AMITABH TEXTILE MILLS LTD. Vs. OFFICIAL LIQUIDATOR

JUDGEMENT

(1.) THIS company appeal arises from the order dated July 29, 2005, passed by the company judge of this Court in Misc. Company Application No. 11 of 2001, Amitabh Textiles Mills Ltd. v. Board for Industrial and Financial Reconstruction, Finance Ministry Government of India, New Delhi and Anr.

(2.) THE relevant facts of the case are that the appellant Amitabh Textile Mills Ltd. (ATML) is registered under the Companies Act, 1956, having its registered office at Prem Nagar, Dehradun. The company was established for manufacture of cotton and synthetic yarn and it started production in July, 1960. The Government of Uttar Pradesh extended term loan and the Punjab National Bank granted working capital assistance to the company. During 1970 -75 the unit expanded its capacity and took term loans from the U.P.F.C. Unfortunately the unit became a sick industrial company on February 26, 1998. A reference under Section 15(1) of the Sick Industrial Companies (Special Provisions) Act, 1985 ('the SICA') was made by the company to the BIFR for revival/rehabilitation. During the reference proceedings the BIFR appointed IDBI for formulating measures for revival of the unit. The IDBI consented to grant term loan assistance for rehabilitation package. In 1990, Sri M.M. Tayal took approval of the BIFR to induct Sri Sandhu Ram Gupta, a new promoter/managing director of the company and Sri M.M. Tayal, resigned from the board as managing director. The Punjab National Bank, respondent No. 3 assisted the sick unit by granting working capital term loan facility under the RBI guidelines during 1992 -93. When the matter was before the BIFR and the draft rehabilitation scheme (DRS) -96 circulated by the BIFR vide order dated November 5, 1996, was a non starter the IDBI reported on November 3, 1997, that the revised DRS was not acceptable and since the promoters were unable to bring in the need based funds to revive the unit, the BIFR recommended winding up of the company under Section 20 of the SICA vide its order dated December 4, 1998. Aggrieved by the said order dated December 4, 1998, an appeal was filed under Section 25 of the SICA before the Appellate Authority for Industrial and Financial Reconstruction (AAIFR). The AAIFR vide its interim order dated July 13, 1998, had directed that ATML would deposit Rs. 5 lakhs with IDBI within two weeks and submit a valuation report of the assets of ATML and private properties of the promoters and the one -time settlement amount as per DRS -96 would be updated by adding interest up to December 31, 1998. Subsequently, the promoters showed their inability to deposit the amount of Rs. 5 lakhs to the IDBI. The AAIFR vide order dated January 6, 1999, gave a finding that there was no possibility of revival of ATML and dismissed the appeal and recommended the winding up orders of the BIFR to the High Court. The aforesaid opinion recommending the winding up of the company was referred to the Allahabad High Court in Company Case No. 1 of 1998 by the BIFR. Meanwhile during 2001 -02 and 2002 -03 Sri Sandhu Ram Gupta made changes in the board, inducting Sri Vijay Kumar Gupta, Sri Omkar Chand Garg, Sri Dinesh Jain and Sri O.P. Bhardwarj as co -directors so as to make efforts and take steps to provide necessary finances to assist the company to rehabilitate itself. But they did not bring in any need based capital funds for revival of the unit and some of them resigned on April 6, 2002.

(3.) THE appellant preferred applications on September 23, 2003 and September 24, 2004, praying the company court not to proceed with the winding up of the company as it had filed one -time settlement proposals with the IDBI and Punjab National Bank. It is also informed that a new promoter, namely, Sri Baldev Singh Mann and his associates had been identified who promised to bring in the need based funds for revival and rehabilitation of the sick company and they would invest monies for enabling the company to arrive at one -time settlements with the IDBI and PNB. A compromise with the secured creditors, namely, IDBI and PNB was proposed under Section 391 of the Companies Act, 1956, which envisaged a compromise or arrangement between the company and its creditors or between the company and its members. On May 25, 2004, an application was filed before the company court praying for induction of Sri Baldev Singh Mann and Sri Deepak Jain as promoter directors of the company and they would bring funds for settlement of secured creditors and for revival of the sick industrial company. It was also informed that a one -time settlement had been approved both by the IDBI and PNB vide their letters dated June 24, 2004 and June 25, 2004. Objections were invited from the secured creditors for induction of Sri Baldev Singh Mann and Sri Deepak Jain. The company court on August 6, 2004, passed an order under Sections 255, 441 and 443, of the Companies Act, approving induction of the co -promoters Sri Baldev Singh Mann and Sri Deepak Jain as directors of the company and also directed to prepare the rehabilitation scheme, submit the same to the secured creditors and after the approval of the secured creditors, file the same in the court. Thereafter, the appellant prepared a rehabilitation scheme and forwarded the same to IDBI and PNB vide its letter dated September 28, 2004 and filed a copy of the rehabilitation scheme with the company court vide its application dated November 16, 2004, which was allowed vide order dated December 21, 2004, to circulate the scheme for rehabilitation to all affected parties and invite their comments.