( 1 ) THE petitioner, namely, Madhu Textiles Ahmedabad Limited has filed this petition under Sections 391 to 394 of the Companies Act, 1956 praying for the compromise and arrangement as per the Scheme proposed by the Company produced at Annexure B to the petition for sanction of this Court so as to make it binding on its Members and Secured Creditors with Banks and Financial Institutions.

( 2 ) ). THE Court has admitted the petition on 03. 02. 2003 and notice was issued to the Central Government. The Court has also passed necessary order with regard to the advertisement to be published in "indian Express" and "sandesh" - both Ahmedabad Edition. Subsequently, the Secured Creditors were joined as parties vide order dated 30. 09. 2004 and accordingly, IDBI, ICICI, IFCI, IRBI, SBI and SBS as well as Majoor Mahajan Sangh, Kadi and the Official Liquidator were joined as parties - respondents. Subsequently, since ICICI Bank has assigned its rights in respect of its debts in favour of Kotak Mahindra Bank Ltd. , notice was issued to the said party and appearance was filed on behalf of Kotak Mahindra Bank Ltd.

( 3 ) HEARD Mr. V. K. Bhatt, learned advocate appearing for the petitioner, Mr. R. M. Desai, learned advocate appearing for State Bank of India, Mr. D. S. Vasavada, learned advocate appearing for Majoor Mahajan Sangh, Kadi, Mr. H. M. Bhagat, learned advocate appearing for Kotak Mahindra Bank Ltd. and Mr. Indravadan Parmar, learned advocate appearing for IDBI and Mr. Sandeep N. Bhatt, learned advocate appearing for State Bank of Saurashtra.

( 4 ) MR. V. K. Bhatt, learned advocate appearing for the petitioner has submitted that the petitioner Company was incorporated in March, 1983 and has started its manufacturing activities in February, 1985. Initially, the Company carried on its activities effectively and it was a profit making Company. However, due to recession in Textile industry, the Company started facing difficulties due to the circumstances beyond its control. As a result, the Company became a sick company within the meaning of Section 3 (1) (O) of the Sick Industrial Companies (Special Provisions) Act and a Reference was accordingly made to the Board for Industrial and Financial Reconstruction (BIFR) which was numbered as Case No. 76 of 1992. During the various hearings before the BIFR, the consensus was that the Company could be revived if the proper scheme of rehabilitation was prepared and implemented. Accordingly, a Scheme was prepared and finalised with the approval of the Industrial Development Bank of India (IDBI) which is the Operating Agency and was considered by BIFR. As per the said Scheme, the promoters were required to bring Rs. 355 Lacs by way of their contributions. Promoters complied with this requirement by subscribing to the additional share capital of Rs. 355 Lacs. However, even after bringing the aforesaid contribution by the promoters, the Scheme could not be implemented as expected due to the strike of the workers for a period of more than four months. The State Government did not co-operate by granting necessary concessions as envisaged in the Scheme. As a result thereof, the Scheme could not be implemented and the Company incurred further losses.

( 5 ) MR. Bhatt has further submitted that in view of the non-implementation of this Scheme, further negotiations and discussions took place between the representatives of the Company and the representatives of IDBI and other Secured Creditors. IDBI got valuation of the property made on the basis of the distressed sales which according to the valuer appointed by the IDBI amounted to Rs. 408. 10 Lacs. Taking this valuation as the basis, at the joint meeting of the secured creditors convened by IDBI, it was decided that the distress value on calculation came approximately equivalent to 62. 99% of the outstanding principal dues of Rs. 647. 84 Lacs of the financial institutions and Banks. One of the conditions of the Scheme was that the promoter wa