PROMILA Vs. DCM FINANCIAL SERVICES LIMITED

JUDGEMENT

(1.) The applicants Smt. Promila and Shri Ram Prakash Gupta are sister and brother. They Jointly deposited with the DCM Financial Services Limited (hereinafter referred to as the Company) six fixed deposits on 'either or survivor basis'. The said fixed deposits matured on 29.09.1998 and the total maturity amount of Rs.1,31,796/- became payable to the applicants, when the company defaulted repayment of the deposits to depositors like the applicants, the depositors started sending applications to the Company Law Board praying -for suitable directions to the Company under Section 45 QA of the Reserved Bank of India Act. Before the Company Law Board the Company submitted that it was not only capable of repaying the deposits but also interested in discharging its liability towards the fixed deposits. However, it was also submitted that such repayment would be possible only within a period of time and not immediately when the deposits matured for repayment. 'The Company also submitted four different schemes for the consideration of the Company Law Board. The Company Law Board was convinced that the Company would be in a position to repay all the deposits already matured and also those which would be maturing in future, provided, some reasonable time was given to the Company. However, the Company Law Board, found that none of the schemes submitted by the Company could be accepted. Hence the Company Law Board rejected them and directed the company to furnish a better scheme. In compliance with the said direction the company furnished another Scheme. Ultimately, after taking into consideration the interest of the company, the interest of the depositors and also the public interest, the Company Law Board passed an order dated 17.7.1998 issuing certain directions regarding the payments to be made to the depositors. As per the said order of the Company'Law Board all depositors of Rs.10,001/- to Rs.25,000/- shall be repaid in 3 years including the interest, from the dates -of maturity at 30% in the first year, 30% in the second year and balance 40% in the third year. The interest for both pre and post maturity periods will be paid along with the last instalment. All deposits of over Rs.25,001/- will be paid in four years from the dates of maturity @ 25% each year and the interest for both pre and post maturity periods will be paid along with the last instalment. During the hearing' before the Company Law Board a large number of depositors suggested that notwithstanding the said Scheme, hardship cases should be given priority considering the hardship faced by the depositors. Some of the hardship cases as suggested by the depositors were medical requirement, old age, marriage, education etc. Therefore, in the order dated 17.7.1998 the Company Law Board directed that besides the amount that may be needed for repaying the depositors as per the scheme, an amount of Rs.1 crore should be kept apart by the Company to meet the needs of hardship cases. To decide such cases on merits and also the quantum, the Company Law Board appointed a committee to decide the same. The Committee was directed to meet at least once in three months to consider such cases. It was also directed that once the committee decided, the amount should be disbursed within a period of 10 days thereafter. Even though the company started making payments in accordance with the directions of the Company Law Board, the company was not able to comply with the directions in totality except in the case of deposits upto Rs.5,0007- and payments on compassionate grounds. Hence the company filed an application dated 21/10/1999 before the Company Law Board praying for review of the scheme formulated by the Company Law Board in its order dated 17.07.1998 and also for condoning the delay in complying with the order dated 17.07.1998. The Company also filed another application (CA 4/2001) on 26.5.2000 before the Company Law Board reporting that the Company had filed a scheme of re-structuring and arrangement with its creditors under Sections 391/394 of the Companies Act before the High Court and that the High Court had been pleased to allow the convening of the meeting of the creditors. The company requested the Company Law Board to adjourn the matter till the petition under Section 391/394 was disposed of. The Company Law Board felt that in view of the pendency of the application under Sections 391/394 of the Companies Act in respect of a scheme of re-structuring and arrangement with the creditors, no further directions could be given by the Company Law Board at that stage. Accordingly the Company Law Board by an order dated 26.05.2000 disposed of both the applications with liberty to the company to apply if need be after the petition filed under Sections 391/394 is disposed of by the High Court.

(2.) According to the applicants, though they surrendered the fixed deposits receipts for repayment, the repayment was not made by the company as directed by the Company Law Board. The applicants allege that in spite of the directions given by the Company Law Board, the Company did not set apart an amount of Rs.1 crore to meet the needs of the hardship cases. It is stated that the applicants are aged 76 years and 69 years respectively and that they need money for medical treatment. The applicants have produced photocopies of the prescription and certificates issued from the AIIMS and the G.B. Pant Hospital. It is alleged that since June 1999 the applicants requested the company every month in writing to repay the full amount along with interest to enable them to meet their medical requirements but there was no favourable response. The applicants have also stated that they are opposing the scheme of arrangement proposed by the company under Sections 391/394 of the Companies Act. The applicants pray for a direction to the company to immediately pay the amount of Rs.1,58,994/- (payable oh 29.9.2000) along with interest upto date (less already paid from July 1999 to 12.12.2000). According to the applicants the said amount is urgently required for admitting Smt. Promila in the hospital for an operation and for meeting the expenses in connection with the treatment of Shri Ram Prakash Gupta. The applicants have also prayed that suitable penalty may be imposed on the respondents for not making the payments in time. During the course of arguments it was submitted by Shri R.P. Gupta, appearing in person, that since the operation could not be postponed any further, Smt. Promila was already admitted in the hospital on, 24.07.2001 for operation.

(3.) A reply has been filed on behalf of the respondents According to the averments in the said reply, pursuant to the directions issued by this Court in CA 811/2000 separate meetings of the secured creditors and the unsecured creditors of the company were convened and the scheme was duly approved by the said meetings of the secured and the unsecured creditors. The company has filed CP 48/2001 under Section 391 (2) and 394 of the Companies Act praying for grant of sanction to the scheme of arrangement and the said company petition is still pending before this Court. If the applicants have any objection to the said scheme of arrangement they should file objections to CP 48/2001 instead of filing the present application. It is also stated in the reply that the company has proposed the scheme of arrangement to repay its dues to all the creditors by adopting a strategy of entering into a scheme of arrangement with its creditors simultaneously ensuring flow of funds for the same. The applicants claim that on the scheme being implemented the company will continue to remain a viable entity and will be able to wipe off its debts. According to the respondents the scheme was approved by 98.81 of the unsecured creditors, present and voting and by 99.81% of the secured creditors, present and voting. It is alleged that through the present application the applicants seek to obtain an unfair preference over other creditors. It is stated that the claim of all the secured and the unsecured creditors will be most efficaciously and promptly met and fulfilled by the company if the scheme is sanctioned by this Court. The applicants seek benefits for themselves with total disregard to the will of the majority of creditors who have already approved the scheme. It is further stated that the company cannot give preference to one creditor over others and that the company has moved a composite scheme for equitable repayment to all its creditors without giving preference to any"individual creditor. The respondents have also pointed out in the reply that the company had filed CA No.891/2000 seeking stay of commencement or continuation of any suit or proceeding against the company and this Court vide order dated 6.7.2000 has directed that no judgment or decree shall be executed against the company. The respondents have stated in the reply that the company has already paid to the applicants more than what they would have been paid under the proposed scheme of arrangement. The details of such payments are given in the reply. As against the total maturity amount of Rs.1,31,796/- the applicants have already been paid a sum of Rs.92,000/-. According to the respondents, the applicants have already been paid almost 70% of their maturity amount in cash whereas the scheme under the consideration of this Court envisages the payment of only. the principal amount.