VIDIANI ENGINEERS LTD Vs. STATE OF ALLAHABAD

JUDGEMENT

(1.) This Company Application No. 21 of 1998 under Section 391(1) the Companies Act, 1956 ('the Act') along with application under Section 392(6) was filed on 20-11-1998, praying for Judge's summons for calling a meeting of creditors of the company to consider a scheme of compromise and/or arrangement between the company and a class of its creditors enclosed as Ext. '1' to the application. On its presentation, the Court directed the matter to be listed along with pending creditors winding up petitions against the company mentioned in Ext. 'B' to the application. On 27-11-1998, the matter was directed to be listed along with pending company petition Nos. 12, 15, 16, 84, 89 of 1997 and company petitionNos. 18, 92,125 & 27of 1998. By order dated30-l 1-1998, this Court felt that before hearing the copies of the application be served on the counsel for the petitioners in the aforesaid company petitions inviting reply/counter affidavits. Objections have been filed by Basant Agro Tech. (1) Ltd. Akshaya Corporation, Metro Chem Industry Ltd. ION Exchange, Raunaq Financial Ltd. Rajeev Securities & Sales (P.) Ltd. and Gill and Company to which the company has filed a rejoinder affidavit of Shri Sandeep Chaturvedi, Manager (Legal) of the company.

(2.) While the application under Section 391(1) was pending an order was passed by this Court in a Creditors winding up petition filed by Gill & Company on 5-11-1998 to deposit a sum of Rs. 10,00,000 by Bank Draft in 2 equal instalments. The first instalment of Rs. 50,00,000 was to be deposited within six weeks from the date of order and the second instalment was be payable within six weeks thereafter and in the event of default, the petition was directed to be advertised in accordance with Rule 24 of the Companies (Court) Rules, 1959. Aggrieved the respondent company Vidiani Engineers Ltd. filed a Special Appeal No. 1065 of 1998 which was admitted on 10-12-1998 and that while staying the deposit of Rupees Five Lacs directed by learned Single Judge the company was required to comply with deposit of first instalment of Rupees Five Lacs, with a clarification that advertisement shall remain stayed provided the appellant-company complies with the directions. In the short counter affidavit of Minoo Fall Titina, holding special power of attorney of Gill & Co., it has been stated, and has not been denied by the counsel for the company, that the order for deposit of 50 lakh was not complied with by the company. A short counter affidavit of Minoo Fali Titina, holding special power of attorney on behalf of Jaykumari Mani Lal Shah, a creditor of the company, to the same effect has been filed informing the Court that the company has failed to comply with the direction to deposit Rs. 50 lakh and thus the compromise scheme which has been formulated in not feasible and credible at all.

(3.) In the application under Section 391/(1) of the Act, the company has stated that it was incorporated with authorised shares capital of Rs. 15,00,00,000 divided into 1,50,00,000 equity share of Rs. 10 each, out of which Rs. 12,58,28,900 was subscribed up to 31-3-1998. The company made good profitable business up to 1995-96 but on account of the false assurance given by the Bankers of the company namely Federal Bank to enhance the working capital, the bank delayed the sanctioning of the enhancement of the working capital to the company, who by that time, had accepted big orders on the basis of the assurance given by the bank and thus the company was forced to borrow and arrange working capital from the private lenders at exorbitant rated. These short-term private borrowings were for temporary period and that their repayment become due even before the dispatch/delivery were ready of the aforesaid big orders. The company had, therefore, to borrow further funds to honour the commitment of repayment to private lenders. As the assured bank finance did not materialized, the company came into the debt trap of private lenders. The company fell further into financial liquidity crunch which resulted into default in payment to the creditors. The post-dated cheques issued were dishounoured on which the creditors resorted to the criminal proceedings under Section 138 of the Negotiable Instrument Act, 1881 the list of which has been annexed to the application as Exhibit 'A', This list shows that as many as 106 criminal complaints under Section 138 of the Negotiable Instrument Act were pending against the company for dishonour of cheques, in Bombay, Pune, Delhi, Jodhpur and in various other parts of the country. Exhibit 'B' is the list of ten winding up petitions filed before this Court and Exhibit 'C' is the list of eleven suits pending against the company in High Court at Bombay, Calcutta and Madras and D.R.T . New Delhi. The most significant of this is suit No. 581 of 1998 filed by Federal Bank Ltd. against the company in High Court at Bombay. Ext. 'C-1' is the list of five cases which have been settled by the company and list 4 cases which have been partly settled including company application No. 16 of 1997 filed by Basant Agro Tech India Ltd. at High Court Allahabad. Exhibit 'C-11' is the list of about 74 creditors who have served demand notice on the company and Exhibit 'C-111' is the list of creditors totalling Rs. 25,65,600 to whom third party security has been given by way of pledging the shares. Exhibit 'D' 'E' 'F' arc the letters issued by the Federal Bank Ltd. In October, November & December, 1995 certifying that the applicant company is respectable and can be treated to be good up to a sum of Rs. 16,40,00,000. This letter is dated 16-10-1995.