MODILUFT LTD Vs. S K MODI

JUDGEMENT

(1.) On 9th February, 1984 a company with the name of Genius Leasing Finance & Investment Company was incorporated under the provisions of the Indian Companies Act, 1956 (for short' the Act'). Name of this company was changed to M.G. Express vide certificate of incorporation dated 17th February, 1993 and thereafter to Modiluft Limited vide certificate of incorporation dated 12th April, 1994. This name has again been changed to M/s Royal Airways Ltd. with effect from 31st December 2001 although there are some disputes over this, as would be noted hereinafter. However, for the sake of convenience it is hereinafter referred to as the company. The authorized share capital of the company was Rs.109,00,00,000/- divided into 10,00,00,000/- equity shares of Rs.10/- each. The issued capital of the company as on 28th February, 1999 was Rs.63,40,00,000/- divided into 6,34,00,000 equity shares of Rs. 10/- each.

(2.) The company started its operation as domestic airlines in the year 1993 after entering into technical collaboration agreement with M/s Lufthansa of Germany and by utilizing aircrafts leased to it by Lufthansa. Thereafter Lufthansa terminated all its agreements with the company and through court took back all its aircrafts. The result of this was that operations of the company came to a standstill. There were many creditors of the company who demanded back their money. As the company was unable to repay their debts, these creditors filed company petitions under Sections 433 and 434 of the Act for winding up of the company. In one such petition, being CP No.68/1997, this court passed orders dated 12th January, 1998 admitting the said petition. This court also appointed the official liquidator as the provisional liquidator on 29th April, 1998. Thereafter pursuant to the orders passed by this court in the said petition on different dates the company deposited certain amounts from time to time and in this manner by 31st December, 1999 it had deposited Rs.9 crores with the Registrar of this court With a view to restart its operations, the company obtained an approval dated 26th December, 1997 from Foreign Investment Promotion Board (FIPB), Government of India for relaunch of the airline and for issuance of 50 million dollars worth of Cumulative Redeemable Convertible Preference Shares (CRCPS) for financing the said relaunch. In the meantime, the company was also making an attempt to relaunch its airline. Thereafter, further approval dated 11th February, 2000 was received from the Government of India, Ministry of Commerce & Industry, Secretariat for Industrial Assistance whereunder the company had been provided a specific approval to raise through a rupee denomination 14% CRCPS having face value of Rs.100/- each with total amount equivalent to US $ 17.50 million in collaboration with Verus Group, Canada through their company, Royal Holdings Services Limited (hereinafter referred to as RHSL') for relaunching the airline. It also obtained no objection dated 29th February, 2000 from the Government of India, Ministry of Civil Aviation to operate scheduled air transport services i.e. to operate an airline.

(3.) Pursuant to the grant of aforesaid approvals by the Government of India, RHSL took out an issue outside India for private placement of 16,00,000 shares of the company. RHSL also secured and entered into investment agreements with investors who agreed to subscribe to the said shares of the value US $ 17.5 million. After the deposit of Rs.9 crores with the Registrar of this court as aforesaid, order dated 2nd January, 2000 was passed by this court directing that the company shall submit a scheme/proposal for settlement of dues of various creditors of the company.