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1999 Supreme(Guj) 674
Gujarat High Court
Judgename :M.S.Shah
STATE BANK OF INDIA - Appellant
Versus
ENGINEERING MAZDOOR SANGH - Respondent
COMPANY PETITION 530 of 1997
Decided On : 12/02/1999
Headnote:
Companies Act, 1956 – Sections 391, 391 (1) and 394 – Code of Civil Procedure, 1908 – Section 151 – Company Court Rules -- Rule 80 – "Class of creditors” – Non-compliance with mandatory statutory provisions of Sec. 391 (1) – Official Liquidator – Assets – Scheme – Prayed Court may review, quash and set aside order 7 sanctioning the Scheme of Compromise and/or arrangement proposed by Engineering Majdoor Sangh or may direct appropriate action to be initiated against Shri k. W. Desai of Engineering Majdoor Sangh for making false statements on affidavit, concealing material facts, practising fraud on Court and misleading this Court – Though possession and custody of assets of unit in question is with the Official Liquidator, stalemate has continued for the last two years as neither the creditors nor any other parties are in a position to present any scheme under Sec. 391 and Sec. 394 Act nor is Official Liquidator in a position to dispose of the assets of the Company with the result that neither creditors nor workers are in a position to get their dues or even part thereof – Whether any action is required to be taken against Mr. K. W. Desai of the Engineering Majdoor Sangh, Baroda, so that any delay in deciding the said question does not prolong the stalemate existing for the last two years – Held, case no separate meeting of secured creditors, unsecured creditors and shareholders of the Company in liquidation were convened or even ordered to be convened. In fact, a meeting of only one class of creditors, workers was convened – Admittedly, no notice under Rule 80 of the Company Court Rules was published or ordered to be published. Mr. K. W. Desai appearing for the Union is not in a position to dispute any of the aforesaid factual aspects although affidavit-in-reply is filed by him on behalf of the Union – Aforesaid factual aspects are not disputed even at the hearing of these applications – All that is contended is that in view of rule 9 of the Company Court Rules, the Company Court has inherent powers to give such directions or pass such orders as may be necessary for meeting ends of justice or to prevent the abuse of process of the Court – Principles laid down in case of Miheer H. Mafatlal (supra) it is not for this Court to evaluate the merits of the scheme which was sanctioned by this Court by order – Once, it is found that scheme was sanctioned without considering and complying with mandatory provisions of Sec. 391 of Act, and Rule 80 of Company court Rules, it must be held that order was vitiated by errors of law apparent on face of the record and the case clearly falls within the scope of review – Order accordingly. (Paras 11 and 13)
( 1 ) IN all these applications the applicants have prayed for review of this Courts order dated 23-9-1997 passed by this Court (Coram: honble Mr. Justice S. D. Dave) in Company Petition No. 224 of 1996 sanctioning the scheme presented by Engineering Majdoor Sangh, Baroda, under secs. 391 and 394 of the Companies Act, 1956 (hereinafter referred to as the act ). Since these applications involve common question of law and fact, they are heard together and common judgment is being delivered in all these four applications
( 2 ) IT may be clarified at the outset that in Company Application Nos. 513 of 1997, 515 of 1997 and 516 of 1997 the applicants have prayed for the following main reliefs. (i) This Court may review, quash and set aside the order dated 23-9-1997 sanctioning the Scheme of Compromise and/or arrangement proposed by the Engineering Majdoor Sangh. (ii) This Court may direct appropriate action to be initiated against Shri k. W. Desai of Engineering Majdoor Sangh for making false statements on affidavit, concealing material facts, practising fraud on the Court and misleading this Court. For the present, this Court is only dealing with the first prayer and the parties shall be at liberty to make appropriate submissions regarding the second prayer at the time of next hearing. It is necessary to make this segregation because the Company in question being Beclawat of India Ltd. was ordered to be wound up as far back as on 22-12-1992 and the properties of the Company were taken over by the Official Liquidator attached to this Court. However, by virtue of the order sought to be reviewed (i. e. , the order dated 23-9-1997) possession of the properties of the Company was taken over by the Engineering majdoor Sangh (hereinafter referred to as the Union ). After the Court passed order dated 23-9-1997, by order dated 23-10-1997 the Court recorded the statement made by the learned Counsel for Engineering Majdoor Sangh that they would restore back the possession and custody of the land, building and machinery of the unit in question to the Official Liquidator by 24-10-1997. Thus, though the possession and custody of the assets of the unit in question is with the Official Liquidator, the stalemate has continued for the last two years as neither the creditors nor any other parties are in a position to present any scheme under Sec. 391 and Sec. 394 of the Act nor is the Official Liquidator in a position to dispose of the assets of the Company with the result that neither the creditors nor workers are in a position to get their dues or even part thereof. For this reason, at the request of Mr. K. W. Desai, this Court has deferred consideration of the second question whether any action is required to be taken against Mr. K. W. Desai of the Engineering Majdoor Sangh, Baroda, so that any delay in deciding the said question does not prolong the stalemate existing for the last two years
( 3 ) BEFORE dealing with the contentions raised in these applications, a few facts leading to filing of these applications may be stated. 3. 1 Some of the creditors of Beclawat of India Limited filed Company petition Nos. 62, 63 and 64 of 1991 praying that the Company be wound up as it was unable to pay its debts. These Company petitions were admitted on 25-10-1991 and were allowed by this Court by order dated 22-12-1992. The company was ordered to be wound up and the Official Liquidator was appointed as Liquidator of the Company in liquidation3. 2 State Bank of India, a creditor of the Company, preferred Company application No. 157 of 1992 wherein by order dated 22-7-1992 this Court permitted the said creditor to file a suit for recovery of its debts. The Bank accordingly filed Civil Suit No. 123 of 1992 against the Company and its guarantors for recovery of Rs. 63,86,645/- as well as for enforcement of the mortgaged security. In the said suit, the trial Court passed an interim order restraining the Company, its directors from dealing with and di
