1 ca1166-07 IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION COMPANY APPLICATION NO.1166 OF 2007 IN COMPANY PETITION NO.369 OF 2003 B.I.F.R. ....Petitioner And M/s.SLM Industries Ltd. ....Applicant V/s. The Official Liquidator, SLM Inds. Ltd. ....Respondent (In Prov.Liqn.) Mr.Arif Bookwala, Senior Counsel with Mr.Vatsal Shah i/b C.N. Mehta for the Respondent company. Mr.V.M. Bhardwaj for Respondent No.2 (341 workers). Dr.T. Pandian, Deputy Official Liquidator present. Ms.C. Paes, Representative Officers of SLM Maneklal Industries, H.O. present. CORAM : S.J. VAZIFDAR, J. DATE : 26TH JULY, 2010. P.C. :- 1. The company has taken out this application seeking an order to set aside the orders dated 14.3.2007 and 6.9.2007 passed by this Court. 2. The company had filed a reference before the B.I.F.R. which was registered as B.I.F.R. Case No.4 of 1991. It appears that a scheme had at one stage been sanctioned. The details thereof are not relevant, as admittedly the scheme did not succeed in taking the company out of the 2 ca1166-07 purview of the Sick Industrial Companies (Special Provisions) Act, 1985 ( SICA Act.). 3. On 23.11.2000, the B.I.F.R. forwarded its opinion to this Court recommending that the company be wound up. The same was treated as a petition for winding up and numbered as Company Petition 369 of 2003. 4. In the meantime, the company filed an appeal before the A.A.I.F.R.. However, the same was withdrawn on 27.2.2001. 5. The above company petition was accepted on 17.4.2003. By an order dated 11.6.2004, the same was admitted and ordered to be advertised. There is no dispute that the petition was accordingly advertised. It is important to note that the company had appointed solicitors to represent it in the above petition. By an order dated 14.3.2007, the Official Liquidator was appointed as the Provisional Liquidator of the company. This is the first order that is sought to be set aside. 6. Mr.Bookwala, the learned Senior Counsel appearing on behalf of the company submitted that the order was passed ex-parte and is therefore liable to be set-aside. 7. I do not agree. Admittedly the solicitors were appointed by the company to represent it in the above proceedings. There is no explanation which establishes that there was a bona-fide mistake or error on the part of the advocates in not having followed the progress in the matter. I see no reason to presume that it was not as a result of the apathy of the company. 8. In any event I am also not inclined to set aside the order considering the facts and circumstances of the case. The company had admittedly made a reference before the B.I.F.R. almost twenty years ago. 3 ca1166-07 Those proceedings ended after ten years with the recommendation of the B.I.F.R. that the company be wound up. At this stage, there were several claims outstanding not merely from the workers who are today opposing this application but from various other creditors. The company had eventually stopped functioning during this stage. Admittedly the dues of the company were at this stage in excess of Rs.25.00 crores. It was submitted that the assets of the company be protected for the benefit of the general body of the creditors. Thus even on merits, there is no warrant for setting aside the order dated 14.3.2007. Further still it is the companies case even today that it has no further assets of having sold the same. The sale of the assets is another aspect which I will come to shortly. Suffice it to note at this stage that it is the case of the company that there are no more assets in its possession. In that event I see no reason whatsoever for setting aside the order dated 14.3.2007. 9. This brings me to the second order sought to be set-aside by this application. Respondent No.2 i.e. Survodaya Labour Union took out Company Application No.954 of 2007 inter-alia seeking an oder directing the Official Liquidator to take physical possession of the properties of the company. This company application was disposed of by the said order dated 6.9.2007. The learned Judge directed the Official Liquidator to take physical possession of the properties. It is true that the affidavit in support of this application wrongly stated that the company had been ordered to be wound up on 12.9.2002. However, a bare reading of the order dated 6.9.2007 does not indicate that it was passed on that basis viz. on the incorrect basis that the company had been ordered to be wound up. It is 4 ca1166-07 possible that the learned Judge passed an order directing the Provisional Liquidator to take possession of the property even otherwise. In exercise of powers, as the Provisional Liquidator, he was entitled to take possession of the property in any event. Further the reasons I have furnished above while refusing to set-aside the order dated 14.3.2007 would also apply in respect of this order. I see no warrant for setting aside this order which directs the Official Liquidator who was appointed as the Provisional Liquidator to take physical possession of the properties. The company in fact contends that it is now not in possession of any properties. 10. It is imperative that the Official Liquidator takes possession of the properties, if any of the company for more than one reason. There are claims of about 2000 workers running into crores of rupees. I hasten to add that the company contends that these claims have all been settled and the workers have been paid in full and final satisfaction thereof. This is disputed by the workers. Some of them contend that they were made to sign affidavits regarding the full and final settlement under duress and that all that they have been paid is only the amounts towards gratuity they were entitled to upto the date of the order i.e. the year 1995. These however, are disputes which I find unnecessary to consider at this stage in this application. These claims and the rival contentions must be adjudicated upon in appropriate proceedings. Till the same is done, it is imperative that the properties of the company are protected by keeping the same in the custody of the Official Liquidator. 11. There are further complications in the matter which arise on account of the purported sales by the company of its immovable properties 5 ca1166-07 which admittedly were very valuable. Mr.Bookwala relied upon the affidavit filed on behalf of the company which indicates that crores of rupees had been paid to the various creditors secured and unsecured including the workmen. He stated that these amounts were paid from out of the sale proceeds of these properties. In view of the fact that the Provisional Liquidator had been appointed, prima-facie the company was not entitled to do so. Even assuming that the workers had voluntarily signed a settlement under Section 2(p) of the I.D. Act, it would make no difference. It will be necessary for the Official Liquidator to also consider the validity and the effect of such transactions. I hasten once again to clarify that I have not considered the rival contentions regarding the validity of the settlement between the company and any of its workmen. It may only be mentioned that apart from the workers, there are certain employees of the company who have also opposed the company application and supported the winding up of the company. Needless to add that they are also entitled to make their claims in accordance with law including in the winding up proceedings. 12. The reliance upon the report of the Official Liquidator prepared pursuant to the order dated 26.6.2008 is of no assistance to the company merely because the company has paid to all its creditors. The workers dues had not been adjudicated. The workers and their union had not been noticed. They had no opportunity of establishing their claim. 13. The above facts warrant an order winding up of the company. There are additional facts in support of the contention that the company be would up. 6 ca1166-07 14. As stated earlier, the proceedings before the B.I.F.R. continued for about ten years. The B.I.F.R. was unable to propound any scheme which would make the net worth of the company positive. The B.I.F.R. therefore, recommended the winding up of the company. The change in circumstances relied upon by Mr.Bookwala are not such as would warrant of dismissal of this petition. The mere fact that many creditors may have been paid to a large extent would not by itself warrant a dismissal of the winding up proceedings. The Official Liquidator has himself received claims worth about Rs.53.00 crores from unsecured creditors. The workers dues are yet to be adjudicated. They have been waiting for about twenty years. It is not as if the manufacturing the process of the company is sought to be revived in the near future. Indeed it is to the contrary. The company has sold its all properties. There are no other manufacturing activities presently undertaken by the company. There is no warrant therefore, to refuse an order of winding up. 15. Even assuming that there is some hope of revival of the company, in the facts and circumstances of the case, it is imperative that an order of winding up first be passed. At the cost of repetition, there is no immediate, proximate hope of reviving the manufacturing/business/trade activities of the company. The creditors have been waiting for twenty years. In my opinion, the ends of justice would be met by winding up the company, determining its liabilities and thereafter leaving the concerned parties the option of adopting proceedings for bringing it out of liquidation of having the winding up order stayed. 16. In the circumstances, Company Application No.1166 of 2007 is 7 ca1166-07 dismissed. The company petition is made absolute by ordering and directing that the company be wound up. The Provisional Liquidator shall continue as the Official Liquidator of the company in the winding up proceedings.