S K GUPTA Vs. K P JAIN

JUDGEMENT

(1.) A private sector sick unit, Indian Hardware Industries Ltd. ('IHI' for short), engaged in manufacture of builders hardware, now in a state of suspended animation since 1971, awaits the outcome of this appeal for infusion of life into it simultaneously providing a ray of hope to primarily the workmen who were rendered jobless and the unsecured and secured creditors whose hard earned money is locked up in it.

(2.) A few facts will put the problem raised in this appeal in focus and proper perspective. M/s. Delhi Flour Mills Ltd. ('DFM' for short) was the holding company of which IHI was the subsidiary. Somewhere by the fall of 1971 functioning of IHI came to a halt and the huge debt was mounting up with the spiralling of interest. As the shares of DFM were closely held by relations of respondent No. 1 referred to as 'Jain group' and as there were fratricidal disputes in Jain family culminating into a litigation in the High Court of Delhi, IHI languished for want of attention. In the meantime M/s. Indian Smelting and Refining Co. Ltd. ('petitioning creditor' for short) filed a winding up petition against IHI in 1975 alleging that IHI was heavily indebeted and was unable to pay its debts as and when they became due. After the dispute in the Jain family was resolved somewhere in 1974, a situation emerged in which one R. P. Jain and the members of his family acquired controlling interest in the holding company DFM. Once R. P. Jain came into saddle, the DFM as holding company proposed a scheme of compromise/arrangement between IHI and its unsecured creditors and after the scheme was approved, the proponent of the scheme submitted Company Petition No. 86/74 to the Company Court for according sanction to the scheme and by Order dated 15th October 1975 the scheme was sanctioned. Sometime after the scheme was sanctioned, DFM transferred its 44,000 shares of IHI and its claim to the tune of Rs. 23 lacs recoverable from IHI, to the present appellants S. K. Gupta and Mrs. Dropadi Gupta (referred to as 'appellants' hereafter). Thereafter the appellants filed Company Application No. 193/76 requesting the Court to make appropriate modification and/or granting further direction for effectively implementing the scheme sanctioned by the Court in respect of IHI by substituting the appellants in place of DFM as proponents of the scheme and imposing upon them the liability to implement the scheme under the supervision of the Court. A little while before this application was moved, respondent K. P. Jain filed Company Application No. 190/76 purporting to be under Section 392 of the Companies Act, 1956, inviting the Court for the reasons mentioned in the application to hold that the scheme sanctioned by the Court cannot be work satisfactorily with or without modification and therefore an order winding up the Company should be made.

(3.) The company Judge by his two orders in the two aforementioned applications dated 26th April 1976 granted the application of the appellants and modified the scheme by substituting the appellants as proponents of the scheme and simultaneously rejected the application of the respondent K. P. Jain for winding up the Company.