w w w . L a w y e r S e r v i c e s . i n



Ferro Alloys Corporation v/s National Steel and General Mills Private Limited


Company & Directors' Information:- FERRO ALLOYS CORPORATION LIMITED [Active] CIN = L45201OR1955PLC008400

Company & Directors' Information:- FERRO ALLOYS CORPORATION LIMITED [Active] CIN = U99999MH1955PLC010653

Company & Directors' Information:- K. R. FERRO ALLOYS PRIVATE LIMITED [Active] CIN = U67120AP1995PTC019278

Company & Directors' Information:- G D FERRO ALLOYS PVT LTD [Active] CIN = U74899DL1981PTC011311

Company & Directors' Information:- M. S. A. STEEL & ALLOYS PRIVATE LIMITED [Active] CIN = U27310UP2008PTC035833

Company & Directors' Information:- F M STEEL ALLOYS PRIVATE LIMITED [Active] CIN = U27106PB2000PTC023910

Company & Directors' Information:- J & C FERRO ALLOYS PRIVATE LIMITED [Active] CIN = U27101WB2007PTC119833

Company & Directors' Information:- N E FERRO & ALLOYS PRIVATE LIMITED [Active] CIN = U28910WB2008PTC126582

Company & Directors' Information:- FERRO INDIA PRIVATE LIMITED [Active] CIN = U51909PN2011PTC141355

Company & Directors' Information:- H C FERRO ALLOYS LIMITED [Strike Off] CIN = U74899DL1995PLC068757

Company & Directors' Information:- P R STEEL & ALLOYS PVT LTD [Active] CIN = U27109WB2006PTC109377

Company & Directors' Information:- K A FERRO ALLOYS PVT LTD [Active] CIN = U27106PB1990PTC010618

Company & Directors' Information:- NATIONAL STEEL AND GENERAL MILLS PRIVATE LIMITED [Active] CIN = U99999DL1970PTC005258

Company & Directors' Information:- STEEL AND GENERAL MILLS CO LIMITED [Active] CIN = U27109DL1956PLC002653

Company & Directors' Information:- V. S. ALLOYS & STEEL PRIVATE LIMITED [Active] CIN = U27100MP2009PTC021808

Company & Directors' Information:- S V STEEL AND ALLOYS PVT LTD [Active] CIN = U99999MH1973PTC016924

Company & Directors' Information:- A S R FERRO ALLOYS PRIVATE LIMITED [Strike Off] CIN = U13201OR2011PTC013442

Company & Directors' Information:- R B STEEL & ALLOYS (INDIA) PRIVATE LIMITED [Active] CIN = U27100KA2010PTC053048

Company & Directors' Information:- NATIONAL STEEL CORPORATION LTD [Strike Off] CIN = U27100WB1942PLC020862

Company & Directors' Information:- STEEL MILLS OF INDIA PVT LTD [Strike Off] CIN = U27109WB1955PTC022703

Company & Directors' Information:- FERRO STEEL PVT LTD [Strike Off] CIN = U51420DL1972PTC006412

    CP.No.406/2003

    Decided On, 02 May 2005

    At, High Court of Delhi

    By, THE HONOURABLE MR. JUSTICE A.K. SIKRI

    For the Appearing Parties: U.K. Chaudhary, Rajat Bhalla, Saurabh Kalra, A.S. Chandhiok, Raman Kapur, Jyoti Mendiratta, Sweta Kakkar, Faisal Amin, Rajiv Bahl, P.L. Sebastian & Yogendra Kumar, Advocates.



Judgment Text

1. This is a petition preferred under Sections 391 and 394 of the Companies Act (in short the 'Act') seeking sanction of the proposed Scheme of Arrangement/Restructuring (hereinafter referred to as the 'Scheme'). The applicant is a shareholder/contributory of M/s. National Steel and General Mills Pvt. Ltd. (hereinafter referred to as the 'Company'). This company is in liquidation. A winding-up petition being CP No. 98/1984 was filed against the company and in the said petition this Court vide order dated 18th August, 1988 passed final winding-up order and appointed the Official Liquidator attached to this Court as the Liquidator. Liquidation proceedings are in progress. It may also be noted that between August, 1984 and 2001 various attempts were made for revival of the company by filing Schemes of Arrangement. However, none of those schemes were found feasible because of paucity of funds and in the absence of workable scheme of arrangement/restructuring.


2. Present petitioner, Sh. Ajay Sharda, who claims that he is the substantial shareholder, filed CA 887/2001 proposing Scheme of Arrangement and Restructuring. Prayer was made in the said application for convening the meetings of shareholders and creditors. In that application order was passed on 31st May, 2001 directing that meeting of shareholders and creditors (secured as well as unsecured) be convened at the registered office of the company. The meeting of the secured creditors was held under the chairmanship of Mr.Rajiv Bahl on 4th August, 2001 at 10AM at 878, East Park Road, Karol Bagh, Delhi. There were only 2 secured creditors of the company viz. UPFC and Allahabad Bank. However, on the said date the meeting could not be convened as certain disputes regarding the amount of the credit payable arose and the meeting was adjourned to 1st September, 2001. The meeting of the unsecured creditors as ordered by this court was duly convened on 4th August, 2001 at 10.30AM, East Park Road, Karol Bagh, Delhi. The unsecured creditors unanimously approved the Scheme in the aforesaid meeting. The Chairman has filed his report to this effect in this court. The shareholders' meeting was also duly convened on 4th August, 2001. The shareholders also unanimouly approved the Scheme in the aforesaid meeting. On 6th August, 2001 the Chairman filed his report in this behalf as well.


3. Adjourned meeting of the secured creditors was held on 1st September, 2001. However, as the matter could not be resolved, the meeting was further adjourned to 3rd November, 2001. Adjourned meeting of the secured creditors was convened on 3rd September, 2001. However, the said meeting could not take place as the matter was taken up for determination of debt to Allahabad Bank by this Court. As the shareholders and unsecured creditors approved the scheme, but further progress could not be made because of the aforesaid issue of Allahabad Bank, pending adjudication, to prevent further sale of the properties of the company CA No.688/2002 was filed by the applicant. Vide order dated 15th July, 2002 this Court, while issuing notice on the said application, stayed the sale of immovable property of the company in liquidation on the condition that a further sum of Rs.50 lakhs would be deposited with the Registrar of this Court. The said amount of Rs.50 lakhs was duly deposited by the applicant. Ex-workmen of the company also filed CA No. 466/2002 claiming their dues and it is stated in the Scheme that the workers would be paid out of the aforesaid amount of Rs. 50 lakhs lying deposited with this Court.


4. Occasion to determine the debt payable to the Allahabad Bank by this Court did not arise as the petitioner was able to settle the dues of both the secured creditors. Thereupon CA No. 1010/2003 was filed by the applicant for dispensation of the meeting of the secured creditors which was directed to the convened by the court as a settlement was arrived at with the secured creditors. Vide order dated 30th September, 2003, this Court dispensed with the meeting of the secured creditor as both UPFC and Allhabad Bank gave their consent to the sanction of the proposed Scheme.


5. In this backdrop present petition is filed seeking sanction of the Scheme. It is, inter alia, stated in this petition that the applicant, from the beginning, has been making very sincere efforts to keep the respondent company afloat and saving the company from ultimate winding up and complete liquidation. The efforts of the applicant did not succeed in the past in view of the financial crises and liquidity crunch faced by the applicant. However, recently, the applicant has been approached by M/s. Schdeva and Associates who are ready and willing to act as co-promoters and shareholders in the company and have brought in substantial funds so as to discharge the legal/valid debts of the company. It is, therefore, now financially possible for the appliant to work out the Scheme of Restructuring/Arrangement between the company and its creditors by which all the eligible creditors of the company can be paid off and pursuant thereto the debts of the secured creditors, namely, Allahabad Bank and UPFC to the tune of Rs.3.5 crores have been paid off.


6. Notice of this petition was issued to the Central Government through the Regional Director, Department of Company Affairs, Kanpur as well as the Official Liquidator attached to this Court. It was also directed that citations be published in the 'Statesman' (English) and 'Jansatta' (Hindi) for 26th February, 2004 These citations are duly published. The Regional Director has filed affidavit dated 12th April, 2004 stating that it has no objection to the proposed Scheme. In the reply filed by the Official Liquidator he has also not raised any objection but certain other prayers are made which have no bearing on the issue which falls for consideration.


7. However, M/s. Empire Trading Company (hereinafter referred to as the 'Objector') alleging itself to be one of the creditors of the company has come forward and has filed objections to the Scheme. Alleging that although it is one of the creditors, but no notice of convening of the meeting was given to it wherein resolution was passed to sanction the Scheme. In fact, according to the objector, the objector is a secured creditor and, therefore, such a meeting of secured creditors should have been held giving chance to the objector to participate in the deliberation and submit his views. Therefore, the contention is that holding of the meeting of the unsecured creditor or dispensation of the meeting of the secured creditor has vitiated the entire procedings. Some other incidental objections are also raised which would be taken note of at appropriate stage. How the objector became a creditor is disclosed in the objections in the following manner:-


8. The petitioner did not have sufficient fund for payment to Allahabad Bank or he did not want to involve the same in the process for making the payment to the said bank, a secured creditor. Thus, an agreement dated 29th June, 1995 was entered into between Mr. Ajay Sharda, the petitioner and Mr. Mohd. Yamin, the objector as per which the objector was to pay Rs.1 crore to the company for payment to Allahabad Bank. Allahabad Bank was a party to this agreement. But at the time of execution of the agreement, Allahabad Bank signed the same only as a witness. Payment of Rs.1 crore was to be made by the objector not because there was any privity of contract between the objector and the bank but to discharge the obligation of the company. The objector, puruant to the said agreement, made payment to the bank on behalf of the company and thus, the objector became creditor of the company. The payments which were made are the following:-


(a)Pay Order No. 919281 dated 24.6.1995 for Rs.1 lac favouring Allahabad Bank- Account National Steel and General Mills Pvt. Ltd.


(b)Cheque No. 400854 dated 6.7.1995 for Rs.49 lacs in favour of Allahabad Bank- Account National Steel and General Mills Pvt. Ltd. drawn on Punjab and Sind Bank, Ghaziabad.


(c) Cheque No. 400855 dated 7.7.1995 for Rs.50 lacs in favour of Allahabad Bank- Account National Steel and General Mills Pvt. Ltd. drawn on Punjab and Sind Bank, Ghaziabad


9. Agreement further provided that the objector shall be entitled to remove the entire stocks, plant and machinery, scraps etc. on payment of the said sum of Rs.1 crore and possession of the factory was handed over to the objector who provided his security guards in the factory premises. Another agreement dated 9th April, 1996 was entered into between the company acting through Mr. Ajay Sharda and the objector, wherein it was stated that earlier agreement dated 29th June, 1995 pertaining to sale of plant and machinery, including shed was valid, genuine and binding on each other. According to the objector, necessity for execution of this agreement has arisen because Allahabad Bank subsequently refused to accept the payment on the plea that it was not in time and further interest was demanded from 1st June, 1996 till 31st December, 1996.


10. According to the objector, in view of dispute between the company and Allahabad Bank/secured creditor, Cas.452 and 453/1995 were filed in CP 98/1984 and it was agreed therein that the petitioner shall pay Rs.1 crore to Allahabad Bank. This statement was recorded on 19th June, 1995 after the petitioner had made arrangement with the objector for providing the said sum of Rs.1 crore. A sum of Rs.50 lacs was paid in cash by two payments-one of Rs.20 lacs on 20th November, 1995 and another of Rs.30 lack on 23rd November, 1995 to the petitioner for the purpose of obtaining the drafts to be delivered to Allahabad Bank. These drafts were, in fact, obtained by the petitioner from Oriental Bank of Commerce, Write Ganj Branch and shown to the objector, who obtained photocopies of the drafts by way of abundant caution. Drafts were accordingly handed over to the bank by the petitioner. It was later discovered by the objector that the bank had returned the drafts to the petitioner on the ground that payment as not made by 30th June, 1995. The petitioner after receiving these drafts back from the bank got the same encashed but did not return the money to the objector. At that stage, as settlement with the bank could not be worked out, this Court ordered sale of plant and machinery of the company by public auction. The objector also participated and submitted his bid for Rs.1.77 crore which was accepted by this Court and the said machinery minus the shed was sold to the objector. However, the objector was not given credit of Rs.50 lacs paid by him to the petitioner. Therefore, according to the objector, he is the creditor to the extent of Rs.50 lacs. He also states that from the date of entering into agreement dated 29th June, 1995 he is in possession of the factory and, therefore, is entitled to expenses of maintaining security at the rate of Rs.6, 000/- per month from November, 1995 and June, 2004 when he purchased the machinery. Therefore, a sum of Rs.1.08 lacs is payable on this account also.


11. In the reply filed by the petitioner to these objections, the petitioner has questioned the very locus stand of the objector to file these objections. It is stated that sum of Rs. 50 lacs was not given by the objector to the company. It is also stated that the demand drafts, as referred to in the application, which were given to Allahabad Bank were made from the funds of M/s. Ashwini Kumar and Company. Therefore, the objector is not a creditor of the company and thus, he cannot raise any claim against the company nor is he entitled to file such objection. It is also stated that the claim of the objector, in any case, is time barred as the drafts are dated 29th November, 1995 and the application has been filed in the year 2004, i.e. after a gap on nine years. It is also stated that claim of the objector that he paid a sum of Rs.50 lacs is clearly false as while purchasing the plant and machinery of the company in auction the objector did not mention having paid Rs.50 lacs already and did not see adjustment thereof. It is stated that objections are filed with oblique motives to delay the process of rehabilitation as the factory premises are in the occupation of the objection who wants to continue to occupy the same. It is alleged that he has been caused substantial damage to the property and other material of the company.


12. In so far as the Agreement dated 29th June, 1995 is concerned, it is denied that the said agreement is entered into by Mr. Ajay Sharda on behalf of the company. Averment made is that no such agreement could have been entered into by Mr. Ajay Sharda on behalf of the company as he was no more director as on that date since the company was under liquidation. It is also denied that a payment of Rs.1 crore was to be made by the objector on behalf of the company in order to discharge the obligation of the bank. It is also denied that possession of the factory was handed over to the objector under the said agreement or that the objector provided any security guards on the factory premises. It is also stated that the sum of Rs.50 lacs as claimed by the objector has not been given to the company M/s. National Steel and General Mills Ltd. It is further stated that the personal arrangement of funds between Mr. Ajay Sharda and the objector was mere book entries and stands satisfied in the year 1995 itself.


Nothing is payable by Mr. Ajay Sharda to the objector now and nothing was payable in the year 1995. Therefore, the applicants have denied that the objector is a creditor, much less a secured creditor of the company. It is also argued that no such amount could be paid to the ex-director in the name of the company after the winding-up orders were passed, as there could not be such a funding without the leave of the O.L. or the Court and no security could be taken either. This is the legal position contained in Sections 456, 457 and 445(3) of the Act. Reliance was also placed on International Shipping Ltd. v. Chandpur Jute Co. Ltd., [1982] 52 CC 121, In Re. National Transports and General Co. (P) Ltd., [1990] 69 CC 791 and Remu Pipes Ltd. v. I.F.C.I., [002] 108 CC 385.


13. The objector has filed rejoinder reiterating the objections and have also enclosed certain documents along with the rejoinder.


14. The primary question which requires determination is as to whether the objector is creditor of the company. To determine this issue the admitted facts, which are brought on record, in respect of dealing of the objector with Mr. Ajay Sharda may first be noted.


15. The ex-management of the company had earlier filed scheme of arrangement under Section 391 of the Act in August, 1988. However, this Scheme could not materialise on account of paucity of funds on the part of promoters/propounders. The liquidation proceedings, thereafter, continued and plant and machinery of the company was put to auction. This auction took place on December 17, 1999. The said plant and machinery was purchased by none else but M/s. Empire Trading Co. itself, i.e. the objector, when its bid being the highest for a sum of Rs.1.77 crores was accepted. What was auctioned was plant and machinery. Land and building has not been disposed of so far. The objector was allowed to remove the plant and machinery. It was alleged that while removing the same the objector/purchaser had caused damage to the property and in view of this, vide order dated May 16, 2000 a local commissioner was appointed, who furnished his report affirming this allegation. What is required to be stressed, on the basis of aforesaid facts, is that after the first Scheme propounded in 1988 was rejected, the plant and machinery was sold to the objector in the year 1999. Thereafter second Scheme was propounded vide CA No. 887/2001 on May 31, 2001 and the events which took place after directing the convening of meetings of shareholders, secured creditors and unsecured creditors have already been noted above. From these facts it is clear that although the shareholders and unsecured creditors had sanctioned the Scheme, impediment was created due to non-settlement with Allahabad Bank and UPFC, who were also ultimately paid their dues in full and final settlement and in view thereof meeting of the secured creditors was also dispensed with by this Court on 30th September 2003. In this manner when Scheme was approved by shareholders, secured creditors and unsecured creditors, present petition was filed for sanction of the Scheme. At this stage, the objector surfaced and stated that he is also one of the creditors but in the meetings of creditors his name is not included.


16. The manner in which the objector wants to be treated as creditor has already been taken note of. It is on the basis of agreement signed between Mr. Ajay Sharda and the objector on 29th June 1995 followed by another agreement dated 9th April 1996. Even at this time attempt was to settle the dues of Allahabad Bank and with that end in view the aforesaid agreement was signed as per which, the objector had agreed to pay Rs.1 crore and this amount was given in the form of pay order dated 24th June 1995 or Rs.1 lac in favour of Allahabad Bank and two cheques dated 6th June 1995 and 7th July 1995 for Rs.49 lacs and Rs.50 lacs respectively in favour of Allahabad Bank. As per the agreement, on giving this payment of Rs.1 crore the objector was to remove entire stocks, plant and machinery, scraps etc. However, matter with Allahabad Bank could not be settled as Allahabad Bank refused to accept the payment on the plea that it was not made in time and also demanded further interest from 1st June 1996 till 31st December 1996. Some applications were filed in this Court and orders were also passed as per which, the objector agreed to make the payment to Allahabad Bank. All these events, even as per the objector's own averments, happened in 1995-96. However, claim of Allahabad Bank could not be settled at that juncture. As the settlement with Allahabad bank was not worked out, this Court ordered sale of plant and machinery of the company by public auction. Thus, the objector was not given plant and machinery etc. pursuant to agreements dated 29th June 1995 and 9th April 1996. On the contrary, this plant and machinery was auctioned in the Court. It is a different matter that in this auction the objector also participated along with other bidders and his bid was accepted being the highest. This bid was, however, for Rs.1.77 crores (as against Rs.1 crore mentioned in the agreement dated 29th June 1995). This amount was also paid to the O.L. Till that stage there was no whisper by the objector that he had paid Rs.50 lacs to the company. He has also not stated that Mr. Ajay Sharda should pay Rs.50 lacs, out of Rs.1.77 crores, as this amount was already paid to him. As on 20th December 1999 when the plant and machinery was auctioned, there was no Scheme before the Court. On the contrary, the O.L. was allowed to proceed with the liquidation of the company and in the process allowed to sell the assets of the company. The objector should have known that, in these circumstances, if it had paid any amount to Mr. Ajay Sharda, he should take steps for recovery of the amount as he could not anticipate at that time that there would be any further Scheme which may be propounded by Mr. Ajay Sharda in May 2001. However, he maintained stoic silence and did not act either, for recovery of this amount. Only when the present petition (second motion) was filed for sanctioning of the Scheme that the objector has come forward and has stated that he had made the payment of Rs.50 lacs in the year 1995. The objections artifiled in July 2004, i.e. after nine years of making the alleged payment, that too to Mr. Ajay Sharda. In this backdrop contentions of the petitioner are to be noted. Payment of Rs.50 lacs has been denied. It is further stated that in any case this amount was not given to the company. The petitioner has also placed on record documents to show that amount to the bank was paid by means of demand drafts, which were obtained after utilizing the funds of M/s. Ashwini Kumar and Company. It is also pointed out that while purchasing the plant and machinery in the auction held on 17th December 1999, the objector did not raise the issue of Rs.50 lacs already paid in the year 1995. Even as per the objector's own case the alleged payment was made to Mr. Ajay Sarda. It is not made to the company or the O.L., who is the custodian of the company after the winding-up orders are passed. Therefore, no definite finding, with certainty, can be arrived at on the basis of documents produced that objector is the creditor of the company. It is also a relevant factor to note that on filing CA No. 887/2001 when the order was passed for convening of the meetings, the objector did not come forward and stated that he was also one of the creditors. Meetings of the unsecured creditors as well as shareholders were held, as scheduled, on 4th August 2001 and both the secured creditors and the shareholders unanimously approved the Scheme. There were only two secured creditors, namely, UPFC and Allahabad bank and meeting of the secured creditors was adjourned from time to time as matter could not be settled with them. Their claim was ultimately settled in the year 2003. During all these years the objector did not come forward and made the claim that he was also one of the creditors and, therefore, entitled to participate in the meetings. In CA No. 1010/2003 order dated 30th September 2003 was passed dispensing with the meeting of the creditors, as claim of both the secured creditors had been settled and they also gave their consent to the Scheme. Keeping in view that the objector had purchased the plant and machinery and is in possession of the building as well, it would be too naive for the objector to say that he was ignorant about these proceedings. It is more so when the O.L. filed Report No. 222/01 dated 10th October 2002 stating in the said report that the objector was still in possession of the factory premises and had not vacated the same, specially after removing the plant and machinery purchased by him in the auction. Even if it is presumed that the objector was ignorant of these proceedings and acquired knowledge only when citations were published in the present petition, there is no explanation as to why the objector did not press for his claim all there years. If his claim was against Mr. Ajay Sharda, he would have taken steps for recovery of this amount against Mr. Ajay Sharda. If his claim was against the company (as the objector now contends), the objector could make such a claim in December 1999 itself claiming adjustment of this amount from Rs.1.77 crores, which was his bid for plant and machinery. He did not act in either direction. Thus, when there is a serious dispute about the objector being a creditor and the objector is not in a position to substantiate his claim as a creditor, it would be difficult for me to treat him as a creditor for the purpose of these proceedings. I may at this stage refer to the following observations made by this Court in the case of In Re. Wear well Cycle Co. Ltd., 1998 (94) CC 723:-


"Coming to the creditors, I find that with regard to the statutory creditors' claim as well as the claims of Misra and Arneja who had placed a substantial amount at the disposal of the official liquidator they were not ordered to be included in the list of creditors even though such payments are matters of court record. The said order of Wadhwa J. has since been upheld by the Division Bench in appeal and a challenge to the Division Bench order has also failed in the Supreme Court and as such the said order has become final. It is for this reason that I am of the view that only those creditors could be included in the list of creditors and credits for the purpose of the meetings, who had been named in the statement of affairs except where the credits have been lawfully transferred. Mr. Lonial has relied on Gian Devi (Smt.) v. Bachan Motor Financiers Pvt. Ltd. [1988] 64 Comp Case 766 (Pand H), where it has been held that the list of creditors cannot be added to and/or varied except under an order of the court. Counsel has placed reliance on rule 168 of the Companies (Court) Rules, 1959."


17. In view of what is stated hereinbefore, argument of learned counsel for the objector would be of no avail when it is contended that Rs.50 lacs were paid by the objector to Mr. Ajay Sharda and if ultimately Allahabad Bank is paid the amount from other source, the applicant cannot take advantage thereof. This would be more particularly in view of the position contained in Sections 456, 457 and 445(3) of the Act. For same reason invocation of doctrine of subrogation relying upon the judgment of the Supreme Court in Krishna Pillai Rajasekharan Nair v. Padmanabha Pillai and Ors., 2004 AIR (SC) 1206 would also not be available.


18. The objections of the objector are accordingly rejected. However, the objector would be entitled to file appropriate civil proceedings for recovery of the alleged claim again Mr. Ajay Sharda and/or the company and it would be for him to prove the claim by appropriate evidence in those proceedings.


19. I now proceed to examine the Scheme as propounded.


20. The company in liquidation, namely M/s. National Steel and General Mills Pvt. Ltd., was ordered to be wound up vide order dated 1st August 1988, passed by this Court, on a petition filed by M/s. Ferro Alloys Corporation Ltd. (the petitioner herein).


21. While the company was under liquidation by the Official Liquidator attached to this Court, the petitioner was paid his dues by the promoters of the company, who are in the process of rehabilitation of the company. On 28th May 2001, Mr. Ajay Sharda, majority shareholder along with new promoters, M/s. Sachdeva and Co. filed CA No. 887/2001 seeking directions of this Court to convene meetings of shareholders, secured and unsecured creditors to consider Scheme. The meeting of the shareholders was held on the August 2001 at 11.45 a.m. at 878, East Park Road, Karol Bagh, New Delhi. Notices to the shareholders were given by registered A/D Post along with proxy forms and statement under Section 393 of the Companies Act 1956. Notices were published on 7th July 2001 in 'The Pioneer' in English and 'Jansatta' in Hindi. Affidavit of Compliances was filed by Mr. Rajiv Bahl, Chairman of the meeting. As per the Chairman's report the shareholders unanimously approved the Scheme. A copy of the Report of Chairman along with minutes of the meeting of Shareholders held on 4th August 2001 is placed on record.


22. Similarly meeting of unsecured creditors was also held on 4th August 2001 at 10.30 a.m. at 878, East Park Road, Karol Bagh, New Delhi. Unsecured creditors unanimously approved the Scheme. Notices to the unsecured creditors were given by registered A/D Post along with proxy forms and statement under Section 393 of the Companies Act 1956. Notices were published on 7th July 2001 in 'The Pioneer' in English and 'Jansatta' in Hindi. Affidavit of compliances was filed by Mr. Rajiv Bahl, Chairman of the meeting. As per the Chairman's report the unsecured creditors unanimously approved the Scheme. A copy of the Report of Chairman along with minutes of the meeting of the unsecured creditors held on 4th August 2001 is placed on record.


23. In so far as the meeting of the secured creditors is concerned, without stating in detail, suffice it to state that it was ultimately dispensed with vide order dated 30th September 2003 and both the secured creditors were paid off. Thus, there are no secured creditors. The Scheme has been unanimously approved by the unsecured creditors and the shareholders. The Regional Director, Northern Region, Ministry of Company Affairs as well as the O.L. have filed their responses, as per which they have no objection to the Scheme.


24. Courts have always taken the view that whenever choice is available to the Court between the revival of the company and its winding up, the Court must as far as possible lean in favour of revival of the company. That will create the prospect of generating jobs and keeping in view the assets of the company in production as against their disposal and distribution (see In Re. Wear well Cycle Co. (I) Ltd. (supra). In the present case a scheme has been propounded, which has clear approval of the creditor as well as members/shareholders. It is not the function of the Court to examine that whether there is scope for a better scheme (In Re. Blue Star Ltd., 2001 (104) CC 371). There is nothing on record to show nor there is even an allegation that the scheme is not bona fide or is otherwise inequitable. No doubt, before sanctioning the scheme the Court is to satisfy itself that there is compliance with statutory requirements. This aspect is lucidly stated in an authoritative pronouncement of the Alex Court in Miheer H. Mafatlal v. Mafatlal Industries Ltd., 1996 (87) CC 792. Following summary of the scope and ambit of the jurisdiction of the Company Court is earmarked in the said judgment:-


"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 enable the voters to arrive at an informed decision for approving the scheme in question. That the majority decision of the concerned class of voers is just and fair to the class as a whole so as to legitimately bind even the dissenting members of that class.


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4.That all necessary material indicated by section 393(1)(a) is placed before the voters at the concerned meetings as contemplated by section 391 sub-section (1). 5.That all the requisite material contemplated by the proviso to sub-section (2) of section 391 of the Act is placed before the court by the concerned applicant 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 any provision of law and is not contrary to public policy. For ascertaining the real purpose underlying the scheme with a view to be satisfied on this aspect, the court, if necessary, can pierce the veil of apparent corporate purpose underlying the scheme and can judiciously X-ray the same. 7.That the Company Court has also to satisfy itself that members or class of members or creditors or class of creditors, as the case may be, were acting bona fide and in good faith and were not coercing the minority in order to promote any interest advere to that of the latter comprising the same class who they purported to represent. 8.That the scheme as a whole is also found to be just, fair and reasonable from the point of view of prudent men of business taking a commercial decision beneficial to the class represented by them for whom the scheme is meant. 9.Once the above said parameters about the requirement of a scheme for getting sanction of the court are found to have been met, the court will have no further jurisdiction to sit in appeal over the commercial wisdom of the majority of the class of persons who with their open eyes have given their approval of the scheme even if in view of the court there would be a better scheme for the company and its members or creditors for whom the scheme is framed. The court cannot refuse to sanction such a scheme that ground as it would otherwise amount to the court exercising appellate jurisdiction over the scheme rather than its supervisory jurisdiction." 25. In Re. Anglo-Continental Supply Co. Ltd., (1922) 2 Ch. D. 723, 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 approved. In the present case the aforesaid requirements have been satisfied. 26. In the aforesaid circumstances and having regard to the averments made in this petition and the materials placed on record and the affidavits filed by the Regional Director, Department of Company Affairs, Kanpur, and the Official Liquidator, I am satisfied that the prayer made in the petition deserves to be allowed. I also do not find any legal impediment to the grant of sanction to the Scheme. Hence, sanction is hereby granted to the above-mentioned Scheme under Section 391 read with Section 394 of the Companies Act, 1956. 27. The petition stands disposed of in terms of the aforesaid order.
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