COMMERCIAL AHMEDABAD MILLS CO. LTD. Vs. STATE

JUDGEMENT

(1.) THIS application is moved under section 536(2) of the Companies Act, 1956, by the Commercial Ahmedabad Mills Co. Ltd. for getting clearance from this court regarding certain borrowings, advances, credit limits and facilities that are being given to the applicant company by State Bank of India, Commercial Branch, Ahmedabad, as well as Industrial Development Bank of India and Industrial Reconstruction Corporation of India, Calcutta, on the ground that these are bona fide transactions which the company has to enter into in the normal course of its business and for the propose of meeting the obligations of the company and for the purpose of keeping the business of the company going.

(2.) IN order to highlight the nature of the request made by the applicant company in the present proceedings, it is necessary to note a few relevant facts leading to the present proceedings. The applicant company owns a textile unit which is known as Commercial Ahmedabad Mills Co. Ltd. in this city and it is engaged in the manufacture of cotton and blended textiles. The company ran into difficulties somewhere in the beginning months of this year. The result was that the Ahmedabad Electricity Co. Ltd. disconnected supply of electricity to the company. Consequently, the company was compelled to close down its textile unit on May 19, 1984. At that time, the company was giving employment to about 2,300 workers, it being a composite textile unit. One of the unpaid creditors of the company filed Company Petition No. 163 of 1984 requesting this court to wind up the applicant company. Notice was ordered to be issued in the said company petition. In the meantime, the management of the company went on endeavouring its best to restart operations of the company. For that purpose, the management of the company approached the company's bankers, State Bank of India, Commercial Branch, Ahmedabad, and the Industrial Development Bank of India. Similarly, the management of the company also took up the matter with the Government of Gujarat to obtain its assistance to restart the mill immediately. The Government of Gujarat gave certain concessions to the company, such as deferment from electricity duty, determent of sales tax, etc. Not only that, the State Government declared the company as a relief undertaking under the provisions of the Bombay Relief Undertakings (Special Provisions) Act, 1958. The State Government also issued a notification in exercise of the powers conferred by sub -clause (iv) of clause (a) of sub -section (1) of section 4 of the said Act directing that in relation to the textile unit of the applicant company which is declared to be a relief undertaking as mentioned above, all rights, privileges, obligations, liabilities (except liabilities of banks), secured or unsecured before the said undertaking was declared to be a relief undertaking under the said notification and any remedy for enforcement thereof, shall be suspended and all proceedings relating thereto pending before any court, tribunal, officer or authority shall be stayed with effect from August 14, 1984. In view of the aforesaid notification which is annexed as annexure 'A' to this application, further proceedings in Company Petition No. 163 of 1984 have remained stayed.

(3.) SO far as the State Bank of India is concerned, vide its letter dated June 11, 1984, it conveyed to the company that the State Bank had accepted in principle the package recommended by the working group set up by the Central Government and was agreeable to make available to the company various facilities, inter alia, on certain terms and conditions, subject to the package being approved by the Reserve Bank of India. Accordingly, the State Bank of India agreed to grant Rs. 98 lakhs which will carry concessional interest at 13 1/2%. It also agreed to give the following financial facilities to the applicant company : Rs.(in lakhs)Demand cash credit limit 208Usance bills discounting 160Funded interest account 137Working capital term loan 152Short -term loan for labour rationalisation 18Letters of credit limit 155Ordinary guarantee limit 200