Varsha Spinning Mills Ltd. vs Unknown
1999 Latest Caselaw 1024 Del

ORDER

Dalveer Bhandari, J.

1. The Registrar of the Board of Industrial & Financial Reconstruction, Deptt. of Economic Affairs, Ministry of Finance, New Delhi has sent a communication to this Court that having conducted an enquiry under Section 16 of the Sick Industrial Companies (Special Provisions) Act, 1985 in accordance with the procedure laid down in the said Act, the Bench of the Board for Industrial and Financial Reconstruction (in short BIFR) has recorded its opinion under Section 20(1) of the said Act that it is just and equitable that M/s. Varsha Spinning Mills Ltd., be wound up and the matter be referred to this Court for opinion and for further action in accordance with law. It may be pertinent to mention that on 25.11.97, the RIFR directed the promoters to renegotiate the one time settlement (for short O.I.S.) with the IDBI. They arrived at a negotiated settlement and the promoters a directed to deposit a sum of Rs.1 crore in an interest bearing 'No Lien A/c' with IDBI in the Company's name within two weeks. The BIFR further observed that if the Company/present promoters deposits Rs.1 crore as aforementioned, in that event the Bench would formulate and circulate a draft scheme for the rehabilitation of the Company. The IDBI, Operating Agency, has reported on 12.11.97 that the promoters of the Company have neither deposited Rs.1 crore with the IDBI in 'No Lien A/c' nor have they submitted revival/OTS proposal. The Bench concluded that the promoters are neither serious in rehabilitating the company nor resourceful enough to mobilise the funds required for rehabilitation. As such, there is no viable rehabilitation proposal with the finance fully tied up for consideration of the Board, despite ample opportunities having been given to all concerned.

2. The BIFR confirmed its prima facie opinion that the Sick Industrial Company-M/s. Varsha Spinning Mills Ltd., is not likely to make its net worth exceed its accumulated losses within a reasonable time while meeting all its financial obligations and that the company, as a result thereof, is not likely to become viable in future and hence it is just, equitable and in public interest, that the company be wound up.

3. Mr. O.P. Taneja, Promoter has filed appeal against order of the BIFR dated 15.11.97 before the Appellant Authority for Industrial & Financial Re-construction. On 20th December, 1996 M/s. Varsha Spinning Mills Ltd. (in short VSML) was declared sick and the IDBI was appointed as the operating agency under Section 17(3) of the Sick Industrial Companies (Special Provisions) Act, 1985. The Company was directed to submit its comprehensive rehabilitation proposal to the operating agency. The time limit was extended upto February, 1997. The operating agency was directed to have a Techno Economic Viability Study of the Company.

4. The Company had submitted its rehabilitation scheme on 4.2.97. It envisaged a total cost of Rs. 50.47 lacs including capital expenditure of Rs. 40 lacs. The Scheme was based on normal reliefs and concessions. The cost of scheme was to be met entirely by way of "promoters" contribution. The Operating Agency reported before the Board that the projections were based on rather optimistic assumptions. The repayment period was taken as ten years. The dues of the financial institutions were under-stated. The total term loan dues of the financial institutions as on 31.12.97 stood at Rs.1377.34 lacs. That apart there was liability towards Bank to the tune of Rs. 80.00 lacs. The promoters indicated before the Board that it would be possible for them to bring in the funds required for one time settlement. They expressed their willingness to deposit Rs.1 crore in an interest bearing no-lien account within 30 days. Despite opportunities this amount was not deposited. The Board clarified that if the amount is not deposited, the operating agency should issue advertisement for change in management inviting offers for rehabilitation of the company.

5. When the amount of Rs.1 crore was not deposited, the Board again directed the operating agency to issue advertisement making it clear that the present promoters can also submit their proposals. No concrete proposal for the rehabilitation of the Company was received from any one. The BIFR came to the prima facie conclusion that the sick company is not likely to make its net worth exceed its accumulated losses within a reasonable time while meeting its financial obligations and as a result of this, it is not likely to become viable on a long term basis and it is just, equitable and in public interest that the company be wound up.

6. The representative of the appellant promoters before the Appellate Authority for Industrial Financial Re-construction (AAIFR) submitted that there is some possibility of settlement with the IDBI and for that purpose the appeal may be adjourned. Despite number of opportunities, no worthwhile proposal was offered for the rehabilitation of the Company and direction to deposit Rs.1 crore in a 'No lien account' has not been complied with. The IDBI has filed a suit in September, 1995. The principal amount due to IDBI is approximately Rs.2 crores and as no concrete proposal has been submitted by the appellant. It may be pertinent to mention that representative of the Bank of Baroda submitted that appellant has entered into a compromise with the Bank and as per the compromise, appellant had to deposit Rs. 74.53 lacs as against the total amount of Rs. 90 lacs and nothing has been paid so far by the appellant. The AAIFR observed that sufficient opportunities were afforded by the Court with a view to rehabilitate the appellant-Company and all efforts went in vain and in this view of the matter the AAIFR did not interfere with the impugned order passed by the BIFR. This Court issued notice to M/s. Varsha Spinning Mills Ltd., and other financial institutions on 17th December, 1997.

7. Mr. Ravi Gupta, learned counsel appeared for the respondent-Company on 5.11.98 and on his request the matter was adjourned to 13th January, 1999. Again on his request, the matter was adjourned to 6th May, 1999. The Court granted final opportunity to discuss the matter with the IDBI on 6th May, 1999. The Court observed that if no settlement is arrived at before the next date, arguments in the petition shall be heard. On 13th September, 1999, again the arguments were heard. No reply to the Company petition has been filed despite several opportunities. No proposal has been submitted by the respondent-Company.

8. On consideration of the totality of the facts and circumstances, it is abundantly clear that the respondent-Company cannot discharge its financial debts. In this view of the matter, no interference is called for and this Court upholds the order initially passed by the BIFR and later upheld in appeal by the AAIFR.

9. Since the Company has been wound up, the Official Liquidator attached to this Court is directed to takeover the assets and records of the Company as early as possible. The Company Petition is accordingly disposed of.