Case: Saroj G. Podar & Others Vs.

ORAL JUDGMENTTipnis, J.This appeal filed by the original petitioners impugns the judgment dated 3rd April 1996 passed by the learned single Judge rejecting the scheme in respect of a company in liquidation filed by the appellants.2.Certain salient facts of the matter are as disclosed hereinafter. On 25th June 1938, Shree Shakti Mills Limited was incorporated as a company. The company was engaged in the business of manufacturing and dealing in man-made fabrics since the date of incorporation and was carrying on the said business until the date of the winding up order i.e. 21st January 1981. Under a Deed of Lease dated 3rd May 1951 entered into between the Governor of Bombay and the aforesaid company, land situate at off Hains Road, Mahalaxmi, Mumbai, admeasuring about 29,981 sq. yards equivalent to 25,007 sq. mtrs. or thereabouts was leased to the company commencing from 1.11.1935 for a period of 50 years. Out of the aforesaid area, an area of about 714 sq. yards equivalent to 595.54 sq. mtrs. has been acquired by the Municipal Corporation of Greater Bombay for public road. The lease deed provides for renewal of the same at the option of the company. The lease having commenced on 1.11.1935 has admittedly expired on 31.10.1985. It is an agreed position that the Official Liquidator has been paying the lease rent to the Collector of Mumbai and has on 4th September 1985 requested the Collector of Mumbai for renewal of the same in accordance with the terms of the said lease. However, it is an agreed position that no document of fresh Indenture of Lease is executed till this date. On 21st January 1981, in a winding up petition filed by Mahindra Ugine Limited, a winding up order was passed by this Court. The Official Liquidator took possession of all the assets of the company, including the aforesaid land. It is an admitted position that under the orders of the Court, all assets of the company, including all movables, plant and machinery of the company and an immovable property of the company at Deolali, except the aforesaid land at Mahalaxmi have been sold and on 12.2.1994, after taking necessary directions from the court, the auction of the said land was fixed on 3.3.1994 and by advertisement dated 12.2.1994 tenders were invited to be lodged on or before 28.2.1994 with the Official Liquidator. On 25.2.1994 the appellants i.e. Podars filed Company Application No.102 of 1994 in the winding up petition for stay of the auction sale and on the same day, Podars also filed Company Application No.103 of 1994 under sections 391, 392 and 393 of the Companies Act for approval of the scheme of compromise and/or arrangement. The Court ordered stay of auction. On 7.3.1994 one Ramraj Kumar Patel and two workers of the company filed Company Application No.104 of 1994 for intervention and postponement of auction of the land proposing revival of the company. On 23.6.1994 an order was passed by the Court giving directions for convening the meetings of various classes of creditors. The date of meeting was changed to 20th August 1994. On 15th July 1994 and 16th July 1994 notices convening the meetings were published in Free Press Journal and Janmabhoomi, respectively. On 22nd July 1994, the President and Vice President of Sanjay Shakti Silk Workers Union claiming registration of about 668 workers of the said company as its members as on the date of the winding up order filed an intervention application. It was contended that the scheme filed by the appellants is not for revival of the unit and, therefore, the workers interest will not be served; that the proposed scheme took care of only 77 workers whereas the workers were more than 600. It was further contended that the liability of the workers was to the tune of Rs.1,49,63,189.16 whereas the scheme was restricted to Rs.75,00,000/- only towards the workers liability. It was contended that the interveners, in fact, had a scheme for the revival of the unit itself and, therefore, more beneficial to the workers. The Court gave directions to the Official Liquidator and both labour Unions, the recognized one, viz., Mill Mazdoor Sabha as also the new Union Sanjay Shakti Silk Workers Union to give lists of workers with full addresses to the Chairman appointed for the proposed meeting of various classes. On 28th July 1994, notices convening the meetings were also published in Loksatta. Notices convening the meetings were also served upon the creditors. On 20th August 1994, meetings of various classes (we are told about eight) were held and the scheme propounded by the appellants was approved by overwhelming majority at all the meetings and on 2nd September 1994, report to that effect was submitted by the Officer who was nominated to preside over the meeting. On 12th September 1994, Petition No.395 of 1994 was filed by the appellants for sanction of the scheme.3.Affidavits were filed by the parties. The Official Liquidator in his affidavit pointed out that the entire factory premises consisting of the suit land, building, etc. are mortgaged to Punjab National Bank for a sum of Rs.2,39,45,000/- and interest thereon; that the suit has been filed by the said Bank; that various other assets of the company were sold by the Official Liquidator for a total price of Rs.90,41,500/-; that the fund position of the company as on 28th October 1994 was : cash in bank - Rs. 8,26,444.70 and investments Rs.1,28,35,000/-. The Official Liquidator also pointed out that he has filed misfeasance summons under section 543 of the Companies Act against the Directors claiming an aggregate sum of Rs.3,59,79,632.49 from the Directors/officers of the company, including the appellants and the same is pending. The Official Liquidator made it clear that he has not so far invited claims in respect of the company. However, he has received uninvited claims from creditors/workers and other Government agencies totally claiming Rs.3,86,31,119/- which includes Rs.3,45,53,048/- being workers claim. The Liquidator pointed out that the appellants having kept quiet for about 13 years from the date of the winding up order have now submitted the scheme when the Official Liquidator has under the orders of this Court sold off all other assets of the company leaving only the said land in question in respect of which after having a valuation done, sale was ordered. The Official Liquidator received three offers which were: (i) Essar Properties Ltd. - Rs.19 crores; (ii) Llyods Realty Ltd. - Rs.125 crores; and (iii) Videocon Properties Ltd. Rs.130 crores. However, the same were not considered by the Court in view of the order passed by this Court on 25th February 1994. The said scheme by the appellants contemplated payments to creditors as per the amounts shown in the statement of affairs. However, the amounts thus shown as due cannot be taken as correct and the exact liability can be ascertained only after adjudication of claims and filing of settled list of creditors as required under the Companies Act. The interveners opposed the scheme filed by the appellants on the ground that the scheme was neither propounded in good faith nor for revival of the company and that the scheme is intrinsically unfair and unworkable as far as the claims of the workmen were concerned. Ajay Podar on behalf of the appellants filed affidavit on 8th December, 1994. It was, inter alia, stated in the said affidavit that, as per the lists obtained from the interveners, the Official Liquidator and Mill Mazdoor Sabha, necessary notices were sent to 830 workmen; that Mill Mazdoor Sabha was the only recognized Union and all the workers ceased to be the workers of the company on the date of winding up i.e. 21st January 1981. The new Union, viz., Sanjay Shakti Silk Workers Union, was registered only on 5th May 1993 having only about 50 members. It was further asserted in the said affidavit that on 25.11.1994 an aggregate amount of Rs.1,93,76,494/- was actually paid to 622 employees and each of the workers has been paid all their legally payable dues and any worker not having been paid would be paid in the same manner. It was pointed out that some of the members of Sanjay Shakti Silk Workers Union have accepted the payment. It was emphasized that under the existing industrial policy, no new textile industry can be established nor any expansion of the existing mills is permissible. In the further affidavit filed by Ajay Podar, it was pointed out that the claim of Punjab National Bank as a secured and unsecured creditor of the company has been duly paid and discharged by making a payment of Rs.13,17,04,527.17 which amount has been accepted in full and final settlement of its claim. It was emphasized that the scheme has been approved by all classes by overwhelming majority and apart from some disgruntled persons who represent some 40 workers, no one has come forward to oppose the scheme; that all the statutory creditors were paid Rs.2,15,00,623.25 in aggregate in full and final settlement of their claims; that Rs.2,51,24,806.08 has been paid in full settlement of the claims of Banks who are unsecured creditors; that out of 114 fixed deposit holders, 82 have been fully paid an aggregate amount of Rs.12,39,555/- leaving a balance of 32 such holders. As far as workers were concerned, 641 workers were paid an aggregate amount of Rs.1,97,88,729/- and only 40 workers remained to be paid about Rs.12,32,000/-; that 233 sundry/trade creditors have been paid an aggregate amount of Rs.7,53,95,451.66 and only 60 such workers remain to be paid about Rs.10,10,415/- and that similarly 47 preference shareholders have been paid an aggregate amount of Rs.16,06,024/- leaving about 49 such shareholders whose dues may amount to Rs.2,68,900/-. It was pointed out that Podar scheme is for the revival of the company for taking the company out of liquidation and to allow it to carry on such business as it may be permitted by law to generate employment and bring in additional revenue.4.It is necessary to mention that one Mathew also proposed a scheme wherein it was proposed to revive the manufacturing activity of the company by undertaking manufacture of Denim (a textile) on the said land and about 250 workers of the company would be given employment in the first year. It is unnecessary to deal with the claim by Mathew as the learned Judge has exhaustively dealt with the same and rejected the same by the very impugned order and no one has filed any appeal against the same.5.Under Secretary, Industries, Energy & Labour Department of the State of Maharashtra has also filed affidavit and referring to the industrial location policy dated 4.5.1993 of the State of Maharashtra, it was pointed out that prior to its closure, the company was manufacturing and dealing in man-made fabrics upto the date of the winding up order and, hence, it can be revived as an art silk manufacturer and can be also restarted as a textile unit which, inter alia, include cotton textiles. However, dyeing and processing of yarn and cloth which would involve use of pollutants like chemicals and dyes would not be permitted. Further affidavit was filed by the said Under Secretary stating that revival of the company was not possible for textile but was possible only for textile product.6.The scheme suggested by the appellants states that the scheme is propounded for taking the company out of liquidation. It further mentions that it is believed that an amount of Rs.20,00,000/- is lying with the Official Liquidator which would be available for distribution amongst creditors; that cheques aggregating to Rs.19,50,00,000/- have been deposited with two senior Solicitors of the company to be held by them in escrow to be utilized for payment of liabilities in accordance with the agreement entered into between Podars and other equity shareholders of the company on the one hand and Bhaveshwar Estate Pvt. Ltd. on the other as also in accordance with the scheme; that on the date of the winding up order, an amount of Rs.2,39,45,000/- including principal, interest and penal interest was due and payable to the secured creditor, viz., Punjab National Bank and the said Solicitors shall pay out of the amount deposited with them an amount not exceeding Rs.10,75,00,000/- of its claim and the said secured creditor shall accept the same in full and final settlement of all its claims against the company. Various amounts were to be paid under the scheme to other Banks, sundry creditors, statutory creditors as also an amount of Rs.75 lakhs to the workers shown as payable in the statement of affairs of the company. Different amounts were shown payable to preference shareholders, fixed deposit holders, payments of dues towards excise duty and income-tax were to be ensured by keeping aside separate amounts payable to those authorities on final orders being passed in the proceedings pending before the authorities. After payment, any surplus in the hands of the Solicitors was payable to Podars and other equity shareholders. The scheme refers to the agreement dated 24.2.1994 between the shareholders, including the appellants, and Bhaveshwar Estate Pvt. Ltd. as purchasers under which agreement the said Bhaveshwar Estate Pvt. Ltd. agreed to purchase the entire 15,000 equity shares of the company from the applicants and others on terms and conditions mentioned in the said agreement and on the final order being passed in the petition, the Board of Directors of the company will stand automatically revived and shall have one Director representing the purchasers and on the balance payment towards purchase price of equity shares being made by the purchasers, the Board of Directors will be reconstituted having all Directors of the purchasers. In this appeal, we are not concerned with the modifications suggested to this scheme by one Mathew. However, the appellants Podars themselves suggested some modifications at the hearing. The first was that the workers will be paid 50% of the salary upto the date of their superannuation or upto the date of the order, notwithstanding the release document by the individual workers in favour of Podars and the age of superannuation would be taken as 60 years. It was further suggested that the appellants undertake to pay to preference shareholders, unsecured creditors, statutory creditors, fixed depositors and other claimants of the company aggregate of the full principal amount due to them together with interest thereon at the rate of 48 per annum from the date of the winding up order till payment. Secondly, it was suggested that the appellants undertake to pay to all the labourers, workmen and staff of the company all dues legally payable to them on winding up under law including outstanding wages, retrenchment compensation, gratuity and like and in addition thereto (i) interest thereon at the rate of 4% per annum from the date of the winding up order till payment or (ii) 50% of salary last drawn by them till the date of sanction of the scheme or the date of superannuation, whichever is earlier, irrespective of the assignments executed by them or any of them after taking into account the amounts already paid to them.7.The learned Judge in the impugned order has observed that so far as the Podar scheme is concerned, it is approved by the overwhelming majority by all the classes. The recognized Union is supporting the same. While considering Mathew scheme, the learned Judge referred to the existing industrial location policy of the State Government. Referring to the affidavits filed by Sarvankar, Under Secretary, Industries, Energy and Labour Department of the State Government, as also to the Government resolutions relevant to the issue, viz., Government resolution dated 27.1.1977 which, inter alia, provided that in Zone-I no new industry whether in large, medium or small scale sector would be permitted in future; that no permission for expansion of the existing industries would be permitted; and that the said policy would be applicable to non-textile industries only. There was another Government Resolution dated 25.5.1977 applicable to cotton textile and, inter alia, provided for non-shifting of such industries, for expansion on certain conditions, for replacement, renovation and/or modernization and for setting up of new units only in Zones III and IV and further providing that policy qua textiles other than cotton textiles, viz., art silk and man-made fabrics, would be governed by the policy adopted earlier. The next Government Resolution is dated 3.2.1984 providing that buildings and plots vacated by medium and large scale industries as a result of closure, etc., will not be allowed to be utilized for industrial purpose and that the said Government Resolution would govern textile industry other than cotton textile industry. The 1st of the Government Resolutions is dated 4.5.1993 which revises the industrial location policy and is applicable to all industries except cotton textile industry and the main objective is to contain pollution and to generate employment opportunities to take care of declining employment in Mumbai. This policy resolution also provides for locational clearance by the Government, subject to other necessary approvals by other departments. It also provides for classification of non-polluting, highly polluting and other industries. As far as zone-I is concerned, it provides that new unit, substitute unit for one that has closed down or relocation of a unit from elsewhere will be allowed freely for schedule industry only and not for others. In the opinion of the learned Judge, an analysis of industries listed in schedule I would show that the paramount consideration for inclusion is non-polluting nature of an industry. The learned Judge felt that textile product would mean a product of textile e.g. ready-made garment. It is in that context that the learned Judge held that the classification of industries is done in order to achieve the main objective of containing pollution. Manufacture of textile like Denim would obviously include several processes like dyeing, bleaching and further processing thus giving rise to pollution. It is on that count that the learned Judge held that setting up of a Denim manufacturing unit is not at all possible.8.Coming to the consideration of Podar scheme, the learned Judge referred to the object of the scheme as mentioned by Podars, viz., "to carry on business, whether existing or new thereby generating new employment and providing more revenue for the Government". The learned Judge felt that the objectives reproduced above are couched in vague terms and it is thus apparent that neither the Podars nor the purchasers who would be ultimately stepping into their shoes are desirous of making known their intentions. However, the learned Judge observed that, as the name suggests, the purchasers appear to be in the business of developing properties. It was contended before the learned Judge that revival does not mean that revival of the very activity and the Court could give importance to the fact that the company is permitted to continue its corporate existence and would carry out the activity permitted under the Memorandum of Association. In this behalf, reliance was placed on the decision of this Court in the case of Vasant Investment Corporation Ltd. reported in 52 Company Cases 139 . The learned Judge considered the facts in the case of Vasant Investment Corporation Ltd. and observed that whether the scheme propounded by the appellants should be granted or not would depend upon the facts and circumstances before him. The learned Judge observed that unlike in Vasant Investment Corporations case, Podars themselves are not going to run the company on revival and thus Podar scheme is on behalf of the purchasers. From their name, the purchasers appear to be a private limited company engaged in development of immovable properties. The learned Judge observed that nothing more is mentioned about them. Nothing is disclosed as to their financial position and the persons who are manning the company and the purchasers remain an anigma till the end. Referring to the agreement dated 24.2.1994 between Podars and Bhaveshwar Estate Pvt. Ltd. i.e. the purchasers, the learned Judge observed that it reveals that equity shares of Rs.100/- each will be purchased by the purchasers at Rs.40,175/- per share; that a sum of Rs.19.50 crores will be deposited on execution of the agreement with the said two Solicitors to be utilized for the discharge of all the liabilities of the company and that the transaction to be completed only after the sanctioning of the scheme by this Court when only the total share price will be paid to Podars and till then all documents shall be kept with the Solicitors. The learned Judge referred to the total consideration which is composed of Rs.60,26,25,000/- for purchase of shares (at Rs.40,125/- per share) and Rs.19.50 crores towards meeting the liabilities. The learned Judge observed that the recitals are mostly aimed at the said land of the company. The learned Judge further observed that the figure of Rs.19.50 crores is worked out on the basis of statement of affairs filed. The learned Judge felt that the purchasers wish to purchase the entire shares of Podars and completely control the company and thus its only asset i.e. the land. The learned Judge wondered why would a party get involved in a business proposition whereby by shelling out almost Rs.80 crores, it wishes to purchase a property which if auctioned, according to Ajay Podars affidavit, cannot probably pay anything to the unsecured creditors. The learned Judge observed that unquestionably, the only objective apparent from the agreement is that the purchasers wish to acquire the said land through the purchase of the equity shares of the company. The learned Judge observed that as in the case of Mathew scheme where the attempt is made to acquire the land through the new Union, the same objective is sought to be achieved by the purchasers through the equity shareholders, viz., Podars and there appears to be no genuine desire to revive the company. The continuation of the corporate existence is only incidental. The learned Judge observed that the only intention appears to be in developing the land which has tremendous potentiality, The learned Judge referred to the fact that the land was, in fact, ordered to be auctioned. Podar filed an application for stay of auction dated 25.2.1994 i.a. the very next day of the agreement. In the opinion of the learned Judge, the purchasers i.e. Bhaveshwar Estate Pvt. Ltd. as well as Mathew chose to take resort to the provisions of the Companies Act providing for propounding of scheme instead of going through the exercise of bidding at the auction. Lack of bona fides are clear from the aforesaid conduct. The learned Judge, thereafter, referred to the facts of Vasant Investment and observed that the facts therein were totally different. The scheme is based only on Statement of Affairs and thus based on the liabilities shown by the erstwhile Directors therein. Admittedly, although all movables are sold and some other immovable property is sold, claims have not been even invited by the Official Liquidator so far and, therefore, no question of examining the same has arisen. The exact liability of the company can be ascertained only after adjudication of claims by the Official Liquidator and when he files in the Court the settled list. The learned Judge has also referred to the complaint by the Regional Director that although required under rule 198 of the Companies (Court) Rules, 1959, half-yearly accounts required to be filed till the dissolution of the company under rule 311 of the said Rules have not been filed upto date. As such, the financial position of the company is also not susceptible of verification. The learned Judge observed that even the exact number of workers is not available. Different numbers are given by Podars, the recognized Union, the new Union and the Official Liquidator. The scheme give names of only 77 workers whereas the number of workers is much more. The labour liability shown by the Official Liquidator in his affidavit is Rs.3,45,530.48 and this is on the basis of uninvited claims lodged with him. The learned Judge has also observed that the affidavits also speak of misfeasance summons being pending adjudication in this Court under which Rs.3,59,79,632/- is claimed against the erstwhile Directors/officers of the company including the appellants and thus the appellants are still under a cloud.9.In para 16, the learned Judge refers to the agreement of Podars with Bhavashwar Estate Pvt. Ltd. and the price of shares of Rs.100/- determined at Rs.40,125/- and held that there is no material to show that the price is fair and reasonable and there is no attempt to understate the same and that the learned Judge was not satisfied that the price arrived at is fair and reasonable and that there is no attempt of tax evasion. The learned Judge held that the scheme has not only to be fair and reasonable but also has to be in public interest. In para 17, the learned Judge has observed that although the scheme is based on the said agreement, it simply refers to the said agreement without specifically spelling out any terms thereof, least of all the price per equity share to be paid by the purchasers to Podars. Purchase of equity shares by the purchasers is an integral part of the scheme, yet neither any valuation is shown to have taken place nor any particulars are given to enable the Court to come to the conclusion that the fixation of price is not contrary to public interest. The learned Judge has held that Podars have failed to produce any material to satisfy the Court that the fixation of the sale price of shares has a rational basis resulting in the transaction being considered to be above board. In para 18, the learned Judge has referred to the fact that proceedings for misfeasance summons are taken out against the appellants and the Directors and the total claim is a large amount of Rs.3,59,79,632/-. The learned Judge felt that as Podar scheme is neither genuine nor propounded in good faith, the fact of nondisclosure coupled with the conduct of the appellants discussed in the impugned judgment is sufficient to come to the conclusion that the scheme is propounded inter alia as a cloak put forth to cover the misdeeds of the Directors. If the scheme is sanctioned, the winding up order will permanently stand stayed; the Official Liquidator will in effect be discharged; there will be none to prosecute the misfeasance summons against the erring Directors and the only asset of the company will once again fall into the hands of persons whose rectitude is under a cloud and through them into the hands of the purchasers and that cannot be permitted under the cloak of a scheme. The learned Judge, therefore, came to the conclusion that the scheme appears to be not only a cloak but also a ruse to abort the misfeasance proceedings. The The termination of these proceedings would be an extra bonus to the appellants who are as it is getting 400 times of their original investment, a real bonanza. This cannot be permitted.10.In para 19 of the judgment, the learned Judge has referred to, in his opinion, the most disturbing aspect of the matter. The learned Judge referred to the allegations that Podars have gone about making payments of the debts of the company surreptitiously and that too even much before the directions were given by this Court on their summons for directions; that they have arrived at secret understandings/bargains with several creditors approaching them individually which amounts to fraudulent preference. The learned Judge has observed that these facts came to light only during the arguments before him. However, the learned Judge hastened to add that he must put on record his appreciation for the manner in which all the concerned counsel, in keeping with the high tradition of the Bar, fully co-operated with the Court in placing whatever information/documents sought from them. The learned Judge then referred to the scheme which proceeds on the basis that the liabilities of the company specified therein would be paid out of Rs.19.50 crores put in the custody of the said two Solicitors. The learned Judge felt that it is obvious that the payment of liabilities is to be made in future after sanction. However, the facts which came to light only during arguments before the learned Judge showed that although the scheme provides that an amount not exceeding Rs.10.75 crores would be paid to the secured creditor, viz., Punjab National Bank and the petition filed on 12th September 1994 says that the said Bank will be paid an amount of Rs.13,17,04,527.17 as against its claim, it was, in fact, paid the said amount on or about 17th May 1994 i.e. not only prior to the date of the petition but also prior to the date of the meeting and even prior to the date on which directions were given. The learned Judge has made reference to several payments being made to various other creditors, including about 560 workers. It was submitted before the learned Judge that the second aspect of the matter was that not only the appellants were bound in law to disclose the aforesaid facts in the petition itself, they were also bound to disclose the same to all the creditors before convening the meetings. It was contended that such disclosure of material facts is necessary for enabling the person participating at the meeting to exercise his discretion as to whether to approve or disapprove the scheme. The learned Judge felt that in the matter, right from its inception, a deception seems to have been set in motion. After filing the summons for directions on 25.2.1994 immediately the appellants in effect commenced implementation of the scheme by paying out the debts knowing fully well that the same would be lapped up hungrily by those waiting for years to be paid. All these facts regarding implementation of the scheme, in the opinion of the learned Judge, were required to be disclosed not only to the Court but also to the persons whose meetings were sought to be convened. The learned Judge then referred to the decision of a Division Bench of this Court in I.S. Davar v. Shankar Vishnu Marathe reported in A.I.R. 1967 Bombay 456, wherein it is held that the consent of the majority of creditors to a scheme does not conclude the issue whether the scheme should be sanctioned by the Court; that the jurisdiction of the Court transcends the mere consideration that a majority of those affected by the scheme is willing to submit to the scheme and that on considerations of more lasting importance like public or commercial morality, the Court may refuse to accept the verdict of the majority. The learned Judge held that it is true that in the affidavit dated 10.2.1995 filed by Ajay Podar some payments having been effected qua several liabilities is mentioned. However, the learned Judge felt that significantly the affidavit is silent as to when the payments were made giving an impression that the payments were made after the meetings. The learned Judge felt that to see that the scheme met with no opposition at the meetings that the persons concerned were paid off and thus neutralized and rendered harmless. There was some controversy regarding suppression of some other agreement with K.& M. Industrial Finance & Trading. However, it appears that the learned Judge had accepted the explanation given by the appellants. The learned Judge found considerable force in the submission that many creditors/workers were paid prior to the meetings against deeds of assignment/release and, therefore, they had no interest left thus vitiating issuance of notices and holding of such meetings and the so-called approval of the scheme was rendered meaningless. The learned Judge felt that the entire process of obtaining approval from the classes whose approval is necessary before presenting scheme for sanction by the Court is not at all followed. Referring to the decision of the Division Bench of this Court in Davars case which cited with approval the observations of Lindey L.J. in re. English, Scottish and Australian Chartered Bank, reported in (1893) 3 Ch. 385, to the effect that the Court is not to simply register the decisions arrived at by the required majority but has to see that the meetings have been property convened and persons participating have been property consulted and have considered the matter from a proper point of view, and if it is so, the Court should be slow to differ. Ultimately, the learned Judge agreed with the submission of the learned counsel for the interveners without any hesitation that the appellants have, right from the word go, with only one desire and that being to profit out of the tremendous rise in land prices, adopted or rather made use of the provisions of the Companies Act without any genuine desire to revive the company. It is for the aforesaid reasons that the learned Judge rejected the scheme propounded by the appellants. The aforesaid judgment is being challenged by the original petitioners i.e. the propounders of the Podar scheme in this appeal.December 4, 199711.We have heard Mr.Manohar, learned counsel appearing for the appellants; Mr.Mahendra Shah appearing for Mill Mazdoor Sabha who is supporting the appellants; Mr.Rao representing certain workers belonging to a separate group of the new Union i.e. Sanjay Shakti Silk Workers Union, who is also supporting the appellants; Mr.Zaiwala, learned counsel appearing for the Official Liquidator; and Mr.Kagtala representing about 9 workmen owing allegiance to Sanjay Shakti Silk Workers Union and opposing the scheme propounded by the appellants. Mr.Manohar contended that out of the amount of about Rs.80 crores to be paid by Bhaveshwar Estate Pvt. Ltd. to Podars, an amount of about Rs.31 crores has been already paid in discharge of different liabilities of the company, viz., the statutory dues, the dues of banks, secured creditors, unsecured creditors, other depositors as also a large number of workers. Mr.Manohar submitted that dues of about 46 workmen could not be paid because their whereabouts are not known. Mr.Manohar has also pointed out that in view of added offer of the propounders of the scheme, the workers stand to gain additionally an amount of about Rs.2.5 crores. Almost all the creditors have been paid, excepting the liabilities amounting to about Rs.22 lakhs. Excepting few workmen, there is no opposition to the scheme and the scheme has been supported by an overwhelming majority. Under the circumstances, submits Mr.Manohar, the learned Judge was in error in rejecting the scheme propounded by Podars. Before taking us to the specific findings against the appellants recorded by the learned Judge and making his submissions thereon, Mr.Manohar took us through the agreement between Bhaveshwar Estate Pvt. Ltd. and Podars and pointed out how the agreement takes care of discharging all the liabilities, including those of the workmen. Mr.Manohar has also pointed out, with reference to the offers received by the Liquidator, that those offers were not proper offers and the highest offer was conditional offer. Mr.Manohar then took us through the scheme propounded by Podars. We do not think it necessary to dwell into the details of the agreement between Bhaveshwar Estate Pvt. Ltd. and Podars as also about the scheme as we have already referred to the required salient features discussed by the learned Judge in the impugned order. Mr.Manohar particularly pointed out that one of the objects as incorporated in the Memorandum of Association of the company is also of dealing in, developing lands and leasing out, etc. Mr.Manohar then referred to the affidavits filed by Ajay Kumar Podar and submitted that all the creditors were aware of these proceedings and not a single creditor has come forward to oppose the scheme propounded by Podars which clearly shows that the claims of almost all creditors of the company in liquidation have been fully paid off and if the Official Liquidator were now to embark upon, invite claims and investigate such claims, that would lead to avoidable delay and would come in the way of expeditious revival of the company in liquidation.12.Mr. Manohar, thereafter, took us through the provisions of sections 391 and 393 of the Companies Act. He has also referred to the provisions of section 445, especially sub-section (3) and the provisions of section 529(3)(b) to indicate the extent and nature of the workmens entitlement. Mr.Manohar, thereafter, referred to certain decisions of different Courts which indicate what should be the approach of the Court while considering the scheme propounded under the provisions of section 391 of the Companies Act. He referred to the decision of the Gujarat High Court in the case of Mafatlal Industries Limited, reported in (1995) 84 Company Cases 230, wherein it is observed as under:".... It is, therefore, that the legislature has provided that where a meeting has taken a certain decision, the Court must apply its mind and consider whether it is in the interest of the Company as a whole and of the class of persons for whom the majority acts and whether the scheme is such that it must be pushed through....... It must look at the scheme to see that it is a reasonable one and, while so doing, the Court will be strongly influenced by a big majority vote and the reasons which actuated the contesting creditors/shareholders in opposing the scheme. Nonetheless, it is essential that the scheme must be a fair and equitable one, though it is none of the business of the Court to judge upon the commercial merits which in fact is the function of the creditors and members...... the Court must test the scheme not from the point of view of a lawyer or an accountant or an expert but it must look at it from the point of view of a reasonable and fair minded person....... 36. Thirdly, the Court must see whether the scheme is such that a fair and reasonable shareholder will consider it to be one for the benefit of the Company and for himself. The scheme must be tested from the point of view of an ordinary reasonable shareholder, acting in a business like manner, taking within his comprehension and bearing in mind all the circumstances prevailing at the time when the meeting was called upon to consider the scheme in question. The court must, therefore, decide whether the scheme is, on the whole, one which deserves to be sanctioned, and in doing so, the court must test the scheme not from the point of view of a lawyer or an accountant or an expert, but, it must look at it from the point of view of a reasonable and a fair minded person. The test in all such cases is to determine how a reasonable person endowed with ordinary commonsense and acting honestly, will view the scheme having regard to all the circumstances bearing reasonably and properly on it. While dealing with a commercial or industrial Company, the scheme has got necessarily to be looked at from the point of view of a prudent commercial man. (vide Sidhpur Mills Co. Ltd., In Re. AIR 1962 Guj. 305 .)"..... The scheme should not be scrutinised in the way a carping critic, a hair splitting expert a meticulous accountant or fastidious counsel would do it, each trying to find out from his professional point of view what loopholes are present in the scheme, what technical mistakes have been committed, what accounting errors have crept in or what legal rights of one or other side have or have not been protected. It must be tested from the point of view of an ordinary reasonable shareholder acting in a business like manner taking within his comprehension and bearing in mind the circumstances prevailing at the time when the meeting was called upon to consider the scheme in question."13.Mr.Manohar has also relied upon the decision of the Gujarat High Court In re Manekchowk & Ahmedabad Mfg. Co., Ltd., reported in (1970) 40 Company Cases 819, wherein it is held as under:".... The Court in exercising its discretion in sanctioning a scheme of compromise with members and creditors under section 391(2) of the Companies Act, 1956, must treat it as cardinal that its function does not extend to usurping the views of the members or creditors....... Nonetheless, it is essential that the scheme must be a fair and equitable one, though it is none of the business of the court to judge upon the commercial merits which in fact is the function of the creditors and members....... While examining the scheme the court should, keeping in view all the aspects of the matter, prefer a living scheme to compulsory liquidation bringing about an end to a Company....... When it comes to choosing between a scheme for reconstruction and an order for winding up, after keeping all the circumstances of the case as also the question of commercial morality in view, and, if the scheme appears to be feasible and workable, it should be preferred to compulsory liquidation."14.Mr.Manohar next relied upon the decision of the Gujarat High Court In Re Navjivan Mills Co. Ltd., Kalol, reported in (1972) 42 Company Cases 265, wherein it is held as under:"...... There are certain well recognised limitations on the courts power to sanction a scheme. The first limitation is that the court would not sanction a scheme which would be invalid without the courts sanction even if every creditor or member concerned agreed to it. In other words, the court has no power to sanction something which the parties could not do by agreement. The second fetter on the courts power is that the court cannot sanction an act being done if the law permits it only subject to conditions and the agreement seeks to dispense with those conditions. The third fetter on the courts power is that the court would not ordinarily sanction a scheme which includes something which can ordinarily be effected by resort to other provisions of the Companies Act. Within the limitations set out above, the court will allow the companies the greatest freedom in devising schemes to suit their requirements and will approve those schemes if they are fair to all whose interests are affected."15.Lastly, Mr.Manohar has referred to the decision of this Court in Vasant Investment Corporation Limited v. Official Liquidator, Colaba Land & Mills Co. Ltd. reported in (1981) 51 Company Cases 20, wherein it is observed as under:".... The court is given wide powers under S.391 of the Companies Act, 1956, to frame a scheme for the revival of a company. Section 391 is a complete code under which the court can sanction a scheme containing all the alterations required in the structure of the company for the purposes of carrying out the scheme. In considering a scheme under s.391, the court must attach importance to the wishes of the members. In addition, it should be satisfied (i) that statutory provisions are complied with, (ii) that the class affected by the scheme has been properly represented and (iii) that the arrangement is such that a man of business would reasonably approve."16.Mr.Manohar then pointed out that the scheme has been rejected on several grounds. One is that there is no proper valuation of the shares of the appellants which are agreed to be purchased by Bhaveshwar Estate Pvt. Ltd. They appear to be undervalued which must result into loss of revenue and, as such, is against public interest. It is a fraud on the revenue. This aspect of the matter is discussed by the learned Judge in paras 16 and 17 of the judgment to which we have already made a detailed reference in the earlier part of this judgment. So far as this aspect of the matter is concerned, Mr.Manohar contended that the findings of the learned Judge are fallacious. They are not only incorrect but are contrary to other findings recorded by the learned Judge in the very judgment. Mr.Manohar submitted that the enquiry as to whether there has been any undervaluation of the shares as alleged is totally unwarranted. No party before the Court has ever challenged the valuation of the shares. Secondly, what was before the Court was consideration of the scheme propounded by Podars and there was no question of the agreement between Bhaveshwar Estate Pvt. Ltd. and Podars being the subject matter of the scrutiny in these proceedings. Any enquiry into the commercial merits and demerits of the said agreement is totally without jurisdiction and clearly unwarranted. Mr.Manohar submitted that the agreement with Bhaveshwar Estate Pvt. Ltd. is totally independent of the scheme. Mr.Manohar next submitted that the burden that there has been undervaluation of the shares lies on the person alleging it. In that behalf, Mr.Manohar referred to the observations of the Supreme Court in the case of K.P. Varghese v. I.T.O. reported in (1981) IT 597, wherein it is held as under:".. It is a well-settled rule of law that the onus of establishing that the conditions of taxability are fulfilled is always on the revenue and the second condition being as much a condition of taxability as the first, the burden lies on the revenue to show that there is an understatement of the consideration and the second condition is fulfilled. Moreover, to throw the burden of showing that there is no understatement of the consideration, on the assessee would be to cast an almost impossible burden upon him to establish a negative, namely, that he did not receive any consideration beyond that declared by him."Alternatively, Mr.Manohar submitted that even assuming that the Court was right in enquiring into the price arrived at between Podars and Bhaveshwar Estate Pvt. Ltd., the price is fair and reasonable. In fact, Mr.Manohar relied upon some of the observations of the learned Judge in his judgment which goes to show that the price offered was a real bonanza to Podars. Mr.Manohar, therefore, submitted that so far as the learned Judge has concluded that the shares were undervalued, the finding is without any basis for the same on the record and, in any case, it was irrelevant to the enquiry.17.The second ground on which the learned Judge has rejected the scheme is that the learned Judge has held that the scheme is made with a view to abort the misfeasance proceedings and, therefore, the same cannot be sanctioned. In that behalf, Mr.Manohar read out the provisions of section 543 of the Companies Act as also the learned Judges reasoning in para 18 of the impugned judgment and submitted that, in fact, there was no reason given by the learned Judge as to why the scheme should be treated as a cloak to cover up the misdeeds of the Directors. In that behalf, Mr.Manohar submitted that the whole purpose of misfeasance proceedings is that the Official Liquidator in the course of winding up proceedings seeks to collect moneys and properties which were wrongly siphoned of by the Directors/ex-Directors so that the creditors of the company do not suffer. Mr.Manohar pointed out that in the present case, all the creditors are being fully paid off and the workers are also being paid an amount which is somewhat more than legally due to them and, therefore, even if the Official Liquidator succeeds in misfeasance summons, amounts that may be collected by the Official Liquidator would be finally paid off to the contributories, viz., Podars themselves. As such, this aspect of the matter, in fact, in any case, would not be material for sanctioning the scheme for revival. Mr.Manohar then took us through the decision in J.S.Davar & Anr. v. Dr. Shankar Vishnu Marathe & Ors., reported in A.I.R. 1967 Bombay 456. Mr. Manohar pointed out about 13 factual aspects which clearly distinguish the said case from the facts and circumstances of the case before us. In the aforesaid case, it was observed by this Court as under:"..... Therefore, if the Scheme is accepted, all that can happen is that the evil day will be postponed. We see no justification for prolonging the agonies of the creditors any more. It seems to us certain that even if the Scheme is accepted, the Company will have to face a fresh challenge to its solvency within a short time." (page 463)Mr.Manohar contended that, as such, in the aforesaid case of Davar, on facts, it was held that the only purpose that would be achieved was that the pending misfeasance proceedings would be terminated. Mr.Manohar, therefore, contended that reliance on the aforesaid judgment to the case in hand was totally unwarranted.18.In this behalf, Mr.Manohar next contended that, as a matter of fact, misfeasance proceedings can always be compromised and, ultimately, they should be compromised. In that behalf, he referred to the decision of this Court in Vadilal Gandhi v. Thakorelal Munshaw & Ors., reported in A.I.R. 1954 Bombay 121, wherein it was held as under:"... The question is whether there is anything in s.235 which would make us say that the procedure laid down in O.23 R.3 is not applicable to misfeasance proceedings. In our opinion, there could not be a fetter case where a compromise should be given effect to then in a misfeasance summons, if the compromise is a fair and proper one. Cases are bound to arise where the liquidator would say to himself that if the officers of the Company are prepared to pay a reasonable amount it would not be worth his while to incur heavy costs in establishing the liability of the officers. In company matters it is always difficult to establish the liability of the directors or other officers of the Company and to bring home to each one of them his misdeeds or his misconduct or his misfeasance. Therefore, even more than in a suit, a fair and reasonable compromise should always be welcomed in Company matters where the liquidator would be saving heavy costs which the Company would otherwise have to incur; and here again, to set all doubts at rest, we have in Palmers Company precedents the form of a compromise on misfeasance summons at page 598, which shows that in England also orders are taken by consent compromising misfeasance claims."Mr.Manohar lastly submitted in this behalf that in any case, the Court can always alter the scheme and the apprehension could have been alleviated by ordering the Directors to deposit the alleged amount of misfeasance with the Liquidator which amount, in any case, after satisfying the claims, if in excess was bound to come back to the company. The next point on which the learned Judge has declined to grant the scheme was that the appellants have made payments to various creditors which they could not have made and, consequently, the appellants have not made full disclosure to the Court as required by the provisions of the Companies Act. In that behalf, Mr.Manohar submitted that there are two aspects of the matter. One is the requirement of disclosure to the Court and the other is the requirement of disclosure to the creditors/preference shareholders. In that behalf, Mr.Manohar pointed out that rule 67 of the Company Court Rules prescribes form 33/34 as the format of summons for direction. It has been complied with in the present case and there is no finding to the contrary. Rule 79 of the aforesaid Rules prescribes form 40 as the format of the petition which also is complied by the appellants. Referring to the provisions of sections 391, 392 and 393 of the Companies Act, Mr.Manohar emphasized that there is difference regarding the material which ought to be disclosed to the Court under the provisions of section 391 and disclosure to the creditors under the provisions of section 393 of the Companies Act. So far as the Court is concerned, the propounder of the scheme is required to disclose all material facts relating to the company such as the latest financial position of the company, the latest auditors report on the accounts of the company, the pendency of any investigation proceedings in relation to the company under sections 235 to 251 and the like. Mr.Manohar submitted that it is clear that if there is any information which the Court desires, it should require the same to be disclosed before the scheme can be sanctioned. If there is some information which although required to be disclosed, that has not been disclosed, the Court can always ask for such information, but the Court should not reject the scheme for nondisclosure. In that behalf, Mr.Manohar referred to the decision In re. Mafatlal Industries Ltd. (supra) wherein it has been held as under:"... 216. The proviso came to be inserted on the recommendation of Daphtary-Shastri Committee by the Companies (Amendment) Act, 1965. The committee observed that in order that the court may not proceed to sanction an arrangement or amalgamation with too little material on record and without information as to important facts which, if they were present before the court, would weigh heavily against the sanction of the scheme, must be disclosed by the company or another person who has applied for sanction.217. However, this obligation is referable at a point of time when an application is made to the Court under Section 391 for its sanction to the proposed scheme. The obligation arising from the proviso to Section 391(2) is not referable to non-disclosure of material facts at the time of the meeting of creditors and/or shareholders or any class of them."19.Mr.Manohar has also relied upon the decision in Khandelwal Udyog Ltd. v. Acme Mfg. Co. Ltd., reported in (1977) 47 Company Cases 503 and especially to the following observations:"(3) That section 393(1)(a) does not ordain disclosure of all material facts. Clause (a) not only enumerates the categories of particulars, but it deliberately makes a departure by omitting any reference to material facts. The legislature having used a different phraseology in the said two provisions, it must be held that the legislative intent under section 393 was not to provide for disclosure of all material facts. Therefore, the nondisclosure of the valuation report or report of the chartered accountants did not come within the mischief of section 393(1)(a). There was, therefore, no breach of the provisions of section 393(1)(a) vitiating the resolution approved by the majority of members at the meetings."Mr.Manohar has also relied upon the decision in Tata Oil Mills Co. Ltd., reported in (1994) 3 CLJ 46, wherein it has been observed as under:"As far as disclosure of information is concerned, it will not suffice for the dissenting shareholder merely to show that he regarded himself as, or was in fact, unprovided with all the material upon which he could come to a just conclusion in regard to accepting or rejecting of the scheme, inasmuch as there would be no limit to the inquiry which would have to be set on foot as to the extent to which his demands for disclosure ought to be conceded. On the facts, there was held to be no substance in the objection that no adequate material was placed before the shareholders at the time of the meeting which would have helped the shareholders to consider the scheme."It was further observed as under:-"The explanatory statement as required under section 172 is quite different than the explanatory statement which is required under section 393(1)(a) of the Act. It is well settled that section 393(1)(a) of the Companies Act, 1956, does not ordain disclosure of all material facts. Clause (a) not only enumerates the categories of particulars, but it deliberately makes a departure by omitting any reference to material facts. The Legislature having used a different phraseology in the said two provisions, it must be held that the legislative intent under the said section 393 was not to provide for disclosure of all material facts."In any case, Mr.Manohar submitted that if any more information was required, the propounder of the scheme should have been given an opportunity to place such additional and further facts which the learned Judge thought were necessary to be furnished before him. Mr.Manohar contended that the alleged nondisclosure was not due to any deliberate intention on the part of the appellants to mislead the Court, but was the result of inadvertence or want of knowledge of the true legal position on the part of the appellants. So far as the disclosure to the creditors ars concerned, Mr.Manohar submitted that there is no particular form which has been prescribed for the explanatory statement under section 393 of the Companies Act. Therefore, explanatory statement as was possible to be sent was sent to all creditors of the company. In the submission of Mr.Manohar, the matters which do not form part of section 393 were not required to be disclosed to the various creditors. Under section 393, unlike section 391, all material facts are not required to be disclosed. In that behalf, Mr.Manohar relied upon the decision in the case of Khandelwal Udyog Ltd., reported in (1977) 47 Company Cases 503, as also the decision in Tata Oil Mills Company Ltd., reported in (1994) 3 CLJ 46. Mr.Manohar, in that behalf, has also read out the observations in the case of Mafatlal Industries Ltd. (supra) as also the decision in the case of Manekchowk & Ahmedabad Manufacturing Co. Ltd. (supra) and submitted that all the information which was required to be given to the creditors had been duly set forth in the explanatory statement and the alleged nondisclosure of facts which the propounder of the scheme was not obliged to disclose cannot vitiate the meetings and cannot form the basis for rejection of the Podar scheme. Mr.Manohar submitted that, in any case, none of the creditors had made any complaint in this behalf and, as such, the learned Judge was in error in rejecting the scheme for the alleged nondisclosure either to the Court or to the creditors. In fact, Mr.Manohar submitted that the creditors were fully aware of the proceedings and they had executed documents which clearly made reference to the Podar scheme and the pendency of the proceedings in this Court. Mr.Manohar next submitted that there is no question of any fraudulent preference as observed by the learned Judge. In that behalf, Mr.Manohar brought to our notice the provisions of section 531 which deal with fraudulent preference and contended that mere payment to creditors can never amount to fraudulent preference. Mr.Manohar submitted that there is no bar under the provisions of the Companies Act for making any payment to the creditors. Mr.Manohar also submitted that, in any case, payments which were made to the various creditors were made by Bhaveshwar Estate Pvt. Ltd. in pursuance to the agreement between the appellants and Bhaveshwar Estate Pvt. Ltd. What is prohibited under the provisions of section 536 of the CompaniesAct is merely purchasing of shares of the company in liquidation, but there is no prohibition of making payments to the creditors or for assignment of debts by creditors of the company in liquidation. Mr.Manohar contended that, as a matter of fact, making payment is the final object of every winding up. Mr.Manohar submitted that, in any case, in such matters, a pragmatic and practical approach should be taken and if substantial provisions are followed, the scheme should not be rejected on such inconsequential and minor irregularities.20.Mr.Manohar also relied upon certain observations in Manekchowk & Ahmedabad Manufacturing Co.Ltd. as also the observations in Vasant Investment Corporation Ltd. (supra). Referring to these cases and the observations therein, Mr.Manohar submitted that in the present case, all the required disclosure to the Court as well as to the creditors were made at appropriate time. He submitted that even in the affidavit, further disclosures relating to various payments that were made and the parties to whom the amounts were paid were completely indicated. Mr.Manohar submitted that at the request of the Court, even a statement showing the dates on which various payments were made was filed in Court. In fact, Mr. Manohar pointed out that in the judgment, the learned Judge has put on record his appreciation in the manner in which all the concerned counsel, in keeping with high tradition of the Bar, fully co-operated with the Court in placing whatever information/documents were sought from them.21.Coming to the most important aspect of the matter on which the learned Judge has held against the appellants, that is the scheme has been rejected by the learned Judge as it is not a genuine scheme for revival of the company and is not made in good faith, Mr.Manohar submitted that Podar scheme is a genuine scheme for revival of the company. He submitted that in view of the industrial location policy of the Government of Maharashtra, it has become legally impossible to restart the old business of the company in liquidation on the existing land. Referring to observations of the learned Judge regarding the industrial location policy, Mr.Manohar contended that even the learned Judge appears to have accepted that restarting the Mills is out of question. Mr.Manohar has also relied upon the observations of I.G.Shah, J. in the order dated 22.7.1994 which are as under:"Now as far as the revival of the unit is concerned, really speaking, it is an admitted position that several years back the entire machinery of the said Company in liquidation has already been sold and is allowed to be removed from the premises by the Official Liquidator after obtaining orders from the Court and therefore the property now consists of only the land and some structures standing thereon. Therefore, revival of the unit as such is practically out of question. The proposal in the Scheme is to see that the liabilities of the Company in Liquidation of the Creditors, labourers and the Preference Shareholders is to be met and though it is true that if it is possible an effort should always be made to revive the unit so as to provide employment to the workers in the peculiar circumstances of the present case i.e. the machinery of the unit having been already sold and therefore is no more in existence at the premises, it is difficult to say that only a scheme for revival of the unit could only be considered."Mr.Manohar, therefore, submitted that in view of the fact that all the plant, machinery, equipments, etc., have been already sold out and as the original business of the company is not possible to be restarted on the land, in view of the industrial location policy of the State Government, the only alternative to the company was to carry out some other business which was permissible under the Memorandum of Association of the company. That is why in the explanatory statement sent under section 393 of the Companies Act, it is stated that the company in liquidation will carry on either the existing or any business permitted in the Memorandum which would generate new employment and revenue. To indicate what amounts to revival, Mr.Manohar relied upon the decision in Vasant Investment Corporation Ltd. (supra) and the following observations therein:"An examination of the scheme showed that it did not require the Court to sanction a change in the business of the Company. Clause 7A of the scheme, as amended, contemplated that the Company would continue to carry on the business which it was doing prior to the winding up, namely, dealing in immovable properties, and that, in the event of the company desiring to carry on any other business, it would act in accordance with the provisions of the Act and, if necessary, would take steps to amend the memorandum of association in accordance with law. The clause, therefore, could not be said to contemplate something which was ultra vires either the memorandum of association of the Company or the provisions of the Act. Once the Company was reconstituted, it would be open to the Company to carry on such business as its memorandum of association warranted; and it would be open to the Company as it is open to any other company - to get its memorandum of association altered in accordance with the provisions of law."Mr.Manohar also emphasized that the learned Judge himself has observed that as far as the submission of the learned counsel for the company that revival would also include continuance of the companys corporate existence is concerned, the aforesaid decisions certainly support it. Under these circumstances, Mr.Manohar submitted that the learned Judge was obviously wrong in holding that the scheme was not for the revival of the company. Mr.Manohar strongly objected to the submission of the learned counsel for one of the interveners that the scheme is only to enable Podars to grab the land. Mr.Manohar submitted that the land always belonged to the company and after discharge of the liabilities would, in any case, come back to Podars. Mr.Manohar submitted that Podars have found a buyer of their shares in Bhaveshwar Estate Pvt. Ltd. who has agreed to pay a reasonable price. Out of the said price, it was envisaged to pay off all the creditors of the company and after the company is revived, Bhaveshwar Estate Pvt. Ltd. would become 100% shareholders of the company in liquidation and would restart the company by initially carrying on the business of developing the said land. This scheme had three advantages. Firstly, the company in liquidation would be revived and thereby employment and revenue would be generated; secondly, the creditors of the company who are waiting for more than 16 years would be paid in full; and thirdly, the equity shareholders of the company, viz., Podars would get present value of their holding in the wound up company. Instead of that, if the properties were to be auctioned, it would be in nobodys interest. It would be a distress sale. The appellants were justified in propounding the scheme which would keep the company alive. Therefore, Mr.Manohar submitted that there is no question of lack of bona fides on the part of Podars as propounders of the scheme. Mr.Manohar, therefore, submitted that each and every count on which the learned Judge has rejected the scheme is not sustainable and the scheme deserves to be accepted and be accepted by allowing the appeal.22.Mr.Mahendra Shah, learned counsel appearing for Mill Mazdoor Sabha representing about 600 and odd workmen, submitted that in pursuance to the agreement between Podar and Bhaveshwar Estate Pvt. Ltd., they have been paid. If the scheme is approved, the workmen stand to gain additionally. Therefore, he submitted that the scheme should be approved.23.Sanjay Shakti Silk Workers Union, the new Union formed in 1993, opposed the scheme before the learned single Judge. However, a large number of members of Sanjay Shakti Silk Workers Union have appeared before us through Advocate Mr.Rao claiming representation of 259 workers. Mr.Rao submitted that about 152 workers belonging to Sanjay Shakti Silk Workers Union have also accepted the amount and they would like to support the scheme.24.Mr.Zaiwala, learned counsel appearing for the Liquidator, read out the affidavit filed by the Liquidator. He further submitted that the Official Liquidator has not even started finalising the claims. No public notice has been given and claims have not been invited, much less any final settled list is prepared. He submitted that, as per practice, the Official Liquidator first realises all the amounts and then prepares the final list of all the creditors and the persons to whom moneys are due and payable. Mr.Zaiwala pointed out that under rule 291 of the Company (Court) Rules, 1959, the fees of the Liquidator will have to be provided for.25.The only lone voice opposing the scheme was of about nine workmen owing allegiance to Sanjay Shakti Silk Workers Union who were represented before us by Advocate Kagtala. Advocate Kagtala referred to the provisions of section 530 of the Companies Act and pointed out the entitlement of the workmen. Mr.Kagtala pointed out that it is incorrect to say that the workmen have got everything which is due to them. He submitted that the workmen should get all the payments legally due till each one of them reaches the age of superannuation or the date of the finalization of the scheme if approved, whichever is earlier. Mr.Kagtala submitted that under the scheme, the workmen are not being paid up-to-date. Referring to the provisions of section 445(3) of the Companies Act, Mr.Kagtala submitted that it is incorrect that upon liquidation, all dues are discharged. It is only in the case when business of the company is not continued that such discharge takes place, Mr.Kagtala, therefore, opposed the acceptance of the scheme and supported the judgment.26.Although we must say that much can be said about the findings of the learned single Judge regarding alleged fraud on revenue or that the scheme is propounded to abort misfeasance proceedings or that the propounders of the scheme have not made necessary disclosures to the Court and to the creditors as also the finding as to the conduct regarding payments having been made to the creditors and the illusory nature of the meetings held; in the facts and circumstances of the case, we are satisfied that the finding recorded by the learned Judge that the scheme as propounded by Podars is not a genuine scheme for revival and is not made in good faith is clearly sustainable and, as such, we propose to deal only with the said finding and think it unnecessary to deal with the other submissions and other points, though, as stated earlier, we find great substance in the same.27.Coming to the genuineness and good faith regarding revival is concerned, it is extremely relevant to notice that although it is true that under clause 3(s) regarding the objects of the company it is provided:"To lay out land for building purposes and to build on improve, let on building leases, advance money to persons building on and otherwise develop the same, in such manner as may seem expedient to advance the Companys interests."It is relevant to notice that, admittedly, the company since its inception till the date on which the order of liquidation was passed was exclusively engaged in business of manufacturing and dealing in man-made fabrics. Now what is being done, in our opinion, would not amount to genuine revival at all. Revival of the company, Shree Shakti Mills Limited, must mean revival of at least a substantial main business of the company which would include the revival of the business which would give employment to several workmen. The scheme, as we would point out hereafter, in our opinion, is only revival of Podars. It is extremely relevant that the agreement which Podars have entered into with Bhaveshwar Estate Pvt. Ltd. clearly shows that after the so-called revival, Podars go out of the picture totally and Bhaveshwar Estate Pvt. Ltd. would be running the so-called revived company. Bhaveshwar Estate Pvt. Ltd., as the name suggests, would merely develop the land by constructing buildings thereon. We find it difficult to hold that this end result can be called revival of the company. We are in agreement with the learned Judge that the so-called revival of the corporate existence of the company is merely incidental. It is obvious to us that Bhaveshwar Estate Pvt. Ltd. are interested in the company only for the solitary asset which remains, viz., the lands on which constructions can be raised for its commercial or other exploitation. This cannot be a revival in the true sense of the word. What is extremely significant is that although the price of shares may not be directly relevant, in the facts and circumstances of the case, the only asset of the company being the land and that too a huge land at a very prime locality in Mumbai, the fact that Bhaveshwar Estate Pvt. Ltd. are purchasing the shares for an amount of Rs 80 crores is indicative of the price which the land is capable of fetching. We are conscious of the fact that out of the three offers which were referred to by the Liquidator, one of the offers is shown to be nonexistent One is only for Rs.19 crores and the other offer, though for Rs.125 crores, is a conditional offer, the condition being that the Liquidator obtains the renewal of the lease. However, it is extremely relevant to consider that during all these long 17 years, on no occasion there was any serious attempt to call for the offers, much less to consider the same. In our opinion, even the amount of liabilities and dues is not finalised. We are informed that the Liquidator has not bothered during these long 17 years even to invite the claims. We find the manner in which the Liquidator has gone about is rather distressing. It is obvious to us that in such matters, it is extremely essential to invite claims and within a reasonable time to have complete idea and the list of all creditors and the amount which is due to statutory creditors, secured creditors, unsecured creditors, other creditors and especially the workmen That majority of the workmen are supporting the claim does not impress us at all for the simple reason that the workmen in the situation, viz., after being thrown out of employment for the last 17 years have hardly any choice, but to accept whatever is offered to them. What is important is that during all these 17 years, no attempt was ever made to even consider the revival, may be partially. All the plants, machineries and other equipments necessary for revival were sold out and after everything was sold out and after everyone was exhausted and the only asset which remained was land cleared of all machineries, etc., the scheme was propounded. We are not impressed by the argument of Mr.Manohar that the agreement between Podars and Bhaveshwar Estate Pvt. Ltd. is irrelevant. We think that on the contrary, the entire scheme propounded by Podars is completely dependent and, in facts based on the agreement of Podars with Bhaveshwar Estate Pvt. Ltd. The agreement, read in its true colours, means nothing except that Bhaveshwar Estate Pvt Ltd. is purchasing the entire equity shareholding of Podars. Now that shareholding can be understood in the form of whatever assets the company would have and the only solitary asset which the company has is large land situate at a prima locality at Mumbai. In simple terms, instead of bidding at the auction, Bhaveshwar Estate Pvt. Ltd. want to purchase this land from Podars for Rs.80 crores. The very offer and the very agreement suggests to us that the land, even in the position as it is, is capable of fetching a huge amount. In fairness, we must state here that the valuation report which was kept and sealed in a cover was opened by us and the valuation made by the Valuer is about Rs.20 crores. However, we are of the view that the very fact that Bhaveshwar Estate Pvt. Ltd. is, in substance, offering about Rs.80 crores is indication enough regarding the true value of the land and the report regarding valuation being not reliable. Any semblance of revival of the company, in our opinion, must include the interest and employment of the workmen who have been thrown out of employment 17 year ago. However, the scheme, as we see it, is nothing but selling the land without public auction to a person dealing in real estates and to develop the land at a real estate. It is difficult for us to hold that this is revival on the slender thread of one of those several objects in the Memorandum of Association of the company.28.As we are not impressed by this so-called revival of the corporate existence of the company, similarly, we are also not impressed by the alleged difficulties created by the industrial location policy. Our reading of the resolutions is that no new Mill or expansion of the existing Mills may be permitted. But that would never prohibit existing Mills or the revival thereof. We are of the view that somehow the matters were allowed to drift. All machineries, equipments, plant and everything required for the running of the Mills were allowed to be sold and after 17 years when nothing but the land remains, the scheme has been propounded for the alleged revival of the corporate existence which, in reality, is nothing but a scheme for exploiting the land for commercial purposes. We are aware that this would be the result even if the land is auctioned. However, in that event, there will be bidders and we see no justification why under the guise of the scheme, Bhaveshwar Estate Pvt. Ltd. should get preferential treatment. In this behalf, it is extremely relevant that there is no indication whatsoever as to what alleged employment and revenue would be generated by the aforesaid scheme. Even the exact liabilities of the company are not determined. The claims are not invited and the liabilities are not finalized. The exact entitlement of the workmen is also not finalized and at no stage, the Court had applied its mind as to whether the workmen are being paid their total dues. Even the exact number of workmen was not determined and we find that initially the scheme suggested that there were 77 workmen which number has, ultimately, grown to more than six to seven hundred. Under the circumstances, the fact that no settled list of creditors is prepared and as the exact total entitlement of creditors as well as the workmen is not determined, the scheme cannot be approved on the hypothesis that all lawful claims of everybody concerned would be satisfied.29.The scheme, in our opinion, is nothing but a scheme to sell the land and, as such, we find that the finding of the learned Judge that the scheme is not genuine and not bona fide is clearly sustainable.30.We cannot leave this case without certain observations regarding the manner in which the Liquidator has gone about the matter. We were rather surprised to hear from the learned counsel for the Liquidator that, as per some practice, the Liquidator first realises the amount and, thereafter, he invites the claims. The procedure is not only absolutely improper but inherently dangerous. For seventeen years no claims have been invited. May be there are certain poor workmen who would not survive such a period to stake their claim. What is important is that in such matters, the Liquidator must invite claims with absolute expediency within a reasonable time, must keep the Court informed about all the liabilities and the prepare settled list of all creditors. That is also very necessary for the purpose of determining the reasonableness of any offers that may be made to the Court. We are also shocked to see, the casual manner in which the Liquidator has referred to the offers received by him. It was pointed out to us that there is no offer by Videocon. When we enquired with the learned counsel appearing for the Liquidator, his only explanation was that the Liquidator was unable to give any explanation as to why he stated that Videocon had not given any offer.31.We have found that in this matter, nothing is finalized. We direct that the Liquidator should move in the matter with utmost despatch.

Decision:
0[ds]We do not think it necessary to dwell into the details of the agreement between Bhaveshwar Estate Pvt. Ltd. and Podars as also about the scheme as we have already referred to the required salient features discussed by the learned Judge in the impugned order. Mr.Manohar particularly pointed out that one of the objects as incorporated in the Memorandum of Association of the company is also of dealing in, developing lands and leasing out,do not think it necessary to dwell into the details of the agreement between Bhaveshwar Estate Pvt. Ltd. and Podars as also about the scheme as we have already referred to the required salient features discussed by the learned Judge in the impugned order. Mr.Manohar particularly pointed out that one of the objects as incorporated in the Memorandum of Association of the company is also of dealing in, developing lands and leasing out,is relevant to notice that, admittedly, the company since its inception till the date on which the order of liquidation was passed was exclusively engaged in business of manufacturing and dealing infabrics. Now what is being done, in our opinion, would not amount to genuine revival at all. Revival of the company, Shree Shakti Mills Limited, must mean revival of at least a substantial main business of the company which would include the revival of the business which would give employment to several workmen. The scheme, as we would point out hereafter, in our opinion, is only revival of Podars. It is extremely relevant that the agreement which Podars have entered into with Bhaveshwar Estate Pvt. Ltd. clearly shows that after therevival, Podars go out of the picture totally and Bhaveshwar Estate Pvt. Ltd. would be running therevived company. Bhaveshwar Estate Pvt. Ltd., as the name suggests, would merely develop the land by constructing buildings thereon. We find it difficult to hold that this end result can be called revival of the company. We are in agreement with the learned Judge that therevival of the corporate existence of the company is merely incidental. It is obvious to us that Bhaveshwar Estate Pvt. Ltd. are interested in the company only for the solitary asset which remains, viz., the lands on which constructions can be raised for its commercial or other exploitation. This cannot be a revival in the true sense of the word. What is extremely significant is that although the price of shares may not be directly relevant, in the facts and circumstances of the case, the only asset of the company being the land and that too a huge land at a very prime locality in Mumbai, the fact that Bhaveshwar Estate Pvt. Ltd. are purchasing the shares for an amount of Rs 80 crores is indicative of the price which the land is capable of fetching. We are conscious of the fact that out of the three offers which were referred to by the Liquidator, one of the offers is shown to be nonexistent One is only for Rs.19 crores and the other offer, though for Rs.125 crores, is a conditional offer, the condition being that the Liquidator obtains the renewal of the lease. However, it is extremely relevant to consider that during all these long 17 years, on no occasion there was any serious attempt to call for the offers, much less to consider the same. In our opinion, even the amount of liabilities and dues is not finalised. We are informed that the Liquidator has not bothered during these long 17 years even to invite the claims. We find the manner in which the Liquidator has gone about is rather distressing. It is obvious to us that in such matters, it is extremely essential to invite claims and within a reasonable time to have complete idea and the list of all creditors and the amount which is due to statutory creditors, secured creditors, unsecured creditors, other creditors and especially the workmen That majority of the workmen are supporting the claim does not impress us at all for the simple reason that the workmen in the situation, viz., after being thrown out of employment for the last 17 years have hardly any choice, but to accept whatever is offered to them. What is important is that during all these 17 years, no attempt was ever made to even consider the revival, may be partially. All the plants, machineries and other equipments necessary for revival were sold out and after everything was sold out and after everyone was exhausted and the only asset which remained was land cleared of all machineries, etc., the scheme was propounded. We are not impressed by the argument of Mr.Manohar that the agreement between Podars and Bhaveshwar Estate Pvt. Ltd. is irrelevant. We think that on the contrary, the entire scheme propounded by Podars is completely dependent and, in facts based on the agreement of Podars with Bhaveshwar Estate Pvt. Ltd. The agreement, read in its true colours, means nothing except that Bhaveshwar Estate Pvt Ltd. is purchasing the entire equity shareholding of Podars. Now that shareholding can be understood in the form of whatever assets the company would have and the only solitary asset which the company has is large land situate at a prima locality at Mumbai. In simple terms, instead of bidding at the auction, Bhaveshwar Estate Pvt. Ltd. want to purchase this land from Podars for Rs.80 crores. The very offer and the very agreement suggests to us that the land, even in the position as it is, is capable of fetching a huge amount. In fairness, we must state here that the valuation report which was kept and sealed in a cover was opened by us and the valuation made by the Valuer is about Rs.20 crores. However, we are of the view that the very fact that Bhaveshwar Estate Pvt. Ltd. is, in substance, offering about Rs.80 crores is indication enough regarding the true value of the land and the report regarding valuation being not reliable. Any semblance of revival of the company, in our opinion, must include the interest and employment of the workmen who have been thrown out of employment 17 year ago. However, the scheme, as we see it, is nothing but selling the land without public auction to a person dealing in real estates and to develop the land at a real estate. It is difficult for us to hold that this is revival on the slender thread of one of those several objects in the Memorandum of Association of the company.28.As we are not impressed by thisrevival of the corporate existence of the company, similarly, we are also not impressed by the alleged difficulties created by the industrial location policy. Our reading of the resolutions is that no new Mill or expansion of the existing Mills may be permitted. But that would never prohibit existing Mills or the revival thereof. We are of the view that somehow the matters were allowed to drift. All machineries, equipments, plant and everything required for the running of the Mills were allowed to be sold and after 17 years when nothing but the land remains, the scheme has been propounded for the alleged revival of the corporate existence which, in reality, is nothing but a scheme for exploiting the land for commercial purposes. We are aware that this would be the result even if the land is auctioned. However, in that event, there will be bidders and we see no justification why under the guise of the scheme, Bhaveshwar Estate Pvt. Ltd. should get preferential treatment. In this behalf, it is extremely relevant that there is no indication whatsoever as to what alleged employment and revenue would be generated by the aforesaid scheme. Even the exact liabilities of the company are not determined. The claims are not invited and the liabilities are not finalized. The exact entitlement of the workmen is also not finalized and at no stage, the Court had applied its mind as to whether the workmen are being paid their total dues. Even the exact number of workmen was not determined and we find that initially the scheme suggested that there were 77 workmen which number has, ultimately, grown to more than six to seven hundred. Under the circumstances, the fact that no settled list of creditors is prepared and as the exact total entitlement of creditors as well as the workmen is not determined, the scheme cannot be approved on the hypothesis that all lawful claims of everybody concerned would be satisfied.29.The scheme, in our opinion, is nothing but a scheme to sell the land and, as such, we find that the finding of the learned Judge that the scheme is not genuine and not bona fide is clearly sustainable.30.We cannot leave this case without certain observations regarding the manner in which the Liquidator has gone about the matter. We were rather surprised to hear from the learned counsel for the Liquidator that, as per some practice, the Liquidator first realises the amount and, thereafter, he invites the claims. The procedure is not only absolutely improper but inherently dangerous. For seventeen years no claims have been invited. May be there are certain poor workmen who would not survive such a period to stake their claim. What is important is that in such matters, the Liquidator must invite claims with absolute expediency within a reasonable time, must keep the Court informed about all the liabilities and the prepare settled list of all creditors. That is also very necessary for the purpose of determining the reasonableness of any offers that may be made to the Court. We are also shocked to see, the casual manner in which the Liquidator has referred to the offers received by him. It was pointed out to us that there is no offer by Videocon. When we enquired with the learned counsel appearing for the Liquidator, his only explanation was that the Liquidator was unable to give any explanation as to why he stated that Videocon had not given any offer.31.We have found that in this matter, nothing is finalized. We direct that the Liquidator should move in the matter with utmost despatch.