ELVOC P LTD Vs. STATE

JUDGEMENT

(1.) This matter involves a question of considerable public importance relating to the principle and procedure for the sale of the assets of a company in liquidation : Whether the only object of such sale is to fetch the maximum price or whether the court, at its discretion, having regard to the prevailing socio-economic questions, which are involved in a welfare State like India, should apply the law in a pragmatic manner having regard to the realities and interest of the public.

(2.) In this case, admittedly, due to mismanagement and misappropriation by the ex-management, the company was ultimately wound up by an order dated 20th of November, 1978, and the official liquidator took possession of the assets, books, papers and documents of the company, on the application of a partnership firm, M/s. Tea Land, of which one of the ex-directors of the company is a partner, for winding-up on a claim of Rs. 68,000, being Company Petition No. 389 of 1976. After the said winding-up petition was admitted, the company made an application for a scheme and obtained stay of the winding-up proceedings but, ultimately, the said scheme application was dismissed by an order dated 13th of June, 1978. Thereafter, the workers and employees of the company assisted the official liquidator to enable him to take possession of all the assets, books, papers and documents of the company but none of the ex-directors or the management assisted the official liquidator in doing so. It appears that a group of workers in order to revive the company formed a co-operative society and got it registered on the 17th of July, 1979, in the name of Elvoc Employees Co-operative Society Ltd., hereinafter referred to as " the applicant-society ", and on the very same day they made an application before this court being Company Application No. 153 of 1979, for a lease or licence of the factory, godown as well as administrative and registered office of the company for a period of five years and also for other reliefs. The said application for grant of lease or licence of the applicant-society was resisted by the said petitioning-creditor, M/s. Tea Land, of which one of the ex-directors was a partner, and also Gurudev Industries Pvt. Ltd., a sister concern of the company (now in liquidation), Elvoc Pvt. Ltd., having common directors and ultimately, by an order dated 17th of September, 1979, made by me, a licence was granted in favour of the said applicant-society for a period of one year at the first instance with a clause for renewal of the same for a further one year until further orders of this court and the official liquidator was directed to execute a licence in a similar form as that of the licence which was granted in favour of a co-operative society in respect of running the Ganges Printing Ink Factory Ltd. (in liquidation) with necessary modifications. By an order dated 23rd of November, 1979, made by me, the said co-operative society was directed to pay a sum of Rs. 10,000 per annum or 50% of the profit, whichever was higher, to be paid in two instalments after the completion of the half yearly accounts, but, initially they had to advance Rs. 10,000. It is an admitted position that the said lease and/or licence was granted by the court solely for the purpose of the beneficial winding-up and to keep the company in a running condition so that it can be sold as such for the benefit of the creditors and contributories of the said Elvoc Pvt. Ltd. (in liquidation). It appears that the said applicant-society has very successfully, with proper expertise and assistance of the Chloride India Ltd. and financial help from the Govt. of West Bengal and other financial institutions, made tremendous progress and revived the company and secured orders from the Central Govt. and State Govt. concerns, including railways, and also export contracts. They mainly manufacture battery chargers, battery eliminators and industrial voltage stabilisers and other electrical equipments which are alleged to be of very high quality for which orders are placed by the said Govt. concerns and departments and, therefore, the applicant-co-operative society made this application either to renew the lease or licence for a further period of five years, and alternatively to sell the entire undertaking of the company including its assets according to the valuation made by the valuer appointed by this court by private treaty and for other reliefs.

(3.) Therefore, for practical purposes this application is for leave to purchase the entire assets, land, factory of the company (in liquidation) by private treaty at a reasonable price by the licensee, Elvoc Employees Co-operative Society Ltd. The licensee was granted licence solely on the ground of selling the properties and assets of the company as a going concern and for beneficial winding-up. An appeal was preferred by a group of ex-employees who appeared to have been set up by the ex-management which was dismissed and it also appears that the same group through one Sri Hridaya Das, an ex-employee of the Elvoc Pvt. Ltd., representing an alleged union, took proceedings under the writ jurisdiction challenging the formation of the applicant-co-operative society and also failed there. Mr. Som Nath Chatterjee, appearing with Mr. S.C. Ukil, for the applicant, submitted that the licensee has made enormous progress and with the help of Chloride India Ltd. has secured various orders, including orders from various departments of the Govt. of India, railways and State Govts. and it has modernised and developed the factory to enable it to produce export quality goods and quality goods and with the assistance of Chloride India Ltd. and the State Govt. has immense potentiality so as to keep the industry going and increase the production for the benefit of the public and as such, having regard to the facts of this case, the court should under the special circumstances and exceptional situation grant leave to the official liquidator to sell the assets to the applicant-co-operative society, by private treaty. He also referred to Rules 272 and 273 of the Companies (Court) Rules, 1959, and the Supreme Court decision in Navalkha & Sons v. Ramanya Das, , and submitted that in the facts and circumstances of a particular case the court is not only to look to the public interest and also the interest of the workers to avoid unemployment and the performance by the licensee who has very satisfactorily worked and made enormous progress and increased the profitability of the company and has secured large orders both from the Central Government concerns, statutory corporations and also from foreign buyers.