BATLIBOI LTD. Vs. MIDEAST INTEGRATED STEEL LTD.

JUDGEMENT

(1.) MIDEAST Integrated Steel Ltd. is under provisional liquidation. Vide order dated 19 September 2002, passed in Company Petition No. 337 of 1996, the Official Liquidator attached to this court was appointed as the provisional liquidator with direction to take over the assets of the respondent company (hereinafter referred as 'the company') including books of accounts, etc. The assets of the company are in his possession now.

(2.) IT may be noted that the respondent company undertook the task of establishing and commissioning a plant in Orissa. For commissioning of the said plant, financial assistance was taken from various financial institutions, including the banks. Certain other parties had also supplied materials, etc., on credit. Before this plant could be fully commissioned and production started, it went into rough weather. As substantial amounts are due and payable to various banks/financial institutions/ secured creditors as well as other unsecured creditors, they started demanding their dues. Number of company petitions came to be filed in this court seeking winding up of the respondent company under the provisions of sections 433(e), 434 and 439 of the Companies Act, 1956 (for short 'the Act'). In these petitions, show cause notices were issued and during the pendency of these proceedings, the respondent company made efforts to pay off these creditors. Some amounts were paid. Certain assurances and undertakings were also held out. However, the respondent company could not stand up to those assurances. Some time in the year 1999, the company/applicant also filed the application proposing scheme of arrangement to pay the petitioning creditors. The orders were passed in this application from time to lime. However, as noted above, since the company/applicant could not adhere to its commitments, the matter was considered by this court on 19 September 2002, See, infra, Batliboi Limited v. Mideast Integrated Steels Ltd., (2005) 3 L.J 90 and by a detailed order, the said scheme of arrangement was rejected. It was, inter alia, observed that in the scheme proposed, the secured creditors were not taken into consideration; amount due to certain creditors was not correctly shown; although representation was made to the effect that the company was negotiating with some third parties for commissioning of the plant, it was not mentioned as to whether these negotiations had reached fusion or not. On this basis, the court came to the conclusion that the scheme as proposed was not proper. Another prominent and influencing factor was that all the petitioning creditors had opposed the scheme in unison. The court thus observed that no useful purpose would be served in directing convening of the meeting of the creditors as 75% or more creditors have to approve such a scheme provided under Section 391(1) of the Act which was most unlikely. While rejecting the scheme, as mentioned above, the Official Liquidator was appointed as the provisional liquidator.

(3.) I may note at this stage that the banks/secured creditors had approached the Debt Recovery Tribunal (DRT), Cuttack, Orissa, and those proceedings are disposed of by the DRT vide order dated 14 July 2004. While passing decree of specific amounts in favor of the banks, the DRT has also propounded and approved a scheme for staggered payment. This order is under challenge before the Debt Recovery Appellate Tribunal and appeal is filed by the secured creditors, as the direction given by the DRT about restructuring of the debt/decrial amount and allowing the ex -management to operate the said plant is not palatable to the secured creditors as the contention of these secured creditors is that the DRT had no jurisdiction to pass such an order. Since the matter is before the Debt Recovery Appellate Tribunal, it is not for me to make any comment upon the validity or otherwise of the said order. This fact is noted for pointing out that as far as the secured creditors are concerned, they had approached the DRT and some order is passed by the DRT in those proceedings. Therefore, the present application filed in this court relates to unsecured creditors and also includes debenture holders and other secured creditors who do not come under the jurisdiction of the DRT. It is proposed to pay to these creditors in a phased manner and prayer is made for order seeking to convene a meeting of these creditors as envisaged under Section 391(1) of the Act. Mr. Rajiv Sawhney, learned senior counsel, appearing for the ex -directors also stated that the propounders have been able to tie up/arrive at some arrangement with a foreign investor who has agreed to provide sufficient funds for commissioning of the plant.