Gaekwar Mills Ltd vs. Bank Of India

IN THE HIGH COURT OF GUJARAT AT AHMEDABAD

SPECIAL CIVIL APPLICATION No 4124 of 2001

For Approval and Signature:

Hon'ble MR.JUSTICE KUNDAN SINGH

============================================================ 1. Whether Reporters of Local Papers may be allowed : NO to see the judgements? 2. To be referred to the Reporter or not? : NO 3. Whether Their Lordships wish to see the fair copy : NO of the judgement? 4. Whether this case involves a substantial question : NO of law as to the interpretation of the Constitution of India, 1950 of any Order made thereunder? 5. Whether it is to be circulated to the Civil Judge? : NO -------------------------------------------------------------- GAEKWAR MILLS LTD Versus BANK OF INDIA -------------------------------------------------------------- Appearance: SINGHI & CO for Petitioners No. 1-2 MR PC KAVINA for Respondent No. 1 MR RM DESAI for Respondent No. 2 MR AR THACKER with MS BALA R THACKER for Respondent No. 3 MR AK CLERK for Respondent No. 4 NOTICE SERVED for Respondents No. 5 and 6 -------------------------------------------------------------- CORAM : MR.JUSTICE KUNDAN SINGH Date of decision:- 02/10/2001 C A V JUDGEMENT

Rule. With the consent of the learned counsel

for the parties, this petition is taken up for final hearing. By means of this petition, the petitioner has sought for quashing and setting aside the impugned opinion and judgment & order dated 4-10-1989 passed by the Board for Industrial Financial Reconstruction ("BIFR" for short) and Appellate Authority, Annexures "A" and "E" and to remand the matter to the respondent no. 5 Board for Industrial Financial Reconstruction, New Delhi.

2. The petitioner - Company has become a sick unit in the year 1978 and the Company was closed down in the year 1986 and the preferred a Reference before the BIFR. But the BIFR rejected the Reference filed by the petitioner Company and formed its opinion that the petitioner Company should be wound up. Being aggrieved and dissatisfied with the order of the BIFR, the petitioner Company filed an appeal before the Appellate Authority AAIFR and the Appellate Authority - AAIFR rejected the said appeal on 23-1-1991. Thereafter, the petitioner Company preferred a Review Petition before the same Appellate Authority which was also dismissed on 14-2-1991 holding that the Appellate Authority does not have any such power to review its own judgment/order. Thereafter, the petitioner Company filed Special Civil Application No. 1474/91 before this Court against the orders dated 14-2-1991 and 23-1-1991. This Court allowed the said petition vide order dated 21-8-1991, and quashed and set aside the orders and the remanded the matter back to the AAIFR with a direction to decide the appeal filed by the petitioner - Company afresh. The petitioner formulated draft rehabilitation scheme for reviving of the petitioner Company and contemplated various concessions and sacrifices by diverse parties including the workers in the mill who agreed to forsake their large dues in order to further implement the scheme of rehabilitation of the petitioner company. It also required guarantee to be given by the State Government to the Gujarat State Cooperative Bank which was to provide funds for the proposed scheme of rehabilitation of the petitioner Company. The said scheme was agreed upon in principle by all the parties including the important creditors of the petitioner Company as also by the workers and was fully supported by the State Government and the Gujarat State Cooperative Bank. But ultimately the Gujarat State Cooperative Bank resiled from its commitment to provide funds to the petitioner - Company under the said sanctioned scheme and that scheme has to be abandoned. The petitioner Company prepared a fresh scheme for rehabilitation as the earlier scheme became unworkable and required to be modified. Under the fresh scheme the petitioner Company had to find out a fresh promoters for enabling funds from the external creditors to clear the dues of the Company any and paying to the creditors and workers and to render the company solvent. The petitioner - Company in case the petitioner - Company is wound up and liquidated a meager amount would be available for the payment to the creditors of the petitioner Company and workers which would result into loss of means of livelihood to thousands of persons in the town of Billimora and other fresh scheme for rehabilitation of the Company was formulated. In that scheme the petitioner Company proposed the selling of the land of the company and the negotiations were at the advance stage for implementation of the proposed scheme. For the said proposal all the parties were agreed. The petitioner Company sought time and the adjournment sought for by the petitioner Company time was supported by the Industrial Development Bank of India and other creditors even by the workers of the said mill. AAIFR refused to grant adjournment and passed the impugned order dated 16-04-2001 and opined that the petitioner Company should be wound up under the provisions of the Companies Act, 1956. The order of winding up is a disastrous and it would not be beneficial either to the creditors or workers. The workers of the mill would not be able to get their salaries, provident fund, gratuity etc. for a long time. The Appellate Authority has not considered the relevant aspects that the petitioner Company has land admeasuring 3 lacs sq. mtrs. of the value of more than Rs. 43 crores which would be sufficient for repayment of the dues of the secured creditors and workers of the company within a short time one year. The impugned order of the Appellate Authority is against the principles of natural justice and it is also against the principles of balance of convenience.

3. Heard Mr. Mihir Thakore Sr. Counsel for the petitioner, Mr. P.C. Kavina, learned counsel for the respondent no. 1, Mr. R.M. Desai learned counsel for the respondent no. 2, Mr. R.R. Thakkar learned counsel for the respondent no. 3 and Mr. A.K. Clerk learned counsel for the respondent no. 4 and perused the relevant material on record.

4. Learned counsel for the petitioner submitted that the impugned orders are illegal and are not sustainable in the eye of law inasmuch as the Appellate Authority has not granted reasonable opportunity to the petitioner to present a tied up scheme although the contesting respondents have not objected to grant reasonable time to the petitioner Company to present tied up scheme under the provisions of the Companies Act, 1956. It is BIFR which can consider the scheme but it was presented before the Appellate Authority. The Appellate Authority cannot reject the same and it can confirm, modify and remand the matter to BIFR for consideration. In the present case, the tied up scheme put up before the AAIFR has not been remanded back to the BIFR for consideration and suitable orders. As such, the order passed by the Appellate Authority is illegal an against the General Policy of the public. On the contrary, Mr. Kavina vehemently opposed the petition and submitted that this Court has no jurisdiction to entertain this petition as there is no jurisdictional error committed by the Appellate Authority. Secondly, the petitioner has an alternative remedy available under the law in the form of presenting a scheme u/s 39 of the Companies Act, after the order for liquidation is passed by the appropriate authority. As the petitioner company has no registered office in the Gujarat State, hence, this Court has no territorial jurisdiction to entertain this petition. Lastly, it was contended that the petitioner has not made payment of a single "pai" and has tried to delay final hearing under one pretext or other.

5. Learned counsel for the respondent no. 3 has adopted the submissions made by Mr. Kavina learned counsel for the respondent no. 1. Mr. Desai, learned counsel for the respondent no. 2 has made formal objection to grant time to the petitioner Company for presenting tied up scheme as it is operating agency having no objection to grant time to the petitioner Company.

6. Learned counsel for the respondent no. 4 Majoor Mahajan Sangh advocated for granting reasonable time to the petitioner - Company to present tied up scheme so that the matter can be disposed of at the earliest and the workers may be able to get their dues as early as possible. In case the order of AAIFR is allowed to be operated the company will be wound up and thereafter the order for liquidation will be passed and the liquidation process will take very long time. Thereafter, the properties of the Company will be sold and for that purpose the workers will have to wait for 5 to 6 years or more and then the workers will be able to get their dues after such long time particularly when they have already waited for such a long time till this date and they will have to again wait for further long time for their dues like salaries, provident fund, gratuity etc. in the proceedings. If any loss is occurred that will be caused to the workers only and they are most sufferers and affected the parties. They are hand to mouth due to nonavailability of the salaries, provident fund, gratuity etc. In case, some time bound programme and tied up scheme is allowed to be presented before the authority concerned by the petitioner for selling the properties and to pay the dues to workers and creditors and the proceedings may be permitted to be completed within a period of six months or any reasonable time that may be allowed by the authority concerned so that the petitioner would be able to get their dues as aforesaid within a short time and they will be allowed if reasonable opportunity is granted to the petitioner to present time bound tied up scheme before the BIFR they will be relieved of liability of making payment of dues to them at the earliest.

7. At the earlier stage I suggested that the petitioner can be permitted to deposit certain amount such as 5 to 10 lacs as assurance amount for implementing the tied up scheme. In case, the tied up scheme is not implemented that amount will go to the creditors or workers who are agreeable to this proposal but that suggestion was not acceptable to the learned counsel for the respondent no. 1.

8. I have considered the contention of the learned counsel for the parties at length and perused the relevant material on record. AT the initial stage I was of the opinion that this petition does not call for interference of this Court. But after hearing the submissions of Mr. A.K. Clerk learned counsel for the Majdoor Union respondent no. 4, I am impressed for substantial justice to be done to them. In case the order of AAIFR stands allowed to be operated, the petitioner Company will be wound up, the liquidator will be appointed liquidation process will go on then, the property will be sold in public auction, thereafter after sale of the property the sale proceeds will be distributed to the secured creditors and workers of the company. First difficulty is whenever any landed property is put to public auction, , sometimes in auction the property is sold at much lesser amount of the actual valuation some times it comes to less than 1/4 amount of the actual valuation, due to meager amount the creditors and the workers of the petitioner company would not be fully satisfied. Secondly, if any order during the liquidation process or auction proceedings are challenged before higher forum which is not unusual the realization of the dues of the workers would go the next generation, even in the ordinary course the liquidation process and sale proceedings will take 5 to 6 years or more then the realization of the dues of the workers will have to remain suspended sine die, the workers are the most affected sufferers since 1986 till this date and future and they are on street and hand to mouth. The Appellate required to grant further time to the petitioner for implementation of the aforesaid scheme on the ground that the time was granted to the petitioner but the petitioner could not implement the scheme and could not sell the properties and consequently the petitioner could not deposit the amount which was to be paid in instalments. Hence, no further time should be granted. On the other hand, learned counsel for the petitioner submitted that the foreign parties were to advance money to the petitioner for housing project. In absence of sufficient time, they could not be able to purchase the properties considering that the properties are in dispute and could be sold by the creditors and respondents unless reasonable sufficient time is granted to the petitioner for implementation of the scheme with the authority to the petitioner to sell the properties within a reasonable time then they can purchase the same and that amount of sale proceeds can be deposited and then the same can be distributed to the creditors and workers of the petitioner and they will be ready to purchase the properties of the petitioner if authority is given to the petitioner for selling its properties.

9. I have also considered the object of the rehabilitation either for restarting the factory or for payment of the dues to the creditors and workers of the petitioner as suggested by Mr. A.K. Clerk learned counsel for the respondent no. 4 because winding up and liquidation proceedings will take much more time about 5 to 7 yeas or more and in that case the workers would be the sufferers. In the facts and circumstances of the case, the Appellate Authority ought to have granted sufficient time to the petitioner for implementing tied up scheme and the Appellate Authority was required to remand the matter to BIFR for implementation of the said scheme.

10. Contention of the learned counsel for the respondents that this Court has no jurisdiction to entertain this petition is not tenable in view of the fact that the factory in respect of which the proceedings are initiated is situated within the territorial jurisdiction of the Gujarat State. Hence, this Court has territorial jurisdiction to entertain this petition. This Court is required to consider dispensation of substantial justice to the parties ignoring the technicalities and this Court does think it just and proper to linger and languishing the parties for such a long time of 5 to 7 years or more. No doubt, an opportunity was given to the petitioner for implementing the scheme but the petitioner could not avail the same due to certain difficulties arose to the petitioner In the facts and circumstances of the case, I think it just and proper to give one more opportunity to the petitioner for implementation tied up scheme for this purpose. Hence, this matter is required to be remanded to the BIFR where the petitioner shall produce tied up time bound scheme within a month from the date of presentation of a certified copy of this order and the BIFR will authorise the petitioner to sell the properties within a specified period of six months or more which may be considered to be reasonable by BIFR and the petitioner shall deposit that amount of sale proceeds before the BIFR and the BIFR shall distribute that amount to the workers and creditors of the petitioner Company towards their dues as per the norms prescribed by the BIFR itself. In my opinion, the matter can be disposed of in this manner.

11. In the facts and circumstances of this case and considering the submissions made by the learned counsel for the parties and material on record, this petition deserves to be allowed. Accordingly, this petition is allowed in part and the impugned orders/awards passed by AAIFR and BIFR dated 16-4-2001 and 4-10-1989 respectively are quashed and set aside and the matter is remanded back to the BIFR to consider afresh and pass appropriate order. The petitioners shall present tied up time bound scheme for selling the properties within a month. The BIFR will authorise the petitioner to sell the properties to the parties proposed within a specified period of six months or time which may be considered to be reasonable and sufficient by the BIFR for this purpose. The BIFR would be at liberty to have powers for exersing to fix norms, supervision, control and for making appropriate directions to the parties concerned during sale proceedings, the sale proceeds will be deposited at BIFR and it will be distributed as per direction or norms fixed by the BIFR to the workers and the creditors to the petitioner. Interim order passed by this Court stands vacated. Rule is made absolute to the aforesaid extent, with no order as to costs.

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/JVSatwara/