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Companies Act, 1956 - Sections 391-394A and 466 - Power to make compromise or arrangements with creditors and members - Winding up of Company - Framing of scheme for revival of company under liquidation - Scheme approved by general meeting but not accepted by Division Bench of High Court - Compromise or arrangement between promoters of Company and sponsor of arrangement - Amended Scheme approved - Non-acceptance by company court on the ground that Scheme not for revival - Official Liquidator inviting offers for disposal of assets of company - Interested persons including sponsors placed proposals - Scheme modified on basis of affidavits of sponsors - Division Bench set aside order of company court and sanctioned Scheme as modified - Challenge to, by promoters and others, who presented their proposals - On appeal, Held: Modified scheme was not for revival of Company in liquidation - Scheme was neither modified by general meeting of members of Company in terms with s. 391 nor requisite majority was obtained and was also objected by shareholders - Also sponsors were nonmember of the Company - Promoters and others, who presented their scheme had sufficient locus standi to challenge the decision of Division Bench - Thus, order of Division Bench as also Company Court set aside - Proceedings remitted back to Company Court.SCML-textile mill ran into difficulties. The Bangurs, Somanis, and LIC were its main shareholders and 20% were the sundry shareholders. State Bank of India and Punjab and Sind Bank were the secured creditors. On 25.7.1984, Company Court ordered winding up of SCML. The Official liquidator took charge of the affairs of SCML. On 1.9.1994, the Company Court directed the Official Liquidator to issue public notice inviting offers for the revival of the mills, absorption of workmen and to purchase the assets of the Company. Advertisement was issued. In pursuance thereof, three parties submitted their offers. Ranganath Somani-contributory, filed Company Application seeking directions of the Company Court for convening meeting of the creditors, contributories and other interested persons to consider a scheme proposed for the revival of the Company. The directions were given. However, the Workers' Union and the three parties challenged the order of Company Court. During pendency, meeting was held and the creditors, contributories and workers approved the scheme. On 4.4.1995, the Division Bench of the High Court set aside the direction for convening a meeting to consider the scheme proposed holding that the scheme proposed was not based on any of the viability report regarding the revival of the company; that there was a failure to disclose the latest financial position of the Company; that as per Ranganath Somani the value of the land belonging to SCML was Rs.200 crores; and that the intention was to acquire the huge lands and other real estate belonging to SCML at a throw away price. The Division Bench directed the Company Judge to obtain viability report. Special Leave Petition was filed challenging the decision of Division Bench and SLP was dismissed. State Bank of India Capital Markets Limited prepared a viability report that only a part of the spinning industry could be retained and revived by disposing of the machinery related to the other activities carried on by SCML and by sale of a portion of the immovable property of the company.On 29.6.2003, Somani Group and LBPL executed a Memorandum of Understanding. Under MOU, LBPL was to get the right to develop and deal with the lands of SCML on payment of Rs.78 crores and 70,000 square ft. of built up area or on paying Rs.97.50 crores to SCML. Thereafter, on application filed by Somanis, Company Court directed the meeting to be convened to consider the amended scheme. At the meeting, the amended scheme was approved. Thereafter, Company Petition was filed seeking sanction of the amended scheme. On 23.7.2004, the Company Court rejected the amended scheme holding that the scheme presented was not a scheme for revival but for disposal of the Company's assets which then vested in the Official Liquidator; that it was only a mode of disposal of the Company's assets; and that the amount of Rs.97.50 crores offered by LBPL was very less than the amount of Rs.200 crores. The Company Court directed the issue of advertisements inviting offers for the assets of SCML. Official Liquidator issued advertisements inviting offers.LBPL, Somanis and Workers' Union challenged the order dated 23.7.2004. The Division Bench of High Court passed an order directing the Somanis, LBPL and the various interveners who had made offers, to place their proposals for rehabilitation on record; to file affidavits for down payment for release to the workers; and Somanis to state whether they would be willing to accept any such better scheme. Some affidavits were filed. LBPL stated in its affidavit that in addition to the payment of Rs.45 crores to the workers, it would set up a spinning unit at the cost of Rs.40 crores on the 7,50,000 sq ft coming to them under the Scheme; it would construct 30,000 square ft unit, housing a school and other accommodation at a cost of Rs.15-20 crores. Rangnath Somani tiled affidavit that the Somanis would be willing to consider any better scheme in the interests of SCML. However, Ramesh Somani-co-propounders of the scheme filed affidavit that he fully supported the scheme of LBPL. The court received the affidavits filed on behalf of the LBPL but c refused to receive the two affidavits, Rangnath Somani wanted to file. By order dated 21.3.2005, the Division Bench of High Court allowed the appeals and set aside the judgment of the Company Court and sanctioned the scheme as modified and as further modified by two affidavits of the Directors of LBPL. Hence, the present appeals by Rangnath Somani and interveners-persons who made offers pursuant to the direction of the court.Appellants contended that once a company was under liquidation, the Chapter dealing with winding up applied and the only provision or substantive provision conferring power of stopping the winding up was conferred on the court by Section 466 of the Act, and unless the court is satisfied that the Company is being taken out of liquidation by way of revival and that it will sub-serve public interest and will conform to commercial morality, the court cannot accept a scheme proposed under Section 391 of the Act; that the appellant in Civil Appeal Nos. 3171-3181 was associated with the original Scheme for which approval was sought from the Company Court; that the appellant had in fact deposited a certain sum as per the direction of the court; that in the instant case modification of the earlier Scheme was sought in which the appellant was involved; and that there was a specific direction by the Division Bench to the appellant and others to present their Schemes/Proposals before the court and they had filed affidavits in that behalf thus the appellants had sufficient locus standi.Respondents contended that it was clear that a Company Court could approve, independently of section 466 of the Act, a scheme and could take the company out of liquidation and even pass an order of stay in terms of Section 391 read with Section 392 of the Act; and that the appellants in Civil Appeal Nos. 3179-3181 of 2005 and Civil Appeal Nos. 3182-3184 of 2005 have no locus standi either to object in the Company Court or to challenge the decision of the Division Bench of the High Court in appeal before this Court since neither of them were creditors, contributories or debenture holders and were total strangers to SCML, having nothing to do with the proposal and acceptance of Scheme under section 391 of the Act. |
