Calcutta High Court
Shreekishan Omprakash vs The Official Liquidator on 5 August, 2022
IN THE HIGH COURT AT CALCUTTA
CIVIL APPELLATE JURISDICTION
(Original Side)
Reserved on: 10.06.2022
Pronounced on: 05.08.2022
APO/48/2020
IN
CP/2/1987
IA NO: ACO/2/2021, ACO/3/2021, ACO/4/2021, ACO/5/2021, ACO/6/2021,
ACO/7/2021, ACO/8/2021, ACO/9/2021, ACO/10/2022, ACO/11/2022,
ACO/12/2022, ACO/13/2022, ACO/14/2022, ACO/15/2022, ACO/16/2022,
ACO/17/2022, ACO/18/2022, ACO/19/2022, ACO/20/2022, ACO/21/2022,
ACO/22/2022, ACO/23/2022
THE BARANAGORE JUTE FACTORY PLC AND ORS.
AND
SHREEKISHAN OMPRAKASH
-VS-
THE OFFICIAL LIQUIDATOR
APO/195/2019
IN
CP/2/1987
IA NO: ACO/1/2020 (OLD NO: ACO/2/2020), ACO/2/2021
THE BARANAGORE JUTE FACTORY PLC (IN LIQN).
AND
BARANAGORE JUTE FACTORY PLC MAZDOOR SANGHA (BMS)
VS.
CHAITAN CHOUDHURY AND ORS.
APO/143/2020
IN
CP/2/1987
IA NO: ACO/2/2021, ACO/3/2021, ACO/4/2021, ACO/5/2021, ACO/6/2021,
ACO/7/2022, ACO/8/2022, ACO/9/2022
THE BARANAGORE JUTE FACTORY PLC (IN LIQN).
AND
2 APO/48/2020
NAMOKAR VINIMAY PVT. LTD.
-VS-
OFFICIAL LIQUIDATOR AND ANR.
APOT/74/2021
IN
CP/2/1987
IA NO: ACO/2/2021, ACO/3/2021, ACO/4/2021, ACO/5/2021, ACO/6/2021,
ACO/7/2021, ACO/8/2021, ACO/9/2021, ACO/10/2021, ACO/11/2022,
ACO/13/2022, ACO/14/2022, ACO/15/2022
BARANAGAR JUTE MILLS EMPLOYEES UNION (INTUC)
-VS-
OFFICIAL LIQUIDATOR, HIGH COURT CALCUTTA
APOT/76/2021
IN
CP/2/1987
IN THE MATTER OF:
THE BARANAGORE JUTE FACTORY PLC (IN LIQN)
AND
YASHDEEP TREXIM PRIVATE LIMITED
-VS-
OFFICIAL LIQUIDATOR, HIGH COURT & ORS.
APOT/80/2021
IN
CP/2/1987
IN THE MATTER OF:
THE BARANAGORE JUTE FACTORY PLC (IN LIQN)
-AND-
YASHDEEP TREXIM PRIVATE LIMITED
-VS-
OFFICIAL LIQUIDATOR & ORS.
Present:
Mr. Abhrajit Mitra, Sr. Advocate
3 APO/48/2020
Mr. Sarvapriya Mukherjee, Advocate
Mr. Yashovardhan Kochar, Advocate
Mr. Anirudha Agarwalla, Advocate
... for Baranagore Jute Factory, PLC
(appellant in APO/48/2020)
Mr. K. Thaker, Advocate
Mr. Jaydeb Ghorai, Advocate
Mr. Suman Chatterjee, Advocate
Mr. Diptesh Ghorai, Advocate
... for appellant in APO 195/2019
Mr. Anirban Ray, Advocate,
Mr. Soumabha Ghose, Advocate ,
Mr. Prasanta Naskar, Advocate.
Mr. Yash Singhi, Advocate
... for Namokar Vinimay Pvt. Ltd.
(appellant in APO 143 of 2020)
Mr. Jishnu Chowdhury, Advocate
Mr. Balaji Chakraborty, Advocate
... for Baranagore Jute Mills Employees' Union (INTUC)
(applicant in ACO/15/2022 in APOT/74/2021 and
(appellant in APOT/74/2021)
Mr. Surajit Nath Mitra, Sr. Advocate
Mr. Sankarsan Sarkar, Advocate
Mr. Subhrangsu Ganguly, Advocate
... for Yashdeep Trexim Pvt. Ltd.
(appellant in APOT 76/2021 and APOT 80/2021)
Mr. Kishore Dutta, Sr. Advocate
Ms. Susmita Shaw, Advocate
Mr. Rajib Mullick, Advocate
Mr. Rakesh Sarkar, Advocate
... for Lakshmi Singh and INTUC
Mr. Jishnu Saha, Senior Advocate
Mr. Deepak Jain, Advocate
Mr. Ishan Saha, Advocate
Mr. Lal Pratap Singh, Advocate
Mr. Umesh Pratap Singh, Advocate
... for Chaitan Choudhury & Ridh Karan Rakecha.
Ms. Manju Bhuteria, Advocate.
Mr. Arun Kumar Mishra, Advocate
4 APO/48/2020
Ms. Arundhati Barman Roy, Advocate
Ms. Tanvi Luhariwala, Advocate
... for Official Liquidator.
Ms. Manju Agarwal, Advocate
Mr. Bajrang Manot, Advocate
... for Radheshyam Ajitsaria & other unsecured creditors
Mr. Pradeep Aggarwal, Advocate
Mr. Arjun Aggarwal, Advocate
Mr. Sourav Kumar Mukherjee, Advocate
Ms. Anjana Banerjee, Advocate
... for Naveen Commodeal Pvt. Ltd.
Mr. Gaurav Kejriwal, Sr. Advocate
Mr. Arik Banerjee, Advocate
Mr. Anuran Samanta, Advocate
Mr. Suman Chakraborty, Advocate
... for Sun Biotech Pvt. Ltd. (Intervenor)
Mr. Ranjit Kumar, Sr. Advocate
Mr. Asish Kumar Mukherjee, Advocate
... for applicant in ACO/3/2021 (in APO/143/2020), ACO/6/2021 (in
APO/48/2020), ACO/9/2021 (in APOT/74/2021)
Mr. Arik Banerjee, Advocate
... for applicant in ACO/16/2022 in APO/48/2020
Mr. Abhisekh Halder, Advocate
Mr. Jai Kumar Surana, Advocate
Mr. Dhruv Surana, Advocate
... for Baranagore Jute Mills (PLC) Workers' Union (UTUC)
Mr. Dhruba Ghosh, Sr. Advocate
Mr. A. Basu, Advocate
Mr. A. Kanodia, Advocate
... for K. M. Tapuria
Mr. Saptansu Basu, Sr. Advocate
Mr. Binay Kumar Jain, Advocate
Mr. Piyush Jain, Advocate
... for S.B. Overseas (Secured Creditor)
Mr. Sakya Sen, Advocate
Mr. Sumanta Biswas, Advocate
... for Petitioning creditor in CP/2/1987
Mr. Mukul Lahiri, Sr. Advocate
5 APO/48/2020
Mr. Snehatosh Majumder, Advocate
Mr. Sandwip Mukherjee, Advocate
... members of Committee of Management
Coram: THE HON'BLE JUSTICE PRAKASH SHRIVASTAVA,
CHIEF JUSTICE
THE HON'BLE JUSTICE SHAMPA SARKAR,
JUDGE
Prakash Shrivastava, CJ:
1. These appeals are directed against the order of the learned Company Judge
dated 04th December, 2019 in C.P. No.2 of 1987.
2. Against the above order of Company Judge, one of the aggrieved party had
filed SLP (C) No. 11476/2020 before the Hon'ble Supreme Court which was
disposed of by order dated 24.03.2021 with certain directions including the
direction to decide the matter expeditiously. On account of restricted hearing due
to COVID-19 the matter could not be heard at that time and has been heard finally
after commencement of physical hearing. Arguments at length have been advanced
by learned counsel for the parties.
3. This case has a chequered history, therefore, before entering into the merits
of the matter it would be appropriate to ascertain the present status of the company
petition.
4. The initial fact of incorporation of Baranagore Jute Factory PLC is noted in
the judgment dated 11th November, 2009 of the Hon'ble Supreme Court of
Judicature, Court of Appeal (Civil Division) in appeal from the High Court of
Chancery Division in Appeal No. A3/2009/0423 in the matter of Chaitan
Chowdhury and Others vs. Damodar Prasad Bhattar and Others reported in
2010 (2) All ER 103 as under:
6 APO/48/2020
"2. The Company was incorporated in England on 22 July 1872
under the Companies Act 1862 for the purpose of carrying on the business of
jute manufacturers at Barnagore, near Calcutta, in what is now the Republic
of India. That remains the sole business of the Company. It is common
ground that the Company has, now, no connection with England; save that it
was incorporated here, maintains its registered office in London and is
required to make annual returns to Companies House."
5. C.P. No. 2 of 1987 was filed at the instance of a Partnership Firm being the
creditor for winding up of the Baranagore Jute Factory PLC (for short, 'BJF') on
the ground that BJF had failed to repay its debt.
6. The Company Judge by order dated 11th of February, 1987 had admitted the
company petition subject to the scrutiny and had given directions for publication of
advertisements. By the same order the Company Court had stayed its order for one
week. The order dated 11th February, 1987 reads as under:
"Under these circumstances, this court admits this petition, subject to
scrutiny, for the principal sum of Rs. 13,13,751.51 together with interest and
cost of this application assessed at 80 Gms. This court gives necessary
direction for publication of advertisement once in The Statesman and once in
the Jugantar. Insertion in the official gazette is dispensed with. This
application is made returnable 8 (eight) weeks hence. This court, however,
stays the operation of this order for one week and directs the advocate-on-
record of the petitioning creditor Mr. R. K. Fugalia to serve a copy of this
order upon the company and also upon the workers who have entered
appearance through Mr. Niharendu Duttt Majumdar. All parties to act on a
signed copy of the minutes of this order on the usual undertaking."
7. Thereafter on 28th October, 1987, the learned Company Judge had passed the
order in terms of prayer (a) and (b) of the company petition and directed that the
Official Liquidator will take possession on a signed copy of the minutes. Prayer
clause (a) of the Company Petition is to wind up the BJF in terms of the provisions
7 APO/48/2020
of the Companies Act, 1956 (for short, "the Act"). In that order, it was noted that
the claim of the petitioning creditor for the goods sold and delivered for a sum of
Rs. 13,13,751.51 was admitted by the company and the company had no defence.
8. On 15th September, 1988, the learned Company Judge while considering an
application for stay of winding up proceedings, taking note of the fact that there
were 5,500 regular workers and the Baranagore Jute Factory was lying closed since
November, 1986 and considering the issue of survival of the workers and scheme
of revival, had directed as under:
"In the meanwhile the ad-hoc Court Committee of management of the
Jute Mill of Barnagore Jute Factory constituted of the persons mentioned
in the scheme for revival as annexed to the petition being Annexure 'B'
is directed to take steps for reopening of the Jute Mill and to run the
same in terms of the scheme as attached to the petition being Annexure
'B'. It is made clear that such management by Ad-hoc Court Committee
making by way of interim arrangement for the benefit of all concern the
applications are not being decided on its merit. This order without
prejudice to the rights and contentions of the Parties. Official Liquidator
will forthwith take possession and remain in possession of the Company
and will complete the inventory which is yet to be completed as also of
the finished goods and will take the assistance of the valuer from the
panel on valuers of the High Court and the cost of the Jute Mill to paid
by Mr. Mitra's client in the first instance."
9. The order of the learned Company Judge dated 15th September, 1988 was the
subject matter of challenge in the Company Appeal wherein the Hon'ble Division
Bench by order dated 22nd September, 1988 had stayed the winding up proceedings
for six months for the time being, by directing as under:-
8 APO/48/2020
"(cc) The winding up proceedings shall remain stayed for six months
for the time being."
10. In addition to staying the winding up proceedings the Division Bench had
issued various directions including the following:
(i) Mr. Nirmal Mitra, Barrister was appointed as Joint Special Officer.
(ii) The Committee of Management consisting of one representative each of the
three groups and one representative from State Bank of India, one from
I.C.I.C.I. and two representatives of the workmen one Jute Technologist
and a Chartered Accountant to be nominated by the six Unions, was
directed to run the Mill under the Joint Special officer.
(iii) The three groups who had submitted scheme for revival were directed to
deposit the sum of Rs. 25 lakhs each to the Joint Special Officer for making
payment to the workers and reopening the Mill and each group was
directed to contribute equally for the funds required for running of the Mill.
(iv) The Special Officer was directed to take possession of the records books,
documents, papers and assets of the company. The Official Liquidator and
receiver were directed to make over such assets books, documents, papers
to the Special Officer."
11. The Company Judge by order dated 19th of December, 2002 dismissed the
C.A. No. 191 of 2002 and CA No. 186 of 2001 for permanent stay of winding up
Order dated 28th of October, 1987 and directed that the winding up proceedings of
the company (in liquidation) shall be taken by the Official Liquidator and finalized
in accordance with law and directed the Official Liquidator to take over possession
and control of the affairs of the company and represent the company in liquidation.
The Company Judge by a separate order passed on the same day on the request of
9 APO/48/2020
the Counsel for the workers union had stayed the operation of the order up to
15.01.2003. The Division Bench had initially passed interim order and
subsequently by order dated 18th of February, 2004 had set aside the order of the
learned Company Judge dated 19th of December, 2002 and directed the Joint
Special Officer to continue to oversee the management and affairs of the Company.
12. Thereafter, the order of winding up has not been given effect to and no steps
have been taken by the Official Liquidator to take over the possession of the assets
of the company in liquidation nor any steps have been taken to sell any of the
assets of the company in liquidation.
13. Learned Single Judge has taken note of the sequence of events and various
orders from 1987 till 2004 by quoting from the judgment In Re: Radheshyam
Ajitsaria reported in 2006 (11) SCC 771 as under:
"BACKGROUND FACTS:
4. Baranagore Jute Mills PLC (for short `the Company') was under the
management of Jardine Henderson Limited. On the failure of the jute
factory to pay dues of several of its creditors, various winding-up petitions
were filed in the High Court under the provisions of the Companies Act,
1956. By an order dated 28.10.1987, the Company Judge directed winding-
up of the Company. The Court appointed the Official Liquidator with a
direction to take possession of the assets of the said Company. An
application was made by one - Shri Raj Kumar Nemani praying for stay of
the winding-up proceedings of the Company and for revival of the
Company as per a Scheme submitted and for appointment of an ad hoc
Committee of Management to run the affairs of the said Company. The six
Unions agreed to the Scheme as it was to the benefit of the workers. The
learned Company Judge stayed the winding up by order dated 15.9.1988
and appointed an ad-hoc Committee of Management to re-open the mills,
but however maintained the assets of the Company under the Official
Liquidator. One of the creditors filed an appeal against the order dated
10 APO/48/2020
15.09.1998. An interim order was passed by the Division Bench of the
High Court appointing Joint Special Officers under whose supervision the
Committee of Management was to be constituted on an ad-hoc basis with
other directions.
5. Mr. Raj Kumar Nemani being aggrieved by the order dated 27.09.1988
passed by the Division Bench filed a special leave petition before this Court
on 07.10.1988 and this Court, by an order dated 30.11.1988 directed that
the scheme proposed by Raj Kumar Nemani supported by the workers and
unsecured creditors be accepted with a direction for implementation of
detailed Scheme. The learned Company Judge was directed to work out the
Scheme.
6. The order passed by this Court on 30.11.1988 reads as under:-
"R.K. Nemani & Anr. .. Appellants
-Versus
Shiva & Co. & Others .. Respondents
ORDER
1. Special leave granted. Heard, learned counsel for the parties.
2. Having regard to the scope of this appeal and having considered the
report of the Special Officer, dated 13th November 1988 made
pursuant to the order of this Court, we are of the opinion that the
scheme supported by the workers and unsecured creditors of Raj
Kumar Nemani, be accepted and a detailed scheme on that basis be
formulated. It is desirable that the scheme be implemented as soon as
possible and the workers and the creditors should be paid in
accordance with the scheme, approved today. Further, the appeal is
disposed of with a direction to work out the scheme by the learned
Company Judge, Calcutta High Court, who is seized of the matter. It
is contended by some of the secured creditors that by the operation of
the scheme, the assets of the secured creditors should not be allowed
to be affected. This contention of the secured creditors may be
agitated before the Company Judge, if they are so entitled. All
11 APO/48/2020
intervention applications are dismissed without prejudice to their
rights, if any, to applicants move the Company Judge, Calcutta High
Court.
3. We express our appreciation of the work of the Special Officer and
on the report he has submitted. The remuneration of the Special
Officer is filed at Rs.5,500/- and to be paid out of the assets of the
Company. The orders of the learned Single Judge and the Division
Bench are modified to the aforesaid extent.
4. The appeal is disposed of accordingly. No order as to costs."
7. The learned Company Judge approved the Scheme on 16.6.1989. The
Scheme, inter alia, provides for payment to all unsecured creditors,
workers, secured creditors, statutory dues etc. On 02.05.1990, appellant No.
1 resigned from the Management of the Company.
8. The learned Company Judge, while considering several applications
made by unsecured creditors complaining that they were not paid by the
Committee of Management, made an order dated 16.12.1991 cancelling the
Scheme, observing that the Scheme had totally failed.
9. On an appeal preferred by the Committee of Management against the
order dated 16.12.1991, the Division Bench of the High Court made an
interim order dated 18.12.1981, reiterated on 24.3.1992 directing payment
of 1% of the respective claims to all creditors on or before 7.1.1992. The
Bench also stayed the order passed by the learned Company Judge dated
16.12.1991 ordering cancellation of the Scheme. A special leave petition
was filed against the order dated 24.03.1992 by one of the creditors. This
Court directed the appeal pending before the Division Bench of the High
Court to be disposed of expeditiously, while also directing payment to the
unsecured creditors to be made @ 2% per month from 01.03.1993. The said
order dated 22.03.1993 in S.L.P.(C) No. 6505 of 1992 reads as follows:
"Acumen Trading Corporation & Anr. .. Petitioners
-Versus-
Committee of Management of Baranagore
12 APO/48/2020
Jute Factory & Ors. ..Respondents
ORDER
1. We have heard counsel for all the parties.
2. By an order dated 16th December 1991, the learned Company Judge
of the Calcutta High Court cancelled the scheme earlier sanctioned on
the ground that the terms of the scheme particularly in the matter of the
schedule of payments to the creditors had not been complied with. That
order was carried up in appeal before the Division Bench of the High
Court, which by its order dated 24th March 1992 now under appeal,
stayed the order of the learned single Judge. The Division Bench
directed that instead of payment of 2% p.m. to the unsecured creditors
contaminated by the scheme, there should be payment of 1% p.m. That
was the effect of the order dated 24th March 1992 of the Division
Bench, when it referred to and incorporated its earlier order dated 18th
December 1991.
3. It is not disputed that payments to the unsecured creditors have not
proceeded strictly in terms of the scheme. There is substantial short-
fall. The parties who have taken over the company under the scheme
and who are liable to effect payments to the creditors in terms of the
scheme cannot take shelter behind the fact that auditors of the
company have not scrutinised the books of account of the company.
That is a matter over which the unsecured creditors have no control.
Till the auditor examine the books of account and report that the claim
of the extent of the claim of the unsecured creditors was not
supportable, there could be no suspension of the scheme of payments.
4. On a consideration of the matter it appears appropriate that the
appeal before the Division Bench of the High Court requires to be
disposed of expeditiously. We request the High Court to dispose of the
appeal within three months.
5. In the meanwhile payment to the unsecured creditors should proceed
at the rate of 2% p.m. from 1st March 1993 and not at 1%. The
13 APO/48/2020
difference for the past on that calculation shall be made good within
three months from today. If there is failure to do so, it will be
appropriate for the Division Bench to put that circumstance also into
scale in deciding whether the order of the learned single Judge setting
aside the scheme should be interfered with in appeal or not.."
6. However, the order of the Division Bench staying the operation of
the order dated 16th December 1991 of the learned single Judge will
continue unless the Division Bench itself considers it appropriate to
modify the same in the light of any subsequent event. The Division
Bench shall also be at liberty to consider any applications for the
modification of the scheme.
7. With these observations and directions the special leave petition is
disposed of."
10. By subsequent orders, this Court directed the Committee of
Management to deposit Rs. 40 lacs in two instalments which was to be
deposited in the Registry of this Court. The said amount was kept in term
deposits. On 11.03.1994, this Court set aside the order of the Division
Bench of the Calcutta High Court passed on 24.03.1992 reducing rate of
payment from 2% to 1%. This Court also directed the Committee of
Management to deposit from the month of April, 1994 onwards a sum of
Rs. 8 lacs per month with the Registry of Calcutta High Court. Further
directions were also issued while remanding the matter back to the learned
Company Judge for distribution of Rs. 40 lacs amongst the creditors. The
above order reads as follows:-
"Acumen Trading Corporation & Anr. .. Petitioners
Versus
Committee of Management of Baranagore
Jute Factory & Ors. .. Respondents
ORDER
1. We have heard counsel on both sides, originally the learned
Company Judge in the High Court directed the "Committee of
14 APO/48/2020
Management" to deposit sums equivalent to 2 per cent per month
calculated on the basis of the extent of unsecured indebtedness of
the company. Subsequently, there was a modification of this order
as to the rate of the payment reducing the extent from 2 per cent
month 1 per cent per month. This was done by the appellate bench.
The unsecured creditors have come up against this order. The
unsecured creditors claim that debts due and owing to them are in
the neighbourhood of Rs.3.4 crores and that it would take a long
time for payment if only 1% per month is paid.
2. In the meanwhile, the Committee of Management has deposited in
the Registry of this Court, a sum of Rs.40 lacs under directions of
this Court. The said sums are in term- deposits with the bank.
3. On a consideration of the matter, we set aside the order of the
Division Bench reducing the amount from 2 per cent per month to 1
per cent per month. The Committee of Management shall from the
month of April 1994 onwards, deposit every month sum of Rs.8
lacs. Deposits will be made in the High Court.
4. The matter will now go back to the learned company Judge,
Calcutta High Court who will issue necessary directions as to the
appropriation and distribution of Rs. 40 lacs now in deposit,
amongst the creditors and also as to the distribution of the sum of
Rs. 8 lacs to be deposited every month by the Committee of
Management. It is made clear that if the Committee of Management
commits default in the matter of these deposits and fall in arrears
for any two months, it will be appropriate for the Company Court to
replace the Committee of Management by an appropriate
alternative mechanism. The amount of Rs.40 lacs in deposit in this
Registry shall be transferred to the account of the Registrar
(Original Side), High Court of Calcutta, together with accrued
interest immediately after the present deposits mature.
5. A grievance was aired by the petitioners that the Committee of
Management is appropriating to itself the funds of the Company
towards its alleged claims as unsecured creditor. Sri Santosh Hegde
15 APO/48/2020
says this is impermissible. It is open to the petitioners to move the
Company Judge in this regard. The contention of the Committee of
Management on this point is also left open.
6. The interlocutory applications are disposed of accordingly."
11. On 13.12.1994, the learned Company Judge appointed a new
Committee of Management composed of the Jain-Jalan group, while
issuing necessary directions for deposit of Rs. 64 lacs by the Jain-Jalan
group with the Registrar of the High Court. The Company Judge also
directed certain lump sum payments to six substantial creditors, except
Nemani Group on the basis of the list approved in the Court's Scheme prior
to cut- off dates in October, 1987 before issuing advertisement inviting
claims from creditors, while directing payments to be made to certain
parties.
12. In appeal against the said order dated 13.12.1994, the Division Bench
allowed the Jain-Jalan group to continue and carry on with the process of
the Scheme, but set aside the direction for preferential payment to six
named unsecured creditors.
13. The learned Company Judge by order dated 23.12.1996 also directed all
unsecured creditors to lodge their claims with the Registrar of the High
Court. The learned Company Judge, on the note of the Registrar, directed,
inter alia, the Registrar of the High Court to confine to the claims of those
unsecured creditors as on 28.10.1987 i.e. the date of winding-up order and
the amounts quantified against their names in the list of unsecured creditors
appended to the Company Application No.63 of 1987 affirmed on
27.4.1997. Pre-scheme unsecured creditors including the appellants lodged
their respective claims with the Registrar on 27.02.1997. The Registrar
submitted the second report excluding the names of the appellants
(Radheshyam Ajitsaria) while including the name of the Nemani group.
The Company Judge, on an application filed by the appellants (Ajitsaria's
group) directed the Registrar to hear to the submissions of the appellants
with regard to their exclusion. The appellants made their submissions and
filed written notes in support of their contentions before the Registrar and
thereafter the Registrar, on 23.04.1997, submitted a report including names
16 APO/48/2020
of the appellants (Ajitsaria's group) as persons entitled to receive payments
in terms of the Scheme. The Company Judge, by a detailed judgment dated
9.9.1998 directed the Registrar to make payments of all creditors as per the
revised statement enclosed to the Supplementary (Second) Report, except
to the Nemani group. The Division Bench, in an appeal against the order
dated 09.09.1998 filed by Jardine Handerson Ltd., made an order on
30.11.1998/1.12.1998 set aside the Registrar's report insofar as the same
exceeded the amount mentioned in the list annexed to Company Appln.
No.63 of 1987. The Registrar, despite the appellants not being held as part
of the Nemani group, however, did not make any payments to the
appellants. The appellants filed an application by way of Notice of Motion,
inter alia, praying for modification of the order dated 09.09.1998 and for a
further direction not to treat the appellants as part of the Nemani group with
a further prayer for immediate payment in terms of the sanctioned Scheme.
On 08.03.2001, the learned Company Judge directed payments to be made
to the appellants, inter alia, holding that the appellants were not the part of
the Nemani group and that their claims were already adjudicated upon and
settled by the Registrar, Original Side.
14. One Shri Chetan Chowdhury claiming himself to be one of the
Directors of the Company filed an appeal against the order dated
08.03.2001. The Division Bench, while granting liberty to the appellants to
withdraw the amount deposited against its name/claim by furnishing a
Bank Guarantee also recorded that it is not clear as to why Chetan
Chowdhury and his group could be in the possession of the Company and
listed the appeal for further directions.
15. On 14.05.2001, the appellants - Ajitsaria's group received payments
from the Registrar of the High Court upon furnishing the requisite Bank
Guarantee. Learned single Judge of the High Court passed an order on
19.12.2002, inter alia, holding that the possession of the Company by the
alleged Board of Directors was wrongful, while directing the Official
Liquidator to take possession of the Company (in liquidation). Several
appeals were preferred from the order. The Division Bench, while staying
the operation of the order dated 19.12.2002, directed the Joint Special
Officers to take possession.
17 APO/48/2020
16. The Division Bench in appeals filed against the order dated 08.03.2001
made an order dated 3.3.2004 directing re- adjudication of the claims of the
appellants which had already been adjudicated. According to the appellant,
the Division Bench without appreciating that the appeal itself was not
maintainable having been filed by 9 outsiders having no locus standi is not
correct in directing readjudication of the claims of the petitioner. The
Bench also dis-allowed the appellant's rights to claim the said amount as a
member approved in the list of unsecured creditors distinct from the
Nemani group. Being aggrieved by the impugned judgment dated 3.3.2004,
the appellants filed the above appeals in this Court. This Court, on
08.04.2004, issued notices in the special leave petitions and also directed
that the Bank Guarantee filed by the appellants with the Registrar of the
High Court on the original side shall be kept renewed until further orders.
By order dated 12.07.2004, leave was granted.
17. The Registrar of the High Court issued two certificates, inter alia,
certifying that the last instalment of Rs. 8 lacs was deposited on
8/9.12.1999 and also certified that a sum of Rs.2,09,70,647.56 p. was lying
with the Registrar in a separate account."
14. Thus, above judgment covers the events up to March, 2004. In continuation
of above sequence of events it is noticed that the Division Bench of this Court by
order dated 03rd March, 2004 in APOT No. 271 of 2001, APOT No. 162 of 2001
and APOT No. 272 of 2001 had held that the appellants Radheshyam Ajitsaria and
Others, who were considered as Members of the Nemani Group, were not entitled
to receive payment on the ground that the said group being the profounder of the
scheme and also that the dues shown by them had not been adjudicated either by
the Court or by the Registrar. The matter went to the Hon'ble Supreme Court
against this order. The appeal was disposed of by the Hon'ble Supreme Court by
order dated 24th May, 2006 in the matter of Radheshyam Ajitsaria and Anr. Vs.
Bengal Chatkal Mazdoor Union and Others reported in (2006) 11 SCC 771.
18 APO/48/2020
The Hon'ble Supreme Court had examined the matter in details and had reached to
certain conclusions which are as under:
"39. The above facts clearly go to show and administer that the
workers do not have a right to oppose the payment to all unsecured
creditors out of the funds lying with the Registrar, Original Side, High
Court. The reasons for our conclusion are as under:
(a) By order of this Court the said funds are meant for disbursement
only for unsecured creditors. Separate arrangements have been made
under the scheme for payment of other dues including workers' dues.
The said scheme sanctioned in 1989 is still in operation and the
present Committee of Management is operating under the same
scheme.
(b) Since 1994 i.e. after the petitioner Group was superseded by the
Jain-Jalan Group, no demands of any nature relating to any
outstanding payments were ever raised by the workers.
(c) In any event, it has been clearly recorded in the order dated 18-11-
2004 whereby the said Chetan Choudhary Group has been allowed to
continue in management, that the said Chetan Choudhary Group is
being allowed to be continued on the same terms and conditions as
under the original sanctioned scheme, thus making them liable to
make payments of all dues, past or present.
(d) Therefore, the Company being a running concern, the alleged dues
of the workers cannot be claimed against any specific member of the
Management Committee. The dues, if any, are against the Company
and not against any individual members of the Committee of
Management. There is no question therefore of holding up payment
due to the unsecured creditors on the ground that workers' dues are
alleged to be outstanding.
(e) Further, since the Company still continues to function, Section
529-A of the Companies Act cannot be pressed into service by the
workers. The protection of Section 529-A is available only when a
company has been wound up, the Official Liquidator has taken over
the assets and disbursements are being made by the Official
Liquidator in the course of winding up of the company. There is no
19 APO/48/2020
question of the worker claiming a preferential right or payment while
a company is running and carrying on business in the usual course and
incurring daily expenses and liabilities."
15. Sub-para (e) above clearly mentions that the company was continuing to
function and Section 529-A of the Companies Act, 1956 could not be pressed into
service by the workers as the same was directed only when company was wound
up and the Official Liquidator had taken over. The Hon'ble Supreme Court in
paragraph 46 of the above judgment had held that:
"46. In any event since the Company is functioning as a going concern
on and from the date of implementation of the scheme of arrangement
as formulated and approved by the High Court as well as this Court,
the question of the workers at this stage when the winding-up
proceedings have been permanently stayed under Section 466 of the
Companies Act, 1956 to state to have a better claim by virtue of
Section 529-A of the Companies Act, 1956 does not and cannot arise.
The workers having a priority over creditors can come into play only
when the winding-up process is in motion and the Official Liquidator
takes steps to formalise winding up. In the instant case, after the
scheme had been sanctioned, the question of winding up would arise
only if the order of permanent stay granted was to be lifted on any
party's complaining of failure of the scheme or inability on the part of
the Company to make payments either in terms of the scheme or
otherwise. The contention to the contrary raised by Mr Nariman has
no force."
16. In the above paragraph, again it was reiterated that the company was
functioning as a going concern. Though in this paragraph, it is observed by the
Hon'ble Supreme Court that the winding up proceedings were permanently stayed
under Section 466 of the Companies Act, 1956 but learned Counsel for the
20 APO/48/2020
appellant has fairly stated that there is no order of the Company Court or the
Hon'ble Division Bench staying the winding up proceedings permanently.
17. In the above judgment, Hon'ble Supreme Court had again reiterated that:
49. In our view, the provisions as contained under Section 529-A of
the Companies Act, 1956 are not applicable in the facts and
circumstances of the case as the order of winding up has been stayed
and the Company is being run under the scheme as a going concern.
"50. One Committee of Management is being replaced by another
Committee of Management on the same terms and conditions with an
object to implement the same scheme. Thus the dues of the creditors
including the workers and other statutory dues are to be paid by the
Committee of Management. Even at present the Company is being run
by a Committee of Management and is now supported by the workers
as would appear from the order dated 18-11-2004."
18. In paragraph 59 of the above judgment, it was very clearly found by the
Hon'ble Supreme Court that the Company was not wound up but allowed to
continue as a going concern by holding as under:
"59. It is important to note that by orders of the Court, the Company
(in liquidation) was not in fact wound up but was allowed to continue
as a going concern. This was undoubtedly in the interest of the
workers. So long as the Company continued as a going concern, the
workers not only continued to get their wages and other benefits and
also retained their rights to be reimbursed out of the assets of the
Company in the event that the assets have to be sold in winding up. In
fact, the fixed assets of the Company are enormously valuable. It has
land in excess of 50 acres in prime locations out of which 17 acres
was acquired by the National Highway Authority upon payment of
compensation of Rs 41 crores recently to the present Company. The
dues of workers are, therefore, in no jeopardy whatsoever. When the
Company continues as a going concern, it is the dues of the unsecured
21 APO/48/2020
creditors which are most vulnerable and it is for that purpose this
Court by its various orders ensured that a separate fund should be
created for the unsecured creditors. In our opinion, it is fair and proper
that the funds so created should only be utilised for the purpose of the
unsecured creditors and not for workers' dues and other dues.
60. It was contended by the respondent that for the purposes of
Sections 441 and 529-A of the Companies Act, the phrase "in winding
up" should refer to "in the course of winding up". In our view, this
cannot be the position because, if so, no part of the fixed or movable
or any other assets of the Company including raw material and
working capital can be alienated by the Company in the usual course
of its business activities for only such time as the winding-up
proceedings are permanently stayed. This would mean that no order
could ever be made exploring the possibility of running the Company
as a going concern during the pendency of the winding-up
proceedings. Such an interpretation would not only be contrary to the
interest of the workers and the industry as a whole but would not be
pragmatic and would be contrary to long-settled practice in the
company jurisdiction."
19. Thus, as per the above judgment of the Hon'ble Supreme Court, company
was a going concern.
20. In the meanwhile, the proceedings before the BIFR were also initiated as the
BJF had filed a reference with the BIFR under Section 15(1) of the Sick Industrial
Companies (Special Provisions) Act, 1985 vide Form 'A' dated 16th of September,
2004. The BIFR on 7th of June, 2006 had recorded a finding that the company had
become a sick industrial company as on March, 2003 and accordingly, declared it
to be so and the BIFR appointed IDBI as the Operating Agency with the direction
to prepare a revival scheme for it, if feasible. The IDBI had submitted the revival
scheme by letter dated 30th of June, 2008 and the BIFR had prepared a Draft
Rehabilitation Scheme (DRS) for revival of the company which was circulated
22 APO/48/2020
vide order dated 2nd of December, 2008 and this scheme was sanctioned by the
BIFR with some modification on 4th of November, 2009. It is worth noting that
Section 22 of SICA, 1985 relating to suspension of legal proceedings, contracts,
etc. provides that pending any enquiry under Section 16 or scheme referred to
under Section 17, no proceedings for winding up of the industrial company or for
execution, distress, etc, shall lie or be proceeded with further except with the
consent of the Board or by the Appellate Authority.
21. At this stage, it would not be out of place to note that in Madura Coats
Limited vs. Modi Rubber Limited and Another reported in (2016) 7 SCC 603
the Hon'ble Supreme Court, in a case wherein a company directed to be wound up
but the winding up proceedings were stayed, has held that when proceedings are
pending both before BIFR and the Company Court but no order of winding up has
been passed against the company, in such a situation the provisions of SICA would
prevail over the provisions of the Companies Act. It has been held that the
reference can also be made to the BIFR and then SICA will over-ride the
Companies Act.
22. Three separate writ petitions bearing No. 12377, 12406 and 12412 of 2010
were filed challenging the jurisdiction of BIFR to entertain the reference and to
frame the scheme. The learned Single Judge had disposed of these petitions by
order dated 25th January, 2011 holding that SICA was not applicable to the
respondent company as it was incorporated outside India and consequently, setting
aside the scheme framed by BIFR. The Hon'ble Division bench by order dated 19th
October, 2012 had set aside the order of the learned Single Judge and had held that
provisions of SICA will be applicable to the respondent company. The order of the
Hon'ble Division Bench was subject matter of challenge before the Hon'ble
23 APO/48/2020
Supreme Court and the Hon'ble Supreme Court by judgment dated 23rd September,
2013 had decided the appeal in the matter of Yash Deep Trexim (P) Ltd. v.
Namokar Vinimay (P) Ltd. reported in (2014) 1 SCC 545.
23. In the matter of Yash Deep Trexim (P) Ltd. (supra), Hon'ble Supreme
Court had taken note of certain relevant facts and found that the company no
longer fell within the ambit of sick industrial company. Therefore, the question
raised in appeal was found to be academic and redundant. But while deciding the
appeal, the Hon'ble Supreme Court found that in 1988, 24 acres of land owned by
the company was acquired for the purpose of building, maintenance, management
and operation of Second Vivekananda Bridge across river Hoogly and in the year
2003, provisional compensation was assessed at Rs. 21,28,21,000/- and on deposit
of the said amount, possession of the land was taken over. It was further found that
the award was passed on 30th January, 2006 and on account of further dispute
between the parties, the matter was referred to the sole arbitrator who had passed
the final award on 13th September, 2012 by awarding an additional compensation
package of Rs. 57,00,00,000/- along with interest which on computation would
amount to Rs. 50,00,00,000/-. On 09th November, 2012, a sum of Rs.
95,00,00,000/- was deposited by the National Highway Authority of India with the
Registrar of the High Court at Calcutta. Thus, it was found that the respondent
company had received or was entitled to receive a total sum of Rs. 170 crores on
account of compensation for acquisition of land. It was further found that on the
basis of the precise details of its liabilities even after meeting of its statutory and
contractual applications, the company would be left with surplus of nearly Rs.
50,00,00,000/- and would not be a sick company anymore. The observations of the
Hon'ble Supreme Court in the matter of Yash Deep Trexim (P) Ltd. (supra) in
this regard are as under:
24 APO/48/2020
"14. Having noted the broad features of the grievances raised in each
of these appeals we may now take note of certain connected facts on
the basis of which we will be required to decide the necessity and
expediency to adjudicate the core question arising in these appeals and
the other issues that have been sought to be agitated before us. It has
already been stated in the earlier part of this order that the respondent
Company is the owner of vast tracts of immovable property in and
around Kolkata which has, with the passage of time, appreciated in
value. Way back in the year 1988 an area of about 24 acres of land
owned by the Company was acquired for the purpose of building,
maintenance, management and operation of the second Vivekananda
Bridge across River Hoogly. In the year 2003 provisional
compensation was assessed at Rs 21,28,21,000 and on deposit of the
said amount possession of the land was taken over. The acquisition of
the land came to be challenged before the High Court and the said
challenge was also carried to this Court. The net result of the aforesaid
exercise(s) was an enhancement of the compensation initially by the
High Court to the extent of 30% and thereafter by this Court by
fictionally shifting the date of entitlement of compensation from the
date of acquisition to the date of taking over of possession.
15. An award dated 30-1-2006 was made in terms of the order of this
Court which had led to further disputes between the parties.
Eventually, all parties agreed to refer the matter to the sole arbitration
of a retired Chief Justice of this Court who by a final award dated 13-
9-2012 awarded an additional compensation package of Rs 57 crores
along with interest, which on computation, would amount to about Rs
50 crores. A sum of Rs 95 crores has been deposited by the National
Highways Authority of India with the Registrar of the Calcutta High
Court on 9-11-2012 in the account of the respondent Company. In this
manner the respondent Company has received/entitled to receive a
sum of nearly Rs 170 crores on account of compensation for
acquisition of the land. The respondent Company has clearly and
categorically and on the basis of the precise details of its liabilities has
contended that even after meeting all its statutory and contractual
25 APO/48/2020
obligations and liabilities it would still be left with a surplus of nearly
Rs 50 crores and, therefore, would not be a "sick company" any
more."
24. In the aforesaid background, the Hon'ble Supreme Court in Yash Deep
Trexim (P) Ltd. (supra) reached to the conclusion that the company is no longer a
sick company and held as under:
"19. In the present case the entitlement of the respondent Company to
receive a total amount of Rs 170 crores (approximately) by way of
acquisition compensation and the payment of Rs 95 crores by NHAI
which is presently lying in deposit with the Registrar of the Calcutta
High Court is not in dispute. That the respondent Company would be
left with a surplus of about Rs 50 crores after meeting all its losses and
liabilities is a common ground amongst all the contesting parties. The
rehabilitation scheme framed by the Board by its order dated 4-10-
1999 is yet to be implemented. In the aforesaid situation keeping in
view the object and scheme of the Act and the virtual consensus of the
contesting parties with regard to the present financial health of the
respondent Company it is clear that the Company can no longer fall
within the ambit of the expression "sick industrial company" as
defined in Section 3(1)(o) of the Act. Further applicability of SICA to
the respondent Company, therefore, does not arise.
20. If the respondent Company no longer falls within the ambit of a
"sick industrial company" as defined by Section 3(1)(o) of the Act and
the Act has ceased to apply to the Company and the rehabilitation
package worked out by the Board has not yet been implemented, the
question(s) arising in the present appeals have surely become
academic and redundant. If that be so, we do not see why we should
answer the said question(s) in the present group of appeals. Instead, in
the fitness of things, we should leave the said question(s) open for
determination in an appropriate case and as and when the occasion
would arise."
26 APO/48/2020
25. In respect of the issue of management of the company, in Yash Deep
Trexim (P) Ltd. (supra) it was directed that for the present, the management of
the company as on date would continue until further order, by holding as under:
"21. Insofar as the other issues, particularly, with regard to the
management of the Company is concerned we have already found that
none of the said issues arise from the order of the High Court under
appeal before us. Even otherwise, we will not be justified to go into
any of the said issues and express any opinion thereon inasmuch as
this Court exercising jurisdiction under Article 136 of the Constitution
is not the appropriate forum to adjudicate grievances/claims with
regard to the right of management of the affairs of the Company by
one group of shareholders or the other. It has been urged before us that
several contentious issues with regard to the rights of one group of
shareholders or the other to be in control of the management of the
Company had been raised and some of such claims are still pending
before the High Court. Coupled with the above is the pendency of
several other proceedings with regard to permanent stay of the
winding up of the Company. Taking into account all that has been
stated above we are of the view that it would be just, proper and
equitable to leave the contesting parties to pursue their remedies
before the High Court or such other forum as may be competent in
law. For the present, the management of the Company as on date will
continue until orders, if any, varying the current position are passed by
any forum competent in law. It is made clear that the above is a mere
working arrangement that we have considered appropriate for the
present and the same should not be understood as any expression of
opinion by us on the entitlement of any particular group of
shareholders to run and manage the affairs of the Company which
issue is left open."
26. Before the Company Court, several applications were filed and learned
Company Judge in the order dated 28th of April, 2014 observed that by virtue of
the winding up order, the proceedings have acquired representative character. This
27 APO/48/2020
order was subject matter of challenge before the Hon'ble Division Bench in ACO
38 of 2016 and connected matters. The Hon'ble Division Bench while passing the
order dated 14.08.2014 had expressed doubt about permanent stay and observed as
under:
"Such contentions of Mr. Sengupta, was refuted by the learned
Counsels appearing for different groups of interveners, i.e, the shareholder,
the workers union and the unsecured creditors, as according to them the
issue as to whether the winding up proceeding has been permanently stayed
or not is still an alive issue which is required to be resolved by the Company
Court.
Contradictory stand, taken by the parties against each other on the
issue of permanent stay of the winding up proceeding, leads us to investigate
deep into the matter to find out the present stage of the said winding up
proceeding. In this regard, it is worth mentioning here that apart from
mentioning that the Company is a going concern and the winding up
proceeding against the said company has been permanently stayed under
Section 466 of the Companies Act, 1956, by the Hon'ble Supreme Court in
the said judgment dated 24th May, 2006 passed in the Civil Appeals
No.4101-4103 of 2004, the order passed by the Company Court and/or any
other competent Court staying the winding up proceeding against the said
company permanently under Section 466 of the Companies Act, 1956, could
not be produced before this Court by the appellant/petitioner in spite of
repeated insistence of this Court. An order of permanent stay of the winding
up proceeding is a judicial order to be passed by the Company Court under
Section 466 of the Companies Act, 1956, which the appellant/petitioner has
failed to procedure before this Court."
"If the winding up proceeding was permanently stayed, then how the
affairs and the management of the said company were directed to be
managed by the Committee of Management and/or the Board of
Management and/or under the supervision of the Special Officer. Was the
Official Liquidator who was directed to take charge of the assets of the
company was ultimately discharged by the Company Court? When and in
which opportune moment the appellants took control over the management
28 APO/48/2020
of the said company? Whether exclusion of Chaitan Chowdhury and Ridh
Karan Rakecha from the Board of Directors was justified or not? Whether
the Committee of Management and/or Board of Management was ultimately
dissolved by the Court or not? Whether the Special Officer appointed by the
Court was discharged or not? Whether the company is still running its
business as per the revival scheme or not? Thus the ultimate question is: Is
the company still under liquidation? We do not find any answer to these
questions from the materials on record and without resolving these issues,
we cannot came to a definite conclusion as to whether the winding up
proceeding against the said company was permanently stayed or not."
"While passing the said order, it was recorded by the Company Court
that the said company was described as a company in liquidation as already
winding up order was passed by this Court and the fuller effect of that order
was yet to be examined. The parties accepted the said order. However, we
feel that there is a grey area on the issue as to whether the winding up
proceeding against the said company has been permanently stayed or not and
we feel that some further research is yet to be made to resolve the said
dispute. Such research is necessary to ascertain the right of the appellant to
manage the affairs of the said company as the Directors of the company
inasmuch as the management of the company cannot be controlled by the
Board of Directors of the company when the company is in liquidation. Thus
we hold that the appellants' right to withdraw the deposited money depends
upon the fate of such research. However, such research cannot be completed
without affidavits being exchanged between the parties. We do not want to
do the exercise as the Company Court has not yet decided these applications
finally, and if we do this exercise at this stage, the aggrieved party will lose a
forum of appeal for challenging our order on this issue.
Considering the amount of deposit which the appellants want to
withdraw, and the company's indebtness to its various creditors and the
quantum of its liability, coupled with the facts that even the workers have
not been paid their dues, we do not feel it safe to allow a particular group of
shareholders, who are described as interloper by the creditors, to withdraw
the money deposited with the Registrar, Original Side of this Court without
deciding the said issue finally, particularly when we find that the
29 APO/48/2020
appellant/applicant themselves have filed an application being C.A.No. 957
of 2010 praying for permanent stay of the company petition No.2 of 1987
which is yet to be decided finally. In the aforesaid context, we do not find
any illegality in the impugned order passed by the Learned Company Court
proposing to dispose of all the pending applications simultaneously."
27. The Hon'ble Division Bench with the aforesaid observation had affirmed the
order of the learned Single Judge.
28. Against this order, SLP (C) No. 2814-2815 of 2015 was preferred wherein,
Hon'ble Supreme Court by order dated 12th of March, 2015 granted leave and by a
reasoned order found that the proper remedy would be to dispose of all the pending
applications and directed the learned Company Judge to dispose of the pending
applications. The appeal was also disposed of by the Hon'ble Supreme Court
without interfering with the order of the Hon'ble Division Bench.
29. Hon'ble Supreme Court subsequently has passed the order in SLP (C) No.
___/2014 CC No. 16278 of 2014 in the case of Radheshyam Ajitsaria Vs.
Baranagore Jute Factory PLCE (in liquidation) and Others whereby the SLP
was permitted to be withdrawn with a request to the Company Judge to dispose of
the pending matters as expeditiously as possible preferably within a period of
three months. The Hon'ble Supreme Court in Civil Appeal No. 4298-4299/2017 in
the case of Baranagore Jute Factory PLC. Mazdoor Sangh (BMS) vs. Baranagore
Jute Factory PLC. Etc had also passed the order dated 30th August, 2017 directing
the Company Judge, not to entertain any fresh application in Company Petition No.
2/1987, without leave of Hon'ble Supreme Court. By this order, Company Judge
was directed to dispose of the company petition within four months.
30 APO/48/2020
30. Learned Company Judge by the order under challenge in this appeal has
disposed of various applications and has reached to the following conclusion:
(i) No terms and conditions were fixed In Re: Ajitsaria excepting that the
Company/BJF was treated as a going concern for which reason the workers
were denied access to Section 529A of the 1956 Act.
(ii) It cannot be said that the Company was intended not to function under the
supervision of Court.
(iii) Literally and classically following the letter and spirit of the law apropo the
present factual matrix, it is the Court, through successive appointment of
Committees of Management (CoMs), Joint Special Officers, the Official
Liquidator and the like has transformed the Company/BJF into an entity
custodia legis.
(iv) The Company/BJF continues to be monitored by the Court at various stages
through its CoMs, Joint Special Officers, the Official Liquidator.
(v) The sudden infusion of the compensation money by NHAI has turned the
balance-sheet of the Company from red to black. The Company's
performance per se has not been credited with the paper turn-around,
although the Company continues to claim the status of a going concern
which will be left with a cash surplus after pending debts/obligations are met
from out of the funds pumped in by NHAI.
(vi) Sum of Rs. 8 lacs only directed to be periodically deposited by the
Company to the Registry of this Court towards satisfaction of part of the
Company's dues, has remained largely unpaid till date.
31 APO/48/2020
(vii) About cut-off date the Company Judge found the argument to be more
deserving that the status of the creditors and/or other claimants to the dues
has acquired a representative character.
(viii) The creditors, workers, bankers, financial institutions, then and now can
be considered to be in queue for their dues up to the stage of their proximate
transactions with the Company at the time the Company was referred to the
BIFR.
(ix) The Company's Books of Accounts remain a mystery wrapped in an
enigma.
31. The Company Judge in the impugned order has recorded further findings
and has issued following directions:
(a) The Company Court continues to be in the position of custodia legis of the
Company/BJF.
(b) Ipso facto there is no permanent stay of winding up.
(c) The Company Judge appointed a three member Committee of Management
(CoM) and held it entitled to appoint an auditor to do complete audit, and to
hold consultation with professionals.
(d) The creditors, workers etc. are directed to submit claims to the CoM and
CoM is directed to quantify and prioritise the claims and submit a schedule
of payments.
(e) The cut-off date for filing claim before CoM is treated to be the period
when the Company was referred to BIFR.
32 APO/48/2020
(f) CP 2 of 1987 is kept alive formally on record to enable the Court to pass
appropriate and further orders after CoM places the recommendation before
the Company Court.
32. In the aforesaid factual background, now this Court is required to examine if
the order of learned Company Judge suffers from any illegality and also examine
the legal position and ascertain if the winding up proceedings have been
permanently stayed or a case is made out to permanently stay the winding up
proceedings.
33. It is worth noting that the order of the learned Company Judge under
challenge as also Registry Report dated 24th of August, 2018 reflect that initially
the record of C.P. 2 of 1987 could not be traced but subsequently the record of C.P.
2 of 1987 was traced out and reconstructed with the assistance of the parties.
34. This being an appeal against the order of the Company Judge it is required to
be decided in the light of the well-settled principles relating to scope of
interference by the appellate Court. If the view taken by the Company Judge is a
possible view then no interference in the order of learned Single Judge is required
merely because another view is possible. In similar circumstances in the matter of
Forbes & Company Ltd. and Ors. Vs. The Official Liquidator of the Hon'ble
Bombay High Court and Ors., 2013 (7) ALLMR 388, in a case where the
Company Judge had dismissed an application for permanent stay, while
considering appeal, the Division Bench of the Bombay High Court had held that:
"16. Now it is in this background that the court would have to consider
whether the exercise of the discretionary jurisdiction of the company court
under Section 466 has to be interfered with in appeal. At the outset, it must
be noted that this Court in appeal is not called upon to determine in the first
instance as to whether a case was made out for the exercise of the discretion
33 APO/48/2020
under Section 466 but whether the judgment of the learned Single Judge
would warrant interference in appeal, based on well settled principle of law
that the court in the exercise of its jurisdiction under Clause 15 of the Letters
Patent would not interfere with an order of the learned Single Judge even if
the learned Single Judge has taken a possible view. The judgment of the
learned Single Judge is, in our view, not merely a possible view to take but
the only correct view based on the facts and circumstances of the case."
35. The moot question in these appeals is if there is a permanent stay of winding
up proceedings. Rival submissions have been advanced by the learned counsel for
the parties on the observation of the Hon'ble Supreme Court about permanent stay
in the matter of Radheshyam Ajitsaria & Anr. (supra). Submission of Mr. Mitra,
learned Senior Counsel for the appellant, placing reliance upon the judgment of the
Hon'ble Supreme Court in the matter of S. Nagaraj (Dead) by LRs. And Others
vs. B.R. Vasudeva Murthy and Others [(2010) 3 SCC 353] is to the effect that
even if the judgment of the Hon'ble Supreme Court is per incuriam, bar of res
judicata operates and that once the Hon'ble Supreme Court has held that there is
permanent stay of the winding up proceedings, then even if the said observation is
held to be obiter and is per incuriam, the order would be treated as final and
binding. Opposing the submission, learned Counsel for the other side have placed
reliance upon the judgments of the Hon'ble Supreme Court in the matter of Dadu
Dayalu Mahasabha, Jaipur (Trust) vs. Mahant Ram Niwas and Another
reported in (2008) 11 SCC 753, Vishal N. Kalsaria vs. Bank of India and
Others reported in (2016) 3 SCC 762 and Union of India and Another vs. Pfizer
Limited and Others reported in (2018) 2 SCC 39 in support of the submission
that the observation made by the Hon'ble Supreme Court about permanent stay of
winding up proceedings is not binding because it was not an issue before the
Hon'ble Supreme Court.
34 APO/48/2020
36. After perusing the judgment of the Hon'ble Supreme Court in the matter of
Radheshyam Ajitsaria & Anr. (supra), we find that in paragraph 34 of the
judgment while formulating the questions of law for determination, Hon'ble
Supreme Court had not formulated any separate question of law relating to
permanent stay, but in the facts of the case there was occasion to examine this
aspect of the matter, therefore, the Hon'ble Supreme Court in paragraph 46 of the
judgment had observed that the winding up proceedings were permanently stayed
under Section 466 of the Act. The fact that no order of permanent stay was passed
by the Company Judge, was not brought to the notice of the Hon'ble Supreme
Court. Subsequently, the Division Bench of this Court by order dated 14th of
August, 2014 in ACO 38 of 2016 taking note of the judgment of the Hon'ble
Supreme Court in the case of Radheshyam Ajitsaria & Anr. (supra) had
expressed doubt about the said observation of the Hon'ble Supreme Court and had
noted that there was a grey area on the issue as to whether the winding up
proceedings of the company have been permanently stayed or not. This order of
the Division Bench was the subject matter of challenge before the Hon'ble
Supreme Court in SLP (C) No. 2814-2815 of 2015. Nothing has been pointed out
to show that the above observation of the Division Bench of this Court was
interfered with or set aside by the Hon'ble Supreme Court in the appeal. Hence, the
issue relating to permanent stay is now required to be dealt with by this Court by
examining the factual and legal position in this regard.
37. Section 466 of the Act deals with power of tribunal to stay winding up and
provides as under:
"466. Power of Court to stay winding up.-(1) The Court may at any
time after making a winding up order, on the application either of the
Official Liquidator or of any creditor or contributory, and on proof to the
35 APO/48/2020
satisfaction of the Court that all proceedings in relation to the winding up
ought to be stayed, make an order staying the proceedings, either altogether
or for a limited time, on such terms and conditions as the Court thinks fit.
(2) On any application under this section, the Court may, before
making an order, require the Official Liquidator to furnish to the Court a
report with respect to any facts or matters which are in his opinion relevant
to the application.
(3) A copy of every order made under this section shall forthwith be
forwarded by the company, or otherwise as may be prescribed, to the
Registrar, who shall make a minute of the order in his books relating to the
company."
38. A bare reading of the said Section reveals that following two conditions are
required to be satisfied for bringing an order of permanent stay of winding up in
existence:
(i) filing of an application either of the Official Liquidator or of any
creditor or contributory for stay of winding up proceedings.
(ii) proof to the satisfaction of the Court that all proceedings in relation to
the winding up ought to be stayed.
39. If the above two conditions are satisfied, the Company Judge has the
discretion to stay the winding up proceedings, either altogether or for a limited
time and impose appropriate terms and conditions. A copy of the order of the stay
is required to be forwarded to the Registrar forthwith who is required to make a
minute of the order in his books relating to the company.
40. In the present case, applications for permanent stay of winding up
proceedings being CA 191 of 2002 and CA 186 of 2001 are pending. Proof to the
36 APO/48/2020
satisfaction of the Court as required by Section 466 is yet to be recorded by the
Company Judge.
41. It is worth noting that Section 466(1) does not use the phrase "permanent
stay" but the expression "order staying the proceedings altogether" has the effect
of permanent stay of proceedings.
42. The Division Bench of Bombay High Court has considered the scope of
Section 466 of the Act in the matter of Forbes & Company Ltd. and Ors.
(supra) in a case where the Company Judge had dismissed the application for
permanent stay of the proceedings under Section 466 of the Act, Hon'ble Justice
Dr. D. Y. Chandrachud (as he then was) taking note of the legal position on the
issue and after considering Section 466 of the Act has held as under:
"11. Sub-section 1 of Section 466 empowers the Company court to stay the
proceedings in winding up either altogether or for a limited time on such
terms and conditions as it thinks fit. Such an order can be passed on the
application either of the Official Liquidator or of any creditor or
contributory. The fundamental requirement of Section 466(1), is that the
court may do so "on proof to the satisfaction of the court that all
proceedings in relation to the winding up ought to be stayed." Section
466(1) confers a discretion on the court and not a mandate. The discretion
has to be exercised on satisfaction that stay of the proceedings in relation to
winding up ought to be granted. The legislature has carefully used the
expressions "on proof to the satisfaction" and "ought to be stayed". Before
the court grants a stay, the statutory requirement is that there must be proof
which is brought before the court on the basis of which it is satisfied that
the proceedings ought to be stayed.
12. The language of Section 466 of the Companies Act, 1956 has been
interpreted, as we shall indicate, by courts in India having due regard to the
37 APO/48/2020
corresponding principles under the provisions of the English Companies
Act. An early decision on the subject in the UK was a judgment of Lord
Esher, M.R. speaking for the Court of Appeal in Re Flatau 2. The judgment
of the Court of Appeal followed an earlier decision in re Hester 3 which
had laid down the rules for a rescission of a receiving order in bankruptcy.
In that context, Lord Esher had held as follows:
18-A. In the Court of Appeal, Lord Esher, M.R., stated (p.639):
Although the consent of all the creditors has been obtained, the
Court will still consider whether what they have agreed to is for
the benefit of the creditors as a whole. The Court has gone still
further, and, I think rightly so, and has said that under the
present Bankruptcy Act it will consider not only whether what
is proposed is for the benefit of the creditors, but also whether it
is condusive or detrimental to commercial morality and to the
interests of the public at large; and they will take into
consideration the position of the bankrupt with regard to his
creditors, and see whether what is proposed will not place his
future creditors, who must come into existence immediately, in
a position of imminent danger. The Court has said this before,
and I adhere to it now.
Fry, L.J., observed (at p. 641):
We are not only bound to regard the interests of the creditors
themselves, who are sometimes careless of their best interests,
but we have a duty with regard to the commercial morality of
the country.
(emphasis supplied)
The same principle was followed in the subsequent decision in Flatau by
Lord Esher, M.R. while holding that even though the present creditors are
fully satisfied and are entirely indemnified, the court must yet consider as to
whether its jurisdiction should be exercised. This principle was subsequently
followed in a judgment of Buckley J. in re Telescriptor Syndicate Ltd.4
Buckley, J held as follows :
I have here to see whether it is proved to my satisfaction that all
proceedings in relation to this winding-up ought to be stayed. I
38 APO/48/2020
decline to say that I am satisfied as to that by the mere fact that since
the winding-up order was made the assent of all the creditors and of a
large majority of shareholders has been obtained.
In a judgment of more recent origin in the UK, Mergarry, J. in Re Calgary
and Edmonton Land Co.Ltd. (In Liquidation), held as follows :
Under Section 256 itself the court
may ... on proof to the satisfaction of the court that all
proceedings in relation to the winding up ought to be stayed"
make an order for the stay "on such terms and conditions as the
court thinks fit.
Quite apart from any authority (and I may mention In re
Telescriptor Syndicate Ltd. [1903] 2 Ch. 174) this language
seems to me to make it abundantly clear that the jurisdiction is
discretionary, and that it lies on those who seek a stay to make
out a sufficient case for it. In particular, the words "satisfied,"
"just and beneficial," "satisfaction of the court" and "ought to be
stayed" seem to me to indicate that the applicant for a stay must
make out a case that carries conviction.
(emphasis supplied)
13. In an early decision of the Calcutta High court in the matter of East
India Cotton Mills Ltd., Justice S.R. Das (as the learned Judge then was
adverted to the position in English law as summarised in Halsburry's Law of
England, thus :
In the exercise of its jurisdiction to stay, the Court, so far as possible,
acts upon the principles applicable in exercising jurisdiction to
rescind a receiving order or annul an adjudication in bankruptcy
against an individual. The Court refuses, therefore, to act upon the
mere assent of the creditors in the matter, and considers not only
whether what is proposed is for the benefit of the creditors, but also
whether the stay will be conducive or detrimental to commercial
morality and to the interests of the public at large. In particular, the
Court will have regard to the following facts; That directors have not
complied with their statutory duties as to giving information to the
39 APO/48/2020
official receiver or furnishing a statement of the affairs; that there has
been an undisclosed agreement between the promoter and the vendor
to the company as to the participation by the former in fully paid up
shares forming the consideration for the purchase of property by the
company on its formation; that the promoter has made gifts of fully
paid up shares to the directors, that there are other matters connected
with the promotion, formation, or failure of the company or the
conduct of its business or affairs, which appear to the Court to
require investigation. The same principles are apparently applicable
whether the company has or has not invited the public to subscribe
for its shares except, possibly, in the case of a private company,
where all the shareholders have full knowledge of what has been
done.
The Calcutta High Court also proceeded on the basis of the law laid down in
re Telescriptor Syndicate Ltd. (supra) and in re Hester (supra).
14. The effect of an order of stay under Section 466 is to place "the order of
winding up in a state of suspended animation" as held by the judgment of the
Supreme Court in Sudarsan Chits (I) Ltd. vs. G. Sukumaran Pillai and others
MANU/SC/0037/1984: AIR 1984 SC 1579 at para 13 as follows :
When winding up order is kept in abeyance it is in a state of
suspended animation. The fact that the Appellate Bench directed that
pending the implementation of the scheme as sanctioned by the High
Court, the winding up order will be kept in abeyance itself without
anything more shows that the order was neither cancelled nor
recalled nor revoked nor set aside. It continued to exist but was
inoperative.
In other words, despite the grant of the stay, order of winding up continues
to exist but is rendered inoperative."
43. The Single Bench of this Court in the case of Mahabir Prasad Agarwalla
and Ors. vs. Ashkaran Chattarsingh and Ors., 85 CWN 557 has summarized
the principles for exercising the discretion under Section 466 as follows:
40 APO/48/2020
"28. Therefore, from the above principles which has been summarised in
different authorities and the decision referred to hereinbelow it appears that
the discretion for stay under section 466 can only be exercised by the Court
(1) if the Court is satisfied on the materials before it that the application is
bonafide, (2) the Court would be guided by the principles and definitely
come to the finding that the principles are applicable to the facts of a
particular case, (3) mere consent of all the creditors for stay of winding up is
not enough, (4) that offer to pay in full or make satisfactory provisions for
the payment of the creditors in not enough, (5) court will consider the
interest of commercial morality and not merely the wishes of the creditors
and contributories, (6) Court will refuse an order if there is evidence of
misfeasance or of irregularity demanding investigation, (7) a firm and
accepted proposal for satisfying all the creditors must be before the Court
with material particulars, (8) the jurisdiction for stay can be used only to
allow in proper circumstances a resumption of the business of the company,
(9) the Court is to consider whether the proposal for revival of the company
is for benefit of the creditor but also whether the stay will be conducive or
detrimental to the commercial morality and to the interest of the public at
large, (10) before making any order Court must see whether the Ex-directors
have complied with their statutory duties as to giving information to the
Official Liquidator by furnishing the statement of affairs, (11) and any other
relevant fact for granting or not granting the stay having regard to the
peculiar facts of a particular case."
44. The above judgment has been duly noted by the Division Bench of Calcutta
High Court in the matter of Bank of India vs. Official Liquidator and Others
reported in 1999 (1) Cal LT 322.
45. So far as the effect of order of permanent stay of winding up proceedings is
concerned, in the case of Sudarshan Chits (I) Ltd. vs. O. Sukumaran Pillai,
(1984) 4 SCC 657 Hon'ble Supreme Court has held in para 14 that when winding
up order is kept in abeyance it is in the state of suspended animation meaning
41 APO/48/2020
thereby it was effectively subsisting but inoperative for the time being. In this
regard it is held that:
"14. However, the narrow question which is required to be considered
in this appeal is: whether the winding-up proceedings were pending or had
come to an end when the Appellate Bench froze the winding-up order by
keeping it in abeyance? Let it be made at once clear that the winding-up
order made by the learned Company Judge in respect of the appellant
Company has neither been quashed, set aside, cancelled, revoked nor
recalled. On the contrary after directing that the winding-up order shall be
held in abeyance, the Appellate Bench directed that Official Liquidator shall
continue to act as Provisional Liquidator as provided by Section 450 and that
itself is a stage in the winding-up proceedings. When winding-up order is
kept in abeyance it is in a state of suspended animation. The fact that the
Appellate Bench directed that pending the implementation of the scheme as
sanctioned by the High Court, the winding-up order will be kept in abeyance
itself without anything more shows that the order was neither cancelled nor
recalled nor revoked nor set aside. It continued to exist but was inoperative.
Any default on the part of the Company in carrying out its obligation under
the scheme by itself without anything more would revive the winding-up
order. Therefore, the winding-up order was effectively subsisting but
inoperative for the time being. Having all the potentiality of being
rejuvenated or being brought back to life.
15. Now if the winding-up order was merely held in abeyance i.e. it
was not operative for the time being, but it had not ceased to exist, the
winding-up proceedings are in fact pending and the court which made the
winding-up order would be the court which is winding up the Company. It is
now well-settled that a winding-up order once made can be revoked or
recalled but till it is revoked or recalled it continues to subsist. That is the
situation in this case. If the winding-up order is subsisting the court which
made that order or the court which kept it in abeyance will have jurisdiction
to give necessary directions to the Provisional Liquidator to take recourse to
Section 446(2)."
42 APO/48/2020
46. The Division Bench of this Court in the case of Asset Reconstruction
Company (India) Ltd. vs. Bengal Shelter Housing Development Limited,
2017(3) CHN (CAL) 192 has held that Company petitions even when dismissed
on merits are traditionally not recorded or disposed of but permanently stayed.
"11. A note by way of a post-script: Company petitions, even when
dismissed on merits are traditionally not recorded as dismissed or disposed
of; but are permanently stayed. Dismissal is recorded only when the petition
is not maintainable or is barred by law. The effect may not be any different
from recording a disposal, but there is a history of more than a century that
goes behind such recording, which must be respected."
47. Calcutta High Court in the matter of In Re: Prudential Capital Markets
Ltd., (2008) 1 CompLJ 314 (Cal) has held that even if there is an order of stay, it
is not a permanent stay without effect of completely obliterating the order of
winding up, so the order of stay keeps the order of winding up in abeyance or
suspended animation but does not altogether wipe it off.
48. It is also not in dispute that none of the following steps which are required to
be taken after passing of the winding up order, have been taken in the present
case:-
a. Under Section 456 of the Companies Act, 1956, copy of winding up
order is required to be filed before the Registrar.
b. Under Section 456 of the Act, the Official Liquidator is to take into
his custody or under his control all the assets and business of the company.
c. Under Sections 454 and 455 of the Act, the statement of affairs is
required to be filed within stipulated time from the date of winding up order
and the Official Liquidator is required to file the preliminary report.
43 APO/48/2020
d. The priorities are required to be fixed as per Section 530 of the Act for
preferential payments. Under Rule 139 of Company (Court) Rules, 1959, the
Official Liquidator is required to take out summons with regard to statement
of the list of contributories and creditors.
e. In terms of Rules 147 and 148, the Official Liquidator is required to
fix a date for proving debt and publish an advertisement in the prescribed
form inviting creditors to prove their claim.
f. In terms of Section 547 of the Act, all requisite documents pertaining
to the company are required to contain the statement that the company is
being wound up.
g. Under Section 551 of the Act read with Rule 311 and Form 48, in case
the winding up of a company is not concluded within one year after its
announcement, the Official Liquidator is required to file the annual
statement in the prescribed form.
h. In terms of Rule 286, the Official Liquidator is required to maintain
the prescribed registers and books of various natures. After the affairs of the
company are completely wound up or other conditions prescribed are
satisfied, the Official Liquidator is to file an application under Section 481
of the Act for dissolution.
i. No steps have been taken by the Official Liquidator so far to sell any
of the assets of the company.
49. It is not a case of any of the parties before us that any steps as mentioned
above or as required under the Act or Rules after passing of the winding up order,
for winding up of the company have been taken in the present case. Thus, so far as
44 APO/48/2020
the winding up proceedings are concerned, they are at the same stage in which they
were on the date of passing of the winding up order, about 35 years back as on 28th
of October, 1987.
50. The fact that Official Liquidator is not in possession of the assets of the
company in liquidation, is clearly mentioned in the affidavit of the Official
Liquidator dated 26th of February, 2015 filed before the Hon'ble Supreme Court,
relevant part of which is quoted as under:
"...4. That in terms of the orders passed by the Hon'ble High Court at
Calcutta from time to time on 26.12.1994 the Official Liquidator
handed over all the assets and properties of the company to the then
Committee of Management appointed by the Hon'ble High Court at
Calcutta. A godown space which was given on rent to the Central
Warehousing Corporation was kept in possession under the office of
the Official Liquidator and the Official Liquidator continued to
receive the rent from the Central Warehousing Corporation. A copy
of the minutes of handing over the properties dated 26.12.1994 is
annexed hereto and marked as "A".
5. It is stated that after the stay of the winding up order by the Hon'ble
Court, the company was running as a going concern under different
Committees of Managements appointed initially Management
Committee appointed by the Board for Industrial and Financial
Reconstruction (BIFR) on a sanctioned Scheme propounded by the
IDBI, the Operating Agency.
7. That a writ proceedings was filed before the Hon'ble Calcutta High
Court challenging the sanctioned approved by BIFR. In the said
proceedings the Hon'ble High Court of Calcutta quashed the reference
of the company to BIFR. Thereupon the Company was running as a
going concern under a Committee of Management appointed by the
Hon'ble Division Bench vide interim order dated 01.04.2011. This
Committee superseded all other Committees appointed earlier. The
45 APO/48/2020
said Interim Order merged into the final order of the Hon'ble Calcutta
High Court dated 19.10.2012 and the Committee appointed by the
High Court seized from 10.12.2012.
8. It is submitted that since the year 1994, other than one godown,
possession of which was kept inadvertently in the custody of the
Official above godown space being let out to CWC in their possession
and was collecting rent for payment of various establishment charges
and other expenses relating to the said company.
9. I state that there was no other activity in the office of the Official
Liquidator relating to the said company as the winding up of the
Company has been permanently stayed and the company was and is
running as a going concern. The order of winding up of the High
Court at Calcutta dated 19.12.2002 was ultimately stayed by the order
Division Bench dated 18.11.04. The permanent stay of the winding up
was also being observed by the Hon'ble Supreme Court in its order
dated 24.05.2006. Accordingly, the Official Liquidator on 16th
January, 2012, handed over the said Godown Space. Copies of the
order dated 01.04.2011, 18.11.2004, 24.05.2006 and the said letter of
handing over dated 16.01.2012 are annexed herewith marked as "B".
10. I state that there is no claim of any creditors in the books of the office
of the Official Liquidator, a statement of accounts comprising of
receipts and payments made on account of the company since winding
up till date was prepared and a sum of Rs. 46,00,000/- being the
balance in hand with this office on account of the company was also
handed over to the said company by way of a cheque in favour of the
company on 8th May, 2012.
11. I state that presently the Official Liquidator is in no way concerned
with the Baranagar Jute Factory PLC, which is now running and
operating independently as a going concern. This office has no other
Books, Accounts and documents which is left to be handed over to the
Respondent No. 1 company."
46 APO/48/2020
51. In the present case, it is also worth noting that the Hon'ble Supreme Court in
the order dated 30th of November, 1988 had opined that the scheme supported by
the workers and unsecured creditors of Raj Kumar Nemani, be accepted and a
detailed scheme on that basis be formulated and be implemented as soon as
possible, therefore, the Company Judge was directed to work out the scheme. The
Record further reflects that the Company Judge had approved the scheme dated
16.06.1989. Though the Company Judge by order dated 16.12.1991 had cancelled
the scheme observing that the scheme had totally failed but the Division Bench in
appeal had passed the interim order dated 18.12.1981 staying the order of the
Company Judge dated 16.12.1991. In S.L.P.(C) No. 6505 of 1992 by the order
dated 22.3.1993, Hon'ble Supreme Court had directed the Division Bench to
dispose of the appeal by observing that the stay of operation of the order of the
learned Single Judge dated 16th December, 1991 will continue. The judgment of
the Hon'ble Supreme Court in the matter of Radheshyam Ajitsaria & Anr.
(supra) clearly mentions that the Company is functioning as a going concern on
and from the date of implementation of the scheme of arrangement as formulated
by the High Court as well as the Supreme Court.
52. The Division Bench of this Court headed by Hon'ble Justice Ruma Pal (as
she then was) by the order dated 07th of September, 1998 passed in T 1013 of 1998
in APOT 523 of 1998, Abhudya Trading Limited has held that the only provision
under which the scheme could be propounded once an order of winding up has
been passed, is for revival of company under Section 391 of the Act. In this regard
it has been held that:
"The only provision under which a scheme could be propounded once
an order for winding up has been passed is for revival of the company under
Section 391 of the Act. A scheme under Section 391 envisages a
47 APO/48/2020
compromise or arrangement (a) between the company and its creditors or
any class of them or (b) between the company and its members of any class
of them. In such an event 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
before approving the scheme. In this case it is neither the company nor the
creditor nor any member of the company which has proposed either by
Maxlife either with any of the creditors of the company whether secured or
unsecured or the shareholders of the company. Maxlife is a total stranger to
the company."
53. Since in this case scheme of revival has been framed and committee of
management has been appointed to run the BJF, therefore, it has been submitted
that stay is operating under Section 391 of the Act. Section 391 of the Act deals
with power to compromise and make arrangements with creditors and members
and provides for making arrangements with the creditors and members and
empowers the Company Court to sanction arrangements. Sub-section 6 of Section
391 empowers the Company Court to grant stay. In the matter of Meghal Homes
(P) Ltd. vs. Shree Niwas Girni K.K. Samiti and Others [(2007) 7 SCC 753] the
Hon'ble Suprme Court has considered the scope of Sections 391 and 466 of the
Act and has held that there is no difficulty in reconciling the need to satisfy the
requirement of both Sections 391 to 394-A and Section 466 of the Companies Act.
There is no incongruity in looking aspects of public interest, commercial morality
and the bona fide intention to revive a company while considering whether a
compromise or arrangement put forward in terms of Section 391 of the Companies
Act should be accepted or not. The Judgment in the matter of Meghal Homes (P)
Ltd. (supra) has been noted with approval by the Hon'ble Supreme Court in the
matter of Arun Kumar Jagatramka vs. Jindal Steel and Power Limited and
48 APO/48/2020
Another [(2021) 7 SCC 474]. Hon'ble Supreme Court in the matter of M/s. J.K.
(Bombay) Private Ltd. vs. M/s. New Kaiser-I-Hind Spinning and Weaving Co.
Ltd. [AIR 1970 SC 1041] has held that the scheme of payment to creditors has
statutory force and is binding on creditors and share holders. So long as company
is carrying out the scheme no winding up order can be passed. The Hon'ble
Supreme Court in this regard has held that:
"35. .............. The principle is that a scheme sanctioned by the court does
not operate as a mere agreement between the parties: it becomes binding on
the Company, the creditors and the shareholders and the statutory force, and
therefore, the joint-debtor could not invoke the principle of accord and
satisfaction. By virtue of the provisions of Section 391 of the Act, a scheme
is statutorily binding even on creditors and shareholders who dismanted
from or opposed to its being sanctioned. It has statutory force in that sense
and therefore cannot be altered except with the sanction of the Court even if
the shareholders and the creditors acquiesce in such alteration, (cf. 1938-4
All ER 337) (supra). The effect of the scheme is "to supply by recourse to
the procedure thereby prescribed the absence of that individual agreement by
every member of the class to be bound by the scheme which would
otherwise be necessary to give it validity". (Palmer's Company Law, 20th
Edn. 664) Sub-Section (2) of Section 391 of the Act allows the decision of
the majority prescribed therein to bind the minority of creditors and
shareholders and it is for that reason that a scheme is said to have statutory
operation cannot be varied by the shareholders or the creditors unless such
variation is sanctioned by the court. The effect, therefore, of a scheme
between a company and its creditors is that so long as it is carried out by the
company by regular payment in terms of the scheme a creditor who is bound
by it cannot maintain a winding-up petition. But if the company commits a
default, there is a debt presently due by the company and a petition for
winding-up can be sustained at the instance of a creditor. The scheme,
however, does not have the effect of creating a new debt; it simply makes
the original debt payable in the manner and to the extent provided in the
scheme. The proposition that a winding-up order can only be passed after
49 APO/48/2020
compelling the company to complete the rights which are still incomplete is
not borne out by the decisions relied on by Mr Sen."
54. Hon'ble Supreme Court in the matter of S.K. Gupta and Another vs. P.
Jain and another, AIR 1979 SC 734 has reiterated that the scheme when
sanctioned does not merely operates as an agreement between the parties but has
statutory force and is binding not only on Company but even dissenting creditors
or members as the case may be.
55. This court cannot lose sight of the settled legal position that winding up
should be resorted to as the last resort after exhausting all remedies. In the facts of
this case and especially considering the fact that the Company is operating as a
going concern, it is not in the interest of justice to direct winding up of the
company. It is worth noting that a large sum of Rs. 170 crores is lying in deposit
with the Registrar of this Court and possibility of some of the contesting parties
having an eye on it cannot be ruled out. Hence, every effort is required to be made
to ensure the amount is utilized for rightful purposes.
56. Thus, on the basis of the aforesaid analysis and after perusal of the record,
we find that:
a. The winding up order passed by the Company Judge on 28th of
October, 1987 was stayed by the Division Bench by order dated 22nd of
September, 1988 for a period of 6 months. Thereafter, there is no material
available on record indicating that the order of stay was extended by the
Division Bench any further.
b. On staying the winding up order for six months by order dated 22nd of
September, 1988, the Division Bench had appointed Joint Special Officer
and Committee of Management and had directed the Committee of
Management to run the mill under the Joint Special Officer.
50 APO/48/2020
c. There is no order of the Company Court or the Division Bench of this
Court in appeal, granting permanent stay of winding up proceedings in
terms of Section 466 of the Companies Act, 1956 or granting stay in terms
of Section 391of the Act.
d. There is no consideration earlier either by the Company Judge or the
Division Bench or any other Court of the principles which have been laid
down for grant of permanent stay by this Court in the case of Mahabir
Prasad Agarwalla and Ors. (supra) and also the Division Bench of the
Bombay High Court in the case of Forbes & Company Ltd. and Ors.
(supra).
e. Though the winding up order was passed by the Company Judge
dated 28th of October, 1987 but thereafter almost 35 years have passed but
no steps in pursuance to the winding up order have been taken till now in
the company petition to wind up the company.
f. The Official Liquidator is not in possession of any of the assets of the
company and has also not taken any of the steps which are required to be
taken by the Official Liquidator under the Companies Act, 1956 on passing
the winding up order. No asset of the BJF has been sold in winding up
proceedings till now though about 35 years have passed after the order of
winding up.
g. In the present case, as already noted above, the scheme of
arrangement as formulated by the High Court and approved by the Hon'ble
Supreme Court is operating and the company is functioning as a going
concern. The Hon'ble Supreme Court on 30th of November, 1988 had
opined that the scheme supported by the workers and unsecured creditors
51 APO/48/2020
of Raj Kumar Nemani, be accepted and a detailed scheme on that basis be
formulated and implemented as soon as possible and thereafter the
Company Judge had approved the scheme on 16.6.1989 and the judgment
of the Hon'ble Supreme Court in the case of Radheshyam Ajitsaria &
Anr. (supra) indicates that the scheme, arrangement so formulated and
approved has been implemented and the Company is running as a going
concern.
h. We also find that the company is a going concern and is no longer a
sick company after receiving the compensation amount from NHAI as has
already been observed by the Hon'ble Supreme Court in the matter of Yash
Deep Trexim Private Limited (supra). It has also been noted by the
Hon'ble Supreme Court in the case of Yash Deep Trexim Private
Limited (supra) that even after meeting its statutory and contractual
obligations and liabilities the company would be left with a surplus of
nearly 50 crores.
57. The aforesaid fact situation clearly indicates that for all practical purposes
there is permanent stay of the winding up proceedings and only a formal order of
permanent stay is required to be passed by Company Judge after obtaining audit
report and recording a finding relating to satisfaction of settled conditions for such
order.
58. The Company Judge is right in observing that the Company/BJF continues
to be monitored by the Court at various stages through its CoMs, Joint Officers etc.
In the facts of the case, we also find no error in the conclusion of the learned
Company Judge about the transformation of BJF into an entity custodia legis.
However, we are unable to concur with the conclusion of the learned Company
52 APO/48/2020
Judge about the cut-off date for creditors, workers, financial institutions and
bankers as the period when the company was referred to BIFR for rehabilitation
scheme. Rule 154 of the Company (Court) Rules provides estimated value of all
debts and claims against the company as far as possible according to the value
thereof at the date of the order of the winding up of the Company. Hence, 28th of
October, 1987 should be treated to be the cut-off date for such claim which is the
date of passing of the order of the winding up in the present case. Since, large sum
is in deposit with the Registrar of this Court, therefore, we are of the view that
claim of creditor on the cut-off date as also of the worker as per direction of the
Hon'ble Supreme Court in the order dated 14.03.0221 can be settled with no
difficulty and, therefore, there will be no impediment for the learned Company
Judge to pass formal order of permanent stay. Though, the Company Judge had
constituted the Committee of Management consisting of three members to
ascertain the financial health of the company, to quantify and prioritise the
respective claims of the creditors, workers etc. but all the three members of the
Committee of Management have categorically stated before this Court that they do
not wish to continue in the Committee of Management. Therefore, the order of the
learned Company Judge in respect of constitution of three members Committee of
Management is set aside and members of the Committee are discharged.
59. Hence, in view of the above analysis, we dispose of the appeal by modifying
the direction of the learned Company Judge and directing as under:
i. Hon'ble Justice Bhaskar Bhattacharya, former Chief Justice of
Gujarat High Court is appointed as a one member Committee to get
the accounts of the company audited through any reputed chartered
accountant firm with the approval of the Company Judge and to take
53 APO/48/2020
inventory of all the movable and immovable assets of the company in
liquidation with the help of the Official Liquidator or any other
competent authority and to invite the claims of creditors, workers etc.
upto the cut-off date and to quantify the same with the help of the
chartered accountant and Official Liquidator.
ii. The above exercise will be completed and the audited reports,
inventory of movable and immovable assets of the company as also
the ascertained claims will be placed before the Company Judge by
the above one member Committee within three months hence.
iii. On receipt of the same and after taking into account the amount
which is already kept in deposit before the Registrar of this Court as
also the observation of the Hon'ble Supreme Court in the judgments
noted above as also of this Court in this order about the circumstances
relating to permanent stay, the Company Judge will settle the claims
upto the cut-off date and pass appropriate order for permanent stay of
winding up proceedings in accordance with law.
iv. All other claimants, including the PF authorities, having their
claims after the cut-off date will be at liberty to approach the
competent Forum/take action in accordance with law.
v. On passing the order of permanent stay of winding up
proceedings, the parties will be at liberty to approach NCLT or any
other appropriate forum for settling their dispute relating to right of
management and issue of mismanagement, oppression, etc. in
accordance with law.
54 APO/48/2020
vi. This Court has the responsibility to ensure that the amount in
deposit with the Registrar of this Court does not go to the wrong
hands, therefore, it is directed that on passing the order of permanent
stay by the Company Judge, the amount in deposit with the Registrar
will not be released to any of the parties for six months or till such
further time as the Company Judge deems proper from the date of the
order of the Company Judge, to enable the parties to approach the
competent Court/Forum for necessary orders about their entitlement.
vii. The one member Committee with the help of the Official
Liquidator will also indentify the workers or their legal heirs entitled
to receive their dues in compliance of the order of the Hon'ble
Supreme Court dated 24.03.2021 in SLP (C) No. 11476/2020 and will
quantify the amount and submit the report to the Company Judge, who
after approval of the same will pass an appropriate order for release of
requisite amount in deposit with Registrar to the one member
Committee and will ensure its disbursement to workers or their legal
representatives.
viii. We also direct that till the aforesaid exercise is completed by
the learned Company Judge, the assets of the company will not be sold
or encumbered with.
ix. The Official Liquidator is directed to extend all possible
cooperation and help to the one member Committee appointed by this
Court and also provide secretarial support.
x. The Hon'ble Retired Chief Justice appointed as one member
Committee is entitled to receive the tentative honorarium of Rs. 2 lacs
55 APO/48/2020
at this stage from the funds which are already with the Registrar of
this Court. This will not preclude the Company Judge from passing
any further order for additional honorarium to the one member
Committee.
xi. In the above circumstances, the prayer for withdrawal of the
company petition cannot be allowed at this stage. However, the
applications for withdrawal of the company petition are kept pending
which can be pressed at the appropriate stage if need so arises.
60. The appeal and pending applications in these appeals are accordingly
disposed of.
(PRAKASH SHRIVASTAVA)
CHIEF JUSTICE
(SHAMPA SARKAR)
JUDGE
Later,
After the judgment was pronounced, learned counsels for some of the parties
have made a prayer for stay of the judgment.
We find no ground to accept the said prayer. Accordingly, the prayer is
rejected.
(PRAKASH SHRIVASTAVA)
CHIEF JUSTICE
(SHAMPA SARKAR)
JUDGE
Kolkata
05.08.2022
___________
PA (RB/SS)
(A.F.R./ N.A.F.R)
