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TMI Blog2018 (7) TMI 871X X X X Extracts X X X X X X X X Extracts X X X X ..... ication is filed by Ex-Management of the respondent company Assotech Ltd. under Section 391 of the Companies Act, 1956 (hereinafter referred to as 'the Act') seeking approval of a Scheme of Compromise and Arrangement between the applicant and a class of its creditors. 2. On 08.02.2016, this court had admitted the main petition, and the OL attached to this court was appointed as the provisional liquidator. Directions were issued to publish citations and for the OL to seal the premises of the respondent and take into custody the assets and books of accounts of the company etc. 3. This court while admitting the petition on 08.02.2016 noted that an FIR being No.121/2015, under Sections 406, 420 and 120B IPC was registered against the Managing Director of the respondent company with the Economic Offences Wing (in short 'EOW'), Delhi. The order also notes that the proceedings under Section 482 Cr.P.C. were filed, which were disposed of on 04.11.2015 wherein it was noted that a settlement agreement had been reached whereby the Managing Directors and other Directors had agreed to pay a sum of Rs. 17.60 crores to the complainants within a period of one year. The schedule of payments was n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... C Bank. It is also pointed out that as far as ICICI Bank is concerned, they have already a property bearing No.A-12 in Sector 24, Noida, admeasuring 1200 sq.mtrs. which is a fully developed five floors, commercial property having estimated realisable value of approximately Rs. 20 crores. The dues of ICICI Bank are Rs. 6 crores approx. After adjusting said dues from the sale of the said property, the balance funds would be available with the respondent company. It was also clarified that list of creditors shown in the scheme are only those creditors who are before the court and have filed litigations. It was submitted that the company is willing to abide by any restrictions that may be imposed for success of the scheme by this court. 9. When the arguments of the above counsel were nearing completion, an application was filed being CA 238/2018 pursuant to certain directions passed by the Supreme Court. 10. This application CA. 238/2018 has been filed by two of the home buyers seeking to be impleaded as a party to the present petition. Other connected reliefs are also being sought. It has been pointed out that the applicants had filed a petition before the Supreme Court under Articl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n it was clarified by the respondent/ Ex.Management that the scheme deals only with unsecured creditors. 13. The learned counsel appearing for Mr.Manoj Srivastava, who claims to be a minority shareholder of the respondent company states that the entire scheme is misplaced as there are large statutory dues payable by the respondent company to various Government Organisations which are not reflected in the scheme. 14. The OL has also filed a reply opposing the scheme. It has been pointed out that the appellant cannot be permitted to satisfy the claims of a few creditors on preferential basis, for if the assets fall short, it would mean that a large number of unsecured creditors being left high and dry. It has also been pointed that the ex-directors have filed their statement of affairs which are defective. Despite issue of a letter on 15.06.2016 to rectify the defects, the ex-directors have not yet rectified the defects. Further, it has been pointed out that when a team of the OL went to take possession of the three projects/schemes, difficulties were encountered as number of occupants claimed that they are in physical possession of various flats without proper explanation. 15. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 37 creditors were present and 34 gave their consent meaning thereby that 90%of the creditors in terms of the value of the meeting have given their consent. 18. In the course of hearing, a note was submitted by the ex-management which requests for the following reliefs:- "1. Discharge of Provisional Liquidator; 2. SFIO order dated 08.11.2016 be set aside; 3. Stay of all the proceedings against Assotech Limited till further directions; 4. An independent Observer to be appointed to oversee the affairs of Assotech Limited- for 9 months from the date of discharge of Provisional Liquidator, on honorarium of Rs. 2.50 Lakhs per month. 5. All the three group housing projects of Assotech are nearing completion, and are likely to be completed as per following time line: a. Celeste Tower, Sector 44, Noida (269 units constructed, out of which 127 units+ 7 shops shall be handed over within 12 months and the balance 37 units shall be handed over within 6 months, 98 units' possession has already been handed over); b. Windsor Court, Sector-78 c. The Nest, Crossing Republik, (141 units' possession handed over balance within 6 to 9 months); Ghaziabad (694 unit' possession h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ally pertains to unsecured creditors who have filed litigations in court. All other creditors do not find any mention in the lists. The question that would arise is as to whether such a classification can be termed to be a class of creditors within the meaning of Section 391 and 392 of the companies Act, 1956. 13. Section 391 (1) and (2) of the Companies Act, 1956 read as follows:- "391. Power to compromise or make arrangements with creditors and members. (1) Where a compromise or arrangement is proposed- (a) between a company and its creditors or any class of them; or (b) between a company and its members or any class of them; the Court may, on the application of the company or of any creditor or member of the company, or, in the case of a company, which is being wound up, of the liquidator, order a meeting of the creditors or class of creditors, or of the members or class of members, as the case may be, to be called, held and conducted in such manner as the Court directs. (2) If a majority in number representing three- fourths in value of the creditors, or class of creditors, or members, or class of members as the case may be, present and voting either in person or, wher ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gn Life Assurance Co. Ltd. v. Dodd 1892 (2) Q.B. 573 CA). 12. Creditors can normally be divided into three categories (which may themselves overlap), of preferential creditors, secured creditors and unsecured creditors. Unsecured creditors normally form a single class, unless there are circumstances that they must be treated differently, i.e. when they have different interests which may come into conflict. A background for the same must be established. In Miheer H. Mafatlal v. Mafat Lal Industries, (1996) 87 Company Cases 792, it has been observed as under: It is, therefore, obvious that unless a separate and different type of Scheme of Compromise is offered to a sub-class of a class of creditors or shareholders otherwise equally circumscribed by the class no separate meeting of such subclass of the main class of members or creditors is required to be convened. On the facts of the present case the appellant has not been able to make out a case for holding a separate meeting of dissenting minority equity shareholders represented by him. 13. The object and purpose of classification of creditors is to ensure that the meetings of different classes of creditors are held in a manner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the provisions of this Act as to preferential payments, the assets of a company shall, on its winding-up, be applied in satisfaction of its liabilities pari passu and, subject to such application, shall, unless the articles otherwise provide be distributed among the members according to their right and interests in the company. What effect can then be given to an attachment levied by a creditor who, but for the attachment would stand in company with all other creditors similarly situated. In my opinion, the short answer to the question would be to ignore the attachment or, as a winding up court, raise the attachment with a view to remove an impediment in collection or realisation of the assets of the company which is being wound up, for its just and equitable distribution. If attachment is held subsisting giving some right to the attaching creditor, it would strike at the root of the principle whereby all unsecured creditors are to be paid in pari passu. 15. In view of the aforesaid position we are in complete agreement with the Company Judge that Malanpur cannot be treated as a distinct class of creditor on the ground that it was a decree holder. It was certainly not a secu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t company. 17. It is manifest from a reading of the above legal position that the scheme as proposed by the Ex.Management does not fulfil the basic criteria of Section 391 of the Companies Act, namely, it fails to propose any compromise or arrangement between the company and any class of creditors. 18. That apart, in my opinion, the scheme lacks bona fide and good faith. If one were to remove the sheen of the proposed scheme, it would become apparent that the scheme is only proposing infusion of a sum of Rs. 5 crores by the Ex. Management and nothing else. 19. There are only three sources for generation of funds. First is of course infusion of Rs. 5 crores by the Ex.Directors from the personal accounts. Second is realisation of funds from debtors/allottees of flats of the said pending three projects. It is proposed to realise about Rs. 124 crores in phases by completion of said three projects and realisation of the dues from debtors/allottees. Third mechanism is the sale of the property at Flat No.A-12, Sector 24, Noida, which is mortgaged to the ICICI Bank Ltd. It is claimed that dues of the ICICI Bank Ltd. is about Rs. 6 crores whereas the property is valued at Rs. 20 crores. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ect. 24. In my opinion, the scheme completely lacks bona fide and is not in good faith. Even otherwise, the scheme is unworkable. Hence, I cannot accept the said scheme. 25. There is another aspect which persuades me not to accept the present scheme, namely, the past conduct of the directors regarding the manner in which they have dealt with the finances and the assets of the respondent Company. These aspects have already been noted by earlier orders of this court. 26. I may first also look at the observations made by the Division Bench on 09.02.2017 while disposing of Co. Appeal No. 17/2016 filed by the ex-management to impugn the orders of this court. One of the reliefs sought was to keep the order appointing the OL in abeyance. The Court had held as follows:- "10. The conduct of the appellant before the learned Company Judge is clearly indicative of the appellant acquiescing in the order admitting the winding up petition and proceeding to settle the disputes with a number of creditors. This itself establishes that the appellant company is heavily in debt. 11. Learned Senior Counsel for the appellant urge that merely because the appellant is in debt would be no ground to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve sold immovable property belonging to the company in liquidation and received the proceeds qua the same in their accounts. 6. Further, it has been brought to the notice of this Court, that despite directions of this Court in this behalf, the ExDirectors have steadfastly neglected, failed and avoided to furnish the Statement of Affairs and the details of the assets in the Balance Sheets; have furthermore failed to hand over peaceful physical possession of all the flats/properties, vehicles, plant and machinery, and cash-in-hand belonging to the company in liquidation to the Provisional Liquidator. xxx 10. A perusal of the communication dated 14.10.2016, received from Mr. Manoj Srivastava, Ex-Director of the company in liquidation, in reply to the notice dated 16.09.2016 under Rule 130 of the Companies (Court) Rules, 1959 clearly manifest that, inter alia, the following acts were committed by the Ex-Management of the company in liquidation, which are prima facie in violation of the said order dated 08.02.2016: (i) The company in liquidation holds 100% shareholdings of M/s Lindex Impex Private Limited and vide agreement dated 2l.03.2016 the shareholdings of M/s Lindex Impex Pri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 subsection (2). 3. That the meetings concerned of the creditors or members or any class of them had the relevant material to enable the voters to arrive at an informed decision for approving the scheme in question. That the majority decision of the concerned class of voters is just and fair to the class as a whole so as to legitimately bind even the dissenting members of that class. 4. That all necessary material indicated by Section 393(1)(a) is placed before the voters at the meetings concerned as contemplated by Section 391 sub-section (1). 5. That all the requisite material contemplated by the proviso of sub-section (2) of Section 391 of the Act is placed before the Court by the applicant concerned seeking sanction for such a scheme and the Court gets satisfied about the same. 6. That the proposed scheme of compromise and arrangement is not found to be violative of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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