Case: Saroj G. Podar &amp; Others Vs.

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 infabrics 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 ofthat the fund position of the company as on 28th October 1994 was : cash in bankRs. 8,26,444.70 and investments Rs.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 aboutthat 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.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, EnergyLabour 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 infabrics 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 andwere 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 inno 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 toindustries only. There was another Government Resolution dated 25.5.1977 applicable to cotton textile and, inter alia, provided forof 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 andfabrics, 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 ofhighly polluting and other industries. As far asis 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 isnature of an industry. The learned Judge felt that textile product would mean a product of textile e.g.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,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.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.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, fullywith 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 withM. Industrial FinanceTrading. 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 theapproval 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.

Reasoning: 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.