Batliboi Ltd. vs Mideast Integrated Steel Ltd.
2004 Latest Caselaw 1392 Del

ORDER

A.K. Sikri, J.

1. Mideast Integrated Steel Ltd. is under provisional liquidation. Vide order dated 19 September 2002, passed in Company Petition No. 337 of 1996, the Official Liquidator attached to this court was appointed as the provisional liquidator with direction to take over the assets of the respondent company (hereinafter referred as 'the company') including books of accounts, etc. The assets of the company are in his possession now.

2. It may be noted that the respondent company undertook the task of establishing and commissioning a plant in Orissa. For commissioning of the said plant, financial assistance was taken from various financial institutions, including the banks. Certain other parties had also supplied materials, etc., on credit. Before this plant could be fully commissioned and production started, it went into rough weather. As substantial amounts are due and payable to various banks/financial institutions/ secured creditors as well as other unsecured creditors, they started demanding their dues. Number of company petitions came to be filed in this court seeking winding up of the respondent company under the provisions of sections 433(e), 434 and 439 of the Companies Act, 1956 (for short 'the Act'). In these petitions, show cause notices were issued and during the pendency of these proceedings, the respondent company made efforts to pay off these creditors. Some amounts were paid. Certain assurances and undertakings were also held out. However, the respondent company could not stand up to those assurances. Some time in the year 1999, the company/applicant also filed the application proposing scheme of arrangement to pay the petitioning creditors. The orders were passed in this application from time to lime. However, as noted above, since the company/applicant could not adhere to its commitments, the matter was considered by this court on 19 September 2002, See, infra, Batliboi Limited v. Midcast Integrated Steels Ltd. (2005) 3 Comp L.J 90 (Del) and by a detailed order, the said scheme of arrangement was rejected. It was, inter alia, observed that in the scheme proposed, the secured creditors were not taken into consideration; amount due to certain creditors was not correctly shown; although representation was made to the effect that the company was negotiating with some third parties for commissioning of the plant, it was not mentioned as to whether these negotiations had reached fusion or not. On this basis, the court came to the conclusion that the scheme as proposed was not proper. Another prominent and influencing factor was that all the petitioning creditors had opposed the scheme in unison. The court thus observed that no useful purpose would be served in directing convening of the meeting of the creditors as 75% or more creditors have to approve such a scheme provided under Section 391(1) of the Act which was most unlikely. While rejecting the scheme, as mentioned above, the Official Liquidator was appointed as the provisional liquidator.

3. The aforesaid facts are noted because the ex-management has now propounded another scheme which is contained in Company Application No. 1144 of 2004. According to the applicants there is a substantial change in the circumstances compared with those prevailing at the time when the aforesaid order dated 19 September 2002 was passed.

4. I may note at this stage that the banks/secured creditors had approached the Debt Recovery Tribunal (DRT), Cuttack, Orissa, and those proceedings are disposed of by the DRT vide order dated 14 July 2004. While passing decree of specific amounts in favor of the banks, the DRT has also propounded and approved a scheme for staggered payment. This order is under challenge before the Debt Recovery Appellate Tribunal and appeal is filed by the secured creditors, as the direction given by the DRT about restructuring of the debt/decretal amount and allowing the ex-management to operate the said plant is not palatable to the secured creditors as the contention of these secured creditors is that the DRT had no jurisdiction to pass such an order. Since the matter is before the Debt Recovery Appellate Tribunal, it is not for me to make any comment upon the validity or otherwise of the said order. This fact is noted for pointing out that as far as the secured creditors are concerned, they had approached the DRT and some order is passed by the DRT in those proceedings. Therefore, the present application filed in this court relates to unsecured creditors and also includes debenture holders and other secured creditors who do not come under the jurisdiction of the DRT. It is proposed to pay to these creditors in a phased manner and prayer is made for order seeking to convene a meeting of these creditors as envisaged under Section 391(1) of the Act. Mr. Rajiv Sawhney, learned senior counsel, appearing for the ex-directors also stated that the propounders have been able to tie up/arrive at some arrangement with a foreign investor who has agreed to provide sufficient funds for commissioning of the plant.

5. When this application came up for hearing on 29 September 2004, he submitted that in order to show their bona fides, the applicants had arranged two managers' cheques in the sum of Rs. 1 crore each in the name of the Registrar of this court and these cheques would be deposited with the Registrar with the stipulation that in case the scheme is not ultimately approved, the applicants should be refunded the said amount, and if the scheme is ultimately sanctioned, this amount shall be distributed to the unsecured creditors in terms of the proposed scheme.

6. I may mention at this stage that there were some objections about proposed scheme, viz., there is no cost of scheme provided; it is not mentioned what would be the fund flow/extent of financing; the proposed scheme provides for only 10% of the payment and how balance 90% would be paid; technical/financial viability of the scheme is not disclosed and there could not be any scheme without involving secured creditors.

7. Going by the track record, all the petitioning creditors were suspicious about the bona fides of the scheme proposed and naturally so. This court also adopted cautious approach and wanted to satisfy itself about the genuineness and seriousness of the endeavor and rosy picture projected by the propounders in these applications. In order to instill confidence and to demonstrate that the attempt now made was serious and bona fide, the applicants had agreed to deposit a sum of Rs. 2 crores as mentioned above. Further, the court also wanted to know as to what kind of arrangement was made between the applicants and the foreign investor. The applicants also agreed to provide the details of the agreement without disclosing the name of the foreign investor at his stage. It was, therefore, directed that some details in this behalf be furnished by the applicants in the form of an affidavit with supporting documents in sealed cover and the same shall not be opened even by the Registrar or any other person. This affidavit was filed. When the matter came up for hearing on 26 October 2004, the applicants agreed to supply the copies of this affidavit along with Annexures to the petitioning creditors as well alter omitting the name and particulars of the financers and complied with the direction given in this behalf. Mr. Sawhney also in-formed that the investor had also agreed to provide a letter of credit of US $ 10 million. He further stated that the applicants had offered to enter into one time settlement with those creditors who were ready to give substantial/negotiated remissions. I Offer was also made to negotiate with those creditors and the applicants showed its willingness to modify the scheme appropriately by providing such a clause. Thereafter, Company Application No. 1318 of 2004, which is an application under Order VI rule 17 of the Code of Civil Procedure, was filed incorporating the amendment in the i scheme as per the aforesaid suggestions which has been allowed. He also submitted that during the course of hearing, the applicants have even settled the matter with three creditors (orders in respect of these creditors are passed separately in today's date) which would be another proof of their bona fides.

8. The applicants have also filed Company Application No. 1318 of 2004 seeking permission to complete the commissioning of the plant.

9. Although banking institutions/secured creditors are not covered by the pro-posed scheme, since prayer made in this application concerns these secured creditors Has well, on 23 November 2004, following directions were given:

"Before any order is passed on this application, it is deemed proper that the applicants hold a meeting with the secured creditors represented by Mr. Sumant Batra, Advocate, and in the said meeting, the applicant should reveal the details of the proposed plan for commissioning of the plant. Mr. Batra submits that since Stressed Asset Stabilisation Fund (SASF) is created and the asset, subject-matter of this petition, is transferred to the said fund, in the proposed meeting representative of SASF shall also be present. He also informs that he is representing SASF also, It is agreed that the meeting shall be held on 29 November 2004 at 2:00 PM in The Belvedere, Oberoi Hotel, New Delhi, when lawyers of the parties shall also be pre-sent and the meeting shall also be attended by them. Mr. Sumant Batra shall inform his clients about the aforesaid meeting so that the concerned officers are able to attend the meeting on the aforesaid date. IDBI shall inform other secured creditors, namely, IFCI Ltd., IDBI, LIC and UTI as well so that these secured creditors, if they so want, may depute their representatives in the said meeting. Copy of the proposed plan shall be given to Mr. Batra by tomorrow evening."

10. I shall advert to the outcome of the meeting held on 29 November 2004 at the appropriate stage.

11. As noted above, some of the unsecured creditors have filed objections to the proposed scheme. IDBI and SAFS have also expressed their apprehensions in case the applicants are allowed to complete the commissioning of the plant on the basis of material available on record.

12. There is no dispute that in such proceedings, interest of the creditors has to be kept in mind. It is common knowledge that all kinds of creditors and investors in company would like to put their money at stakes only if they are reasonably confident that they would be able to recover the money invested. It is well known that in most of big companies, large chunk of investment is by financial institutions. These financial institutions, in turn, mobilise their resources from small investors. Therefore protection of creditors' right in any system is sine qua non of a healthy economy. It is however, equally important that when an industrial company becomes sick-first attempt has to be made to rehabilitate and restructure such a company. The reason is obvious. Sick industrial companies, when remain sick, result in blockage of sizeable national resources which may have cascading effect on all sectors of economic and social life of the nation. It may, in addition, put the creditors in a spot as it become difficult to recover their dues in such an eventuality. The ill effects of sickness in industrial companies would be loss of production, loss of employment, loss of revenue to Central and State Governments and locking up of investible funds of banks and financial institutions. Therefore, while on the one hand, protection of creditors right has to be ensured, it cannot be denied that the companies which go sick due to reasons beyond their control and which have the potential to become viable are require to be revived. Therefore, the court has to encourage revival/rehabilitation of the undertaking if serious and genuine efforts are made in this behalf and there is a possibility for the same. Question is of balancing the interest of parties which may appear be conflicting in nature but which are not so when the matter is looked into in proper perspective. Balancing reconstruction, rehabilitation and recovery is a delicate task and it is the duty of the court to achieve the same, if it is possible in a given situation.

13. The Official Liquidator has already been appointed as the provisional liquidator in this case. He is in possession of the assets of the company, including the still-born unit. During the hearing of the case, it transpired that the money which is pay-able to the banking and financial institutions with interest is much more than the net worth of the assets belonging to this company. If the company is finally wound up and the Official Liquidator sells the assets of the company, even the secured creditors will not be able to get their entire dues. As far as unsecured creditors are concerned to get even a fraction of their dues would be a far cry. On the other hand, if the company is able to revive itself and starts production, it is possible that all the creditors would be in a position to recover substantial amount due to them. It is in this backdrop, orders are required to be passed in the present proceedings and governed by this consideration, I am inclined to give one more chance to the propounders of the scheme to rehabilitate the company. At the same time, it is also to be ensured that the creditors, secured and unsecured, are not adversely affected in any manner whatsoever.

14. Objections raised by these petitioning creditors are more in the nature of apprehensions about the genuineness of the scheme. As observed above, in view of the past conduct such kind of initial reaction or outburst from the unsecured creditors was understandable. However, what is to be kept in mind is that while allowing this chance to the applicants, these creditors are not worse off than what they are at present. Once this aspect is taken care of, there should not be any objection as far as these unsecured creditors are concerned.

15. Insofar as application seeking convening of the meeting is concerned, making such an order should not and would not prejudice these unsecured creditors in any manner.

16. Mr. Sawhney, learned senior counsel appearing for the ex-directors, sought to allay the fears of the creditors by making submissions on two fronts: factual as well as legal.

(1) Factual aspects

16.1 (a) It was his submission that the applicants have already exhibited their bona fides by series of measures taken pursuant to the directions given by this court from time to time which are taken note of above and which include deposit of Rs. 2 crores in this court; filing of the agreement with the foreign investor and giving copies thereof to all concerned without disclosing the name at this stage (He also stated that there were certain reasons for not disclosing the name of the investor at this stage and it the time of second motion complete details in this behalf would be given); producing letter of credits worth Rs. 46 crores which were opened by the foreign investor in favor of the suppliers (these LCs were shown for perusal of the court); making suit-able amendments in the proposed scheme; rectifying the dues payable to certain creditors on pointing out the mistakes by those creditors etc.

16.1.1 It may specifically be noted that although in the scheme-Indian Hume Pipes Co. Ltd. is shown as creditor in the sum of Rs. 78 lakhs approximately, after the counsel for Indian Hume Pipes Co. Ltd. pointed out the correct figure, the company/applicants have accepted that the money due to Indian Hume Pipes Co. Ltd. is Rs. 1,07,99,677.10. Similarly, in the case of Bnbkok Engineering, amount is corrected to Rs. 2.68 crores + Rs. 3.92 lakhs.

16.1.2 (b) Mr. Sawhney also submitted that settlement with the Lessers (ICICI Bank and First Leasing Company of India Ltd.) should also be taken as an important indicator proving bona fides and seriousness of the applicants.

(2) Legal aspects

16.2 Referring to the judgment of the Gujarat High Court in the case of In re Maneckchowk and Ahmedabad Manufacturing Co. Ltd. reported in (1970) 2 Comp LJ 300 (Guj): (1970) 40 Comp Case 819, he emphasised following portion of the said judgment (at page 315 of Comp LJ):

"In my opinion, no proposition of law can be deduced from the aforementioned case as suggested by Mr. Vakil that the disclosure ought to be made at the initial stage. It is always a question of fact whether the creditors and members did consider the schme in the various meeting after getting the relevant information which would help in judging the scheme on its merits. But it cannot be said that as disclosures were not made at the initial stage when the directions were given by the court, the requirements of the proviso were not complied.

Looking to the language of the proviso, especially, its opening words:

"Provided that no order sanctioning any compromise' or arrangement shall be made (...) and the location of the proviso in the scheme of Section 391 and especially, the fact that Section 391(1) and Section 391(2) envisage two distinct and in-dependent stages when the court is called upon to apply its mind to the proposed scheme of compromise and arrangement and the contents of the affidavit required to be drawn up in prescribed form in support of the judges summons under Section 391(1) it is not possible to accept the submission of Mr. Vakil that disclosures as required by the proviso should be made at the initial stage when the application is made under Section 391(1)."

17. He also referred to the judgment of the Bombay High Court in the case of KEC International Ltd. v. Kamani Employees Union and Ors. reported in (2000) 1 Comp LJ 351 (Bom) wherein following observation was made (para 67 at page 372 of Comp LJ) "It is pertinent to note that the words used [are] 'court must be satisfied with regard to the latest financial position of the company'. In this context, as mentioned earlier, the judgment of the Delhi High Court in Bhagwan Singh and Sons Smt Kalawati, Smt Satyawati and Smt Pramod Kumar (1983) 3 Comp LJ 37 (Del), supra, the meaning of words 'latest financial position' has categorically been held as the financial position should be when the matter is due for sanction. Obviously, it means, at the time of final hearing of the petition and this requirement is statutory since the Supreme Court in Miheer H. Mafatlal v. Mafatlal Industries Ltd. (1996) 4 Comp LJ 124 (SC), supra, has categorically held that all the statutory requirements have to be strictly complied with before sanctioning amalgamation scheme. There fore, what is required is the latest financial position at the time of final hearing of the application, i.e., at the time of sanctioning."

17.1 Therefore, his submission was that most of the objections relate to the stage of second motion and were not even relevant at this stage.

18. Refuting the contention that notice to the Central Government was required at this stage, he referred to the Division Bench judgment of this court in the case of YKM Holdings (P) Ltd. and Ors., In re (2001) 1 Comp LJ 439 (Del): (2001) 90 DLT 163 and submitted that provisions of Section 394A of the Act are to be complied with serving such a notice at the time of second motion.

19. I am inclined to accept the submission of Mr. Sawhney that, at this stage, when a scheme of arrangement is proposed, the court is to ascertain as to whether ultimately, the creditors representing three-fourths in value would be giving their consent to the proposed scheme and would be passing a resolution to this effect. In case the applicants are not able to get the resolution through by having the consent of creditors of three-fourths in value, it would be the rejection of the scheme at the threshold itself. In case even when such a resolution is passed, the applicants will have to approach this court through second motion and at that stage, the court will consider as to whether to sanction the proposed scheme of arrangement or not. While taking a view in the matter at that stage, the court shall satisfy itself about all material facts relating to the company after taking into consideration its financial position, etc., That is the procedure provided under Section 391 of the Act.

21. Having regard to the confidence building measures adopted by the applicants as highlighted by their counsel, it would be wise to provide this chance to the applicants with certain conditions to ensure that the interests of these creditors remain insulated.

22. Therefore, considering these submissions, I am of the view that prayer made in Company Application No. 1318 of 2004 should be allowed and a meeting of the unsecured creditors and other secured creditors which are covered by the scheme, be convened.

23. Accordingly, it is ordered that meetings of the unsecured creditors and secured creditors of the company be held on 15 January 2005 at 11 a.m. at the Claridges Hotel, at New Delhi for the purpose of considering and approving the scheme of arrangement.

24. For the purpose of holding the said meetings of the unsecured and secured creditors, I hereby appoint Justice Usha Mehra (retd.) as chairperson, and Mr. P.V. Kapur, Senior Advocate as alternate chairperson. The chairperson and the alternate chairperson shall be paid a sum of Rs. 60,000 and Rs. 40,000 respectively, by the company in addition to meeting their incidental expenses. The alternate chairperson shall also attend the meetings and assist the chairperson in conducting the meetings and preparing the report(s).

25. Notice convening the aforesaid meetings of the unsecured and secured creditors stating that the copies of the proposed scheme and the statement under Section 393 of the Companies Act can be obtained free of charge from the registered offices of the company, shall be published in one issue of 'The Statesman' ((English) and 'Jansatta' (Hindi)) at least twenty-one days before the day appointed for the meetings.

26. In addition to the publication of the notice in the newspapers, individual notices convening the meetings along with the scheme of arrangement and the statement under Section 393 of the Companies Act shall be sent by post under certificate of posting to the unsecured and secured creditors of the company at their registered or last known addresses at least twenty-one days before the date appointed for the meetings.

27. The Advocate for the company shall issue the advertisement and notice as per the draft settled by the chairperson appointed by this court.

28. Voting by proxy shall be permitted if a proxy in the prescribed form duly signed by the person entitled to attend and vote at the meetings is filed with the registered offices of the companies at least forty-eight hours before the meetings.

29. The results of the aforesaid meetings shall be reported to this court by the chairperson within one week from the conclusion of the meetings and the report shall be verified by affidavit.

30. Let me now revert to the second issue which is of greater significance, viz., commissioning of the plant.

31. Insofar as commissioning of the plant is concerned, it may be mentioned that when earlier attempt was made for commissioning of this plant, at the instance of ' IDBI, Mecon Ltd., Ranchi, prepared Techno-Economic Feasibility Report. The scope was to carry out study of the condition of the plant and equipment and prepare a Techno-Economic Feasibility Report for making estimate of fund requirement for further implementation of the project. The said exports had submitted their report ex-pressing that it was viable to commission the plant and estimated expenditure thereof was also mentioned. The project at that lime could not take off. Since few years passed in the process, the company/applicants approached Mecon Ltd. for updating the said project report. Mecon Ltd. has prepared the Report in May 2003, copy of which was given to IDBI as well. As pointed out above, on 23 November 2004, directions were given for a joint meeting of the company/applicants with IDBI and SASF as well as other secured creditors. This meeting was held as scheduled. On behalf of IDBI, an affidavit of Mr. G.M. Yadwadkar, DGM, is filed enclosing therewith IDBI/SASF's report about the said meeting. It is, inter alia, pointed out that IDBI/SASF could not take decisions as to whether such a consent is to be given or not; as according to them many important aspects were missing in the plan furnished by the company/applicants, gist whereof is given in paragraph 7 of the Report which reads as under:

"In response, IDBI/SASF representatives submitted that the information contained in letter dated 24.11.2004 is grossly insufficient. As per the order dated 23.11.2004, the applicant should reveal the details of the proposed plan for commissioning the pant. The letter, dated 24.11.2004, though does not refer to the pig iron plant of MISL, presumably refers to commissioning of the said plant. However, no comprehensive plan for completing the project and commissioning the same has been indicated in the said letter. It was further mentioned by the representatives of IDBI/SASF that a view on commissioning the plant could be taken only after a comprehensive proposal was made available so as to enable the secured creditors to assess the long term viability (technical and financial) and project capability to service the debt. This would necessitate furnishing information on critical issues like estimated requirement of funds for completion of the balance facilities (and not only part of the productive facilities), sources for raising the requisite funds and the terms on which such funds would be made available, organisational set-up contemplated for completion and commissioning of the plant on sustained basis, proposed arrangement set-up including the role of the promoters, arrangements envisaged for procurement of critical raw materials on a long term basis, role and responsibilities of the technical collaborator (which would include revalidation of the performance guarantees for the plant), estimates of projected profitability and cash flow and the arrangements contemplated for capturing the cash flows through trust and retention account/escrow mechanism (so as to ensure that the funds generated are utilised in a pre-defined manner), detailed repayment pan for meeting the dues of the secured creditors, etc. After making available such detailed plan, the secured creditors would need a reasonable time to deliberate on the same. In the circumstances, it was not possible to the secured lenders to comment on the commissioning of the plant."

32. As already noted above, at the instance of IDB1 itself Mecon Ltd. had earlier undertaken the project and opined that it was viable to commission the plant. This was accepted by the IDB1 at that stage which would be clear from IDBI's fax letter dated 18 May 1998 produced by the company/applicants at the lime of hearing. Same expert, namely, Mecon Ltd. appointed by the IDBI earlier have updated their report as per which the project is still viable. That apart, Mr. Sawhey further stales that by 10 December 2004, the company/applicants shall be furnishing complete details of the plant together with the financial arrangement. The company/applicants shall also disclose complete details about the investors as well as to the IDBI. Me further states that notwithstanding the order of the DRT qua financial institutions/secured creditors, if the scheme is ultimately sanctioned the company/applicants are allowed to take over, the company/applicants shall pay the entire principal amount, i.e., amounts disbursed by these financial institutions within four years in four equal annual Installments from the date when the scheme if approved.

33. In view of reports of Mecon Ltd., there is every possibility that the plant can be commissioned. It is also not in dispute that the investment made already is colossal and only few crores are required now for completion of the blast furnace No. 2. According to the company/applicants sum required for this purpose is approximately Rs. 12 crores and investors have already provided these funds with assurance to provide further funds, if required and the commissioning is possible within six weeks. If this phase of the plant is allowed to be commissioned, it would not act to the detriment of any secured or unsecured creditors. On the contrary, it would enhance the present value of the project. It is an almost baked cake, but of no use today as it is not completely baked. Little effort is required to bake it fully. If that is achieved, all concerned can enjoy the taste of it. Even if the scheme is not sanctioned ultimately, the secured creditor shall have the security with them in a better form. Therefore, I am of the opinion that this permission should be granted, but at the same time, precautions are to be taken to ensure that the secured creditors remain protected while the commissioning process goes on and the applicants are in no manner able to tinker with the unit.

34. Thus first thing which is to be ensured is that it is not handed over to the them at this stage. They shall only provide the necessary finance. As mentioned above, the plant and other assets are in possession of the official liquidator. It shall remain in the custody of the official liquidator. For the purpose of commissioning, it is proposed to appoint a Committee of Experts. The company/applicants have already contacted Mr. Arvind Pandey, ex-Chairman of Steel Authority of India Ltd. and Mr. B.P. Singh, former CMD of Neelanchal Spark Nigam Ltd. for availing their services. It is not in dispute that two are the experts in this field. The Committee shall consist of these two persons and a nominee of IDBI to oversee the commissioning of the plan. The interest of the financial institutions/secured creditors shall further be taken care of by allowing IDBI to nominate its representative. Furthermore, by allowing the commissioning of the plant, no control of the plant is being given to the company/ applicants. It is also made clear that without the settlement with the secured creditor or final approval of the scheme in respect of them either in the proceedings originated from DRT or by this court, the applicants would not be able to gel this control.

35. Other submission of Mr. Batra, during the course of arguments, was that before commissioning work starts, Mecon Ltd. should be asked to certify upfront that the proposed expenditure would be adequate for commissioning of a portion of the plant as proposed and such action would not damage the other assets in the factory. He also suggested that the commission should be carried out under the supervision of the court receiver directly or through an expert body like Mecon Ltd. to be appointed by this court for this purpose and security and safely of the company/ applicants should be ensured by the court receiver so that no materials arc removed from the plant. Needless to mention, before actual work of commissioning starts, Mecon Ltd. should satisfy itself that the security agency deployed by the official liquidator shall ensure that no material or equipment is removed from the plant. It is also made clear that in case the scheme is not approved, no right of any nature shall accrue in favor of any third party, including the foreign investor. On commissioning of the plant, report shall be submitted by Mecon ltd. to the court.

36. These Company Applications are disposed of on the above terms.

Company Application No. 1079 of 2004

37. Mr. S.K. Luthra, learned counsel for the official liquidator, submits that the Official Liquidator is paying the security charges which should be reimbursed. Mr. Sawhney states that although this is not the liability of the company/applicants at this stage, still the company/applicants would settle the dues of the Official Liquidator in this behalf.

37.1 This application is disposed of Company Applications 905 of 2004 in Company Petition No. 230 of 1999 and Company Applications 621 of 2003 and 1212 of 2004 in Company Petition 337 of 1996.

38. Two of the petitioning creditors are ICICI Bank and first leasing company of India who have filed Company Application No. 905 in Company Petition No. 230 of 1999 and Company Application No. 1212 of 2004 in Company Petition No. 337 of 1996, respectively. Their contention in these applications is that they had given boilers and turbines respectively to the company on lease basis. Not only rentals are due, according to them, they are entitled to take back the leased equipments as there is a default in making payment of the leased rentals by the company to these Lessers. During the course of arguments, the applicants have settled the dispute with these Lessers on the following terms:

(1) The applicants/company shall pay 40% of the principal amount which works lout to Rs. 4.8 crores in the case of ICICI Bank and Rs. 1,61,60,000 in case of first Leasing Company of India.

(2) Both these Lessers shall be paid Rs. 30 lakhs each immediately out of Rs. 2 crores deposited by the applicants in this court.

(3) At the time of second motion, if eventuality arises, the applicants shall deposit Rs. 60 lakhs in this court to cover this amount.

(4) Balance amount shall be paid to the aforesaid Lessers by 20 March 2005. In case he balance amount is not paid by 20 March 2005, both the Lessers shall be entitled to take possession of their leased equipments.

(5) Certain debentures were issued by the company/applicants to First Leasing Company of India on account of unpaid rentals having become due. These debentures shall remain in the custody of the First Leasing Company of India and shall be returned to the company/applicants and/or counsel after full payment, as aforesaid, is made.

(6) Mr. J.K. Singh, ex-Chairman, who is present in court, accepts the aforesaid terms and shall file an undertaking in the form of affidavit within one week.

39. Mr. Rajiv Shakdher submitted that there should be a clause providing right to recompense the Lessers in case the scheme is ultimately approved and the unit starts functioning and makes profit in future as the Lessers had given up substantial part of principal amount and entire interest component. Since this was not acceptable to the Company/applicants, Mr. Shakdher, learned counsel appearing for ICICI Bank submitted that at the time of second motion, he will be pressing this request before the Bench.

40. The Registrar/Registrar (Companies) shall issue the cheques in favor of two Lessers and the cheque shall be handed over to the respective counsel.

41. Third such creditor is Orissa Mining Corporation Ltd. which had supplied iron pre to the company/applicants. It has filed Company Application No. 621 of 2003. As per the averments made in this application, Rs. 45 lakhs as principal amount is due besides interest. Mr. Sawhney submits that the company/applicants are ready to pay the entire principal amount within thirty days to this applicant in case the applicant does not press for interest. Mr. Mehta, learned counsel appearing for this applicant, on the other hand, submits that since payment was due much earlier, interest has be come payable and he would be leaving it to the court to decide the question of inter est.

42. In proceedings of this nature, one has to take practical and equitable view and one would not go strictly according to the commercial terms in which the supplies were made. We are dealing with the proceedings which relate to scheme of reconstruction. As noted above, two Lessers, namely, ICICI Bank and First Leasing Company of India, have agreed to even forgo substantial part of the principal amount due The parties have argued on the question of interest. It would, therefore, be just and equitable, in the facts of this case, that no interest is paid to the Orissa Mining Corporation; more particularly, when the company/applicants have agreed to pay the en tire principal amount, that too, within thirty days. We have also to bear in mind the insofar as supply of goods is concerned, the goods being movable, title in those good have already passed in favor of the company/applicants. At the most Orissa Mining Corporation could be one of the unsecured creditors. If such an unsecured creditor is getting entire principal amount in immediate future there is no reason to allow payment of interest in the given circumstances. Orissa Mining Corporation shall be entitled to get this amount from Rs. 2 crores deposited in this court. At the time of second motion, the propounders shall make up this deficit as well by depositing the amount in this court to achieve a figure of Rs. 2 crore again.

43. The Registrar/Registrar (Companies) shall issue the cheque in favor of this applicant and the cheque shall be handed over to the counsel.

43.1 These Case are also disposed of.

41.2 CP No. 337/1996

41.3 List on 16 February 2005 for directions.