax, customs, excise, Municipal Corporation, Gujarat Electricity Board, Revenue dues, etc. She has further submitted that the statutory claims of the Government dues under section 530(1) (a) of the Companies Act, 1956, is a separate class of creditors and no compromise or arrangement is proposed in respect of such claims in the proposed scheme. She has, therefore, submitted that the scheme, if sanctioned may not bind the preferential creditors as a class and the company shall have to honour its liabilities towards them for which there is no express provision in the scheme as proposed. This becomes important since certain assets of the company with certain specified liabilities shall stand transferred to two separate private limite ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assets of the company for the period from May, 2008 to October, 2008. The official liquidator is also required to remit an amount of Rs. 54,807 for the years 2006-07 and 2007-08 to the credit of the Central Government as Central Government's fees under section 291 of the Companies (Court) Rules, 1959. The valuation of various assets of the company was obtained by the official liquidator from Government approved valuers. The aggregate amount outstanding to be paid to the Government approved valuers is Rs. 4,11,817. Thus, the outstanding bills of valuation as per the details, the total outstanding bills expenses including the Central Government fee paid aggregate to Rs. 69,24,452. The official liquidator has also incurred the expenses of Rs. 12,66,724 for making payment of security charges and advertising charges. Some of the amount was deposited by the secured creditors and the ex-promoters of the company. However, the official liquidator requires an amount of Rs. 81,91,178 to clear the outstanding bills and expenses. As against that, an amount of Rs. 57,44,215 is available in the company's account. Therefore, an amount of Rs. 24,46,963 is the short-fall. She has, therefore, sub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of winding up, the required payments in accordance with the law, not exceeding a sum of Rs. 25 lakhs as indicated in the official liquidator's report, shall be made by the company. Lastly, Mr. Soparkar has submitted that the company shall reimburse the amount as required by the court for the expenses incurred by the official liquidator since the proposed scheme is already approved by the concerned parties, at the respective meetings and that nobody has come forward with any objection to the proposed scheme, that itself is indicative of the bona fides of the petitioner as well as the scheme. He has, therefore, submitted that there is no justification for deposit of Rs. 1 crore as suggested by the official liquidator and no such direction is required to be given by this court in this regard. Since all other legal compliances are made by the petitioner, the present scheme is required to be sanctioned. 20. On notice being issued on the Regional Director, an affidavit is filed by Shri R. K. Dalmia, Deputy Registrar of Companies, Ahmedabad along with the letter dated December 4, 2008, received by him from the office of the Regional Director. Mr. Harin P. Raval, learned Assistant Solici ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ementioned petition can be moved before the company court for sanctioning of the scheme." 21. In response to the affidavit filed by the Deputy Registrar of Companies, one of the promoters of the scheme, Shri Rajiv S. Mardia has filed additional affidavit dealing with the objections raised by the Regional Director. Based on this affidavit, Mr. Soparkar has submitted that as regards the ascertainment of claims of secured creditors, the unsecured creditors, workers and other liabilities are concerned, the said exercise is not required to be undertaken by the official liquidator in the light of the present proceedings. The scheme of compromise has been proposed to the secured and unsecured creditors and they have approved the said proposal by requisite majority at the respective meetings convened for the purpose. With regard to the ascertainment of the liability of the workers and other statutory liabilities, he has submitted that the same are already listed out and explained vide the additional affidavit dated December 11, 2008, filed before this court in reply to the report of the official liquidator. With regard to the second objection, Mr. Soparkar has submitted that the detailed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed scheme. Pursuant to the said publication, neither the petitioners nor their advocate have received any objection from any person. He has, therefore, submitted that the scheme is required to be sanctioned by this court. 22. Over and above the objections raised by the Regional Director, Mr. Harin 22 Raval, learned Assistant Solicitor General, in his arguments has also raised an issue that Maradia Steel Ltd., in respect of which the scheme of arrangement is proposed by the petitioners, is under liquidation and hence, as per the provisions contained in section 391(1) of the Act, only the liquidator can file such application before the court seeking sanction of the scheme and since the present application is not filed by the official liquidator, and on the contrary, the liquidator is objecting to the scheme, the petition itself is not maintainable and hence, it deserves to be dismissed. 23. While dealing with this objection, Mr. Soparkar has invited the court's attention to the decision of the hon'ble Supreme Court in the case of Meghal Homes P. Ltd. v. Shree Niwas Girni K. K. Samiti [2007] 139 Comp Cas 418, wherein it is held that while defining a company for the purpose of secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion are sought to be transferred. Without making any provision for discharge of the liabilities of the statutory creditors, if the units are to be transferred, in that case, the statutory creditors will certainly raise an objection. Similarly, no concrete proposals are found with regard to the satisfaction of the dues of the workers or re-employment of such workers in case the scheme is sanctioned by the court and company is put to work. 26. Though the scheme is approved by the secured creditors, one of the secured creditors is Asset Reconstruction Company (India) Ltd. (ARCIL). Five secured creditors have assigned their debts to ARCIL, the details of which are as under : (Rs. in crores) Sl. No. Particulars Outstanding debt as per scheme Purchase consideration Payable under scheme 1. IFCI Ltd. 90.99 50.00 48.80 2. Bank of Rajasthan 22.46 07.50 12.00 3. Axis Bank 22.69 03.96 12.20 4. Bank of India 13.12 02.45 07.00 5. JP Morgan Chase Bank 14.78 02.60 07.90 27. Assignment of debts is held to be invalid by the Division Bench of this court in its recent judgment in O. J. Appeal No. 156 of 2007 and other cognate matters decided on January 12, 2009 (Kotak ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of Rs. 1 lakh only. It has no assets except cash on hand of Rs. 77,320 as on March 31, 2008. It is also very important to highlight the fact that the promoters and first directors of this company are none else but Mrs. Prem Rasiklal Mardia, wife of Rasiklal Mardia and Neena Rasiklal Mardia, the daughter of Shri Rasiklal Mardia, one of the promoters of the present scheme. 28. Similarly, ADPL is also formed on April 6, 2006 and its authorised share capital is Rs. 1 lakh only. It has also no assets except cash on hand of Rs. 72,320 as on March 31, 2008. One of the promoters and first directors of this company are also none else, but Mrs. Prem Rasiklal Mardia, wife of Rasiklal Mardia, one of the promoters of the present scheme. The court is, therefore, of the view that the only object of proposing the scheme is to transfer the assets of the company to close relatives of the promoters of the scheme. There is no concrete proposal nor any trust-worthy resources are found so as to inspire the confidence in the court to successfully implement the scheme if the court grants its sanction. As a matter of fact, this is the third attempt made by the ex-directors and promoters of the scheme to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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