TMI Blog2013 (3) TMI 65X X X X Extracts X X X X X X X X Extracts X X X X ..... ssets doing so. It must be recorded that several parleys were held between the representatives of the State Government and the company for opening the Sahaganj unit, but nothing has come of the conciliation proceedings following the company’s staunch refusal to put any concrete proposal on the table for the payment of the workers’ dues. The State Government refers to the affidavit filed in course of the present proceedings saying that its electricity utility has a claim of Rs.11.20 crore in respect of the Sahaganj factory, the West Bengal Development Corporation Limited has a claim of Rs.14 crore, and a sum in excess of Rs.7.95 crore is due by way of land revenue apart from sales tax dues in excess of Rs.40 crore. Also provident fund authorities suggest that a siezable sum in crores is due from the company but quantification of the amount has not been made. The appearing workers of the company that an amount in excess of Rs.46.27 lakh is due from the company as at December 31, 2012. The company suggests that it has reached a settlement with its creditors who had come to court and who have a combined principal claim of about Rs.32 crore. The company has made no attempt to detract ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Jayjit Ganguly, Adv.,Mr Rudrajit Sarkar, Adv.,Mr Aniruddha Mitra, Adv.,Mr Rishad Medora, Adv.,Mr Rishab Dutt, Adv.,Mr Ahana Sikdar, Adv.,Mr Supratim Laha, Adv.,Ms Noelle Dey, Adv.,Mr Rohitendra Deb, Adv. Mr Dipak Dey, Adv., Mr S.K. Tiwari, Adv., Mr Biswanath Chatterjee, Adv.,Mr Biswajit Konar, Adv. For the workers: Mr Jishnu Chowdhury, Adv.,Mr Arnab Sardar, Adv. For the State: Mr Anindya Mitra, Advocate-General Mr Paritosh Sinha, Adv.,Mr Debangshu Basak, Adv.,Mr Amitava Mitra, Adv. For the Provident Fund Mr Shiv Chandra Prasad, Adv. JUDGMENT The wheel appears to have turned full circle for this industrial giant of a company whose name was once synonymous with automobile tyres. Dunlop India Limited today stands on the brink, its two manufacturing facilities not having functioned for years and its workers and employees imploring for their dues to come out of the assets of the company upon the company being wound up. Several other creditors have joined in the fray, particularly upon the facts pertaining to some of the company s valuable properties coming to light in an order of this court of March 26, 2012. Some of the creditors of the company who had bayed for blo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proceed with the petition. In addition to the several petitions which have been taken up together, there are a number of applications in these matters which remain pending. CA No. 198 of 2012 is a creditor s application seeking intervention in one of the petitions which has been advertised. CA No. 410 of 2009, CA No. 28 of 2011, CA No. 110 of 2011, CA No. 111 of 2011 and CA No. 114 of 2011 are applications by the company that have now become infructuous. These applications were filed when the company enjoyed the protection under the West Bengal Relief Undertakings (Special Provisions) Act, 1972. The company no longer enjoys the immunity under such statute. CA No. 832 of 2011 is also an infructuous application since the company has sought recall therein of the order of admission relating to CP No. 159 of 2011, but the petition has long been advertised. CA No. 852 of 2011 and CA No. 609 of 2012 are applications by supporting creditors which ought only to have been filed by way of affidavits. CA No. 378 of 2012 has been brought by the workers of the company, primarily those employed at its Sahaganj unit. The latest application, CA No. 765 of 2012, is by the company seeking modificati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ht winding-up of the company. Several affidavits of supporting creditors were also received and more creditors sought time to file their affidavits in support of the prayer for winding-up. The order of December 9, 2011 recorded the company s submission that the company had entered into tentative settlements with some creditors but payments had not been released to such creditors since at least one of the creditors petitions had been advertised. The court perceived that some settlements, and consequent payments, may have been made prior to any petition being advertised but subsequent to the filing of CP No. 233 of 2008 which went on later to be advertised. The court found, prima facie, that some payments made to some creditors ran the risk of later being assailed as fraudulent preference. The company admitted that it was indebted to the petitioner in CP No. 159 of 2011 in the sum of Rs.33.61 crore by way of principal and requested the court to permit the company to make payments in instalments to such petitioner since the other creditors had also to be paid. By the order of December 9, 2011 the court required the company to inform all its secured creditors that the matters would ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... everal creditors petitions were taken up on January 6, 2012, the court s perception as to the conduct of the company is reflected in the opening lines of the order made on such date: that on the basis of the affidavit filed on behalf of the company, there was substantial basis to the joint oral prayers made on behalf of the several creditors that the official liquidator should be appointed as provisional liquidator over all assets and properties of the company. The creditors had brandished a news article published in the Mumbai edition of the Times of India on December 16, 2011 entitled Dunlop puts Worli property on the block. And yet the court showed patience and indulgence in bowing to the cardinal principle that it would take no notice of a newspaper article unless there was material before it that substantiated the contents thereof. The order of January 6, 2012 reflected the court s anguish that no details had been furnished by the company in accordance with the directions contained in the order of December 9, 2011. With considerable diffidence, the court blandly recorded the excuse proffered by the company that it required more time to scrutinise its books and papers at t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 26, 2012. It is necessary to dwell on the judgment. The relevant application was carried by Madura Coats Limited, a creditor which had instituted independent proceedings by way of CP No. 13 of 2009 for a principal claim of over Rs.2 crore on the basis of the company s admission in a draft rehabilitation scheme presented to the Board for Industrial and Financial Reconstruction (BIFR). Such creditor has lodged a suit elsewhere in this court for a substantially larger claim where the claim in the winding uppetition is not reflected. The order of March 26, 2012 proceeded, as all orders under Section 450 of the Act must, to first assess whether there was an unimpeachable claim before ascertaining whether the circumstances existed for making an exceptional order for the appointment of a provisional liquidator.Upon finding that there did not appear to be any plausible defence to the relevant petitioning creditor s claim, the order of March 26, 2012 alluded to the reference made by the company to the BIFR under the Act of 1985. The reference remained pending from January 19, 1998 with no apparent scheme having been formulated by the BIFR for nearly a decade even as the company, only by vi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not subject to the provisions of the said Act of 1985 was not based on its independent opinion but founded on a Madras High Court order that observed that since the net worth of the company was a positive sum of Rs. 242.65 crore for the year ended March 31, 2007, the BIFR cannot retain its jurisdiction over the petitioner company any further. That order was rendered by the Madras High Court on a petition under Article 226 of the Constitution of India where the company claimed that it was entitled to the protection under Section 22 of the 1985 Act in course of challenging the seizure of certain goods by the customs authorities. It is also of importance to note that the company s previous attempt to have its reference before the BIFR annulled on the ground of its net worth having become positive following the revaluation of some of its assets was repelled by the BIFR by an order of July 23, 2007 and an appeal therefrom was dismissed by the AAIFR on December 4, 2007. It is also the admitted position that during the currency of the reference pertaining to the company before the BIFR, prohibitory orders against the alienation of the company s properties were in place under Section 22 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... employees and workmen. This company did not take such a mundane road. Instead, it effected the transfers, or most of them, when its creditors had no access to it or its properties by virtue of the protection that it enjoyed under the said Act of 1985 and the company did not use the money to pay off its creditors; its management used the company for the cash cow that it was for self aggrandisement and to the detriment and prejudice of its creditors, employees and workmen. Whether or not the transactions were in breach of the provisions of the said Act of 1985, they are good enough grounds to be cited to seek the appointment of a provisional liquidator over the company. It must not be lost sight of that Dunlop India Limited is a listed company and its controlling shareholding may not even constitute fifty percent of its paid-up capital. Since the four immovable properties have been alienated from the company and parked with entities under the exclusive control of the group holding the controlling shareholding in the company, such act would also amount to gross mismanagement qua the othershareholders of the company and be seen as a fraud on such other shareholders. The eleme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... transfer. Sub-section (1) of Section 53 of such Act prescribes that every transfer of immovable property made with intent to defeat or delay the creditors of the transferors shall be avoidable at the option of any creditor so defeated or delayed. The provision permits a suit to be instituted by a creditor of the transferor in representative capacity for the benefit of all the creditors. That Section 53(1) of such Act does not affect any law relating to insolvency only implies that it does not derogate from any law relating to insolvency. There is, therefore, the recognition on the general law of this country for a creditor to regard the transfer of an immovable property by the debtor to be fraudulent in some circumstances. In a society governed by the Constitution which spells out its aspirations and even a sense of morality, no constitutional functionary far less a court owing not only allegiance but its existence to it can condone the acts of graft that have come to light. The company and its management may appear to be unconcerned upon the discovery of the brazen acts of defalcation, doubtless inspired by the perception of corruption elsewhere in the society; but eve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssets and properties of the company are made available for the effective control, and protection thereof and of the company s interests, by the official liquidator. All decisions of the company will be subject to the approval of the official liquidator. Since the four transactions entered into by the company in the year 2006-07 or thereabouts were fraudulent, the title therein may not be deemed to have passed at all from the company. Two sets of appeals were preferred from the order of March 26, 2012, one by the company and another by ICICI Bank Limited. The company s appeal, APO No. 129 of 2012, was disposed of by an order of July 19, 2012. Though the appellate order observed that it could not support the findings of the learned Trial Judge that the aforesaid transfer which have taken place before presentation of winding up as being fraudulent and invalid in the insolvency jurisdiction , it held as follows: Therefore, we are of the prima facie view that strong case of indebtedness has been made out. Equally strong case has been made out about the act of waste of the present management. They are not trustworthy nor do they inspire any confidence in the mind of the Court to k ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efor should be given upon the Special Officer appointed by this Court who on receipt of the same will be entitled to approach the learned Company Judge to seek leave to take appropriate legal measure as may be advised and as may be directed. Therefore, we do not find any reason to grant any relief on this appeal. We make it clear that it would be open for the appellant to take steps in accordance with law; obviously notice of such action shall be given to the Special Officer in the event aforesaid transferred properties are sought to be roped in. Thus this appeal is disposed of with above observation and finding and direction. The several creditors winding-up petitions that appeared continually before the company court after the order of March 26, 2012 were adjourned pending the outcome of the appeals from the order of March 26, 2012, though there was no strict necessity to defer the same. The company court afforded time and opportunity to the company to ensure that a credible repayment plan was presented for taking care of not only the debts of the creditors who were before court, but also of the workers and other employees who could not be individually expected to approach th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ck exchange s approval or deemed approval should come within 30 days of the filing thereof. The company should ensure that the matters are ready for hearing on all aspects when they appear next on December 4, 2012. No further adjournment will be granted to the company. Thereafter, applications or supporting affidavits came to be filed by the workers and other employees of the company. The matters were adjourned from time to time to enable the company to assess the claims of the workers and to finally bring a plausible proposal for disbursement of money to its creditors. The company court waited for about 14 months since the two petitions were advertised for the company to present an alternative to the court so that it would not be necessary to wind up the company; but the company has neither furnished any particulars or accounts that remain in the company s possession, nor has the company indicated whether it has the resources to meet its debts. It appears that the only endeavour of the company has been to stall the inevitable and hope to put in as much time as possible between its alienation of the four valuable properties and the ultimate order of winding-up. Indeed, despit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cipal claim in excess of Rs.4.5 lakh, the petitioner in CP No. 13 of 2009 with a principal claim in excess of Rs.2.03 crore, the petitioner in CP No. 73 of 2010 with a principal claim in excess of Rs.87 lakh, supporting creditor Smiffs Capital Markets Limited with a principal claim in excess of Rs. 8 crore and another supporting creditor, Transport Corporation of India Limited, with a principal claim in excess of Rs.31.84 lakh have all unequivocally expressed their desire in court that the company should immediately be wound up and no further opportunity be afforded to it to fritter away its remaining assets. There is no creditor represented in court that opposes the winding-up of the company despite the question being asked several times by court in course of the hearing. However, several petitioning and supporting creditors no longer press their claims or their petitions in view of the company having apparently reached some arrangement with them. The company s offer to pay Rs.50 lakh per month to its workers is laced with a condition that it must have a chance to open its manufacturing facilities and the court must facilitate the same. The State Government says that the land ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or employee of the company has appeared to resist the order of winding-up. The conduct of those in management of the company in fraudulently selling off assets conservatively estimated at Rs.2,300 crore makes it just and equitable for the company to be wound up. The company has been unable to show any prospects of it carrying on any business in the near or the distant future. The company s inability to pay its debts is established and no ground is shown for the company court to exercise its discretion to not wind up the company despite its obvious insolvency. ICICI Bank Limited has only submitted that it has no role to play in the present proceedings as it has had no transaction with the company and has no opinion on whether the company should be wound up or not. It is necessary to record a minor matter as this may only be the first episode of the corporate scandal that is Dunlop India Limited. A letter had been addressed apparently on behalf of the company expressing the company s reservations for this Judge to hear these matters. Regrettably, the then Chief Justice had deemed it proper to forward the letter, through a battery of officials in the administration, to the Judge. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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