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2005 Supreme(Guj) 30
Gujarat High Court
Judgename :K.A.Puj
APURVA J.PAREKH - Appellant
Versus
ESSEN COMPUTERS LTD - Respondent
COMPANY PETITION 111 of 2001
Decided On : 01/19/2005
Headnote:Companies Act, 1956 (Central Act 1 of 1956) - Sections 2(15), 53, 113, 393, 393(1)(a), 418, 314, 22, 209, 297, 73, 301, 391, 391(1)(a), 391(2), 394, 392, 235 to 251 & 293(1)(a) - Companies (Court) Rules, 1959 - Rule 68 - Company under liquidation - Winding up - Scheme of - Compromise - Sanction - Scope of - It can not be said that impugned scheme was approved by requisite statutory majority - In the concerned meeting relevant material to enable creditors to arrive at an informed decision for approving the scheme in question was not furnished - The petitioners have also not produced the latest balance-sheets - It is also surprising that while seeking order from Court for appointment of petitioner No. 1 as Chairman of the meeting - It was not disclosed that he was debtor of the Company and beneficiary under the scheme sought to be approved - Looking to the conduct of petitioners in the past and looking to the provisions of the scheme it can not be said that proposed scheme was fair and reasonable and was unsponsored acting with bona fide and good faith - Finding scheme on the face of it unjust and improper and not workable Court refused to grant sanction.
It cannot be said that the Scheme was approved by the requisite statutory majority. There is also a substance in the objection raised by the objectors that the concerned meetings of the Creditors had not been got the relevant materials to enable them to arrive at an informed decision for approving the scheme in question. All necessary materials were not placed before the voters at the concerned meetings as contemplated by Section 391(1) of the Act. The petitioners have not produced the latest balance-sheets and hence, all requisite material contemplated by the proviso to Sub-section (2) of Section 391 of the Act were not placed before the Court by the petitioners seeking sanction for such a scheme and the Court was not satisfied about production of these requisite materials before the Court. [Para 68]
It is rather shocking and surprising that while seeking the order from this Court for appointment of Chairman of the meeting, the petitioner No. 1 has not disclosed the material fact before the Court that he is the debtor of the Company and he is going to cast his vote being one of the Creditors of the Company and he is also one of the beneficiaries under the scheme. Since he being the Judge of his own cause was not entitled to be appointed as the Chairman of the meeting and report submitted by him before the Court cannot be considered to be trust-worthy. Looking to the other terms incorporated in the Scheme, it is difficult to hold that the said Scheme of compromise and arrangement is not violative of any provisions of law and is not contrary to public policy. [Para 69]
Looking to the conduct of the petitioners in the past as well as looking to the provisions of the Scheme, it cannot be said that the Sponsors were acting bona fide and in good faith. The Court did not find the Scheme as a whole to be just, fair and reasonable from the point of view of prudent men of business taking a commercial decision beneficial to the class represented by them for whom the Scheme was meant. [Para 70]
Taking overall view of the matter and considering the entire facts and circumstances of the case, it can hardly be said that the Scheme proposed by the petitioners for sanction of the Court is fair and reasonable. The Court has not dealt with each of the objections raised by the objectors and the defence of the petitioners in great detail even after recording them in the judgment extensively in as much as the Scheme, on the face of it, does not seem to be just and proper and not even workable. The Court cannot be a party to such a Scheme by putting its seal by granting sanction and accordingly, sanction is refused.
Cases Referred :
Bhagwan Singh and Sons Pvt. Ltd. vs. Kalawati & Ors., 60 Company Cases 94.
K. Sudhakar Gupta vs. Electro Thermics (P) Ltd. & Ors., 2004 (58) CLA 78 (AP) [Para 35];; State of West Bengal & Ors. vs. Pronab Kr Sur & Ors., 2003 (54) CLA 207 (SC) [Para 36];; Miheer H. Mafatlal vs. Mafatlal Industries Ltd., 1996 (87) Company Cases 792 [Para 67].-Relied on
( 1 ) THE petitioners, namely, Shri Apurva J. Parekh, the Ex-Director of Essen Computers Limited as petitioner No. 1 and Essen Finance and Investment Limited, a Company registered under the Companies Act, 1956 as petitioner No. 2, have filed this petition to obtain the sanction of this Court to the scheme of compromise proposed by the petitioners with the Loan Creditors, Secured Creditors, Creditors for goods and expenses and Statutory Creditors of the Company, namely, Essen Computers Limited (In Liquidation ).
( 2 ) THE Company was floated in the year 1984. The Company was mainly dealing in Computers, peripherals, modules, instruments, hardware, software and systems. After successful beginning, on account of various reasons beyond the control of the management, the company suffered heavy financial losses. The main reason for such financial losses was the failure of the Eastern block market and set back suffered by the hardware industries in the country. As a result thereof, the Company closed down its business activities on 31. 03. 1994 and by an order dated 17. 04. 1997 passed by this Court in Company Petition No. 97/1995, the Company was ordered to be wound up. Since then the Official Liquidator attached to this Court has taken over the charge of the assets of the Company.
( 3 ) SOME times in the year 2001, the petitioners felt that if the winding up operations of the Company were continued, the Creditors were not likely to receive anything and as against that, there was a possibility of revival of the Company for the benefit of such Creditors and shareholders of the Company and in this view of the matter, the scheme of compromise and/or arrangement was being proposed by the sponsors with the objective of revival of the company and for repayment of a part of the dues of the Creditors of the Company in a phased manner.
( 4 ) ACCORDINGLY, an application being Company Application No. 112/2001 was filed before this Court seeking appropriate direction for convening the meetings etc. and this Court vide its order dated 12. 04. 2001 directed the petitioners to convene the meetings of the Loan Creditors, Secured Creditors, Creditors for Goods and Expenses and Statutory Creditors of the Company for the purpose of considering and if thought fit, approving with or without modifications the said compromise or arrangement and the said order directed the petitioner No. 1 to act as the Chairman of the meeting and to report the result thereof to this Court. The notice of the meeting was sent individually to all the Loan Creditors, Secured Creditors, Creditors for Goods and Expenses and Statutory Creditors of the Company as required by the order together with copy of scheme of compromise and of the explanatory statement required under Section 393 of the Act and a form of Proxy. The notice of the meeting was also advertised as directed by this Court in "indian Express", Ahmedabad Edition of 14. 04. 2001 and "jansatta", Ahmedabad Edition of 13. 04. 2001. On 07. 05. 2001, the said meetings of the Loan Creditors, Secured Creditors, Creditors for Goods and Expenses and Statutory Creditors of the Company were duly convened in accordance with the order of this Court and the petitioner No. 1 acted as the Chairman of the said meetings and he has reported the result of the meeting to this Court.
( 5 ) AS per the report of the Chairman, the meeting of the Loan Creditors of the Company was attended by four Loan Creditors in person, and through Proxies and the total value of their debts was Rs. 31,94,11,000/ -. The said scheme of compromise was read and/or explained by the Chairman of the meeting and the poll was taken to ascertain the wishes of the Creditors. All the four Creditors present in person or through Proxy have voted in favour of the Resolution and thus the Resolution approving the scheme of compromise was carried unanimously.
( 6 ) THE meeting of the Secured Creditors of the Company was attended by four Secured Creditors in per
