CHAMPARAN SUGAR CO LTD Vs. STATE OF ALLAHABAD

JUDGEMENT

(1.) Vide the order dated June 28, 1993, the Board for Industrial and Financial Reconstruction ("BIFR" in short) recommended the winding up of the company, Champaran Sugar Company Limited (hereinafter referred to as "the company in liquidation"). Subsequently the order dated June 28, 1993, passed by the BIFR was confirmed in appeal by the Appellate Authority for Industrial and Financial Reconstruction (AAIFR) on July 4, 1994. Consequently, accepting the recommendation made by the BIFR, this court, vide its order dated September 5, 1994, ordered that the company in liquidation, namely, Champaran Sugar Company Limited having its registered office at Sutherland House, Kanpur, be wound up and appointed the official liquidator, High Court, as the liquidator. However, before the liquidator could take possession of the assets of the two factories of the company at Chanpatiya, West Champaran and Bara Chakiya, East Champaran (Bihar) an application was filed by one Venka-teshwar Vanijya India Limited ("VVIL" in short) stating that the applicant may be impleaded as a party to these proceedings and further be permitted to submit a scheme for running the company in liquidation, and its mills on immediate basis in accordance with the directions given by this court. They also submitted the scheme for taking over and running the company in liquidation. On December 16, 1994, this court directed that the scheme submitted by the applicant (VVIL) be circulated to the banks and other financial institutions who are the major creditors of the company as well as on the company (in liquidation) and the liquidator. The court also directed that a meeting of the major creditors and officers of the company (in liquidation) he held under the chairmanship of the liquidator for considering the proposed scheme of VVIL. Before the meeting could take place two other proposals for taking over and running the company (in liquidation), one from the I.F.B. Agro Industries Limited and the other from Shree Hanuman Sugar Industries Limited, Calcutta, were received. Appearances were also put in by the company (in liquidation), by the workers' union of the head office of the company at Kanpur, by the unions of the workmen and the cane growers of the two sugar factories of the company (in liquidation) at Bara Chakiya and Chanpatiya and by the Bihar Rajkiya Udpadak Sangh through their respective counsel.

(2.) After hearing learned counsel for the parties, this court fixed January 21, 1995, the date of the meeting of the major creditors and the aforesaid parties under the chairmanship of the liquidator. Notices had already been directed to be issued to the major creditors which were duly sent by registered post as well as by telegram fixing January 16, 1995, for appearance before the court. However, except the State Bank of India, the other major creditors, viz., the banks and the financial institutions did not put in appearance. The court, however, directed that in case the said creditors wanted to be heard they could attend the meeting for considering the proposals for rehabilitation of the company (in liquidation) on the date fixed for the meeting. The liquidator had submitted a report after the meeting was held on January 21, 1995, in which it was reported that the financial institutions or the major creditors did not attend the meeting and no consensus was arrived at between the parties who attended the meeting. However, they were agreeable that the factories should be immediately started as the crushing season was already on and the cane growers and workers were suffering irreparably. This court after hearing learned counsel for the parties, who had put in appearance in this case, was of the opinion that the schemes/proposals which were now being put up before this court after the recommendations had been made by the BIFR for winding up of the company have to be minutely scrutinized and it has to be seen whether the efforts made by the parties were feasible and could be accepted or the same had been made only to grab the assets of the company (in liquidation). It has also to be examined whether the parties who had submitted their schemes/proposals were having any substantial financial support to pay off the huge dues of the workmen, cane growers and the creditors of the company (in liquidation). However, pending further and deeper probe into the proposals/schemes submitted before the court it would be proper in view of the consensus arrived at between the parties that the two factories of the company (in liquidation) at Bara Chakiya and Chanpatiya be permitted to run immediately. Out of the three proposals/schemes submitted and after hearing learned counsel regarding the interim arrangement that could be made pending consideration of the proposed schemes, this court, vide its order dated February 1, 1995, permitted VVIL to run the two factories of the company (in liquidation) as an interim measure for the remaining period of the crushing season by putting them to terms. The applicant, VVIL, however, backed out possibly because it could not fulfil the terms and conditions imposed by this court in its order dated February 1, 1995.

(3.) When the matter was listed again before this court, an application was filed on behalf of one Vishnu Sugar Mills Limited praying that they may be impleaded as a party to the above proceedings and permitted to run the two factories in accordance with the proposals given by them subject to further directions of this court. They, however, submitted that before they submit a proper scheme for consideration before this court they may be permitted to inspect the two sugar factories and may also be given the details of the creditors and the amount of dues of the two factories at Bara Chakiya and Chapatiya separately. Learned counsel appearing for Hanuman Sugar and Industries Limited also made a similar request. This court, vide order dated March 9, 1995, permitted the applicants and all other parties before the court to make inspection of the two factories and also directed the official liquidator to get published an advertisement in at least four national dailies intimating that this court is considering the scheme of rehabilitation of the company (in liquidation) and if any other party is interested therein they may submit their proposal/scheme before this court on or before April 3, 1995. On the advertisement being published another party, namely, Dr. B.C. Roy and Pharmaceutical Limited submitted a proposal/scheme for running the two factories of the company (in liquidation). The other two applicants, namely, Vishnu Sugar Mills and Hanuman Sugar and Industries Limited also sought time to furnish their detailed scheme in the light of the inspection of the two factories of the company (in liquidation) made by them. The court permitted them to submit their schemes provided they furnish cash security of rupees five lakhs each by means of a bank draft in the name of the Registrar, High Court, which was to be refunded to the party in case its scheme was not found acceptable by this court. It is noteworthy that I.F.B. Agro Industries which had earlier submitted a scheme along with VVIL did not pursue their scheme any further. When the matter was listed on May 10, 1995, a statement was made by learned counsel appearing for Vishnu Sugar Mills and Hanuman Sugar and Industries Limited that as the financial institutions have not come forward before this court and as the applicants are not very clear about the total liabilities which they have to incur, it is not possible for them to submit any further scheme and they proposed that directions be given by this court for outright sale of the units individually along with the assets without the liabilities and free from all encumbrances. This court consequently held that as Vishnu Sugar Mills and Hanuman Sugar and Industries Limited were not interested in submitting any scheme, the scheme submitted by Dr. B.C. Roy and Pharmaceuticals Limited, which has also furnished a bank draft of rupees five lakhs as security, shall be considered after notice is served on the Cane Commissioner, Bihar, Secretary, Industries Department, Government of Bihar, Director of Industries and the Chief Secretary, Government of Bihar. Notice was directed to be sent by registered post as well as by dasti. Subsequently, notice was also directed to be issued to the Bihar Industrial and Technical Consultancy Organisation Limited ("BITCO" for short). Despite service of the notice, the Government of Bihar did not put in appearance but a letter dated June 16, 1995, was sent to the Deputy Registrar of the court by the Cane Commissioner stating that the scheme furnished by Dr. B.C. Roy and Pharmaceuticals Limited was too vague and without necessary details and unless all the details are furnished it was not possible to make any comments on the scheme furnished by them. When the matter was listed on July 22, 1995, learned counsel appearing for Dr. B.C. Roy Pharmaceuticals Limited stated that they are getting a detailed scheme prepared by a chartered accountant and shall also furnish the latest audited balance-sheet of the company to show their financial status. Subsequently an affidavit was filed on behalf of the said applicant giving certain more details. At that stage Shree Hanuman Sugar and Industries Limited submitted another scheme along with a bank draft for rupees five lakhs stating that as the figures had now been received regarding the dues of the company (in liquidation) to its secured creditors, they were interested in running the two factories and were, there- fore, submitting a fresh scheme. Appearance was also put in on behalf of IFCI which also sought time for examining the proposals made by the two applicants.