Soldiers United Motor, Transport Company Pvt. Ltd. Vs. the Official Liquidator and Shri Suresh Jindal - Court Judgment

Vijender Jain, J.

1. Aggrieved by the order passed by the learned Company Judge, the present appeal has been filed. By the impugned order, the learned Single Judge disposed of CP No.64/78, Eviction Petition E.No.240/86 and CP No.31/93. In CP No.64/78, winding up order was passed on 3.8.1979. A former director filed CP No.31/93 under Section 391 of the Companies Act, 1956 seeking sanction of the scheme of arrangement propounded therein. On the other hand, the landlord of the premises filed the objection to the said scheme. The Official Liquidator rejected the scheme. The learned Company Judge vide the impugned order dealt with CP No.64/78 in which winding up order dated 3.8.1979 was passed. After winding up of the company, an application was moved before the Company Judge and partial stay was granted on 28.8.1984. The same has also been reproduced in the impugned order by the learned Company Judge.

2. Eviction petition (E.No.240/86) was filed by the landlord seeking eviction of the company from the rented premises situated at Asaf Ali Road on account of non-payment of rent in the Court of the Rent Controller. Those proceedings were transferred to the Company Court. The impugned order has exhaustively discussed in detail regarding the right of the landlord in view of the peculiar facts and circumstances of this case and passed the impugned order taking into consideration that the tenanted premises have not been used since 1979 and the scheme propounded by the Director of the company was not bona fide and was filed with a view to retain the premises illegally. The learned Company Judge recorded a finding in para 12 of the impugned order that the scheme was not workable as company has lost its substratum being not in business since 1979.

3. Mr.P.C. Khanna, learned senior counsel appearing for the appellant before us has assailed the order of the learned Company Judge relying on the provision of Section 391(2) of the Companies Act and contended that if majority of shareholders representing 3/4th value of the creditors or class of creditors approved the scheme, the learned Company Judge did not have any other right except to accept the scheme and the only course open for the learned Company Judge was to have allowed scheme to operate so that the company could have been rehabilitated. It was further contended that in terms of the provisions of Sections of 38, 39 and 40 of Provincial Insolvency Act on which Section 391 of the Companies Act was modelled the requirement of law was for submission of a scheme for rehabilitation for satisfaction of the debts of the company and a proposal for a scheme of arrangement of affairs and the Court was to call the meeting of the creditors under Section 39 of the Provincial Insolvency Act and to have seen whether the approval was granted as proposed. Mr.Khanna contended that company has deposited a sum of Rs.1 lakh for payment to the creditors and in the event of the scheme being sanctioned, the amount deposited by the appellant was sufficient to ensure full payment to the creditors. Mr.Khanna vehemently contended that when the propounder of the scheme had deposited the amount, it was incumbent upon the Court to have sanctioned the scheme and in case full payment was not made to any class of creditors the Court could have dealt with the matter as Court had ample power to do so under Section 391 of the Act to wind up the company. On the face of it the argument looks very attractive. However, in view of the fact that the order of winding up was passed on 3.8.1979 and the appellant could not pay the petitioner (in the company petition) within one month pursuant to the order passed by the Company Court the aforesaid order was passed in winding up petition.

4. The registered office of the company was at Jindal House, Asaf Ali Road, New Delhi. It was rented premises. The landlord filed an eviction petition on the ground of non-payment of rent in the year 1976. The same was filed under the provisions of Section 14(1)(a) of the Delhi Rent Control Act. The same was disposed of by giving benefit of Section 14(2) of the said Act. Thereafter, it seems that the former Managing Director of the company filed an application dated 28.8.1984 on which a partial stay was granted directing the applicant therein in the following terms:

'Reply has been filed on behalf of the Official Liquidator. Time is sought on behalf of the petitioning creditor to file reply. Petitioning creditor may file his reply within two days.

Counsel for the applicant who is a former Managing Director of the company states that if the winding up is partially stayed pending the hearing of this application to enable the applicant to seek revival of the route permits on behalf of the company and to take steps to revive the activities of the company, he would be willing to deposit in the account of the company in any bank a sum of Rs.1,00,000/- and accept and reasonable condition that may be imposed by the court with regard to withdrawal of the amount from the account. He further states that he is willing to enter into an appropriate arrangement with the petitioning creditor in accordance with law. I would, thereforee, partially stay the winding up and permit the applicant to act for and on behalf of the company for the purpose of obtaining renewal of the route permits and do all other things that are necessary for the purpose of consultation with the Official Liquidator. This is subject to the condition that the applicant opens a new account in the name of the company and deposits into the said account within two weeks a sum of Rs.1,00,000/-. The applicant would enter into appropriate arrangement with the petitioning creditor within the said account of any amount more than Rs.5,000/- without the prior permission of this Court. The petitioner would be allowed access to the premises belonging to the company. The company would not, however, surrender the tenancy or otherwise part with the possession of the premises without the prior concurrence of this Court. The company would be allowed to function from the said premises.

Liberty to the petitioner to file rejoinder to the reply. List for hearing on 27 September, 1984.'

5. After obtaining the partial stay on the winding up order, the propounder of the scheme could not obtain the permit for running the buses as without permit having been obtained by them, the scheme could not have been implemented. The learned Company Judge has extensively dealt in para 9 of the impugned order as to how at the time of hearing of the petition, the company in question neither had any buses nor the route permits which had expired long ago and that even after getting the order from the Company Court on 11.3.1999 when another chance was given to the propounder, the propounder was not able to get the permits revived. There is a finding by the learned Company Judge that what was the present position of the secured creditors claim is not known as nothing has come on record as no provision has been made in respect of their dues. thereforee, the argument advanced by learned counsel for the appellant that in view of the fact that the shareholders in relation to 75% of the holding of the company has passed the resolution for sanction of the scheme cannot revive the scheme as the company has lost its net worth.

6. Even otherwise the Regional Director also opposed the scheme and objected to the scheme on the ground that the object of the scheme cannot be achieved unless the claims of the creditors are settled by the Official Liquidator under Sections 529, 529A and 530 of the Act and until and unless they are paid in full before revival of the company since the company was ordered to be wound up by the Company Court pursuant to the requirement of Section 447 of the Companies Act. Needless to emphasis that in view of numerous pronouncements of the Supreme Court as well as this Court, the first and foremost duty of a Company Court is to revive the Company. But the Court has undertook an exercise about the feasibility, completeness and workability of the scheme. If the scheme is used as cloak to achieve some other purpose rather than projected purpose of the revival, it would be unfair to the creditors as well as others to sanction such schemes. In view of the finding of the learned Single Judge that this scheme was nothing but to retain the tenanted premises, the learned Company Judge has rightly rejected the scheme.

7. It seems that on account of making default of the rent another eviction petition was filed by the landlord on 12.4.1986 under Section 14(1)(a) of the Rent Act and the company filed CA No.1175/2002 before the Company Court praying for transfer of said case and pursuant to the order passed by the Company Court on 9.5.2003 that eviction petition was transferred to the company court. In view of the fact that the learned Company Judge has considered the state of affairs from 1976 till date that the company did not have either the buses or the route permit to ply the buses nor have paid arrears of rent and no effort was made before the Company Court for infusion of fresh funds, the finding of the learned Company Judge for rejecting the scheme and passing a decree for eviction cannot be faulted. The Company Court rightly came to the conclusion that the scheme was neither bona fide nor viable. There is no infirmity with the order passed by the learned Company Judge. No ground to interfere.