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TMI Blog2010 (4) TMI 1178X X X X Extracts X X X X X X X X Extracts X X X X ..... Sh. Ashok Bahadur. At the time of incorporation, the company had the following promoter directors :- (i) Sh. Uday Singh (ii) Sh. Ashok Bahadur (iii) Sh. Naveen Chopra 4. The company was engaged in the development of various grades of automobile coolants to become the original equipment manufacturer and supplier to various auto manufacturers which included Maruti, Telco, Ashok Leyland, Escorts. Originally the industrial activity was commenced in rented premises in Udyog Vihar, Gurgaon. The company thereafter decided to expand its manufacturing activity to the complimentary fields of engine oils, brake fluid and other auto care products for which there were few competitors in the country. It even had a collaboration with M/s Liqui Moily of Germany. The company set up its lubricating oils manufacturing unit in the industrial estate of Dharuhera, Haryana and also relocated its coolants manufacturing unit there. This project envisaged a capital lay out of ₹ 2550.00 lakhs (including ₹ 500 lakhs as additional margin working capital). 5. On account of primary market weakness and depression, the company was unable to raise the capital through the rights issue which had b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 99. 9. The IFCI Ltd. was appointed as the Operating Agency under section 17(3) of the SICA to prepare a draft rehabilitation scheme (DRS) of the company based on a proposal to be submitted by the company. However, despite repeated opportunities, the BIFR found that the scheme proposed by the company was not as per RBI guidelines and the company was unable to put forth a viable revised proposal. Consequently, by an order passed on 4th May, 2000, the BIFR directed the IFCI to issue an advertisement for change of management of the company. 10. The company preferred an appeal before the Appellate Authority, Industrial & Financial Reconstruction (for short 'AAIFR') against the order dated 4th May, 2000 of the BIFR. Despite opportunities given by the appellate authority as well, no viable proposal could be propounded by the promoters for rehabilitation of the company on a one time settlement basis because of limited resources. 11. The banks and financial institutions appear to have been opposed to any financial sacrifices by them before the BIFR and had preferred winding up of the company. It was, therefore, concluded that the company/promoters were apparently not serious in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Board for Industrial and Financial Reconstruction expressed an opinion under Section 20(1) of Sick Industrial Companies (Special Provisions) Act, 1985 on 5th March, 2002 that M/s. Sunstar Lubricants Limited, was a sick company and it would be just, equitable and in public interest to wind it up. 16. The recommendation of the BIFR to this court was registered as Company Petition No. 154/2002. After considering the records, the opinion expressed by BIFR and on hearing the parties, the court was satisfied that the net worth of the Company had been substantially eroded and there was no real possibility of any revival or rehabilitation of the Company and it would also not be possible for the company to effectively exceed its net worth within a reasonable time. Accordingly, vide an order dated 3rd December, 2003, the Company was ordered to be wound up; and the Official Liquidator attached to this court was appointed as its liquidator with the direction to take over the assets and records of the Company. Citations of the winding up order were directed to be published in 'Statesman' (English) and 'Jansatta' (Hindi) and also in the Delhi Gazette. 17. Pursuant to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Shanghai Banking Corporation Limited (also two secured creditors of the company) in the year 2002 and cleared the entire outstanding dues to these creditors in full and final settlement of their claims. 22. In this background, vide the order dated 30th November, 2006 passed in CA 1390/2006 in these proceedings filed by the promoters of the Company, this court cancelled further auction proceedings with respect to the assets of the Company and directed the promoters of the Company to deposit a sum of ₹ 6,93,482/-, being the proportionate expenditure incurred by the Official Liquidator for publication of citations & sale proclamation and security charges, etc. w.e.f. 1st December, 2006 onwards. The Court also directed the promoters to deposit a further sum of ₹ 50,00,000/- with the Official Liquidator to show bonafides of the applicant and payment to the security agency and bank charges of the bidders. Pursuant to the said directions, the promoters deposited the entire sum of money with the Official Liquidator. 23. Another OTS proposal submitted by the promoter with the State Bank of Indore was accepted by it for a sum of ₹ 65 lakhs and a sanction letter dated 3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with the Official Liquidator. 29. Vide order dated 11th December, 2007, the Official Liquidator was directed to take steps for the sale of the said properties in consultation with the secured creditors. The Official Liquidator was further directed to invite claims from the workers as well as the secured creditors. Pursuant to the said directions, claims were invited by publication in 'Times of India' (English) and 'Nav Bharat Times' (Hindi). 30. Vide order dated 25th February, 2008, the properties belonging to the Company and possessed by the Official Liquidator were put to auction. The properties mentioned in Para 14 above, except at Sl. No. (i), were auctioned by the court and the total value realized was ₹ 22,83,00,000/-. 31. Claims of three preferential creditors, viz. Provident Fund Commissioner, Delhi for a sum of ₹ 14,81,264/-; Sales Tax Authority, Tamil Nadu for a sum of ₹ 10,97,847/- and Sales Tax Authority, Rewari, Haryana for a sum of ₹ 19,50,123/- and one unsecured creditor, namely, M/s. Pearl Polymer Private Limited for a sum of ₹ 17,58,398/-, were received by the official liquidator. 32. Sh. Ashok Bahadur, the pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... detailed herein-above. The claim of the provident fund department stands admitted by the Official Liquidator for ₹ 14,81,264/-. The claims of the other creditors were disputed by the ex-management and were stated to be sub-judice. It is observed in this report that the ex-management in their statement of affairs had disclosed claims of ESI, PF, Sales Tax and Income Tax (TDS) and some other unsecured creditors. 37. Vide CA No. 263/2009, it was contended by Mr. Ashok Bahadur, propounder of the Scheme, that an amount of ₹ 1,81,95,769/- was lying in the account of the company and the amount payable towards statutory dues was only to the tune of ₹ 45,29,234/- and to the unsecured creditor to the tune of ₹ 17,58,398/- and prayed that the Official Liquidator be directed to scrutinize the claims expeditiously and settle the dues from the fund available in the account of the Company. 38. The Official Liquidator submitted a report dated 17th March, 2009 stating that the claim of Sales Tax Authority, Rewari was admitted for a sum of ₹ 10,22,622/- only. In addition, the claim of ESI for an amount of ₹ 8,21,000/- and the Income Tax Authority for a sum of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tal paid up capital of the Company, have accorded their consents & no objections to the Revival Scheme. It is further claimed that no proceedings under Section 235 to 251 of the Companies Act, 1956 are pending against the Company, and that no proceedings under Section 397 and 398 of the Companies Act, 1956 have ever been launched against the Company. 41. Learned counsel for the applicant has further drawn my attention to the signed consent to the proposed Scheme of Revival of the twelve shareholders who are holding 87,75,040 shares of the company which has been placed on record. It is submitted that at present there are 1,16,22,970 equity shares of the company and their details have been pointed out. The twelve shareholders who hold 87,75,040 equity shares, constitute 75.5% of the total equity shares. The majority of the shareholders thus have given their consents/no objections in writing to the proposed Scheme of Revival. The approval and consent of the individual directors Sh. Uday Singh, Ashok Bahadur and Navin Chopra have also been placed on record. The above narration of facts and the reports of the Official Liquidator indicate that all the secured creditors of the Company ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the concerned authorities to file the requisite Form No. 66 to enable finalization of admitted claims. 45. Learned counsel for the applicant has thus submitted that some of the provisions of the Scheme with regard to clearing of the dues payable to the secured creditors already stand implemented. 46. So far as the unsecured creditors are concerned, it is submitted that the Company had the following claims against it: (i) Mobil Sales Corporation: ₹ 2,41,10,929/-; (ii) Indian Additives Limited: ₹ 34,96,198/-; (iii) Anupam Products Limited: ₹ 10,11,050/-; (iv) Pearl Polymer Limited: ₹ 17,56,578/-; (v) Income Tax Department: ₹ 1,29,000/-; (vi) Sales Tax Department: ₹ 65,76,000/-; (vii) Provident Fund Department: ₹ 14,11,826/-; and (viii) ESI: ₹ 8,20,472/- The contention is that the total outstanding works out to ₹ 329 lacs which includes a sum of ₹ 8,20,472/- as payable to ESI and ₹ 14,11,826/- payable to the provident fund authorities. In addition, there are some statutory dues payable to the Income Tax Department and Sales Tax authorities. Learned counsel submits that while the claims of statutory ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... its own production at its factory for at least three to four years but will use the surplus blending facilities of other manufacturers to blend the lubricant by paying a nominal charge as it suits the promoters more now as they are starved of cash and that this practice of using other facilities to manufacture lubricant is prevalent world wide and not a new phenomenon. However, as the time progresses and the Company pays off its liabilities then it would utilize its surplus to set up a new factory in the premises situated at Narsingpur, Gurgaon (Haryana). 49. Mr. S.K. Luthra, learned standing counsel for the Official Liquidator submitted that they have no objection to the Scheme of Revival, as such. However, it is important that the assets of the Company must be protected till the dues of all the creditors are cleared.It is noteworthy that no claims at all have been received from workmen. 50. The above narration would show that the equity shareholders holding more than 75% of the total equity shares have given their consents/no objections in writing to the proposed Scheme of Revival and all the secured creditors have been paid off. 51. Perusal of the scheme shows that secured ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er paying the statutory dues and the claim of the unsecured creditor, M/s. Pearl Polymer Limited, an amount of more than ₹ 1.25 crores will still be available in the account of the company. The other three unsecured creditors, as mentioned in the Revival Scheme, have not filed their claims although the Company had made provisions to pay off their debts also. It would be questionable as to whether such amounts could be legally claimed even now. 53. The scope and ambit of the jurisdiction of the company court while consideration of a scheme for revival has been stated in the pronouncement reported at (1996) 87 Comp Cas 792 entitled Miheer H. Mafatlal vs. Mafatlal Industries Ltd. in the following terms :- 1. The sanctioning court has to see to it that all the requisite statutory procedure for supporting such a scheme has been complied with and that the requisite meetings as contemplated by Section 391(1)(a) have been held. 2. That the scheme put up for sanction of the Court is backed up by the requisite majority vote as required by Section 391 Sub-Section (2). 3. That the concerned meetings of the creditors or members or any class of them had the relevant material to enab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... its winding up, courts must as far as possible lean in favour of the company. The same facilitates creation of the prospect of generating jobs and putting the assets of the company in productive use as against their disposal and distribution. [Ref : (1998) 94 Com.Cases 723 Delhi in Wearwell Cycle Company (I) Ltd.; 120 (2005) DLT 58 Ferro Alloys Corporation vs. National Steel & General Mills (P) Ltd.]. 55. In (1922) 2 Ch. D. 723 Re. Anglo-Continental Supply Co. Ltd. the Court held that before giving a sanction to the scheme of arrangement, it would see "Firstly, that the provisions of the statute have been complied with. Secondly, that the class was fairly represented by those who attended the meeting and that the statutory majority are acting bona fide and are not coercing the minority in order to promote interests adverse to those of the class whom they purport to represent; and thirdly, that the arrangement is such as a man of business would reasonably approve". These requirements appear to have been satisfied in the present case. 56. In the decision reported at MANU/DE/2353/2005 : [2008] 144 CompCas 780 (Delhi) in Re: JVG Leasing (Securities and Finance) Ltd. and Or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... H/0509/2005 : [2005] 127 CompCas 752(Bom) Shree Niwas Girni Kamgar Kruti Samiti Vs. Rangnath Basudev Somani in para 29 observed as follows :- "29. ..... Sections 391 and 393 of the Companies Act permits any reasonable form of arrangement between the company and shareholders and its creditors and leave the nature of the arrangement to the realm of the commercial wisdom of the concerned parties. The scheme for revival of the Company, therefore, need not necessarily be for functioning of the same activities that were carried on prior to the starting of liquidation proceedings and it is always open for the shareholders to revive the company and carry on business in accordance with law." 58. It is trite that there is no legal prohibition to the grant of the Scheme for Revival and that the present application is maintainable despite the passing of the winding up order. (Re :(1938) 8 Com.Cases 313 (Madras) Re : Calicat Bank Ltd. ; (1982) 52 Com.Cases 139 Re: Vasant Investment Corporation Ltd.) 59. The conduct of the promoters/applicants before this court would show that they have acted bonafide and have facilitated discharge of all liabilities even by sale of assets and generating fun ..... X X X X Extracts X X X X X X X X Extracts X X X X
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