IMPERIAL FASTNERS PVT LTD Vs. INDUSTRIAL DEVELOPMENT

JUDGEMENT

(1.) THIS is an appeal under Section 483 of the Companies Act, 1956 challenging the order dated 25.6.2004 and the order dated 9.7.2004 passed by the learned Company Judge in Misc. Case Nos. 19 of 2004 and 34 of 2004 respectively in Company Petition No. 29 of 2003.

(2.) THE case, in brief, is that M/s S.N. Corporation Limited being opposite party No. 2 was established in the year 1982 in joint sector in association with Industrial Promotion and Investment Corporation (for short, 'IPICOL') and its commercial production was started in or about 1985. But, due to mismanagement by the private entrepreneur and for other reasons the said company being opposite party No. 2 started incurring loss since the beginning. The management of the said company was transferred to Industrial Development Corporation of Orissa Limited (for short, 'IDCOL') being opposite party No. 1 herein. In 1990 the said company became sick and remained in BIFR for about 13 years till 5.5.2003 and on that date finding no other alternative for revival of the said company despite making all efforts, the Board for Industrial and Financial Reconstruction (for short, 'BIFR') ordered for winding up of the said company and referred the matter to this Court for initiating a winding up proceeding. However before that a loan of Rs. 2.37 crores was provided by IPICOL to the said M/s S.N. Corporation Limited (for short, 'SNCL'). During the management under IDCOL another amount of Rs. 23 crores was advanced by it to opposite party No. 2 being SNCL towards repayment of loan and meeting the loss year after year. Ultimately in the month of November, 1998, the company was closed under the Industrial Disputes Act, 1947 with the permission of the Government of Orissa in the Labour and Employment Department. The closure compensation was also paid to all the workers of the company. Efforts were also made to attract the private entrepreneurs for take over of the company so that it could be revived. Various private entrepreneurs visited the plant but no other offer was received except from one entrepreneur who was willing to take over the company at Rs. 7.26 crores. But the said entrepreneur did not show interest to take over the company and ultimately backed out. Even the appellant company being M/s Imperial Fastners Pvt. Ltd. (for short, 'IFPL') also visited the plant number of times before the company was referred to this Court for its winding up. But ultimately the appellant company did not show any interest nor submitted any proposal for revival of the company to the BIFR. They waited till the order of winding up was passed by the BIFR and it referred the matter to this Court. The learned Company Judge of this Court issued public notice inviting objections against the proposed winding up of the company by his order dated 4.9.2003. At that time the appellant company offered a price of Rs. 2.10 crores for purchasing the assets of the company. Another party also made an offer of Rs. 2.24 crores to purchase the same. Opposite Party No. 4 being SCAW Industries Pvt. Ltd., (for short, 'SIPL') which was due to set up a steel plant in or about the same area offered only Rs. 1 crore for the surplus land of 40 acres along with Guest House cum Administrative Building of the company thereon. However, opposite party No. 2 being SNCL filed an application before the learned Company Judge to permit IDCOL/SNCL for inviting offers through open advertisement in order to attract best possible price for the assets of the company. The learned Company Judge of this Court accordingly passed necessary orders. Pursuant to the said order open advertisement was first made to sell its surplus land and Guest House cum Administrative Building. In response to the said advertisement only two parties, namely, M/s SCAW Industries Pvt. Ltd. (for short, 'SIPL') and M/s. K.D. Sharma submitted their offers. It was found that SIPL was the highest bidder quoting Rs. 1.25 crores for the surplus land where the Guest House cum Administrative Building is situated and accordingly, the offer of SIPL was recommended by the Asset Disposal Committee of the Government to the learned Company Judge of this Court for appropriate order. However, due to certain objections raised by the appellant company stating that the said company was ready to pay Rs. 2.95 crores for the entire assets of the company which includes, inter alia, 60 acres of land in two plots, plant and machinery, finished goods, raw materials with buildings thereon. Further the said appellant company was ready to run the plant. In view of the aforesaid objection, learned Company Judge kept the offer of Rs. 1.25 crores made by SIPL for about 40 acres of land and the Guest House cum Administrative Building standing thereon in abeyance and further directed that fresh advertisement may be issued inviting offers from interested parties for sale of the entire assets of the company including land, building, plant and machinery along with surplus assets of 39.98 acres of land with Guest House cum Administrative Building standing thereon as package I and for plant and machinery and the remaining land excluding the said 39,98 acres of land whereon the Guest House cum Administrative Building stands as Package II. However, the earlier offer of SIPL of Rs. 1.25 crores for the said plot of land measuring about 39,98 acres with Guest House cum Administrative Building standing thereon was kept under consideration of the learned Company Judge. In accordance with the said order of the learned Company Judge, an advertisement and information memorandum was issued to the eligible parties on the basis of their turnover and net worth. In response to the said advertisement, five parties including the appellant and opposite party No. 4 being SIPL and opposite party No. 5 being M/s Sundaram Fasteners Limited participated in the bid. The bids were then opened and evaluated by the Asset Disposal Committee of the Government. Before opening of the financial bids of the parties, reserved price was fixed by the Asset Disposal Committee after recommendation by the Adviser who was earlier appointed for the sale of the assets of SNCL. After the financial bids in presence of all the parties were opened on 30.4.2004, it was found that the offer price of other bidders was below the reserved price fixed for Packages I and II. M/s Sundaram Fasteners Limited (for short, 'SFL') offered a price of Rs. 5.20 crores for the plant and machinery and other movable assets of the company excluding the factory land of 20 acres and the factory building. The said offer of SFL did not include 39.98 acres of land whereon the Guest House cum Administrative Building was situated. According to the offer of SFL for Rs. 5.20 crores, it would remove the plant and machinery and other movable assets of the company to a different State. But the appellant company offered Rs. 4.10 acres only for all the assets under Package II. The reserved price for all the assets of Package II was fixed at Rs. 5.99 acres. When the bids were opened in presence of all the bidders, it was known to every body that SFL offered Rs. 5.20 crores for the plant and machinery and movable assets of the company under Package II with the condition that it would take away the said movable assets of the factory to their factory at Chennai. However, SFL suo motu increased their offer by a further amount of Rs. 1.05 crores to compensate their inability to run the plant in Orissa where the factory was situated by their letter dated 30.4.2004. Therefore, the offer made by SFL amounted to Rs. 6.25 crores, i.e. (Rs. 5.20 crores + Rs. 1.05 crores) for the plant and machinery and the movable assets only. They did not propose in their bid to purchase the land and building. The Asset Disposal Committee ultimately held that except the offer of SFL all other offers were below the reserved price and therefore, decided not to consider the offers made by others. The offer made by SFL was found to be much more than the reserved price. In this regard, it must be mentioned here that the offer made by SFL did not include the plot of land measuring about 39.98 acres with the Guest House cum Administrative Building standing thereon for which SIPL had already offered a price of Rs. 1.25 crores which Was kept in abeyance pursuant to the order of the learned Company Judge. Therefore, the offers made by SFL and SIPL amounted to Rs. 7.50 crores, i.e. (Rs. 6.25 crores + Rs. 1.25 crores) leaving behind a plot of about 20 acres with factory and other buildings thereon which can be utilised for setting up another industry based on available infrastructure facilities. Therefore, the Asset Disposal Committee in its meeting held on 6.5.2004 recommended the offers made by opposite party No. 4 (SIPL) and opposite party No. 5. (SFL) to the learned Company Judge of this Court.

(3.) LEARNED counsel for the appellant mainly contended that in the advertisement and the information memorandum it was clearly stipulated that the assets of the company would be sold preferably to a party who is ready to revive and run the company. But if the plant, machineries, tools etc. are removed to a different State on accepting the recommendations of the Asset Disposal Committee it would not be possible to revive and run the company within the State and therefore, the impugned order is not in the interest of the State and accordingly same should be interfered with.