BOARD FOR INDUSTRIAL AND FINANCIAL RECONSTRUCTION Vs. THE MANAGING DIRECTORS, M/S. HINDUSTANI CYLINDERS CO. LTD. AND OTHERS

JUDGEMENT

(1.) The aforecaptioned Company Petition has been initiated by this Court, pursuant to a reference by the Board for Industrial and Financial Reconstruction (BIFR) recommending winding up of the Company in question, viz. , M/s. Hindustany Cylinder Company Ltd. , (hereinafter referred to as the 'Company', for short). Having conducted an enquiry under Section 16 of the Sick Industrial Companies (Special Provisions) Act, 1985, (hereinafter referred to as 'SICA', for short) in accordance with the procedure laid down in the said Act, the BIFR recorded an opinion under Section 20(1) of the SICA that it is just and equitable that the Company should be wound up and the said opinion of the BIFR has been placed before this Court in terms of Section 20(1) of the SICA, which has resulted in the institution of the above winding up case as CP No. 30/2006 on the file of this Court.

(2.) The above Company is a joint sector company with equity participation of KSIDC (Kerala State Industrial Development Corporation) and was incorporated on 28.2.1985 and was originally promoted by Sri. R. Martin Joseph, Sri. Crispin Roy, Sri. C. Johnson and Sri. P. Marikani with equity participation of 40% by the KSIDC with a paid up capital of Rs. 34. 17 lakhs. The Company was engaged in the manufacture of Dissolved Acetylene (DA) Cylinders and is stated to have functioned well up to the year 1992. Later, the Company diversified its production from DA Cylinders to Liquid Petroleum Gas (LPG) Cylinders, and gone into financial crisis along with labour related problems. So the Company was declared as a Sick Industrial Company under Section 3(1)(o) of the SICA by the BIFR on 11.6.1998. The Canara Bank was appointed as the operating agency and proceedings were initiated as Case No. 106/1998. The BIFR sanctioned scheme No. SS-99 for rehabilitation of the Company as per order dated 28.5.1999 under Section 18(4) read with Section 19(3) of the SICA. Later, BIFR modified the scheme and numbered the scheme as MS-00 as per order dated 25.7.2000 and had shifted the cut of date from 31.12.1998 to 31.12.1999. The modified scheme envisaged modernization-cum-expansion programme in respect of the existing facilities. The cost of the scheme was estimated at Rs. 77. 43 lakhs. The BIFR had appointed Canara Bank as the monitoring agency to monitor the progress of the scheme and the net worth of the Company was expected to become positive by 2003-04 and its accumulated losses were expected to be wiped out by 2007-08. The said scheme was expected to be funded by the promoters. The BIFR periodically reviewed the scheme and on the last review hearing held on 31.05.2006, the BIFR noted that the company and the promoter are neither serious enough nor resourceful enough to revive the company on a long term basis. The BIFR also observed that the Company's operations remain suspended for the previous three years even after sanctioning of the scheme for the revival of the Company. Accordingly, the BIFR declared the scheme, namely SS-98/MS-2000, as failed and formed a prima facie opinion that it would be just and equitable and in the public interest that the Company should be wound up under Section 20(1) of the SICA. Accordingly, winding up notice was issued, fixing the date of mandatory hearing as 22.8.2006 for hearing objections/suggestions to the winding up notice. Later the date of hearing was changed from 22.8.2006 to 30.8.2006. On 30.8.2006, after hearing the Company and the secured creditors, the Board opined that the Company should be wound up. Accordingly, the opinion has been referred to this Court under Section 20(1) of the above Act and the reference has been numbered as the captioned Company Petition. On 01.11.2006, this Court has issued notice to the 1st respondent Company and to the Canara Bank, Bangalore Branch.

(3.) The Managing Director of the Company, one Sri. R. Hari, had filed objection dated 8.5.2007. The Managing Director of R-1 submitted before this Court that he had approached Government of Kerala to revive the Company and accordingly One Time Settlement (OTS) was arrived at with the creditors to the Company, and that before the OTS, the liability of the Company was Rs. 1737 lakhs, whereas if the OTS is worked out, the total liability will be only Rs. 375 lakhs. It was also pointed out that the estimated assets of the Company is Rs. 235 lakhs only. The 1st respondent has produced Annexure-R1(e) minutes dated 26.8.2006 of the meeting chaired by the Principal Secretary (Industries and Commerce), Government of Kerala to fortify the above claim. As per Annexure R1-(e) minutes, the Canara Bank, KSIDC and KFC (Kerala Financial Corporation) have agreed that their secured loans to be settled by way of OTS for the principal outstanding, and the Canara Bank agreed to settle the unsecured working portion of that Bank at 50% of the principal amount. The Kerala State Electricity Board (KSEB) also had agreed to settle their dues to the actual power consumed and the decision on settlement of the sales tax arrears was deferred. As per Annexure-R1(g) dated 9.1.2007, the KFC stated that it could forego interest amounting to Rs. 474. 27 lakhs and reduce the liability to Rs. 66. 82 lakhs (principal amount). As per Annexure-R1(i), which is the draft minutes of the meeting chaired by Deputy Labour Commissioner produced by the 1st respondent, the disputes between the management and workers were agreed to be settled. The 1st respondent further stated in the objection that the dues to 4th respondent, IDBI (Industrial Development Bank of India), were also included with the dues towards the 5th respondent, KSIDC. So the 1st respondent prayed before this Court to permit it to submit a revival proposal of the company on the basis of the decision arrived at with the State Government level and to reject the recommendation of the BIFR.