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High Court Of Calcutta
I.P.Mukerji, J.
Brownia Business Ltd
Vs.
Buxa Dooars Tea Company (India) Ltd.
Appeal No : CP. No. 368 of 2009 with C.A. No. 526 of 2008
Decided on : July 21, 2010
Scheme of Arrangement - Tea Company in Liquidation - Approval of Scheme - Company and Shareholders - Scheme for Carrying on Business - Interests of Workers and Creditors - Supervision by Court - Sections 391 and 392 of the Companies Act, 1956.
Fact of the Case:
Contributories of a tea company in liquidation filed an application for sanctioning a scheme to carry on the business that was carried on by the company, as if it had not been wound up. The scheme related to two tea gardens of the company (in liquidation). The Official Liquidator opposed the scheme on various grounds, including the interests of the workers, the sale of machinery, and the creation of third party interests.
Finding of the Court:
The court held that the scheme could be approved under section 391 of the Companies Act, 1956, which includes a company in liquidation within its ambit. The court also relied on the Supreme Court's decision in Miheer H. Mafatlal v. Mafatlal Industries Ltd., which held that the court's jurisdiction in such cases is supervisory and not appellate.
Issues: 1. Whether the scheme takes care of the interests of the workers? 2. Whether the scheme provides for the sale of machinery in the tea garden and their replacement by new machinery? 3. Whether third party interests might be created in implementation of the scheme which would increase the liability of the company?
Ratio Decidendi: The court held that the scheme should be given a chance to take effect, considering the support of a substantial majority of the contributories and secured creditors of the company (in liquidation). The court also took into account the views of the Official Liquidator and imposed certain conditions to supervise the implementation of the scheme, including the deposit of a sum of Rs.5 lac with the Income Tax department and the submission of quarterly statements of accounts to the Official Liquidator.
Final Decision: The court allowed the application and approved the scheme, subject to certain conditions.
Certainly. Based on the provided legal document, here are the key points summarized:
The court's jurisdiction in approving a scheme of arrangement under section 391 of the Companies Act, 1956, is supervisory rather than appellate. The court will not interfere with the informed decisions of the concerned parties unless the scheme is not in the best interests of the company or its creditors (!) (!) .
The scheme pertains to a company in liquidation, specifically the Buxa Dooars Tea Company (India) Limited, which was ordered to be wound up. The scheme involves continuing the business of two tea gardens as if the company had not been wound up (!) .
The scheme was supported by a substantial majority of contributories and secured creditors, with approvals obtained in separate meetings. Various stakeholders, including workers' unions, secured creditors, unsecured creditors, and tax authorities, have expressed their support or no objection to the scheme (!) (!) (!) .
The Official Liquidator opposed the scheme on grounds including the interests of workers, sale and replacement of machinery, and potential third-party interests that could increase liabilities. Nonetheless, the court found that the scheme should be given a chance to succeed, considering the support from the majority of contributors and creditors (!) (!) .
The court emphasized that its role is supervisory, not to judge the commercial wisdom of the scheme, but to ensure that the scheme complies with legal requirements and protects the interests of all stakeholders, including workers and creditors (!) (!) .
Conditions were imposed for supervising the scheme's implementation, including the deposit of Rs. 5 lakh with the Income Tax department and the submission of quarterly accounts to the Official Liquidator. The court also authorized the official to inspect the assets and ensure compliance (!) .
The court permitted the revival and operation of the two tea gardens under the scheme, with the Official Liquidator relinquishing possession of these assets to the applicants, who will operate the gardens in accordance with the scheme (!) .
The scheme's approval is conditional upon certain procedural steps, including the supply of a computerised copy of the scheme and schedule of assets to the tax department, and the payment of Rs. 3 lakh to the Official Liquidator to cover security costs (!) (!) .
The court retained the liberty for parties such as the Provident Fund authorities to seek modifications to the scheme regarding provident fund dues, and authorized the Official Liquidator to conduct periodic inspections to ensure adherence to the scheme's terms (!) .
Overall, the court approved the scheme, recognizing the importance of supervising its implementation without overstepping into the commercial judgment of the concerned parties, and aimed to facilitate the revival of the company’s business under the specified conditions (!) .
Please let me know if you need further elaboration or assistance.
1. THE Judgment of the Court was as follows: THE Court: THE company in question is Buxa Dooars Tea Company (India) Limited (in liquidation). By an order of this Court dated 1st March, 2006 the company was directed to be wound up. THE Official Liquidator has taken possession of its assets.
2. THIS is an application by some contributories of the company for sanctioning of a scheme for carrying on business that was carried on by the company, as if it had not been wound up. The scheme relates to two tea gardens of the company (in liquidation), being Kalchini and Raimatang tea gardens. Pursuant to an order of this Court dated 8th September, 2008 in C.A. 526 of 2008, separate meetings of members and creditors of the company (in liquidation) were held. It is submitted before me that notice of the meeting was given to all statutory creditors. In the said separate meetings, by the required majority, the scheme were adopted.
The question now is about approval of the scheme.
3. IT is submitted that two affidavits have been filed by workers' unions, supporting the scheme. They are also represented by counsel. Two secured creditors namely, Bank of Baroda and Tea Board are also represented by counsel. They do not have any objection to the said scheme, provided the terms of the scheme are carried out. Two unsecured creditors are also represented to signify their consent. Consent has also been signified by the learned counsel appearing for the Agricultural Income Tax Authorities.
4. HOWEVER, this scheme has been opposed by the Official Liquidator. Learned counsel for the Official Liquidator submits that - 1) the scheme does not take care of the interests of the workers, 2) the scheme provides for sale of the machinery in the tea garden and their replacement by new machinery. If the old machinery are sold and subsequently not replaced, that might result in loss of assets to the company, 3) third party interests might be created in implementation of the scheme which would increase the liability of the company.
Mr. Anil Gupta, learned counsel appearing for the Provident Fund Authorities, submits that their dues are about 12 crores. Further, learned counsel for the Income Tax department submits that income tax dues of the company in liquidation from assessment years 1991-92 amount to about Rs.28,10,199/-, till 1st March, 2006.
5. IT is quite plain that language of section 391 includes within its fold, a company which is being wound up. Therefore, a scheme can be proposed by contributories of a company in liquidation or its creditors or both. Further, in the case of Miheer H. Mafatlal v. Mafatlal Industries Ltd. reported in AIR 1997 Supreme Court 506, the Supreme Court in paragraph 28 and 28A has made a detailed analysis of the law relating to compromise or arrangement between companies or between a company and its creditors and members. In paragraph 28A the Supreme Court has said as follows:
"The Court certainly would not act as a Court of appeal and sit in judgment over the informed view of the concerned parties to the compromise as the same would be in the realm of corporate and commercial wisdom of the concerned parties. The Court has neither the expertise nor the jurisdiction to delve deep into the commercial wisdom exercised by the creditors and members of the company who have ratified the Scheme by the requisite majority. Consequently the Company Court's jurisdiction to that extent is peripheral and supervisory and not appellate. The Court acts like an umpire in a game of cricket who has to see that both the teams play their game according to the rules and do not overstep the limits. But subject to that how best the game is to be played is left to the players and not to the umpire. The supervisory jurisdiction of the Company Court can also be culled out from the provisions of section 392 of the Act."
6. IN section 392 the Court has the power to supervise such arrangement or scheme.
I have perused the scheme. I have also considered in
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