Case: State Of W.Bengal  Vs. Pronab K. Sur

latest financial position or the report on the accounts of the Company was placed before the Court as required by the proviso to Section 391(2). Though the Court was exercising special jurisdiction under the Companies Act, the relevant provisions were completely disregarded and the Court was only guided by its own notions of justice. The pre-requisites laid down under the Companies Act for passing the order under Section 391 or 394 cannot be treated as empty formalities which can be thrown to winds at the whim of the Judge. The most objectionable part of the impugned order is to consider one or two offers placed before the Court by the Company without giving due publicity. If the peculiar circumstances of the case required that the normal procedure of calling for bids through advertisement or other means of publicity was to be dispensed with the Court should have at least recorded reasons for the same. But, nothing of that sort was done. The Division Bench should have acted with the awareness that there could be no arbitrary selection of the prospective purchaser, even assuming that an order for sale could be lawfully made. Above all, if the purpose was to rehabilitate or revive the Company, definite proposals for revival should have been insisted upon and the High Court should have passed appropriate orders to ensure that the industry was put back on its wheels and started the production within a time frame, but the only direction given in the order was to pay the amount of one crore or so to the 2nd Respondent-Company ostensibly for the purpose of restarting the industry. How to ensure proper utilization of that money - nothing is mentioned in the order. No provision for monitoring the revival has been made. At the same time all the pending proceedings were terminated. There can be no doubt that the Division Bench out-stepped the limits of its jurisdiction and passed orders of the extra-ordinary nature. 14. The other important reason why the impugned order of the Division Bench cannot be sustained is the subsequent developments that have taken place. It appears that CMS Ltd. (6th Respondent) is no longer interested in the deal. They have not entered appearance before this Court though notice was served. The learned counsel for the 2nd Respondent-Company is not in a position to say that CMS Ltd. is still interested to purchase the land. Secondly, the learned counsel for United Bank of India has made it clear that the bank is no longer agreeable to abide by the terms agreed to earlier under which the bank had to receive Rs. 1.80 crore in full settlement of their claim. The learned counsel appearing for the Bank has contended with justification that it would be imprudent on the part of the Bank to now accept the sum which was offered about 7 years back. The accumulated interest since then would be almost double the amount offered to the Bank in the year 1996. The learned counsel further made it clear that the Bank would like to remain outside the winding up proceedings and pursue the suit filed as long as back in 1992. In view of these two developments, we are of the view that the substratum and underlying basis of the order under appeal has disappeared and it is no longer possible to give effect to the directions given by the Division Bench in the Company Appeal. For all these reasons, the order passed in the Company Appeal is liable to be set aside. 15. The Company Petition No. 90 of 1992 will be restored to the file of High Court and the learned Company Judge will be free to deal with the Petition and the applications, if any, filed therein in accordance with law. 16. As already observed, the order of the High Court in regard to grant of exemption under Section 20 of the U.L.C. Act being in a way inter-related to the approval of the sale of vacant land, should also fall along with the order passed in purported exercise of jurisdiction under The Companies Act. That apart, there is an additional reason why we are inclined to set aside the order of the High Court on this aspect. The High Court did not consider the relevance and effect of the guidelines issued by the State Government in regard to the exercise of power under Section 20 vis-a-vis excess land held by sick industrial units. The High Court was not justified in describing them as unknown guidelines because the orders containing the guidelines were very much on the record and they were adverted to in the pleadings etc. We are not expressing any view on the question whether the application under Section 20 of ULC Act should be dealt with solely from the point of view of the guidelines. We are also refraining from expressing any view on the question of validity of those guidelines in the light of Section 20. These are all questions to be decided by the High Court to the extent they are considered necessary and relevant for adjudication of the writ petition. Whether or not it is a fit case for grant of exemption at least in respect of part of the land so as to facilitate the discharge of workers salaries and statutory dues is also a matter which the High Court may consider, if necessary. It is, however, made clear that the pendency of proceedings under the Companies Act shall not be construed to be a bar to give effect to the provisions of ULC Act in view of the over-riding effect conferred by Section 42 of the Act.17. Accordingly, we set aside the impugned order of the High Court in regard to its finding and declaration on the point of exemption under Section 20 of ULC Act. Writ Petition 383 of 1997 shall be restored to the file of the High Court and the same be dealt with by a Division Bench expeditiously.

Decision (1 = appeal accepted, 0 = rejected): 1

Explanation:
1[ds]order of the High Court in regard to grant of exemption under Section 20 of the U.L.C. Act being in a way inter-related to the approval of the sale of vacant land, should also fall along with the order passed in purported exercise of jurisdiction under The Companies Act. That apart, there is an additional reason why we are inclined to set aside the order of the High Court on this aspect. The High Court did not consider the relevance and effect of the guidelines issued by the State Government in regard to the exercise of power under Section 20 vis-a-vis excess land held by sick industrial units. The High Court was not justified in describing them as unknown guidelines because the orders containing the guidelines were very much on the record and they were adverted to in the pleadings etc. We are not expressing any view on the question whether the application under Section 20 of ULC Act should be dealt with solely from the point of view of the guidelines. We are also refraining from expressing any view on the question of validity of those guidelines in the light of Section 20. These are all questions to be decided by the High Court to the extent they are considered necessary and relevant for adjudication of the writ petition. Whether or not it is a fit case for grant of exemption at least in respect of part of the land so as to facilitate the discharge of workers salaries and statutory dues is also a matter which the High Court may consider, if necessary. It is, however, made clear that the pendency of proceedings under the Companies Act shall not be construed to be a bar to give effect to the provisions of ULC Act in view of the over-riding effect conferred by Section 42 of the Act.17. Accordingly, we set aside the impugned order of the High Court in regard to its finding and declaration on the point of exemption under Section 20 of ULC Act. Writ Petition 383 of 1997 shall be restored to the file of the High Court and the same be dealt with by a Division Bench