Judgment:
S.N. Sapra, J.
1. The respondent has filed the present application under rule 9 of the Companies (Court) Rules, 1959, thereby seeking directions to State Bank of India to accept the proposals of Mr. Mehtani to start the company and also to accept the collateral and primary securities, as offered by the applicant.
2. Briefly, the facts are that Shri Rakesh Dua and Shri Sanjay Dua, petitioners, have filed Company Petition No. 113 of 1987, under Section 43p of the Companies Act, 1956, for winding up of N.K.M. Industries Pvt. Ltd., hereinafter called 'the company', on the ground that, since its inception, the company failed to commence its business and it was also just and equitable to do so, because, the company did not make any profits.
3. The company was incorporated on September 25, 1981, with the objects of carrying on the business of manufacturing and processing woollen and other textile fabrics and also of manufacture, sell and export various forms of paper and pulp.
4. According to the allegations as made in the company petition, petitioner No. 1 had taken over as managing director and petitioner No. 2 as director on April 6, 1983. There were six shareholders in the company, apart from two petitioners. Mr. K. K. Mehtani and Mr. N.K. Mehtani were also shareholders and directors.
5. It appears that the company availed of various financial facilities and took loans from the State Bank of India, South Patel Nagar Branch, New Delhi. The directors were also the guarantors in their personal capacity.
6. The machinery which was imported was installed in June, 1985. It appears that disputes and misunderstanding arose between petitioners and Mr. Mehtani and the factory was locked by the petitioner. The result was that production could not commence and interest on the loans was accruing.
7. At the time of admission of the petition, notice to show cause was directed to be issued to the respondent-company, as well as to Shri N.K. Mehtani, Sh. K.K. Mehtani and State Bank of India, South Patel Nagar Branch, New Delhi.
8. Replies to show cause notice have been filed.
9. During the course of proceedings efforts were made to resolve the disputes between the parties so that one group could take over the factory of the company and start business. The parties, it appears, agreed that the business be taken over by Mehtanis, subject to certain conditions. As the petitioners were the guarantors, no settlement could be possible, unless the liability of the petitioners was transferred to Mehtanis and the company. For this, the State Bank of India agreed to shift the liability but subject to adequate primary as well as collateral securities.
10. In the application, it is alleged that since the unit has remained closed for over four years and it became sick, an application was moved on August 25, 1988, by Shri K.K. Mehtani to the State Bank of India, South Patel Nagar Branch, New Delhi, with a copy to the Regional Bank Manager, for a package of relief and concessions, with a view to revive the unit and to restore it to the normal state of health. The facilities asked for by Mr. Mehtani are as under :--
'(i) Penal interest be waived and unpaid interest on term loan and cash credit account be funded into a separate term loan. No interest be charged on such funded portion of the term loan. The company shall however, pay simple interest at 10% on original term loan and the repayment thereof be rescheduled, spread over seven years from the date of restructuring.
(ii) Funded interest be allowed to be repaid within three years from the date of commencement of implementation of the rehabilitation programme.
(iii) Irregular portion of cash credit account be funded as working capital term loan and allowed to be repaid within five years. The interest on W.C.T.L. be charged at 10%
(iv) Need-based credit limit, viz., C. C. hypothecation bills purchase, overdraft against limits be sanctioned.
(v) Release the property presently held as collateral security and owned by Shri Rakesh Dua and his family members/firm. The said properties are charged to the bank as collateral security in some other account and the charge was extended to cover N.K.M. Industrial Fabrics (P.) Ltd. as well.'
11. On the directions of this court, there have been several meetings with Shri Mehtani and officials of State Bank of India. Another letter dated January 28, 1989, was also written by Mr. Mehtani, to the bank. However, the bank has refused to accept the proposals asmade by Mr. Mehtani. The applicant, thus, states that there are guidelines issued by the Reserve Bank of India to the effect that if a company is a small scale industrial unit, and that it is viable to revive the same, then, in that event, the bank may waive the collateral security. But, in spite of this, the bank is adamant to take collateral security. The applicant states that it is ready to give collateral security of the shed, which is worth Rs. 8 lakhs and primary security of plant and machinery, which is worth Rs. 16 lakhs.
12. In its reply, the State Bank of India has disputed the allegations as made by the applicant. According to the bank, the primary security, now offered by Mr. Mehtani, is only of scrap value. The machinery which was imported six years back, as a product of close-wall technology, was an obsolete piece discarded as useless. Moreover, the machinery is lying idle ever since its purchase. The bank has further alleged that the proposals put forward by Mr. Mehtani are not commercially sound and these do not prove the viability of the project.
13. At this stage, in my view, it is not necessary to dispose of the application, because, if the matter is reconsidered by the bank, in the light of the directions to be issued by this order, then, not only will it be in the interest of the bank, as it may be able to recover its dues, but it will help a sick unit to revive. There is no doubt that the bank has agreed to shift the liability, provided adequate primary and collateral securities are given.
14. As there is a dispute with regard to the actual value of the sheds offered by Mr. Mehtani by way of collateral security and the value of plant and machinery offered as a primary security, in my opinion, the value should be determined by an approved valuer to be appointed by the bank.
15. Accordingly, I direct the State Bank of India, South Patel Nagar Branch, New Delhi, to have the value of the sheds and plant and machinery determined by an approved valuer ; the applicant, namely, Mr. Mehtani is also entitled to get the value determined an approved valuer, and the valuation report shall be submitted to the bank. After the valuation reports are received then, in that event, the bank is directed to decide the matter keeping in view the totality of circumstances, the observations made above and guidelines of the Reserve Bank of India.
16. In case the bank conies to the conclusion that the securities are not adequate, then, it shall give its reasons and forward the report to this court.
17. This exercise shall be completed within a period of two months. To be listed before the company judge on January 15, 1991.