Delhi High Court
Gujarat State Financial Services ... vs Thapar Agro Mills Ltd. on 20 March, 2013
Author: S. Muralidhar
IN THE HIGH COURT OF DELHI AT NEW DELHI
CO. PET. No. 81 of 1996
GUJARAT STATE FINANCIAL SERVICES LTD. ..... Petitioner
Through: Mr. Manish K. Bishnoi, Advocate for the
OL.
Mr. S.B. Singh, Advocate for Auction
Purchaser/Applicant in CA Nos. 322 and 440 of
2013.
versus
THAPAR AGRO MILLS LTD. ..... Respondent
Through: Mr. Arun Kathpalia with Mr. C.S.
Gupta,Advocates for ex-Management/
Propounders.
Ms. Amrita Mishra, Advocate for SBI Mutual
Fund.
Mr. Arvind Kumar Singh, Advocate for IFCI Ltd.
Mr. Sanjiv Kakra with Mr. Irfan Ahmed,
Advocates for IARC.
Mr. Sangram Patnaik, Advocate for IDBI.
AND
CO.PET. 425 of 2011
IN THE MATTER OF:
THAPAR AGRO MILLS LIMITED ..... Petitioner
Through: Mr. Rajiv Bahl, Advocate for the OL.
Mr. S.B. Singh, Advocate for Auction
Purchaser/Applicant in CA Nos. 322 and 440 of
2013.
Mr. Arun Kathpalia with Mr. C.S. Gupta,
Advocates for ex-Management/Propounders.
Ms. Amrita Mishra, Advocate for SBI Mutual
Fund.
Co.Pet. No.81 of 1996 Page 1 of 19
Mr. Arvind Kumar Singh, Advocate for IFCI Ltd.
Mr. Sanjiv Kakra with Mr. Irfan Ahmed,
Advocates for IARC.
Mr. Sangram Patnaik, Advocate for IDBI.
CORAM: JUSTICE S. MURALIDHAR
ORDER
20.03.2013
1. Co. Pet. No. 425 of 2011 has been filed by the former Directors/Share
Holders of the Respondent company, Thapar Agro Mills Ltd. ('TAML') for
sanction of the Scheme of compromise and arrangement ('Scheme') under
Sections 391 to 394 of the Companies Act, 1956 ('Act') for revival of TAML
which was ordered to be wound up by the Court by an order dated 25th April
2000 in Co. Pet. No. 81 of 1996.
2. Earlier, by an order dated 11th May 2011 in Co. Appln. Nos. 742 and 744
of 2011 in Co. Pet. No. 81 of 1996, the Court had issued directions for
holding of the meeting of the share holders, secured and unsecured creditors
of TAML. Pursuant to the said order a meeting of the secured creditors was
held on 9th July 2011. 5 of the secured creditors representing 90.57%
approved the Scheme. In the meeting of the equity share holders held on the
same day, 62 share holders representing 100% of the members present and
voting approved the Scheme. At the meeting of the unsecured creditors held
on the same day, 41 unsecured creditors representing 99.07% approved the
Scheme. It is stated that apart from the fact that the Scheme has been
approved by over 90% of the share holders and secured and unsecured
creditors of TAML, the Scheme will also benefit all the parties concerned
and will be in public interest.
3. A copy of the Scheme has been enclosed as Annexure P-3 to Co. Pet. No.
425 of 2011. The main features of the Scheme have been set out in paras
9.10 and 9.20 of Co. Pet. No. 425 of 2011 as under:
"9.10
Settlement with creditors:
That the applicant contributories/shareholders and ex-directors,
promoters with the help of Strategic Investor are able to work out
settlement with majority of secured creditors ensuring revival and
sustainability of the company on long term basis. The secured
creditors are i.e. State Bank of Patiala ('SBOP'), State Bank of
India ('SBI'), Industrial Finance Corporation of India ('IFCI'),
Standard Chartered Bank ('SCB'), Punjab State Industrial
Development Corporation ('PSIDC'), Punjab National Bank
('PNB') and Punjab Financial Corporation ('PFC'). State Bank of
Patiala & Punjab National Bank have already assigned their dues
in favour of securitization company-International Assets
Reconstruction Company Private Limited ('IARC') vide deed of
Assignment dated 20th March 2009 & dated 24th December 2009
respectively. State Bank of India is also in the process of
assigning dues in favour of IARC. TAML has classified it's
creditors in various classes based on preferential payments,
security interest created, agreements and instruments executed
between parties. The applicant contributories/ex-management
have negotiated One Time Settlement of dues of secured creditors
and also paid upfront amount with the help of Strategic Investor.
The present scheme is therefore on very realistic basis. In views
of One Time Settlement with State Bank of Patiala/IARC, State
Bank of India, Industrial Financial Corporation Limited, Punjab
State Industrial Development Corporation, Punjab Financial
Corporation, Punjab National Bank/IARC and Standard Chartered
Bank, settled dues shall be paid as per the payment schedule in
the Scheme."
"9.20
Settlement Terms:
In terms of present Scheme, the dues and liabilities of secured
creditors, unsecured creditors, statutory liabilities and other
liabilities are being paid as under:
A. Class-I Secured Creditors
Sl. Name Settlement Already
No. negotiated paid
(a) State Bank of 1000.00 250.00
Patiala & Punjab
National Bank
both assigned to
M/s.
International
Assets
Reconstruction
Company
Private Limited.
(b) IFCI Limited 170.00 10.00
(@)
(c) Punjab State 253.50 38.03
Industrial 247.24 209.21
Development (**)
Corporation
Limited
(d) State Bank of 245.00 12.25
India
(e) ICICI assigned 45.00 (*) 0.00
to Standard
Chartered Bank
(f) Punjab Financial 6.43 (**) 6.43
Corporation
Total 1719.93 525.92
Settlement Letters issued by secured creditors have already been filed
with this Hon'ble Court enclosed marked as Annexure P-4 (Colly),
Annexure P-5 (Colly), Annexure P-6 (Colly), Annexure P-7 (Colly) &
Annexure P-8 (Colly).
(*) Applicant has already approached SCB for settlement at Rs.45 lakhs
and approval is yet to be received. Copy of letter for settlement is
enclsosed as Annexure P-9.
(@) IFCI has issued letter to revoke OTS but as per OTS terms, pending
settlement amount will carry interest.
(**) Dues of PSIDC and PFC have been paid full.
B. Class II- Fixed Deposit Holder & Employee Dues
Sl. Name Settlement
No. offered
1. Fixed 312.30
Deposit
Holders
2. Employees 0.73
claim
Total 313.03
C. Class III-Govt. Dues & Statutory liabilities
No. Particulars Settlement
offered
(Rs. In
lakhs)
1. Ministry of 90.00
Commerce,
DGFT,
Ludhiana
2. Office of the 11.81
Dy.
Commisioner 4.38
Excise
Taxation
-----do----
3. Dy Excise and 25.19
Taxation
Comm,
Ambala
4. Income Tax, 35.64
Delhi
5. Municipal 61.19
Taxes and
other Taxes
Total (A) 228.21
Principal dues of Rs.17.78 lakhs of P.F. Department will be paid
at Par.
D. Class IV-NCD Holders (Unsecured)
Sl. Name Settlement
No. offered
NCD 170.00
Debenture
Holders
Total (20% of 170.00
principals)
E Class V- Lease Finance, ICD, Bills Discounting &
unsecured creditors including unsecured creditors obtained
decree:
Sl. No. Name Settlement
offered
Unsecured creditors including 275.76
lease finance, ICD, bills
discounting, Bridge loans, raw
material suppliers etc.
including obtained decree
from competent courts.
Total (15% of principals) 275.76"
4. Notice in Co. Pet. No. 425 of 2011 was issued to the Regional Director
('RD'), Northern Region, Ministry of Corporate Affairs as well as the
Official Liquidator ('OL') on 3rd October 2011.
5. One of the objections by the OL is that the claim does not disclose the
name of the strategic investor whose help is sought for reviving TAML. The
projected balance sheets, profit and loss accounts and restructuring of
existing liabilities are stated to be "highly fanciful and imaginary" and
"baseless and very vague". Second objection is that the Scheme proposed to
set a Solvent Extraction Plant at Ludhiana for which new plant and
machinery would have to be bought for a sum of Rs.200 lakhs. It is stated
that since the old plant and machinery was sold at Rs.2.05 crores the new
plant and machinery would be much more expensive.
6. In the affidavit of the RD it is pointed out that apart from the fact that the
name of the strategic investor is not disclosed there is no mention about any
rehabilitation of the workmen. It is further stated that there is no mention also
whether the company has obtained no objection from the Securities and
Exchange Board of India ('SEBI') and the Stock Exchanges.
7. An affidavit dated 20th January 2012 has been filed by Mr. Satish Thapar,
one of the former Directors of TAML stating that pursuant to the publication
effected in the newspapers as directed by the Court, no objection has been
received from any share holder, secured creditors, unsecured creditors or any
other party.
8. Mr. Satish Thapar has on 3rd March 2012 filed a rejoinder to the objections
of the OL. In this he has disclosed that except IFCI all other creditors have
accepted the Scheme upfront. It is further stated that the total payment of
Rs.525.92 lakhs through the strategic investor itself establishes the bonafides
of the Scheme. It is further stated that the Scheme is viable and if given
effect to, all the liabilities of TAML will be wiped out. As regards the
strategic investor, it is explained as under:
"A very close friend of the promoters have (sic has)come forward
to help in settlement and to revive company. The promoters had
given personal guarantee and there is huge decree passed by Debt
Recovery Tribunals. The promoters considered appropriate to
settle dues of the creditors and revive operations, hence they
requested close old family friend for help. Shri Karam Singh Bath
resident of H.No. 285, New Jawahar Nagar, Jalandhar and Mr.
Pavitar Singh resident of H.No.678, Urban Estate Phase-II,
Jalandhar who are financially strong and capable of bringing
funds agreed to help promoters by bringing funds through their
closely held company M/s. Silverline BuildTech Private Limited
having registered office at 306-L/1, Model Town Jalandhar,
Punjab. The net worth of the said company is more than Rs.16
crores (sixteen crores) and net worth of Mr. Karam Singh Bath &
family is around Rs.230 Crores (Two hundred thirty crores) and
net worth of Mr. Pavitar Singh is around Rs.33 crores (Thirty
three crores)."
9. A copy of the net worth certificate as on 30th January 2012 as duly
certified by the Chartered Accountant ('CA') has been enclosed. It is pointed
out that there are no imaginary figures either in the projected balance sheet or
in the profit and loss account. It is stated that under the Scheme, the total
payments of Rs.2,724.71 lakhs have been envisaged and the total cost of the
Scheme is approx. Rs.36.50 crores which is much more than the total value
of all the assets. The plant and machinery proposed to be set up is of much
lower capacity than the earlier plant and machinery which was sold at scrap
value of Rs.2.05 crores. The present revival process involves only a small
capacity of Solvent Extraction Plant having capitalisation value of around
Rs.200 lakhs. It is accordingly submitted that there is no basis of comparison
with the earlier plant and machinery as stated by the OL. It is pointed out
that the Scheme has already received the support and confidence of 90% of
the stake holders.
10. An affidavit has been filed on 11th October 2012 by Mr. Satish Thapar
updating the information regarding the dues of the creditors. As far as the
SBOP, the PNB, the SCB and the SBI are concerned, the debts owing to
them have been assigned to IARC. The negotiated settlement amount as
regards IARC is Rs.1,290 lakhs of which a sum of Rs.262.50 lakhs has been
paid. The dues of the PSIDC (Rs.247.24 lakhs) and of the PFC (Rs.6.43
lakhs) have already been paid in full. It is stated in para 5 that it is proposed
that the dues of the IFCI together with interest would be paid within 30 days
of the sanction of the Scheme and the dues of IARC and other unsecured
creditors within four months of the sanction of Scheme. A sum of Rs.526.17
lakhs has been already brought in by the strategic investor which
demonstrates the bonafides shown by it to revive the company. It is
explained that the revival is in two phases: (a) establish the operations of the
oil mill in the first phase and (b) real estate development of surplus assets in
second phase. A sum of Rs. 0.73 lakhs is offered for settling the claims of the
employees.
11. On 10th December 2012, a counter affidavit was filed by IARC stating
that Rs.250 lakhs deposited with it has been kept in a no lien account. It is
submitted by IARC that TAML should be directed to pay it the settlement
amount as per the Scheme.
12. The submissions of learned counsel for the parties have been heard at
some length.
13. Counsel for IARC states on instructions that IARC agrees that after
appropriating the sum of Rs. 250 lakhs kept in the no lien account towards its
dues, the balance amount would be paid by TAML to IARC within four
months of the sanction of the Scheme.
14. Counsel for the IFCI states on instructions that IFCI is agreeable that the
balance amount owing to it can be paid to by TAML within six months from
the date of the sanction of the Scheme together with simple interest @ 15%
per annum.
15. Counsel for the IDBI acknowledges that out of the sum of Rs.49.20 lakhs
owing to it, a sum of Rs.41 lakhs has already been paid. Further, a post dated
cheque ('PDC') dated 31st March 2013 has been issued in its favour for the
balance sum of Rs. 8.20 lakhs.
16. It has been stated by Mr. Arun Kathpalia, learned counsel appearing for
the Propounders on instructions that the said PDC when presented for
payment will be honoured. He further states that in the unlikely event of the
cheque not being honoured IDBI can have recourse to all the remedies
available to it in accordance with law. He also states that the former Director
of TAML will give an undertaking by way of an affidavit to the above effect.
17. The above submissions have been considered by the Court. The broad
principles governing the consideration by the Company Court of a Scheme
presented to it under Section 394 of the Act for revival of a company have
been explained by the Supreme Court in Miheer H. Mafatlal v. Mafatlal
Industries Ltd. (1997) 1 SCC 579 and later reiterated in Hindustan Lever v.
State of Maharashtra (2004) 9 SCC 438. It was explained in the latter
decision in (SCC para 32, p.457) that: "Function of the Court while
sanctioning the compromise or arrangement is limited to oversee that the
compromise or arrangement arrived at is lawful and that the affairs of the
company were not conducted in a manner prejudicial to the interest of its
members or to public interest, that is to say, it should not be unfair or
contrary to public policy or unconscionable. Once these things are satisfied
the scheme has to be sanctioned as per the compromise arrived at between
the parties." It was also explained in Hindustan Lever as under (SCC, p.
451):
"While exercising its power in sanctioning the scheme of
amalgamation, the court is to satisfy itself that the provisions of
statute have been complied with. That the class was fairly
represented by those who attended the meeting and that the
statutory majority was acting bona fide and not in an oppressive
manner. That the arrangement is such as which a prudent,
intelligent or honest man or a member of the class concerned and
acting in respect of the interest might reasonably take. While
examining as to whether the majority was acting bona fide, the
court would satisfy itself to the effect that the affairs of the
company were not being conducted in a manner prejudicial to the
interest of its members or to public interest. The basic principle
underlying such a situation is none other than the broad and
general principle inherent in any compromise or settlement
entered into between the parties, the same being that it should not
be unfair, contrary to public policy and unconscionable or against
the law."
18. The Court proceeds to examine the Scheme for revival presented to it by
the former Directors of TAML in light of the above principles. The
explanation offered by Mr. Satish Thapar in his affidavit in regard to the
objections raised by the OL merits acceptance. What weighs with the Court
first is that over 90% of the share holders, secured creditors and unsecured
creditors of TAML have approved the Scheme. The second factor is that the
strategic investor has demonstrated its bonafides by bringing in the money
which has been used to pay off some of the secured creditors as noted
hereinbefore. Thirdly, the terms on which the balance amount will be paid to
the creditors appears to be reasonable. Learned counsel appearing on behalf
of the creditors have conveyed to the Court that they accept the terms of
payment as proposed. Therefore the objections of OL do not survive. This
also accounts for the points raised by the RD in its report.
19. In para 2 (C) of the affidavit filed by Mr. Satish Thapar on 11th October
2012, the claims of the Government and statutory bodies as accepted by the
Propounders have been set out. Mr. Arun Kathpalia, learned counsel for the
Propounders, explains that these figures were taken from the Report No. 596
of 2012 dated 10th October 2012 of the OL which has enclosed as Annexure-
B a copy of the report of the Committee that had examined the claims of the
creditors as well as Government and employees. In the said report the claims
of Government and employees have been set out as under:
"C. Claims of Government and Employees (Preferential
Payment) under Section 530.
Claims Claims Remarks
Received Admitted/
Rejected
1. Ministry 90,00,000.00 90,00,000.00
of
Commerce,
DGFT,
Ludhiana
2. Office of
the Dy.
Commissio 5,49,554.00
ner (i) 11,80,689.00
Excise
Taxation, 1,73,211.00
Ludhiana
(ii) 4,37,792.00
3. Dy. 25,18,740.00 25,18,740.00
Excise &
Taxation
Commissio
ner-Cum-
Collector,
Ambala
4. Income 35,64,000.00 Rejected Claims are not
Tax received.
Department 1. Relates to a
,New period of 91-92
Delhi. to 97-98 (2) not
in proper form.
5. N.C. 1,14,920.00 20,000.00 (Admitted under
Bhatt, Section 530.)"
Manager
20. As against the above determination, the Propounders have in the affidavit
dated 11th October 2012 accounted for the entire sums claimed by each of the
above Government departments and statutory bodies. Further it has been
undertaken that the principal dues of Rs.17.78 lakhs of the Provident Fund
Department which have been raised subsequently will be paid.
21. Mr. Manish K. Bishnoi, learned counsel for the OL submitted that it was
not clear whether the above Government agencies had in fact been served
notices. As far as the above submission is concerned, it is seen that along
with Co. Pet. No. 425 of 2011 the Propounders have placed as Annexure P-
11 the list of unsecured creditors. This includes the above Government
departments and statutory bodies. It is this list that was placed before the
Chairperson of the meeting of unsecured creditors convened pursuant to the
orders passed by this Court. The report of that meeting was chaired by Mr.
P.K. Mittal. He has sworn an affidavit dated 15th July 2011 enclosing his
report of meeting as Annexure-A. He has stated that the unsecured creditors
were "summoned by notice served individually upon them in person by post
and by advertisements published in Delhi Edition of 'Indian Express'
(English) in its issue dated 14th June, 2011 and in 'Veer Arjun' (Hindi) in its
issue dated 14th June, 2011. Ludhiana Edition of 'Indian Express' (English)
dated 14th June, 2011 and 'Ajit Samachar' (Hindi) dated 14th June, 2011 and
duly held at Hotel Parkland Exotica, Chhatarpur Mandir Road, Mehrauli,
New Delhi on 9th July, 2011 at 3.00 P.M." The report also notes that 44
unsecured creditors attended the meeting by which they approved the
Scheme.
22. When notices have been served of the meeting to approve the Scheme on
all the unsecured creditors including the Government departments, the
requirement of giving them an opportunity to object to the Scheme has been
fulfilled. When no objection till date has been received, it cannot be
presumed that they have any objection to the Scheme as such. Nevertheless,
Mr. Arun Kathpalia, learned counsel appearing for the Propounders on
instructions makes a statement that the Propounders will file an affidavit in
this Court within three days stating that if there are any further statutory or
Government dues that may be found to be payable by TAML, they will be
paid in accordance with law. With the above statement there are no further
objections to the Scheme.
23. Accordingly, sanction is hereby accorded to the Scheme as propounded
by the Propounders with the modifications as indicated hereinabove and
subject to TAML filing an affidavit by way of undertaking in this Court
within three days stating that:
(i) the post dated cheque dated 31st March 2013 issued to IDBI will be
honoured upon presentation.
(ii) the balance dues of the IFCI will be paid within six months from today
together with simple interest @ 15% per annum.
(iii) IARC will be permitted to appropriate Rs.2.5 crores kept with it in a no
lien account towards its dues. The balance dues of IARC will be paid within
four months from the date of sanction of the Scheme.
(iv) apart from clearing the statutory dues as mentioned in the Scheme, any
further statutory dues that may become payable will be paid by the
Propounders in accordance with law. The dues of the Government and
statutory bodies as mentioned in the Scheme and in the affidavit dated 11th
October 2012 of Mr. Satish Thapar will be paid within four months from the
date of sanction of the Scheme.
24. The fund position of TAML as on 5th September 2012 is Rs.78,61,836.
The OL will after paying of the dues of the security agency as well as
deducting the expenses incurred by the OL thus far (for which a detailed
statement will be filed in these proceedings by the OL with a copy to the
Propounders within four weeks) release the balance sum to the Propounders
simultaneous with handing over to the Propounders possession of the
registered office and any other movable or immovable assets that have been
seized and which remain in the possession of the OL together with the books
of accounts, records and all other documents within a period of four weeks
from today. This is subject to the Propounders furnishing to the OL copy of
the affidavit by way of undertaking in terms of the above directions given by
the Court.
25. With such handing over of the books of accounts, the OL will stand
discharged and Co. Pet. No. 81 of 1996 will be closed.
26. Within 30 days TAML will file with the ROC an intimation of revival of
TAML and take all other appropriate steps including filing of final returns,
balance sheets and other statutory documents in accordance with law.
27. In the event there is any default in any of the above steps, it will be open
to the parties to approach this Court for directions.
28. Company Petition No. 425 of 2011 is disposed of in the above terms.
CA No. 322 of 2013 in Co. Pet. No. 81 of 1996 (for modification of order
dated 29th September 2005)
29. This is an application for modification of order dated 29th September
2005 passed by the Court in regard to purchase of 8.78 acres of land by the
Applicant belonging to TAML at Rudrapur, Tehsil Kichha, District Nainital
(Uttarakhand). It is stated that earlier the Applicant had filed an application,
being CA No.1178 of 2004 which was disposed of by the Court on 29th
September 2005 rejecting the prayer of the Applicant that he should be given
possession of 12 acres of land instead of nine acres. Counsel for the parties
confirm that the sale was made to the Applicant of only 8.78 acres and
possession was also given to him of that extent of land.
30. In the present application, it is now stated that in CA No.1178 of 2004,
the prayer was in two parts. One relating to the area of the land and the other
relating to removal of encroachment by the former Directors from the office
of the unit which was sold to the Applicant in auction. Counsel for the
Applicant states that although the said application was disposed of, nothing
was said about the encroachment and that therefore the Applicant wishes to
renew the said prayer regarding encroachment by way of this application.
31. Possession of the extent of 8.78 acres of land was given to the Applicant
way back in 2004. The application earlier filed by the Applicant was also
disposed of on 29th September 2005. The Applicant has waited for almost
nine years thereafter to file the present application. It is, therefore, not
possible for the Court to entertain his prayer at this stage. In the event that
the Applicant is aggrieved by any unauthorized encroachment on the land in
question, it will be open to the Applicant to take recourse to other remedies
as may be available to the Applicant in accordance with law.
32. The application is dismissed with the above observations.
CA No. 440 of 2013 in Co. Pet. No. 81 of 1996 (for handing over of the
balance/left out land as noted in order dated 29th September 2005)
33. In view of the fact that the Scheme propounded by the former Directors
of TAML has been approved by a separate order, passed today, this
application does not survive and is dismissed as such.
S. MURALIDHAR, J.
MARCH 20, 2013
dn
