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2018 Supreme(Del) 1603
IN THE HIGH COURT OF DELHI AT NEW DELHI
JAYANT NATH, J.
Manmohan Singh Bhalla - Petitioner
Versus
Assotech Limited - Respondent
CO. PET. 357 of 2015
Decided On : 11-07-2018
Advocate Appeared:
For the Petitioner: Ms. Neelam Rathore, Mr. Shaantanu Devansh, Ms. Pooja Sharma
For the Respondent: Mr. Chatanya Madani, Ms. Ranjana Roy Gawai, Ms. Rishika Rana, Ms. Vasudha Sen, Mr. Shivansh Gupta, Mr. Vishal Bhardwaj, Mr. Mukesh Sharma, Ms. Usha Rani Rohilla, Ms. Shweta Bhargav, Alankar Infra, Mr. Manish Shukla, Mr. Vikas Singh, Mr. Keshav Mohan, Mr. Rishi K. Awasthi, Ms. Ritu Arora, Mr. Piyush Chaoudhary, Mr. Kabir Ghosh, Mr. Nishant Kumar Srivastava, Manoj Srivastava, Ms. Sangeeta Chandra, Mr. Ajit Kr. Sinha, Mr. Ashwarya Sinha, Ms. Ameya Vikram Thanvi
The court's supervisory jurisdiction over a scheme of compromise and arrangement, the requirement for a just, fair, and reasonable scheme, and the interpretation of what constitutes a 'class' of creditors under Section 391 of the Companies Act.
Headnote:
Companies Act - Scheme of Compromise and Arrangement - Section 391 - Summary of Acts and Sections: Companies Act, 1956, Sections 391, 392, 464, 465, 643, 138 of the N.I. Act - The court discussed the legal provisions of Section 391 of the Companies Act, 1956, and the interpretation of what constitutes a 'class' of creditors. The judgment highlighted the requirement for the company to disclose all material facts to the court, the need for a just, fair, and reasonable scheme, and the court's supervisory jurisdiction over the scheme.
Fact of the Case:
The Ex-Management of Assotech Ltd. filed an application seeking approval of a Scheme of Compromise and Arrangement under Section 391 of the Companies Act, 1956. The court admitted the main petition and appointed a provisional liquidator. The respondent company faced legal and financial challenges, including an FIR and non-adherence to a settlement agreement. The Division Bench dismissed the appeal and allowed the Ex-Directors to file a comprehensive scheme of arrangement.
Finding of the Court:
The court found that the proposed scheme lacked bona fide, was unworkable, and did not fulfill the basic criteria of Section 391 of the Companies Act. The court also noted serious doubts about the manner in which the ex-directors conducted their business, including allegations of siphoning off funds and selling immovable properties. The court dismissed the application seeking approval of the scheme.
Issues: The issues included the classification of creditors, the disclosure of material facts by the company, the justness, fairness, and reasonableness of the scheme, and the conduct of the ex-directors.
Ratio Decidendi: The court emphasized the need for a just, fair, and reasonable scheme, the requirement for the company to disclose all material facts to the court, and the court's supervisory jurisdiction over the scheme. The judgment also clarified the interpretation of what constitutes a 'class' of creditors under Section 391 of the Companies Act.
Final Decision: The court dismissed the application seeking approval of the scheme and ordered an expeditious enquiry by SFIO.
Jayant Nath, J.
CA No.714/2017 in Co.Pet. No.357/2015
1. This application is filed by Ex-Management of the respondent company Assotech Ltd. under Section 391 of the Companies Act, 1956 (hereinafter referred to as ‘the Act’) seeking approval of a Scheme of Compromise and Arrangement between the applicant and a class of its creditors.
2. On 08.02.2016, this court had admitted the main petition, and the OL attached to this court was appointed as the provisional liquidator. Directions were issued to publish citations and for the OL to seal the premises of the respondent and take into custody the assets and books of accounts of the company etc.
3. This court while admitting the petition on 08.02.2016 noted that an FIR being No.121/2015, under Sections 406, 420 and 120B IPC was registered against the Managing Director of the respondent company with the Economic Offences Wing (in short ‘EOW’), Delhi. The order also notes that the proceedings under Section 482 Cr.P.C. were filed, which were disposed of on 04.11.2015 wherein it was noted that a settlement agreement had been reached whereby the Managing Directors and other Directors had agreed to pay a sum of Rs.17.60 crores to the complainants within a period of one year. The schedule of payments was not adhered to and the directors defaulted.
4. Against the above order of this court dated 8.2.2010 admitting the petition, the respondent company went up in appeal before the Division Bench. On 09.02.2017 the Division Bench dismissed the appeal. However, it was left open to the Ex-Directors of the respondent company to file a comprehensive scheme of arrangement disclosing therein all the admitted creditors of the respondent company and such particulars of debt which the appellant admitted. The proposal would indicate the manner in which the dues of the creditors are proposed to be liquidated.
5. In pursuance to the said observations of the Division Bench of this court, now the present scheme of compromise/arrangement has been filed.
6. The present application came up for hearing for the first time on 10.04.2017 when this court issued notice to the petitioner in ten different company petitions filed against the respondent seeking winding up of the respondent, which had been earlier disposed of on 20.07.2016.
7. On 20.12.2017, I heard Mr. Vikas Singh, Sr. Adv. for the Ex-Management of the respondent company; Ms. Ranjana Roy Gawai, Advs. for the applicant IDBI in CA No. 1734/2017; Mr. Manish Shukla, Adv. for Assotech the Nest Apartment Owners in C.A. No.2045/2017; Mr. Saakar Sardana, Adv. for Ms. Divya Vedi, Creditors; Ms.Sangeeta Chandra, Adv. for the OL and Mr. Punit K. Bhalla, Advocate for ICICI Bank.
8. The learned senior counsel appearing for the Ex-Management of the respondent company has explained the mechanism of the scheme proposed by the respondent company. It is urged by the learned senior counsel that as per the scheme, a sum of Rs.5 crores will be infused from personal resources by the applicant/Ex-Management. Once construction starts, the flat buyers will pay their dues and this will help to revive the functioning of the company. It was pleaded that as far as the secured creditors are concerned, they will be taken care of by future cash flow. The respondent company will put the secured creditors Essel Finance, Religare and ICICI Bank under an arrangement whereby 60% of the amount received from future cash flow basis from the Nest Phase-3 (existing project) will be kept towards the cost of construction and the balance amount shall be paid to the three secured creditors in the proportion of Rs.17.5 % each for Religare and Essel Finance and 5% for ICIC Bank. It is also pointed out that as far as ICICI Bank is concerned, they have already a property bearing No.A-12 in Sector 24, Noida, admeasuring 1200 sq.mtrs. which is a fully developed five floors, commercial property having estimated realisable value of approximately Rs.20 crores. The dues of ICICI Bank are Rs.6 crores approx.
