C/W CA NO.237/2023, CA NO.46/2024 &
CA NO.350/2023 IN COP NO.34/2014
Company Court can the same be dealt with. He also
8.2 The Scheme has not yet 'taken off' till today. Based
243/2011 in COP No. 1068/1997, the Scheme is liable to
be declared as null and void and consequently cancelled.
Arrangement. It is admitted that employees' dues were
C/W CA NO.237/2023, CA NO.46/2024 &
CA NO.350/2023 IN COP NO.34/2014
No. 6 propounder from his funds, but from the amounts
infrastructure belonging to Respondent No.2 company.
made by Respondent No.6 be set aside.
9. Learned Senior Counsel Sri. Vikram Huilgol appearing
for Sri. Sammith S, and Sri. Sammith S., counsel for
Respondent Nos. 2 and 6 would broadly contend as
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CA NO.350/2023 IN COP NO.34/2014
to produce any material or Scheme for Revival of
Respondent No.2 despite several opportunities being
granted to them. In this regard, attention is drawn to the
Order dated 27/07/2006 wherein the Learned Single Judge
has clearly held that no Scheme was put forth by any of
the employees or staff or their Union. The same has even
been reiterated and observed even in Order dated
20/03/2012. Further, the employees or their Union have
not even preferred any petition for adjudication of their
claims before the Industrial Disputes Tribunal.
9.3 It was pointed out that the appellant union is
contradicting its own earlier stance as can be observed
from the stance taken during the remanded proceedings in
COP 55/1997 wherein the winding-up of Respondent No.2
was opposed. However, at present they are seeking to set
aside the order of revival of Respondent No.2. The
proceedings of the Scheme of Arrangement and the
Shareholders' meeting were also extensively referred to
demonstrate that the employees are not serious in their
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CA NO.350/2023 IN COP NO.34/2014
approach and are engaging in speculative litigation with
vested interests.
9.4 The continuation of these proceedings would be an
abuse of the process of law, as Respondent No.6 has
spent considerable amounts to revive Respondent No.2
and owing to the present proceedings, the entire revival
has come to a standstill. Even if Sections 391 & 392 of
erstwhile Companies Act 1956 are to be considered, they
deal with implementation of Scheme and it cannot be read
strictly. There should be a liberal construction. In any
event, the powers under these provisions should be
exercised sparingly as laid down by the Apex Court in SK
Gupta vs. KP Jain, (1979) 3 SCC 54. While the Court may
certainly provide guidance for proper working of the
Scheme, winding up or nullifying the Scheme should not
be adopted as a matter of course.
9.5 There can be no rigid approach to implementation of
the Scheme and the very purpose of corporate
restructuring would be defeated should it be insisted that
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CA NO.350/2023 IN COP NO.34/2014
the revived Company should operate its original business
alone. In any event, the Memorandum of Association of 2nd
respondent clearly demonstrates that the objects of
company were wide in scope and included the power to
sell & lease property. As such, any contention raised
otherwise by the employees/staff/the Union that only the
pharmaceutical business should be carried on is erroneous
since the Memorandum of Association and the Scheme
itself at Clause 13 allow dealing with property of the
company. He places reliance on the decision of the
Bombay High Court in Shree Niwas GirniKamgar Kruti
Samiti v. Rangnath Basudev Somani, 2005 SC Online Bom
338, to state that Scheme cannot dictate revival of a
particular business.
9.6 Our attention is also drawn to annexure enclosed
with the Statement of Objections to the OSA, which
evidences payment made to the employees of the
Employees' Union at the time of retrenchment, and a
further Memo is also placed on record demonstrating
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CA NO.350/2023 IN COP NO.34/2014
payments made to staff members including the sums of
Rs. 45,07,000/- & Rs. 45,98,000/- to the party-in-person.
Reliance is also placed on the Possession Memo to
demonstrate that the Official Liquidator having handed
over possession of company property to Respondent No. 6
on 08/07/2015, the property belonging to 2nd respondent
was no longer custodia legis upon approval of the Scheme.
Reference is, also made to the proceedings as against
KIADB, which culminated in WP No. 14961/2021 wherein
one of us, has directed execution of Sale Deed in favour of
Respondent No.2 by Order 17/03/2023 and consequently,
the Sale Deed has been executed on 04/12/2023.
9.7 Further, the challenge to the acquisition proceedings
by KIADB in respect of the immovable properties allotted
to Respondent No.2 has also culminated in an Order dated
26/03/2024 in WA 859/2019 passed by a Co-ordinate
Bench of this Court. It is contended that having fought a
long list of litigations and finally on the brink of taking
steps for revival of Respondent No.2 in the present OSA &
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CA NO.350/2023 IN COP NO.34/2014
CAs are impeding revival. In any event, the scheme has
been substantially implemented inasmuch as the dues of
all secured creditors, unsecured creditors, debenture
holders and employees are cleared. He, therefore prays for
dismissal of the OSA and all the CAs.
10. We have also heard learned Panel Counsel Sri. P.V.
Chandrashekar appearing for KIADB, Sri. Jagadeeshgoud
Patil representing Official Liquidator, and Smt. Prema
Hatti, learned Central Government Counsel.
11. Having heard the learned counsel for the parties, and
having perused the papers, we decline indulgence in these
matters for the following reasons:
11.1 The entire object of winding-up and revival
contemplated under the erstwhile 1956 Act is to ensure
that wherever possible corporate entities should not be
ordinarily liquidated and a reasonable opportunity of
reviving them should be granted, in order to fulfil the
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CA NO.350/2023 IN COP NO.34/2014
claims of all stakeholders. Winding up of a legal entity
has several consequences, needs no research.
11.2 No doubt Section 392 of Companies Act, 1956 has
a wide amplitude, and the Company Court should ensure
that the Scheme continues to work and operate. However,
it is also equally important to note that a scheme spread
over a long period of time inevitably encounters practical
hurdles that cannot be contemplated at the time of
approval of the Scheme. As such, when majority
stakeholders have not raised any issue regarding the
implementation of the Scheme, and when admittedly both
the workmen & staff of 2nd respondent have been paid
either the retrenchment compensation or the One Time
Settlement amount, it would be upsetting the proverbial
apple cart in the event this Court interferes in the
implementation, which we opine is presently underway,
more particularly when the Memorandum of Association as
well as the Scheme both contemplate a wide scope
including selling & leasing of land. In any event, the
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CA NO.350/2023 IN COP NO.34/2014
learned counsel appearing for Respondent Nos. 2 & 6
would submit that the sale of the immoveable property is
only to industrial concerns since the said property is
situate within the KIADB Industrial Estate and no other
purpose would be permitted. A fair submission is made
that the Respondent Nos. 2 & 6 would make sincere
attempt to impress upon such industrial concerns to
employ eligible & qualified workmen/employees should
they make applications in this regard. We appreciate this
gesture.
11.3 While it has been brought to our attention that the
decision of Bombay High Court in Shri Niwas (supra) has
been set aside by the Apex Court in Meghal Homes (P)
Ltd. v. Shree Niwas Girni KK Samiti, (2007) 7 SCC 753, we
find that the Apex Court has remanded the matter back for
fresh consideration on account of several proposals by
several stakeholders having not been considered
adequately. However, the Apex Court has not interfered in
the finding of Bombay High Court insofar as it pertains to
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CA NO.350/2023 IN COP NO.34/2014
requiring flexibility with respect to revival of a company
and not being rigid as to revival of a particular business
only.
11.4 The present case is one where Respondent No.2
has been embroiled in litigation since the last thirty years
and several of the claims have long been rendered either
redundant or infructuous. Even the creditors themselves,
both secured & unsecured, have approved the Scheme of
Arrangement propounded by Respondent No.6. Such being
the case, ordinarily, this Court cannot exercise a review of
the factual submissions made therein. However, given that
the matter has been thoroughly contested by both the
parties, we have given our anxious consideration to all the
facts put forth by the parties and considered various
materials placed before us.
11.5 The Learned Single Judge at the time of
consideration of COP 55/1997 in Order dated 27/07/2006
held as under:
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CA NO.350/2023 IN COP NO.34/2014
"12. Company Application No. 448/2006 is filed
in Company Petition No. 55/1997 seeking for
impleading. It is clear from a perusal of the
application that the said application has been
filed by Shrishma Employees' Union and
according to the averments made in the
application the applicant - Union claims that its
members are the former employees of the
respondent - Company and the Labour Court
has rejected reference and the order passed by
the Labour Court rejecting the application for
recovery of arrears under Section 33(c) (2) of
the Industrial Disputes Act and the same is
pending consideration in W.P.Nos. 4513 and
4514/2006. In any view of the matter, it is
clear from the proceedings of the B.I.F.R., and
the material on record that all possibilities of
reviving the respondent - Company were
explored and only thereafter,
recommendation has been made for
winding-up the respondent - Company
and if the said recommendation is
accepted, the question of considering the
Company Petition 55/1997, itself would
not survive for consideration. The
applicant is not a proper and necessary
party to the petition. Therefore, the
Company Application No. 448/2006 is also
liable to be dismissed.
13. So far as the Company Application No.
732/2006 is concerned, it is also filed in
Company Petition No. 55/1997 by nineteen
employees who are working in the respondent
- Company. I have perused the averments
made in the application that it is filed on
20.07.2006 seeking for permission to furnish a
proposal for taking over the first respondent in
the application and reviving the same.
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CA NO.350/2023 IN COP NO.34/2014
However, proposal is not submitted and
the manner in which the amount of Rs.12
Crores, which is due to be paid to the
Creditors, would be mobilised is also not
stated and it is clear that when the
operating agency had advertised calling
for Change of Management, no proposal
was filed by the applicants in Company
Application No. 448/2006 or the
applicants in Company Application No.
732/2006 and the only applicant in
Company Application No. 613/2006 had
given a proposal which was rejected and
wherefore, it is clear that there in no merit
in Company Application No. 732/2006 and
the same is liable to be dismissed."
(emphasis supplied)
11.6 Although, the said order of learned Single Judge
was set aside by a Co-Ordinate Bench, it is pertinent to
note that it was done only on the ground that they were
proper & necessary parties and therefore they should be
heard before passing any order. Thereafter, even in
proceedings post remand, learned Single Judge by Order
dated 20/03/2012 has observed as follows:
"3. Having heard the learned counsel appearing
for the rival parties, the subsequent position
which is evident is that the learned
counsel representing the Employees Union
and the staff members had an opportunity
to put forth their contentions. But, they
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CA NO.350/2023 IN COP NO.34/2014
have not put forth any scheme before this
Court whereby the company can be kept
afloat. In the meanwhile, during the pendency
of these petitions, the assignee of the secured
creditors however filed an application under
Section 391 of the Companies Act in CA No.
321/2010 praying this Court for a direction to
convene the meeting of the shareholders,
secured creditors and unsecured creditors to
consider the proposal for revival of the
respondent company. This Court allowed the
said application on 30.06.2010 and fixed the
meeting schedule. Accordingly, the meeting of
the shareholders and the creditors were held.
The scheme proposed by the assignee of the
secured creditor did not secure the approval of
the unsecured creditors and the shareholders.
In that view, the scheme has failed and as such
the petitions for winding up had to be
considered on its own merits and accordingly,
the same is being considered at this juncture.
4. In a circumstance where the Hon'ble Division
Bench had set aside the earlier order of winding
up only on the basis that the Employees Union
and the staff members were not heard and in
that situation where the subsequent efforts
made by the assignee of the secured creditor to
revive the company had failed and where there
is no scheme for revival of the company, the
earlier dated 27.07.2006 passed by this Court
would be relevant to be noticed at this juncture
instead of reassessing the material once over
again. In that view, a perusal of the said order
would indicate that this Court had made
detailed reference to the proceedings which
were held before the BIFR. In that context, it
is necessary to notice that in the hearing
held by BIFR on 07.04.1999, the Bench
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CA NO.350/2023 IN COP NO.34/2014
was of the view thar the respondent-
company is to be declared as a sick
company under Section 3(1) (o) of the
Sick Industrial Companies (Special
Provisions) Act,1985. The Industrial
Development Bank of India was appointed
as an operating agency to prepare the
rehabilitation scheme and the hearing was
thereafter held on 12.03.2003. Despite the
subsequent proceedings before the BIFR,
the revival was not possible and the show
cause notice for winding up was ordered
by the BIRF on 26.07.2005 and the
hearing was held on 02.01.2006 to
consider the objection. Subsequent
thereto, having noticed that only course to
be adopted is to wind-up the company has
referred the matter to this Court. In such
circumstance, where the BIFR had made
all efforts to consider the revival of the
respondent company and had failed, and
further before this court also, all efforts of
revival have failed and when it is not in
dispute that the respondent company is
due the amounts payable to the creditors,
the only recourse would be to wind up the
respondent company so as to enable the
Official Liquidator to realise the assets and
pay the creditors.
5. It is to be noted that the employees union
had also contended with regard to certain
arrears payable to them regarding which the
applications have been filed under Section 33-
C (2) of 1947 Act and the same were pending.
Ultimately, in the process of winding up, only
the workmen, all other creditors who are
entitled to receive the amount are entitled to
receive the amount will be able to make the
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CA NO.350/2023 IN COP NO.34/2014
claim before the Official Liquidator. When the
claims are invited, the interest of all parties
would be protected."
(emphasis supplied)
11.7 The above order has attained finality, and no
challenge has been laid to the same. It becomes evident
from the above that although the Employees' Union and
some of the employees demonstrated their interest
towards reviving Respondent No.2, no concrete action was
taken by them towards putting forth a scheme, much less
propounding a scheme approved by Creditors. The
employees & their union have miserably failed to even
demonstrate their bona fide. It can be reasonably inferred
that there has been a consistent attempt to thwart the
revival and, therefore, their claim deserves to be
dismissed on this very ground. It is settled position of law
that a party cannot approbate and reprobate at the same
time, and the conduct of the Employees' Union is one of
the same and deserves to be met with consequences. A
bare perusal of the shareholder meeting held on
23/01/2014 pursuant to the Order dated 19/11/2013 in
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CA NO.350/2023 IN COP NO.34/2014
CA 2064/2013, which is available through the Chairman's
Report dated 05/02/2014, would demonstrate that
although notices were published, no proposal was put
forth by the Employees' Union or the staff members
towards the scheme.
11.8 It is clearly seen from the Order dated 31/01/2012
in WP No. 4513/2004 and 1951-2081/2012 (L-RES) where
the dismissal of Employees' Application filed under section
33(C)(2) of 1947 Act was impugned, the same came to
be partly allowed and the employees were granted liberty
to file fresh applications under section 33(C)(2) of the Act.
However, admittedly, the employees have not approached
the competent tribunal for adjudication of their claims as
has been observed in the impugned order dated
11/04/2016 entered in RP 498/2015 c/w RP 740-
742/2015. The employees cannot now seek adjudication of
the same through the present proceedings as a surrogate.
In fact, against the order dated 31/01/2012 the
employees preferred WA No. 299/2013, which came to be
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CA NO.350/2023 IN COP NO.34/2014
disposed off on 02/09/2014. Subsequently RP No.
1051/2014 came to be filed and that too met the same
fate by a detailed Order. Thereafter, employees filed WA
No. 1021/2016 & 646-777/2017 (L-RES), wherein a Co-
Ordinate Bench has observed that there was deliberate &
intentional delay in preferring the appeal and even on
merits there was no scope for interference in the order
passed by the learned Single Judge. Therefore it
dismissed the same on 06/11/2019.
11.9 The appellants have also filed an application
before the Assistant Labour Officer and Conciliation
Authority (in LD-IDM/128/2022-LD-DO-6-L.S.) for
declaring that the act of retrenchment by the management
of Respondent No.2 on 27/04/1994 is illegal. The same
also has been dismissed by the competent authority by
Order dated 19/02/2022. The same having not been
challenged by the employees till date, it has attained
finality regardless of infirmities, if any. Statutory orders,
howsoever bad arguably they may be, would remain on
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CA NO.350/2023 IN COP NO.34/2014
record for all ostensible purposes until they are set at
naught in appropriate legal proceedings. In other words
they have legal consequences.
11.10 Even the present appeal was dismissed for non-
prosecution vide order dated 05/09/2023 and the
application for restoration also came to be rejected on
23/09/2023. However, another application came to be
filed by the appellants in IA No.3/2023, which came to be
allowed on 09/01/2024 with the following observation:
"...keeping in view the reasons assigned in the
and since the doctrine of audi alterem partem
is very much required to be considered and an
opportunity has to be provided to both the
parties to the proceedings, it is deemed
appropriate to allow the application.
Hence, keeping in view the submission of the
learned Senior Counsel and the reasons
assigned in the affidavit accompanying the
application, I.A.No.3/2023 is allowed.
Consequently, the order dated 05.09.2023 is
recalled and the appeal in O.S.A.No.8/2016 is
restored to file..."
It is clear from the above that sufficient opportunity is
granted to the appellants to put forth their case.
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CA NO.350/2023 IN COP NO.34/2014
Nevertheless, the appellants have failed to make out any
case for interference.
11.11 With respect to the immovable property being
custodia legis in terms of Section 466 of 1956 Act, while
the same is true when a winding up order is passed, that
is not applicable when the company is ordered to be
revived by approving a Scheme of Arrangement proposed
by a propounder. In the present case, the Scheme having
been proposed & approved and the Official Liquidator
having transferred possession of the movable &
immovable property of the 2nd respondent-Company to
Respondent No. 6, the same cannot be said to be custodia
legis any longer.
11.12 Insofar as CA 237/2023, CA 350/2023 & CA
46/2024 are concerned, the same are also filed by some of
the former employees/ staff members of Respondent No.2.
These persons were also parties to all the above
proceedings and have consistently taken a stance
supporting that of the Employees Union. As such, the
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CA NO.350/2023 IN COP NO.34/2014
present applications are merely an attempt to prolong the
proceedings and is yet again a classic case of approbation
and reprobation which does not merit consideration, owing
to lack of bona fides on the part of the said applicants.
That apart, the grounds raised by them have been
answered in the preceding paragraphs.
11.13 One last thing cannot be left unmentioned: we
had suggested to the Respondent No.2 & the employees
union to sit across the table and negotiate some amicable
settlement, years having passed after the workmen ceased
to be in the employment. However, that did not much
march. Despite that the Respondent No.2 expressed its
willingness to pay some amount ex gratia only to the
workmen who were borne on record as on the eventful
day; this offer, learned Sr. Advocate Mr.Vikram Huilgol
appearing for the Company said, was only for buying
peace. This gracious proposal too fell on the deaf ears. It
is unfortunate that matters like these are prolonged for
over thirty years. Even successful resolution applicants
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CA NO.350/2023 IN COP NO.34/2014
such as Respondent No.6 herein, who have invested
substantial money into propounding the Scheme and
satisfying creditors & stakeholders, are made to suffer at
the hands of litigants such as these appellants and the
applicants, who are nothing but trying to engage in a
proverbial dead-horse flogging.
In the above circumstances, we find this appeal &
applications to be devoid of merits and accordingly,
dismiss the same, costs having been reluctantly made
easy.
Sd/-
(KRISHNA S DIXIT)
JUDGE
Sd/-
(C M JOSHI)
JUDGE
Snb/cbc
