M/S Meghal Homes Pvt. Ltd vs Shree Niwas Girni K.K.Samiti & Ors

2. Just like various other textile mills located in that city, SCML also ran into difficulties. A creditor of the Company made an application C.P. No. 642 of 1983 under Section 433 of the Companies Act, for the winding up of the Company. By order dated 25.7.1984, SCML was ordered to be wound up by the Company Court. The Official Liquidator took charge of the affairs of the Company.

3. Nothing significant seems to have happened for a decade. Then, on a report of the Official Liquidator, the Company Court passed an order dated 1.9.1994 directing the Official Liquidator to issue a public notice inviting offers for the revival of the textile mills and absorption of the workmen and to purchase the assets of the Company. At that stage, Rangnath Somani, a contributory, filed Company Application No. 339 of 1994 seeking directions of the Company Court for holding a meeting of the creditors, contributories and other interested persons to consider a scheme proposed allegedly for the revival of the Company. The application was opposed. The Company Court directed the convening of the requisite meeting to consider the proposed scheme. Pending consideration thereof, the Company Court also withheld the proceedings pursuant to the public notice inviting offers. The order of the Company Court directing the convening of a meeting for the purpose of considering the scheme propounded was challenged in appeal by the workers' union and three of the parties who had submitted their offers in response to the advertisement issued by the Official Liquidator pursuant to the direction of the Company Court dated 1.9.1994. Notwithstanding the pendency of the appeals, a meeting as directed by the Company Court was held and a scheme was approved by the creditors, contributories and workers. An application for sanctioning the scheme was also filed. But, meanwhile, on 4.4.1995, the Division Bench of the High Court allowed the appeal against the order dated 1.9.1994 and set aside the direction for convening a meeting to consider the scheme proposed. The Company Application filed in that behalf was thus dismissed. In the view of the Division Bench, the scheme proposed was not a bona fide one since it was not on the basis of any viability report regarding the revival of the company and there was a failure to disclose the latest financial position of the Company. The court also found that even on the showing of Rangnath Somani, the value of the land belonging to SCML would be approximately Rs. 200 crores if unencumbered and that itself was a very conservative valuation. The court was of the view that the intention behind presentation of the Scheme appeared to be to acquire the huge lands and other real estate belonging to SCML at a throw away price ostensibly in the guise of reviving the mills but with no real intention of reviving it. After the obtaining of a viability report, the Division Bench wanted the Company Judge to consider certain suggestions. They were:

5. A Petition for Special Leave to Appeal filed in this Court challenging the decision of the Division Bench as Special Leave Petition (Civil) No. 13305 of 1995 was dismissed on 10.7.1995.

6. The State Bank of India Capital Markets Limited was assigned the task of preparing a viability report. That Body made its recommendations after a due study of the situation. On the first aspect posed by the Division Bench, it answered:

7. On 7.11.1998, a new Industrial Location Policy of the Government of Maharashtra became operative. That applied to all industries in the Mumbai Metropolitan Region excluding the cotton textile industries. Since cotton textile industry was excluded from its purview, it appears that there was no restriction on restarting of the manufacturing activities of SCML.

10. On 12.12.2003, the Company Court directed the meeting to be convened to consider the amended scheme. On 21.2.2004, the amended scheme was approved at the meeting. Company Petition No. 315 of 2004 was filed on 7.4.2004 seeking sanction of the amended scheme. The Regional Director on behalf of the Central Government pointed out that the propounders of the scheme were required to file an affidavit regarding the latest financial position of the Company but that they had not filed such an affidavit. On 23.7.2004, the Company Court rejected the amended scheme and dismissed the Company Petition No. 315 of 2004. The court held that the scheme presented was not a scheme for revival but it was in substance a disposal of the Company's assets which then vested in the Official Liquidator. The court found that it was only a mode of disposal of the Company's assets and hence it would be proper for the Company Court holding the assets to dispose of the assets after inviting offers. That would fetch a better price and such a course would be in the interest of the Company's minority shareholders, workmen and secured and unsecured creditors. The court was also of the view that the amount of Rs. 97.50 crores offered by LBPL was considerably less than the amount of Rs. 200 crores, which the Division Bench had noticed about ten years back, would be the minimum price that could be fetched if the properties were to be auctioned. The Company Court directed the issue of advertisements inviting offers for the assets of SCML showing a reserve price of Rs. 150 crores. The Official Liquidator issued advertisements inviting offers.

For the moment, we are not concerned with those reasons and therefore we are not adverting to them at this stage. In answer to the second query posed, the answer was:

31. We thus allow Civil Appeal Nos. 3179-3181 of 2005, Civil Appeal Nos. 3182-3184 of 2005 and Civil Appeal No. 4377 of 2006, set aside the judgment of the Division Bench and that of the Company Court, and remit the matter to the Company Court for a fresh consideration in accordance with law and in the light of the directions contained in the judgment. Civil Appeal Nos. 3569-3571 of 2005 is dismissed as withdrawn. The parties are directed to suffer their respective costs. The parties will appear before the Company Court for further directions on 12.11.2007.