KRISHNAKUMAR MILLS CO. LTD. Vs. STATE

JUDGEMENT

(1.) ALL that is asked for by this applicant is the permission to convene the meeting of the shareholders and creditors to consider with or without modifications the arrangement of the scheme of compromise and arrangement between the Krishnakumar Mills Company Ltd. under liquidation, and the creditors and members of the aforesaid mills. The application is made by one Ratilal Manila Shah, of M/s. National Machinery Mfg. Works, having their office at Tavdipura, Ahmedabad. The said firm claims itself to be a creditor of the mills -company to the tune of Rs. 1,41,000. The scheme has been opposed at the initial stage of issuing directions on the summons being taken out mainly by the two secured creditors, namely, the Gujarat State Financial Corporation and the State Bank of Saurashtra. On behalf of the Corporation as well as the State Bank of Saurashtra, affidavits -in -reply to this application have been filed and they have opposed any orders being issued by this court for convening the meeting of the shareholders and creditors for consideration of the scheme contending, inter alia, that the scheme is neither reasonable nor practicable of being implemented and a similar scheme was in the past rejected by the court summarily. * * * *

(2.) SINCE the company closed down its business, the creditors started pressing the company of payment of the dues and ultimately in the month of August, 1971, Messrs. Bhaidas Cursondas and Company of Khamgaon filed Company Petition No. 19 of 1971 for winding up the affairs of the company. This court by an order dated 7th February, 1972, wound up the company. The appeal filed by the company, being Original Jurisdiction Appeal No. 2 of 1972, was also dismissed by the order of the court dated 6th March, 1972. The official liquidator appointed by this court had taken out a judge's summons in Company Application No. 19 of 1974, for powers to sell the movable and immovable properties of the company by public auction in accordance with the directions given by this court from time to time. This court by its order of 13the May, 1974, permitted the official liquidator to sell the asset of the company by inviting offers as mentioned therein. Both the secured creditors, viz., the Gujarat State Financial Corporation and the State Bank of Saurashtra have agreed to the sale of the assets of the company by the liquidator, free from their change subject to the conditions that the sale proceeds realised shall be charged with and retained as their security for the repayment of their loan together with interest and all other costs, charges and expenses, etc., payable in connection therewith. The official liquidator has, accordingly, advertised the sale of the assets in the various newspapers and the advertisements have appeared in the newspapers all over India. The last date for receiving the tenders is 15th July, 1974, which on receipt, shall be placed before this court on 16th July, 1974, that is, to -morrow. The tenderers are required to remain present at the time of opening of tenders so as to enable them to raise their offers. The official liquidator has for the purposes of advertisements incurred expenses to the extent of Rs. 6,000 by way of advertisement charges. the invitation of offers for the purchase of this unit together with the valuation report has been circulated with the terms and conditions of sale to 32 Chambers of Commerce and Industries, and Federations of Mills and Industries in India, and some of these chambers and federations have, in turn, circulated the news regarding the sale of the assets of this mills -company to their respective members. It is at this stage that this application has been made under section 391 for obtaining leave to convene the meeting of the shareholders and creditors to consider the scheme, the draft of which has been annexed to the affidavit filed in support of the summons at annexure 'A'.

(3.) IN In re Alabama, New Orleans, Texas and Pacific Junction Railway Company, the relevant principles which the court has to bear in mind in connection with the sanction to be granted, have been laid down succinctly. The court was considering the scheme at the final stage, whether the sanction to the scheme as approved and adopted by the meeting of the shareholders and creditors should be accorded or not. However, the principles which are to be borne in mind have been stated in clear terms; firstly, that the provisions of the statute have been complied with or not; and, secondly, that the majority has been acting bona fide or not. The court has to consider a further factor which has been laid down as under : 'Further than that, the court has to look at the scheme and see whether it is one as to which persons action honestly, and viewing the scheme laid before them in the interest of those whom they represent, take a view which can be reasonably taken by business men. The court must look at the scheme, and see whether the Act has been complied with, whether the majority are acting bona fide and whether they are coercing the minority in order to promote interests adverse to those of the class whom they purport to represent; and then see whether the scheme is a reasonable one or whether there is any reasonable objection to it, or such an objection to it as that any reasonable man might say that he could not approve of it.'