Court emphasized that revival schemes for companies in liquidation must adhere to statutory compliance, as any unauthorized share transfer renders the scheme void.

JUDGMENT :

(PER: HON'BLE MR. JUSTICE JAYANT BANERJI)

Heard the learned counsel appearing for the appellant and the learned counsel appearing for the respondent Nos.1 and 2.

2. The instant appeal has been filed seeking to set aside an order dated 01.09.2025 passed by a learned judge of this Court in Company Application No.70/2025 in Company Petition No.131/1988.

3. The company application was filed by the respondent No.1 under the provisions of Section 466 read with Sections 391 to 394 of the Companies Act, 1956, Act read with Rules 6 and 9 of the Companies (Court) Rules, 1959, Rules with a prayer to sanction the scheme of arrangement and to recall the winding- up order dated 30.11.1990. The respondent No.2 is the company (in-liquidation). By the order dated 30.11.1990 in the aforesaid company petition filed by the creditor of the company, the company was ordered to be wound-up and the Official Liquidator, OL was appointed.

4. The Karnataka State Financial Corporation, KSFC was permitted to sell the assets of the company (in-liquidation) in association with the Official Liquidator by means of an order dated 14.07.2006 passed by the Company Court in Company Application No.934/2004. On an application being filed by the applicant-respondent No.1 seeking to set aside the sale and to implead him, while allowing the impleadment application, his application was partly allowed against which, an appeal was preferred before a Division Bench of this Court, which set aside the sale and directed the KSFC to take legal action for sale of assets in accordance with law by means of an order dated 19.12.2008.

5. The case of the applicant is that he has put in a lot of effort to get the winding-up order recalled by investing huge sums to repay all the creditors. Further proceedings were initiated against the applicant in view of the personal guarantees issued on behalf of the company. It is stated that the OL had admitted the claim of Rs. 1,12,11,794/- excluding the claim of the KSFC; that the claims of the Karnataka State Industrial Infrastructure Development Corporation, KSIIDC and KSFC, who are the only secured creditors, had been settled by the respondent No.1 on 03.05.2025 and 12.03.2025 respectively by paying the entire dues.

6. Earlier an application was filed by the respondent No.1 seeking recalling of the winding of order dated 30.11.1990, which came to be withdrawn on 31.01.2025 with liberty to file a comprehensive scheme. The scheme of arrangement for revival of the company (in-liquidation) was filed, in which, the respondent No.1 claimed to be its propounder. This scheme of arrangement was enclosed with the company petition as Annexure-J. The details of the payment/settlement qua the secured creditors and the employees were mentioned in the scheme.

7. The OL filed its objections to the aforesaid company application. Reference was invited to the judgment of the Supreme Court in Meghal Homes (P) Ltd. v. Shree Niwas Girni K.K. Samiti & Others, (2007) 7 SCC 753 , as well as to the provisions of Section 391 of the Act, to contend that the purported scheme of revival made reference to various documents concerning land title and ownership, without such documents being made available, establishing clear title upon verification, which demonstrated lack of bona fides on part of the applicant.

8. It was pointed out that the applicant being the Ex- Director and also a shareholder had admittedly failed to participate in or support the liquidation process for nearly 35 years and had abruptly surfaced after