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Som Distilleries and Breweries Ltd. Versus State of M.P. and another

2017 (11) TMI 785 - MADHYA PRADESH HIGH COURT

Rejecting the proposal submitted by the petitioner on the OTS policy - accepting one time settlement as submitted by the petitioner after winding up order was passed - Held that:- From perusal of the record, it reveals that respondent NO.2 has extended the facility of ICD to the petitioner of the different amount. The petitioner-company could not repay the said amount to respondent No.2- Corporation in time. Respondent No.1/State has framed one time settlement policy. As per the said policy, the .....

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t the amount of ₹ 50 lakh which was paid to respondent No.2 by the petitionercompany. Thereafter the Delhi High Court passed an order for winding up of the company on 03/05/2013 - The Delhi High Court in its order after exploring the possibilities of settling the dues as per OTS policy was of the view that the settlement is not possible on account of the fact that already numerous opportunities was made available to the petitioner-company to comply with the requirement of OTS amount of .....

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ejected by the respondents vide order dated 29/10/2016. The State Government thereafter has revised the OTS policy and stated that the OTS policy dated 16/05/2007 would be operational till 30/06/2017. Accordingly, the petitioner again submitted proposal on 29/05/2017 which was rejected by respondent No.2 in its meeting dated 20/06/2017. As per the settlement of respondent No.2, the total dues against the petitioner as on 31/05/2017 is 172.40 crores. As the order passed by the Delhi High Court in .....

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learned Govt. Advocate For The Respondent : Shri Piyush Bhatnagar, learned counsel ORDER The petitioner has filed the present writ petition challenging the action of respondents thereby rejecting the proposal submitted by the petitioner on the OTS policy. 2. The petitioner is a company registered under the provisions of the Companies Act, 1956. The petitionercompany engaged in the business of manufacturing and sale of liquor. The petitioner-company has largest brewery in the State of Madhya Prad .....

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an object to promote the industrial growth in the State of Madhya Pradesh. Respondent No.2, thus, falls within the definition of State as per Article 12 of the Constitution of India and, therefore, amenable to the writ jurisdiction of this Court. 3. Respondent No.2 in the year 1998 floated an Inter Corporate Deposit (ICD) Scheme to help the various companies situated in the State of Madhya Pradesh. Respondent No.2 granted ICDs to about 50 companies in the State of Madhya Pradesh and out of which .....

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, in order to help out the industries from the economic depression, framed the OTS policy. The introduction of such policies, in order to help the industries, is not a favour but an attempt on the part of the Government to ensure that there is a steadiness and continuation of economic activity in the market, which in turn ensures revenue generation for the Government and livelihood for thousands of people. 4. The petitioner-company being in need of money accepted the ICDs from respondent No.2 du .....

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h bank. The petitioner-company by its letter dated 07/02/2011 requested respondent No.2 for settling the amount under OTS policy along with cheque of ₹ 25 lakh. Respondent No.2 vide letter dated 18/03/2011 rejected the proposal given by the petitioner-company, however, accepted the cheque amount. In the meanwhile, proceeding under Section 138 of Negotiable Instruments Act as well as winding up was initiated against the petitioner. During proceeding under Section 138 of Negotiable Instrumen .....

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was also ready to settle the dispute and even got the Demand Draft prepared to be handed over to respondent No.2. However, later on respondent No.2 arbitrarily backed on from its own concrete proposal in terms of the OTS policy. The order was challenged by the petitioner before this Court and the same was disposed of vide order dated 17/04/2012. 5. Respondent No.2 filed winding up petition before the Delhi High Court in the year 2008 against the petitioner company. The said writ petition was re .....

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the petitioner was that the amount of ₹ 75 lakh already paid by the petitioner during pendency of the winding up petition, be adjusted against the principal amount as done in the case of other borrowers. However, the respondents failed to consider the reasonable request of the petitioner in adjusting the said amount against the principal amount which ultimately resulted in passing of winding up order on the basis of allegedly admitted amount of ₹ 10.97 crore as per the balance sheet .....

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,47,000/-. After filing of the SLP, the petitioner again vide letter dated 08/05/2014 requested respondent No.2 to settle the dispute. Respondent No.2 vide order dated 29/05/2014 declined the proposal of the petitioner on the ground that winding up petition of the petitioner company is pending before the Supreme Court. The Supreme Court vide its order dated 07/07/2014 directed the respondents to consider the proposal of settlement of the petitioner dehors the pendency of the SLP. Accordingly, on .....

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e Supreme Court vide order dated 26/09/2016 summarily dismissed the SLP and upheld the order passed by the Delhi High Court. The petitioner thereafter submitted a detailed representation on 14/11/2016 to the respondents alleging discrimination against the petitioner. The petitioner further submitted that though the petitioner has raised the issue of applicability of the OTS policy in the present case before the Company Court, Appellate Court as well as the Supreme Court, but, the same was never .....

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9. Respondent No.2 has filed reply and stated that the petitioner-company is in persistent default of the due amounts and, in fact, no cause of action arose in filing the writ petition and no statutory provision is being violated so as to enable the petitioner in seeking the relief in the writ petition in exercise of extraordinary writ jurisdiction of this Court under Article 226 of the Constitution of India. It has been submitted that respondent No.2 sanctioned and disbursed a sum of Rs.one cro .....

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repayment was 6th February, 2002. The third promissory note was issued on 9th August, 1999 in the sum of Rs.one lakh. Accordingly ICDs were issued in favour of the petitioner-company from time to time. On 28th March, 2003, the petitioner-company cited financial difficulties and requested respondent No.2 not to pursue the recovery proceedings against it. On 16th June, 2003 respondent No.2 issued a legal notice calling upon the petitioner-company to make payments under the ICDs. On 24th April, 20 .....

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Court took into account the possibilities of settlement as per the OTS policy on different dates and the petitioner-company did not settle the dues at all. The Delhi High Court thereafter passed an order of winding up of the Company and appointed a provisional liquidator. The Delhi High Court served company petition on the Official Liquidator attached to the Court. The official liquidator is directed to take over all the assets, books of accounts and records of the petitioner company immediately .....

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n meeting dated 20/06/2017 and the same has been rejected, therefore, the one time settlement dated 16/05/2017 as well as 29/05/2017 is now not in force. It is submitted that the petitioner's case for settlement is considered at part with other defaulter and no discrimination whatsoever has been made while dismissing the proposal dated 29/05/2017. The decision taken vide board meeting dated 20/06/2017 is in largest interest of respondent No.2 and has taken into consideration of the facts and .....

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ondent No.2 and as such respondent No.2 is an unsecured creditor. Respondent No.1-State of Madhya Pradesh framed one time settlement policy. The said policy is not a general policy which may be either adopted or followed by other financial institutions. Respondent No.2 vide letter dated 11/07/2007 offered petitioner -company to submit proposal for one time settlement. The petitioner submitted its proposal which was not accepted by respondent No.2 saying that it is not in accordance with the OTS .....

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spondent No.2 refused to adjust an amount ₹ 50 lakh which was paid to respondent No.2. The Delhi High Court thereafter passed an order for winding up of the petitioner-company vide order dated 03/05/2013. While disposing of the company petition, the Court has granted 15 days' time to the petitioner-company to repay the admitted amount. Special Leave Petition was filed by the petitioner-company before the Apex Court which was also dismissed. He submitted that the order passed by the Del .....

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of Delhi for winding up or even in a case where the money decree is passed by the competent Court, settlement is possible unless it is barred by any statute. 13. Learned counsel for the petitioner further contended that in the present case, respondent No.2 has settled the dues of many other borrowers despite the fact that the dispute being pending before the High Court and Megha Lok Adalat. He also submitted that the petitioner-company is a profit making company and is regularly paying the taxe .....

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the petitioner vide decision dated 20/06/2017 which has been challenged by way of amendment. The said decision has been taken only on the ground that by pursuing liquidation proceeding, the respondent No.2 may be get more amount than payable under the OTS policy. The said reason given by the respondents for not accepting his proposal is illegal and arbitrary. He also submits that pursuant to the winding up order, the assets of the company has to be taken over by the liquidator and has to be sol .....

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hereafter the claim of the unsecured creditor like respondent No.2 would be considered on pari pasu basis. There are huge amounts for payment to the secured creditors as well as statutory dues and there is more than a surety that in liquidation proceeding, nothing would be left after the payment of secured creditor and statutory dues and respondent No.2 may have to remain satisfied with its wishful thinking and it may not get a single penny. 14. Learned senior counsel for the petitioner relied u .....

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n after dismissal of the appeal against money decree in favour of Bank, directed for consideration of proposal under the OTS scheme. It is submitted that similar view has been taken by the Apex Court in the case of Lakshmi Narayan Vs. S.S. Pandian reported in (2000) 7 SCC 240. Thus, in light of the aforesaid judgments, learned senior counsel submits that after dismissal of the SLP at the most it can be said that the judgment of the High Court has become final, but by, itself, is not an impedimen .....

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ndia, the High Court has plenary powers to issue directions and orders also to any person and also to any authority. He relied upon the judgment passed by the Apex Court in the case of Dwarka Nkath Vs. Income Tax Officer, reported in AIR 1966 SC 81, in which it has been held that the High Court has power to mold the relief taking into account the peculiar and complicated requirements. He also submitted that here is the case where the matter is to be decided taking into account the public interes .....

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ausing severe loss to the public exchequer. In the liquidation proceedings, there are all chances that respondent No.2 may not get a single penny. In light of the aforesaid submissions, learned senior counsel for the petitioner submits that the present writ petition may be allowed and the decision dated 20/06/2017 may be set aside. 16. Learned counsel for the respondent No.2 argued that the process of settlement of amount, as per OTS policy, has already been taken up on previous occasions before .....

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proposal or representation of petitioner-company whatsoever. One time settlement policy is framed by the Reserve Bank of India under Sections 21 and 35A of the Banking Regulation Act. However, in the present case, one time settlement policy framed by the State Government has not been framed as per any statutory provision of law, therefore, any settlement in deviation from OTS policy cannot be enforced in exercise of extraordinary writ jurisdiction of this Court under Article 226 of the Constitu .....

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pointed official liquidator. 17. Learned counsel for respondent No.2 further submitted that respondent No.2 has taken decision in the Board meeting dated 20/06/2017 rejecting the proposal for settlement of disputes thereby exercising available statutory options of pursuing liquidation proceedings and proceedings under Negotiable Instruments Act for securing the due amounts. The only statutory remedy left to the respondent No.2 is to comply with the directions issued by the Delhi High Court. He f .....

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002) 3 SCC 496. He also relied upon the judgment passed by Madras High Court in the case of Tamil Nadu Industrial Investment Corporation Ltd. Vs. Millenium Business Solutions Pvt. Ltd.and another, reported in AIR 2005 Madras 232. 18. I have heard learned counsel for the parties and perused the record. From perusal of the record, it reveals that respondent NO.2 has extended the facility of ICD to the petitioner of the different amount. The petitioner-company could not repay the said amount to res .....

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ffer was again made to settlement the dues under the OTS policy, but, finally it failed as respondent No.2 refused to adjust the amount of ₹ 50 lakh which was paid to respondent No.2 by the petitionercompany. Thereafter the Delhi High Court passed an order for winding up of the company on 03/05/2013 in which in para-25 to 32 has held as under : 25. From the correspondence, it appears that SDBL was unmindful of the fact that it was for MPSIDC to determine, on the basis of the offer made by .....

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it might consider an OTS proposal and on that basis again, SDBL was advised to submit OTS proposal in accordance with prevailing OTS policy. On 12th April, 2012 also, a letter was written by MPSIDC, following the order dated 30th March, 2012 by this Court to SDBL stating that so far MPSIDC has not received any settlement proposal in accordance to the government approved OTS proposal 2007 from your company. It was also pointed out that as per the demand letter dated 7th April, 2012 of MPSIDC, th .....

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7; 7,00,00,000 + Interest ₹ 74.08 lakhs along with recoverable expenses of ₹ 17.12 lakhs. Also the said sum was asked by MPSIDC by its letter dated 10th May, 2012 to be paid by SDBL immediately . The submission of SDBL that there was a deemed acceptance of its earlier OTS offer only because MPSIDC encashed ₹ 75,00,000/- is not tenable. MPSIDC made it clear by its letter dated 10th May, 2012 that the sum of ₹ 75 lakhs already stood adjusted and would not be adjusted agains .....

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of ₹ 10,97,70,329. The OTS amount payable by SDBL was far less than the said amount. Despite numerous opportunities, SDBL was not made payment of the OTS amount to MPSIDC till date. The order passed by this Court on 30th March, 2012 noted that While this Court was in the midst of dictating the order for provisionally winding up SDBL, its representative stated that SDBL shall immediately meet the officers of the Petitioner corporation and repay the entire amount that is due and payable to t .....

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le. With SDBL failing to meet the deadlines for paying the OTS amount repeatedly, the OTS no longer holds good as far as MPSIDC is concerned. 28. In the circumstances, the Court concludes that SDBL has no bonafide defence in the winding up petition and is unwilling and, therefore, unable to pay the admitted liability. In other words, the defence of SDBL as to why it will not pay the admitted debt is neither one of substance nor in good faith. SDBL has also not been able to satisfy the Court that .....

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SDBL immediately upon this order becoming effective as indicated hereafter. The OL shall in that event also prepare a complete inventory of all the assets of the SDBL before sealing the premises in which they are kept. He may also seek the assistance of a valuer to value the assets. He is permitted to take the assistance of the local police authorities if required. 30. Publication of the citation of the petition be effected in the Official Gazette. 'The Statesman' (English) and 'Veer .....

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affidavits in this Court, with advance copies to the OL, within four weeks thereafter setting out the details of all the assets, both movable and immovable, of the SDBL company and enclose herewith the balance sheets, profit and loss accounts and copies of the statements of all the bank accounts for the last three years. 32. Given the history of this litigation, and the fact that SDBL claims that it is a profit making company that has the capacity to pay the admitted liability, the Court consid .....

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o MPSIDC to institute other appropriate proceedings in accordance with law to recover the balance amount claimed by it. If such payment is not made to MPSIDC within six weeks then this order, and in particular para 29 to 31 above, will become immediately operational. MPSIDC will immediately inform the OL and the OL will proceed to take steps in terms of paras 29 to 31 of this order. In that even, a compliance report shall be filed by the OL before the next date of hearing. 19. The Delhi High Cou .....

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as affirmed by Hon'ble the Apex Court in SLP vide order dated 26/09/2016. Thus, the order passed by the Delhi High Court in company petition has attained finality. After dismissal of the SLP, the petitioner has again submitted a proposal for settlement of the amounts. The said proposal was rejected by the respondents vide order dated 29/10/2016. The State Government thereafter has revised the OTS policy and stated that the OTS policy dated 16/05/2007 would be operational till 30/06/2017. Acc .....

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.2 has rightly rejected the proposal submitted by the petitionercompany. 20. The Madras High Court in the case of Tamil Nadu Industrial Investment Corporation Ltd. (supra) in para-18 has held as under : 18. Before parting with the case we would like to mention that recovery of tens of thousands of crore rupees of loans of banks and financial institutions has been held up by Court orders under Article 226 proceedings which were really unwarranted. However, much sympathy a Court may have for a par .....

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ust exercise its jurisdiction on well settled principle and not mere sympathy or compassion. 21. Similarly, this Court in the case of M/s Som Distilleries Limited Vs. The State of Madhya Pradesh, reported in 2014 SCC Online M.P. 3020, vide order dated 09/04/2014 in para-15 has held that the Corporation cannot be forced to accept the offer of amount which, according to them, is not as per the OTS Scheme of 2007. In the present case, the Corporation has rejected the application submitted by the pe .....

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tor, no suit or other legal proceeding shall be commenced, or if pending at the date of winding up order, shall be proceeded with against the company, except by leave of the (Tribunal) and subject to such terms as the (Tribunal) may impose. (2) [The Tribunal] shall, notwithstanding anything contained in any other law for the time being in force, have jurisdiction to entertain, or dispose of- (a) any suit or proceeding by or against the company; (b) any claim made by or against the company (inclu .....

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