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



Sunil Gandhi & Another V/S A.N. Buildwell Private Limited


Company & Directors' Information:- A N BUILDWELL PRIVATE LIMITED [Under Liquidation] CIN = U70101DL2005PTC141808

Company & Directors' Information:- C S BUILDWELL PRIVATE LIMITED [Active] CIN = U70109DL2006PTC152306

Company & Directors' Information:- P P BUILDWELL PRIVATE LIMITED [Active] CIN = U70101DL2004PTC128014

Company & Directors' Information:- Y P BUILDWELL PRIVATE LIMITED [Strike Off] CIN = U70101DL2004PTC127977

Company & Directors' Information:- G B BUILDWELL PRIVATE LIMITED [Active] CIN = U70101UP2005PTC066165

Company & Directors' Information:- G D BUILDWELL LIMITED [Active] CIN = U45201DL1997PLC089171

Company & Directors' Information:- A D BUILDWELL PRIVATE LIMITED [Strike Off] CIN = U70101DL2009PTC186665

Company & Directors' Information:- BUILDWELL INDIA PVT LTD [Converted to LLP] CIN = U51109WB1961PTC161568

Company & Directors' Information:- R S BUILDWELL PRIVATE LIMITED [Active] CIN = U45201DL2005PTC133221

Company & Directors' Information:- A M BUILDWELL PRIVATE LIMITED [Active] CIN = U51311DL2004PTC217780

Company & Directors' Information:- A P BUILDWELL PRIVATE LIMITED [Active] CIN = U74899DL2005PTC141187

Company & Directors' Information:- D V BUILDWELL INDIA PRIVATE LIMITED [Active] CIN = U45200DL2011PTC224557

Company & Directors' Information:- V S BUILDWELL PRIVATE LIMITED [Active] CIN = U45201DL1999PTC098426

Company & Directors' Information:- R V BUILDWELL PRIVATE LIMITED [Active] CIN = U45801DL2004PTC127838

Company & Directors' Information:- L I GANDHI AND CO PVT LTD [Strike Off] CIN = U31200GA1981PTC000423

Company & Directors' Information:- SUNIL & CO PVT LTD [Active] CIN = U32109WB1984PTC037810

Company & Directors' Information:- K G BUILDWELL PRIVATE LIMITED [Active] CIN = U70101DL2010PTC198212

Company & Directors' Information:- M S BUILDWELL PRIVATE LIMITED [Strike Off] CIN = U45200DL2008PTC179532

Company & Directors' Information:- M D BUILDWELL PRIVATE LIMITED [Strike Off] CIN = U70101DL2005PTC133241

Company & Directors' Information:- A. K. BUILDWELL PRIVATE LIMITED [Active] CIN = U45400DL2007PTC165985

Company & Directors' Information:- J M D BUILDWELL PRIVATE LIMITED [Active] CIN = U74899DL1994PTC062656

Company & Directors' Information:- J C P BUILDWELL PRIVATE LIMITED [Active] CIN = U45201DL2006PTC148031

Company & Directors' Information:- V N BUILDWELL PRIVATE LIMITED [Active] CIN = U70102DL2012PTC233131

Company & Directors' Information:- M A BUILDWELL PRIVATE LIMITED [Strike Off] CIN = U70109DL2006PTC153217

Company & Directors' Information:- G. S. P BUILDWELL PRIVATE LIMITED [Active] CIN = U45200DL2007PTC160692

Company & Directors' Information:- C. P. BUILDWELL PRIVATE LIMITED [Strike Off] CIN = U45200DL2008PTC173955

Company & Directors' Information:- B P BUILDWELL PRIVATE LIMITED [Active] CIN = U45200DL2008PTC175694

Company & Directors' Information:- P R BUILDWELL PRIVATE LIMITED [Strike Off] CIN = U70101DL2005PTC137840

Company & Directors' Information:- P V BUILDWELL PRIVATE LIMITED [Strike Off] CIN = U70101DL2013PTC248059

Company & Directors' Information:- L S BUILDWELL PRIVATE LIMITED [Strike Off] CIN = U45400DL2007PTC167192

Company & Directors' Information:- GANDHI COMPANY LIMITED [Dissolved] CIN = U99999MH1942PTC003529

    CO.PET. No. 6 of 2019

    Decided On, 17 February 2020

    At, High Court of Delhi

    By, THE HONORABLE JUSTICE: JAYANT NATH

    For the Petitioner:-------. And For the Respondent: Ashim Sood, B. Rhythm, Satya Prakash, Shikha Sadh, Kunal Sharma, Puja Jain, Advocates



Judgment Text


1. This petition is filed under sections 391-393 of the Companies Act, 1956 praying that the proposed scheme of compromise and arrangement which is attached as Annexure 1 to the petition be sanctioned by this court so as to be binding on the Members, creditors(secured and unsecured), stakeholders and allottees of the respondent company.

2. The case of the petitioner is that the respondent company was allotted an IT/Technology Park Project called Spire Edge Project in Manesar, District Gurugram. The project comprises blocks A to F. It is the case of the respondent company that blocks B, C and D of the respondent company have been handed over to the respective allottees as occupation certificate of these blocks were received. Lease deeds have also been registered for some of the allottees. As far as block A is concerned, it is stated that the Scheme envisages shifting of the allottees to blocks B, C and D by allotting them areas which are unsold subject to the allottees making payments.

Another project of the company is Spire Woods Project which is a residential scheme located in sector 103, Gurugram, Haryana. This project has 12 towers containing 620 dwelling units.

3. A perusal of the Scheme filed by the petitioner shows that it seeks three-fold objects, namely, revival of the company, construction of the Spire Edge Project and Construction of the Spire Woods Project.

Regarding the Spire Edge Project, the propounders expressed their willingness to complete the construction of towers ‘E’ and ‘F’ and furnished offices. Certain terms are introduced, namely, that the allottees shall not claim any penalty, damage, compensation, etc. from the Company. It is claimed that an amount of Rs. 25 crores is required for completion of construction of Block ‘E’ and ‘F’ and the furnished offices of Spire Edge Project. The same will be organized out of funds which will be infused by the propounders and out of sales as well as loans to be raised. The allottees of tower ‘A’ of Spire Edge Project shall be shifted to other towers of Spire Edge project. Immediately upon sanction of the scheme by the Court, the propounders shall make arrangements of funds over a period of 90 days and shall cause to be contributed Rs. 25 crores to be used for revival of the Company and its project. It is stated that proof of Rs. 12 crores has already been given to the OL.

Similarly, the Spire Woods Project would also be revived by SW New Developers who is said to be a renowned real estate developer. The said SW New Developer has agreed to invest a sum of Rs. 20 crores through any of its companies.

4. This scheme was put up for approval in Company Application CO.APP.(M)115/2016. This court disposed of the said petition on 16.10.2018. The court dispensed with meeting of Optionally Convertible Debentures Series A and Optional Convertible Debentures Series B and of Block F of the Spire Edge Project as there is not even a single unit owner. The court also held that no meeting of the allottees of Blocks B, C and D need to be called. Meeting of members and creditors of the respondent company were called in different categories including

(i) Allottees of block A Spire Wood Project

(ii) Allottees of furnished office of Spire Edge

(iii) Allottees of Block E Spire Edge Project.

(iv) Meeting of all the equity shareholders in Class A, B and C respectively.

(v) The meeting of secured and unsecured creditors.

(vi) Meeting of all allottees of Spire Wood Project.

In the meantime a few allottees of Blocks B, C and D of Spire Wood Project filed an appeal being Co.(A) 26/2018 against the order of this court dated 16.10.2018. The Division Bench on 11.12.2018 ordered that the meeting of all the allottees of Blocks B, C and D of Spire Edge Project would also be held alongwith the other meetings. Consequential orders were passed by the Division Bench.

5. In terms of the orders of this court dated 16.10.2018, 14.11.2018 and of the Division Bench dated 11.12.2018 meetings have been held on different dates i.e. 23.12.2018, 16.12.2018, 6.1.2019, 13.1.2019 and 14.1.2019. Notices were also advertised in Business Standard (English edition and Hindi edition). The respective chairpersons of the meetings have filed their reports. The result of the voting of the scheme that took place is as follows:-




Synopsis of Court Convened Meeting for Revival of A.N. Buildwell Pvt. Ltd.


Synopsis of Spire EDGE Project
Block A (Spire Edge Project)-06.01.2019

Particulars

In number

Percentage(based on the numbers of allottees)

Total No. of Allottees

34

100

Total No. of Allotees/Proxy Appeared

24

71

Total Votes

24

100

Valid Votes

24

100

Invalid Votes

0

0

Total Valid Votes Cast in favour of the Scheme

Without Modification

20

83

With Modification

4

77

Total FOR (with or without Modifications)

24

100

Total Valid Votes Cast Against the Proposed Scheme

0

0


Block B, C & D (Spire Edge Project)-14.01.2019

Particulars

In number

Percentage(based on the number of allottees)

Total No. of Allottees

1041

100

Total No. of Allotees/Proxy Appeared

395

38

Invalid Votes

11

Valid Votes

384

100

Total Valid Votes Cast in favour of the Scheme

Without Modification

22

6

With Modification

293

76

Total FOR (with or without Modifications)

315

82

Total Valid Votes Cast Against the Scheme

Without Modification

19

5

With Modification

50

13

Total Against (with or without modifications)

69

18

Synopsis of Spire EDGE Project


Furnished Office (Spire Edge Project)-06.01.2019

Particulars

In number

Percentage(based on the number of allottees

Total No. of Allottees

50

100

Total No. of Allotees/Proxy Appeared

36

Total Votes

36

100

Valid Votes

36

100

Invalid Votes

0

0

Total Valid Votes Cast in favour of the Scheme

Without Modification

29

81

With Modification

6

17

Total FOR (with or without Modifications)

35

97

Total Valid Votes Cast Against the Proposed Scheme

1

3


Block E (Spire Edge Project)-06.01.2019

Particulars

In number

Percentage(based on the number of allottees)

Total No. of Allottees

152

100

Total No. of Allotees/Proxy Appeared

103

68

Total Votes

103

Valid Votes

102

100

Invalid Votes

1

Total Valid Votes Cast in favour of the Scheme

Without Modification

97

95

With Modification

4

4

Total FOR (with or without Modifications)

101

99

Total Valid Votes Cast Against the Proposed Scheme

1

1

Synopsis of Spire WOODS Project


Spire Woods

Particulars

In number

Percentage(based on the number of

allottees)

Total No. of Allottees

517

100

Total No. of Allotees/Proxy Appeared

366

71

Total Votes

366

Valid Votes

364

100

Invalid Votes

2

Total Valid Votes Cast in favour of the Scheme

Without Modification

66

18

With Modification

292

80

Total FOR (with or without Modifications)

358

98

Total Valid Votes Cast Against the Proposed Scheme

6

2

Synopsis of Creditors (Secured & Unsecured) of A.N.Buidwell Pvt. Ltd.


Secured Creditors

Particulars

In number

Percentage(based on the number of Allottees)

Total No. of Secured Creditors or Respondent Company

2

100

Total No. of Secured Creditors/Proxy Appeared

2

100

Total Votes

0

0

Valid Votes

0

0

Invalid Votes

0

-

Votes cast in favour of the Scheme

0

-

Total Valid Votes Cast Against the Proposed Scheme

0

-


Unsecured Creditors

Particulars

In number

Percentage(based on the number of Allottees)

Total No. of Unsecured Creditors or Respondent Company

171

100

Total No. of Unsecured Creditors/Proxy Appeared

19

11

Total Votes

19

100

Valid Votes

18

100

Invalid Votes

1

-

Votes cast in favour of the Scheme

18

100

Total Valid Votes Cast Against the Proposed Scheme

0

0

6. What follows from the above result is that with the necessary modifications each of the category of creditors have passed the Scheme with modifications with a majority of more than 75%. In nutshell, learned counsel states the result as follows:-

(a) Block A (Spire Edge Project) 100% approval

(b) Blocks B,C and D, (Spire Edge Project) with modification 82%

(c) Furnished Office (Spire Edge Project) with modifications 97%

(d) Block E (Spire Edge Project) with modifications 99%

(e) Spire Woods Project with modifications 98%

7. In terms of section 391 of the Companies Act, 1956, much above 75% of the creditors have given their consent to the annexed scheme.

8. This petition came up for hearing before the Court on 8.3.2019. This Court directed notice to be issued to the (i) Official Liquidator/Provisional Liquidator (ii) Income Tax Department (iii) Excise and Taxation Department, Government of Haryana. (iv) Service Tax Department/Good & Service Tax Department (v) Directorate of Town and Country Planning, Chandigarh (vi) HSIDC Limited Haryana (vii) Real Estate Regulatory Authority, Gurugram, Haryana (viii) State Environmental Impact Assessment Authority, Haryana and (ix)Regional Director, Northern Region, Ministry of Corporate Affairs. Publication was also directed to be issued in Newspapers The Business Standard (English Edition) and The Business Standard (Hindi edition). On 22.5.2019 learned senior counsel for the petitioner stated that the scheme has been uploaded on the website. Opportunity was granted to the parties to file objections.

9. The Official Liquidator has also filed his report being OLR No.162/2019. Nothing adverse is mentioned against the said scheme in the said report.

10. Objections have been received from various stakeholders including Mr.Vijay Shankar Pandey, Ms.Renuka Kulkarni, Mr.Anil Kumar Sharda, Ms.Deepa Kapoor, Spire Edge Maintenance Lease and Faciliation Ltd. (SELFC) and Ms. Shikha Sadh.

11. The following are the broad objections raised by the aforenoted parties.

(i) Ms.Shikha Sadh

As per the objections filed, it is stated that the scheme involving stakes of hundreds of crores cannot be sanctioned on the basis of vague and cryptic statements. It is stated that the revival scheme is nothing but a tool to sell off the valuable assets of the Company under liquidation.

It is pleaded that all builder buyer agreements with customers should be honoured as promised. Otherwise, the present scheme of revival is nothing but an attempt to cheat the customers under the canopy of revival scheme.

It is further pleaded that revival plan proposes to stay all criminal cases of any nature sine die against the ex-management of the company which is completely contrary to the decision of the Division Bench of this court in case of RBI vs. C.R.B. Capital Markets Ltd., 195(2012) DLT 204.

It is pleaded that the Scheme prohibits the objector to pursue her complaint under Section 138 of the NI Act and her FIR No. 114/2016 registered in PS Sarita Vihar against the ex-management of the Company.

It is further pleaded that the revival plan seeks directions against the statutory bodies like Income Tax Department, Excise and Taxation Department, etc. which is wholly illegal.

(ii) Vijay Shankar Pandey

The aforesaid objector is said to be an allottee of a residential unit of the respondent in the Spire Woods Project. He has filed a criminal complaint on 30.05.2015 against the respondent company for cheating, conspiracy and criminal breach of trust. This complaint has been clubbed with FIR No. 114/2016 filed with PS Sarita Vihar.

It is claimed that the revival scheme is against public policy, unconscionable and prejudicial to the interest of the allottees of the Spire Woods Project. The prejudicial terms include settlement of FIRs, criminal complaints, lack of particulars regarding the identity of the new investor in the respondent and the manner in which and the terms on which it proposes to complete the Spire Woods Project.

It is pleaded that once the revival scheme is sanctioned, SW New Developer Company (a potential investor) could completely disappear leaving all allottees high and dry.

It is further pleaded that exoneration of the respondent company, its past directors and officers and original shareholders from pending litigations including criminal cases contemplated under various clauses of the revival scheme is against public policy and illegal. Reliance is placed on the judgment of the Supreme Court in the case of J.I.K. Industries Ltd. & Ors. vs. Amarlala V. Jumani & Anr., (2012) 3 SCC 255 and the judgment of this court in the case of Krishna Texport Industries Ltd. vs. DCM Ltd.,(2008) 104 DRJ 101 (DB).

It is further pleaded that despite the revival scheme having been passed by the majority, the revival scheme ought not to be granted sanction since it is not commercially viable and is unfair to all classes of creditors including the Spire Woods Project allottees. The said company SW New Developer Company has made no real discernible and tangible monetary commitment. Major shortcoming in the revival scheme is that the said SW New Developer Company is willing to invest Rs. 20 crores subject to certain terms and conditions.

It is stated that the object of the scheme is apparent, namely, that the propounders, namely, the past directors and the shareholders seek to put themselves in control of the respondent Company from which they have already siphoned off funds. At the same time, SW New Developer Company despite undertaking to complete the Spire Woods Project has not been given any representation on the Board of Directors of the respondent Company.

(iii) Ms.Renuka Kulkarni.

It is pleaded that on account of the acts of the ex-management of the respondent company, the investors were constrained to file an application seeking direction for conducting of a free and fair investigation by SFIO against the various illegal acts committed by the said ex-directors. The OL has also supported such an investigation.

It is further stated that the majority of the investors are in their twilight years and are investors who have booked units in Blocks B, C and D of the Spire Edge Project. They have been denied fair treatment by the petitioners. Most of the investors in the said block have paid the land enhancement cost to the respondent Company. However, the same was not deposited by the petitioners with the authority.

Most of the investors participated in the process of voting, casted their votes in favour of the scheme subject to modifications as were listed out in the typed sheet of paper attached to the respective voting slips. It was expected that the petitioners would call for a meeting with the representatives of the investors for an in-depth discussion and negotiation but nothing of that sought was done.

(iv) Spire Edge Maintenance Lease & Facilitation Pvt. Ltd. (SELFC)

SELFC has filed objections for and on behalf of the allottees/investors of Block B, C and D in the Spire Edge Project. Majority of the shareholding in SELFC is held by the said investors in accordance with the Builder Buyer Agreements executed by the respondent Company. Reliance is placed on the judgment of the Supreme Court in the case Meghal Homes (P) Ltd. Vs. Shree Niwas Girni K.K. Samiti and Ors., (2007) 7 SCC 753. Essentially the objections are a claim for better terms than what the scheme proposes.

It is pleaded that Technology Upgradation Charges/WTC should be refunded back to the allottees or should be adjusted against the outstanding payment that some allottees may have to make. It is prayed that payment of 14 months unpaid assured returns/commitment charges @ Rs. 55/- per sq. ft. as stipulated in the builder buyers agreement be made. It is pleaded that the incomplete building of blocks was forced upon the allottees on 30.10.2011 and hence, assured returns to all allottees were stopped on the pretext that possession has been offered. The difference of time period between the date when the possession was forced and the date when the actual occupancy certificate was obtained is 14 months. Hence, investors feel that it would be justified for them to demand pending assured returns for the said 14 months.

It is further pleaded that the petitioners be directed to make immediate payment of Rs. 20 crores to SELFC for the purpose of repair, renovation and completion of buildings of Block B, C and D to enable SELFC to commence efforts to put the said building on lease for the benefit of the allottees. Such other objections have been raised by SELFC seeking to improve the terms of the rival Scheme.

12. I may note that somewhat similar objections as stated above have been filed by other objectors including Sh.Anil Kumar Sharda and Ms.Deepa Kapoor.

13. I have heard learned counsel for the parties including the learned counsel for the objectors and learned counsel for the OL. I will now deal with the objections filed.

14. As far as the objections filed by SELFC are concerned, it is manifest that they are only bargaining and trying to improve the terms of settlement to make them more favourable in favour of the allottees of blocks B, C and D in the Spire Edge Project. Directions are also sought to be made to the company to make certain payments. Clearly, these objections only seek better terms than offered by the Scheme. They cannot be termed as objections.

15. As far as other objections are concerned, it is manifest that the two apprehensions of the objectors are: (i) that the promoters of the scheme are seeking to wriggle out of the criminal liabilities fastened on them as various criminal complaints are pending and (ii) the scheme is an attempt to siphon off the funds of the company by the propounders of the scheme.

16. As far the issue of waiver of the criminal liability is concerned, reference may be had to the judgment of the Supreme Court in the case of J.I.K. Industries Ltd. & Ors. vs. Amarlala V. Jumani & Anr., (supra) where the Supreme Court held as follows:-

'19. In the instant appeal in most of the cases the offence under the NI Act has been committed prior to the scheme. Therefore, the offence which has already been committed prior to the scheme does not get automatically compounded only as a result of the said scheme. Therefore, even by relying on the ratio of the aforesaid judgment in J.K. (Bombay) (P) Ltd. [AIR 1970 SC 1041] , this Court cannot accept the appellant's contention that the scheme under Section 391 of the Companies Act will have the effect of automatically compounding the offence under the NI Act.'

17. Similarly, the Division Bench of this court in the case of Krishna Texport Industries Ltd. vs. DCM Ltd.(supra) held as follows:-

"24. It cannot be lost sight of that the aforesaid provisions take colour from the same intent and in a similar situation. The proceedings arose on account of the failure of the company to meet its financial commitments. Thus if winding proceedings are pending, the civil proceedings can be put in abeyance for the time being to give some time to the company to come up with a scheme or otherwise to clear its liability. In fact, in view of the D.K. Kapur’s case (supra), the matter is not even res integra insofar as this Court is concerned that in such a situation criminal proceedings cannot be kept in abeyance.

Xxx

26. We are in agreement with the view that the words used in all the aforesaid provisions of 'proceedings' or 'other proceedings' must be construed ejusdem generis with the expression ‘suit’ used aforesaid and clearly imply civil proceedings. It is only such construction which is in conformity with the intent of the legislature introducing these provisions in the said Act

Xxx

33. It can hardly be said that the object of Section 391 (6) of the said Act is to prevent action against the officers of the company who may be involved in cheating, criminal breach of trust, mis-appropriation, forgery and for that matter dishonour of cheque. Again the provision cannot be used to bring to an end a prosecution arising from Income Tax Act or Foreign Exchange Control Act. The proceedings are clearly not of a pecuniary nature involving recovery of money. Interestingly, even the scheme stated to be approved at the behest of the respondent company does not envisage bar to any criminal proceedings or payment of any actual amount in the given facts of the case as discussed at the inception of this judgment, but only seeks to extinguish the liability of the appellant on the ground that the respondent is liable to pay a lesser amount, the interest not running, and the claim is alleged to have been extinguished by payment to a third party at the behest of the appellant for which there is no written document.'

18. A perusal of the scheme would show that amongst all clauses, the following clauses refer to the issue of criminal liability. The said clauses read as follows:

'15.4. The statutory authorities including but not limited to Registrar of Companies, NCT of Delhi and Haryana, Income Tax Department, Service Tax Department, GST Department and Value Added Tax Department be directed not to initiate any proceedings, civil as well criminal, in respect of any non-compliance on the part of the Company and/ or its Directors/Shareholders under the Applicable Laws.

15.5. All the Statutory Authorities to waive off interest and/or penalty charged /levied for any non-compliance under applicable laws in view of the fact that Company could not complete the statutory compliances as mentioned due to various reasons as mentioned in Scheme, including but not limited to registration under RERA, GST, VAT, Service Tax and Income Tax.

15.6. The Income-Tax Department be directed to stay the demands and vacate the ex-parte orders and to condone the delay and ·allow the Company to file appeals, revision applications and any other proceedings before the appropriate authorities and or court.

15.7. All the cases, civil as well as criminal, filed against the Company, its ex-Directors & Officers and the Original Shareholders to be vacated or stayed sine-die. Any other proceedings filed in any Court in India including consumer forums by any person, company and or institutions including public interest litigation be vacated or stayed sine-die.'

Hence, there is an attempt in the scheme to try and seek waiver of the criminal proceedings. To that extent the aforesaid clauses of the scheme would accordingly not be approved. However, once the scheme is implemented and the concerned creditor receives his share as per the scheme, appropriate consequences would follow as per law in the pending criminal matters.

19. Regarding the concern of the objectors that the scheme is nothing but an attempt to siphon off funds and assets of the company in question, the said apprehension can be taken care of by appointing a court supervisor who would supervise the completion of the scheme. This is so as the OL has already been appointed as the Provisional Liquidator. It is true that the funds of the company cannot be dissipated in the guise of a revival scheme. To ensure that is not done, it would be necessary to have a close watch on the functioning of the revival scheme and the manner in which the assets of the company are dealt with. To ensure the same, it would be appropriate for this court to appoint a court commissioner to supervise the functioning of the scheme. This would allay the fears of the objectors, namely, that the propounders of the scheme would end up siphoning off valuable funds and assets of the company.

20. On the above facts, reference may be had to the judgment of the Supreme Court in Meghal Homes (P) Ltd. vs. Shree Niwas Girni K.K.Samiti and Others, (supra) where the court held as follows:-

'45. Considerable arguments were raised on the role of the Court when a scheme under Section 391 of the Act was propounded for its consideration. The decision in Miheer H. Mafatlal v. Mafatlal Industries Ltd. [(1997) 1 SCC 579] was relied on. That was a case of merger or amalgamation of two companies. Neither of the companies was in liquidation. This Court held that compromise or arrangement included amalgamation of one company with another. This Court also defined the broad contours of the jurisdiction of the Company Court in granting sanction to a scheme in terms of Section 391 and Section 393 of the Act. This Court laid down the following parameters:

'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 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 class of voters concerned 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 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 adverse to that of the latter comprising the same class whom 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 aforesaid broad parameters about the requirements 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 to the scheme even if in the 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 on that ground as it would otherwise amount to the Court exercising appellate jurisdiction over the scheme rather than its supervisory jurisdiction.'

46. We may straightaway notice that this Court did not have occasion to consider whether any additional tests have to be satisfied when the company concerned is in liquidation and a compromise or arrangement in respect of it is proposed. Therefore, it cannot be said that this would be the final word on any scheme put forward under Section 391 of the Act, whatever be the position of the company concerned. Even then, this decision lays down the need to conform to the statutory formalities, the power of the Court to ascertain the real purpose underlying the scheme, the bona fides of the scheme, the good faith in propounding it and that as a whole, it is just, fair and reasonable, at the same time emphasising that it is not for the court to examine the scheme as if it were an appellate authority over the commercial wisdom of the majority.

47. When a company is ordered to be wound up, the assets of it are put in possession of the Official Liquidator. The assets become custodia legis. The follow-up, in the absence of a revival of the company, is the realisation of the assets of the company by the Official Liquidator and distribution of the proceeds to the creditors, workers and contributories of the company ultimately resulting in the death of the company by an order under Section 481 of the Act, being passed. But, nothing stands in the way of the Company Court, before the ultimate step is taken or before the assets are disposed of, to accept a scheme or proposal for revival of the Company. In that context, the court has necessarily to see whether the scheme contemplates revival of the business of the company, makes provisions for paying off creditors or for satisfying their claims as agreed to by them and for meeting the liability of the workers in terms of Section 529 and Section 529-A of the Act. Of course, the court has to see to the bona fides of the scheme and to ensure that what is put forward is not a ruse to dispose of the assets of the company in liquidation.'

21. Similarly, in Modiluft Limited vs. S.K.Modi, 2005 (123) DLT 413, a co-ordinate Bench of this court held as follows:-

'40. I do not find that the scheme is inherently incapable of performance and unworkable. I would take note of some of the case law cited at the Bar, which would throw light on the approach to be adopted in such cases.

41. Dealing with such aspects, the Gujarat High Court (speaking through D.A. Desai, J. as His Lordship then was) and considering the matter in all its length and breadth in re. Maneckchowk and Ahmedabad Manufacturing Co. Ltd. reported (1970) 40 Comp. Cas. 819 made the following observations which would equally apply to the present fact situation:

'Even at the cost of repetition, it must be mentioned that the scheme is opposed by a very few creditors and an infinitesimally small number of shareholders. The fact that the scheme has been approved by a requisite majority of shareholders is undoubtedly a strong argument in its favour, unless it is shown that their approval was not obtained fairly and the terms of the scheme are not such as a reasonable

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man may accept. The approval of a scheme by statutory majority of creditors and members is not decisive of the matter. But it is equally true that due weight should be attached to the choice indicated by the creditors and members who are vitally interested in the company and the scheme affecting the company. Further, on the analysis of the votes cast at the meeting, the salient feature that comes out to the surface is that the scheme was opposed especially by those who, apart from the merits of the scheme, are personally opposed to Gopaldas Parikh and Linubhai Banker. The feud appears to be more between the blood relations rather than between the creditors and members who have offered their best commercial judgment to the scheme on its merits. It is an inescapable conclusion that Chandulal Banker as a power of attorney holder of Shardaben, and Shantaben who is the principal contender, opposed the scheme tooth and nail not because he had the interest either of the company or creditors and members at heart but because he had to leave the active management when Gopaldas Parikh and Linubhai Banker stepped in and because of his personal vandetta against both of them. In this view of the matter it is not possible to accept the submission of Mr. Vakil that the scheme should not be imposed upon dissentient members.' ....... 43. It is also trite law that the Court would not reject a scheme simply because there could have been a better scheme.' 22. In my opinion, it is not for this court to sit on the commercial wisdom of the scheme. This court is not sitting as an appellate authority to determine the commercial facets of the scheme. Majority of the concerned creditors in terms of Section 391 of the Companies Act, 1956, have in their wisdom approved the scheme with modification by above 75% majority. I see no reason to not accept the scheme. There is no merit in the aforenoted objections and the same are dismissed. 23. However, the scheme is approved subject to the following:- (a) Mr. Justice S. P. Garg (Rtd.) (Mobile No. 9910384627) is appointed as the Court Appointed Commissioner to supervise implementation of the Scheme. The Propounders would be entitled to implement the Scheme, as above, under supervision of the Court Appointed Commissioner. (ii) The Court Appointed Commissioner will ensure that the tasks as stipulated in the Scheme are completed expeditiously in a time bound manner. The OL will permit the promoters to implement the Scheme, as stated above, under the supervision of the Court Appointed Commissioner. (iii) The propounders of the Scheme will open a separate escrow account where all receipts of any form including sums payable by the propounders under the scheme and revenues received pursuant to the revival scheme by the company would be deposited. The escrow account would be operated for expenses incurred under the supervision of the Court Appointed Commissioner. (iv) The Court Appointed Commissioner is empowered to pass any directions or orders to the promoters for the purpose of implementing of the Scheme. (v) The functioning of the Scheme shall be reviewed by the Company Court after three months. If necessary, this court would be at liberty to pass further directions as the developments may require including directions to recall the approval to the scheme. (vi) The fees of the Court Appointed Commissioner is fixed at Rs.1,00,000/- plus out of pocket expenses per month. This will be subject to enhancement, if required. (vii) I may only clarify that the Scheme is approved subject to a direction to the concerned departments to take a lenient view while dealing with the company keeping in view the attempts to revive the company. (viii) The Ld. Court appointed Commissioner is requested to file a report every month. This report will be put up to the Court for direction. 24. With the above directions, the petition stands disposed of.
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