Punjab-Haryana High Court
Kundanmal Dabriwala And Ors vs M/S Dabriwala Steels And Engg. Comp on 9 June, 2022
CA-76-2014 and other -1-
connected applications
CA-76-2014, CA-80-2014
in
CA-389-2013
in
CP-51-2006 and
CA-118 & 119 of 2019
KUNDANMAL DABRIWALA AND ORS.
VS
M/S DABRIWALA STEELS AND ENGG. COMPANY LIMITED
AND ORS.
Present:- Ms. Manisha Gandhi, Sr. Advocate
with Ms. Salina Chalana, Advocate
Mr. Deepak Saini, Advocate
for the applicant (in CA-76-2014).
Mr. Anand Chhibber, Sr. Advocate
with Mr. Rakesh Kumar, Advocate
Ms. Ateevraj Sandhu, Advocate
for applicant (in CA-80-2014).
***
1. This order shall dispose of CA-76 & 80 of 2014 and CA-118 & 119 of 2019 in CA-389-2013 arising from CP-51-2006.
2. On the recommendations of Board of Industrial and Financial Reconstruction (in short 'BIFR') which has been upheld by the Appellate Authority for Industrial & Financial Reconstruction (in short 'AAIFR'), the High Court vide order dated 24.02.1995, ordered the winding up of M/s Dabriwala Steel and Engineering Company Ltd. (hereinafter referred to as "DSECL"). On 17.09.2004, the sale of plot No.136, Sector 24, Faridabad, by Haryana State Financial Corporation (in short 'HFC') in favour of M/s Excel Buildcon Pvt. Ltd. for an amount of Rs.4.10 Crores, was confirmed. The State Bank of India held second charge over plot No.136. The dues of HFC as well as SBI were cleared qua their charge on the said plot, whereas, remaining sale proceeds were deposited in the account of the Company under the charge of the Official Liquidator. On 09.02.2006, the High Court 1 of 8 ::: Downloaded on - 24-12-2022 08:57:52 ::: CA-76-2014 and other -2- connected applications permitted the charge of the plot No.142 be taken over by the Official Liquidator from the SBI which was the secured creditor of the said plot and permission to sell was also granted. In the meantime, the promoters tried to settle the dues of the creditors and payment under one time settlement schemes were finalized by SBI, the HFC and the workers. The payments were made to some of the creditors by the Directors of DSECL. In order to pay-off all the creditors, the promoters entered into a scheme of revival with Sh. Sanjay Gulati as financer of the Company in lieu of certain consideration as envisaged in the scheme of revival. Sh. Sanjay Gulati was one of the proponents of the scheme of revival who brought in finances in order to revive the Company. On 19.03.2009, CP-51-2006 was filed by the promoters as well as the financers with a prayer to sanction the scheme while ordering revival of the Company. The objections to the scheme filed by certain creditors and other parties were considered. Vide order dated 19.03.2009, the objections of the creditors were settled and the scheme for revival of the Company was sanctioned. Five Company Appeals against the order dated 19.03.2009, were filed. Interim orders passed in the Company Appeal resulted in stay of raising further construction on plot No.142, Sector 24, Faridabad. During the pendency of the appeal, the promoters of DSECL sent a letter to the financer terminating the relationship with the financer. It is alleged that the same was done to wriggle out of the common ground taken by all the objectors to the scheme that the scheme of revival has been filed by the promoters only to circumvent confirmation of auction proceedings of plot No.142. In the communication, the financial assistance of the financer -Sh. Sanjay Gulati is acknowledged. The CA-25-2011 in CP- 29-2009, has been filed by the promoters on 12.03.2011 with a prayer to 2 of 8 ::: Downloaded on - 24-12-2022 08:57:52 ::: CA-76-2014 and other -3- connected applications modify the scheme of revival. The financer Sh. Sanjay Gulati filed a reply. All the five appeals against the order of sanctioning of the scheme of revival were disposed of vide separate orders in the year 2013. CA-25-2011 was also disposed of. The financer sent a letter to the promoters expressing his intention to act upon the scheme after disposal of the Company Appeals on 07.08.2013. CA-389-2013 was filed under Section 392 of the Companies Act, 1956 (hereinafter referred to as 'the 1956 Act'), for modification of scheme on certain additional grounds while making allegations against the financer. The same was dismissed as withdrawn on 18.02.2014.
3. CA-76-2014, has been filed by the financer/proponent of the revival scheme for certain directions, inter alia, to be issued to the promoters to transfer shares and remain bound by the order of revival dated 19.03.2009, whereas, CA-80-2014, has been filed by the promoters/seeking modification in the scheme and allow the amount contributed by the financer to be refunded to them with simple interest. In CA-119-2019, the promoters have prayed for issuing directions to Sh. Sanjay Gulati to deposit the original title deeds and possession letter of plot No.142, Sector 24, Faridabad, whereas, in CA-118-2019, the promoters pray for direction to respondent No.2-Sh. Sanjay Gulati to file an affidavit indicating his last two years Income Tax Returns and other financial details.
4. This Bench has heard the learned Senior counsel representing the parties at length and with their able assistance perused the paperbook. The learned counsels, on liberty being granted, have also filed their respective written submissions.
5. First, the Bench proceeds to take up CA-76 & 80 of 2014. In CA-80-2014, the promoters allege that more than four years have elapsed 3 of 8 ::: Downloaded on - 24-12-2022 08:57:52 ::: CA-76-2014 and other -4- connected applications but no tangible step has been taken to implement the revival scheme. Moreover, due to the pendency of the appeals, it might take even a longer time to finally adjudicate the matter. It is alleged that the shareholders of the applicant-Company have witnessed a negative attitude from Sh. Sanjay Gulati with regard to the adherence of the scheme of revival passed by the High Court. His conduct was also not proper in taking the title deeds and possession letter of the plot from the office of the official liquidator without intimating the shareholder of the applicant-Company. Sh. Sanjay Gulati, immediately after passing of the revival order, has installed the hoarding of his own Company i.e. Omega Constructions on the said plot to proclaim before the general public that his Company is now the owner of the plot. It is alleged that the said plot No.142 was nowhere connected with the scheme of revival. Sh. Sanjay Gulati has unilaterally started raising construction on the said plot of the applicant-Company and despite request to stop the construction, he continued with the construction resulted in lodging of criminal complaint. It is alleged that in view of the subsequent developments as well as his misconduct, the scheme of revival has become unworkable. Consequently, a prayer has been made to permit the promoters to return the amount of Rs.1.05 Crores along with simple interest and allow the present shareholders and Directors of the applicant-Company to carry out the business of warehousing sector according to the provisions of its memorandum and Articles of Association.
6. At this stage, it is important to note that the appeal filed by DSECL challenging the decree for possession by way of specific performance of plot No.142, Sector 24, Faridabad, has been dismissed vide judgment dated 01.09.2021, against which a petition for Special Leave to 4 of 8 ::: Downloaded on - 24-12-2022 08:57:52 ::: CA-76-2014 and other -5- connected applications Appeal(Civil) No.21091 of 2021, is stated to be pending before the Supreme Court. It is evident from the reading of the application that the promoters have not provided details of the manner in which the amount is sought to be refunded to the financer, who is opposing the proposal. Furthermore, the promoters have alleged that they want to now use the plot for warehousing sector. However, the litigation with regard to the plot is still pending. Further, there is no concrete proposal in this regard. With regard to the allegation that the financer, after passing a resolution, took back the documents of title of plot No.142, it is evident that as per the revival scheme which was sanctioned, the financer is the Managing Director and a majority shareholder to the extent of 85% of the total share holdings of the company. Hence, now the Managing Director of the Company, is entitled to take steps for revival of the Company.
7. The next allegation is that no tangible steps have been taken to implement the scheme of revival. It may be noted here that the scheme of revival was sanctioned in the year 2009. As many as five Company Appeals were filed in which interim orders were passed. The aforesaid appeals remained pending till 2013. The promoters of DSECL sent a letter terminating the relationship with the financer on 15.02.2010, in order to avoid allegations in the pending appeals. Immediately, on dismissal of the five appeals, the financer sent a communication to the promoter expressing his intention to act upon the revival scheme. However, it is the promoters who filed an application i.e. CA-389-2013, for modification of the scheme, which was withdrawn on 18.02.2014. Thereafter, on 20.01.2014, the promoter filed this application i.e. CA-80-2014, which is pending. It is the case of the promoters that after taking over the possession, the financer 5 of 8 ::: Downloaded on - 24-12-2022 08:57:52 ::: CA-76-2014 and other -6- connected applications started raising construction resulting in lodging of complaint by the promoters with the Police. Thus, it was the promoters who were creating hurdles in implementation of the revival scheme. It is also evident that the company through its promoters have lost the litigation with regard to the only immovable property of the Company. In such circumstances, the financer cannot be said to be at fault. Similarly, the allegations of the negative attitude of respondent No.2 for adherence of the scheme are totally unsubstantiated. As regards the allegations of putting up hoarding of his own Company, Sh. Sanjay Gulati has taken these steps in order to protect the company's property.
8. The allegation of the promoters that plot No.142 which is the property of the Company was nowhere connected with the scheme of revival is, also, factually incorrect.
9. The modification of an approved scheme of revival and rehabilitation cannot be permitted unless there are compelling circumstances which justify the Company Court to pass such an order which is, primarily, to protect the interests of the Company. In this case, the promoters have failed to bring any convincing facts, supporting their contention, to the notice of the Court.
10. The promoters have already made repeated attempts to run the Company, but have failed. The Company closed down its manufacturing activity in the year 1985. It has been 37 years. The promoters have failed to manage the Company resulting in sale of plot No.136 as well as decree against the Company with respect to plot No.142. It was the financer who came to the rescue of the Company. Now, without any proper justification, it would not be appropriate to permit the promoters to take a U-turn from the 6 of 8 ::: Downloaded on - 24-12-2022 08:57:52 ::: CA-76-2014 and other -7- connected applications settlement entered into and approved by the Court.
11. Keeping in view the aforesaid facts, CA-80-2014 is dismissed, whereas, CA-76-2014 is allowed while issuing direction to the Company, its promoters and majority shareholders to implement and give effect to the scheme of revival in accordance with the sanctioned scheme approved by the Court on 19.03.2009 subject to the decision of the Supreme Court in the pending litigation with respect to the only immovable property of the company.
12. The learned counsel representing the promoters relies upon the judgment passed in S.K. Gupta and another Vs. K.P. Jain and another, AIR 1978 SC 734. This Court has carefully read the judgment. In that case, the Court, primarily, upheld the locus standi of the appellant to maintain the application for substitution under Section 392(1) of the 1956 Act. The Court also held that the Company Court has the jurisdiction to entertain and decide applications under Section 392 of the 1956 Act regarding the sanction of the revival scheme. The Court held that the High Court shall have power to supervise the implementation of the compromise or arrangements. The aforesaid judgment does not lay down that the promoters can pray for modification of the revival scheme at will without any reasonable basis. The next judgment relied upon by the learned counsel representing the promoters is M/s Meghal Homes Pvt. Ltd. Vs. Shree Niwas Girni K.K. Samiti and others, AIR 2007 SC 3079. In the aforesaid case, the Court was considering the test which the Court must apply before ordering revival of the Company which has already been ordered to be wound up. The Court held that the Company Court has all the powers to accept a scheme or proposal for revival of the Company. However, the Courts laid down that the scheme as a whole 7 of 8 ::: Downloaded on - 24-12-2022 08:57:52 ::: CA-76-2014 and other -8- connected applications has to be just, fair and reasonable and it should not be a scheme which is only an excuse to take over the assets of the Company.
13. The next judgment relied upon by the learned counsel representing the promoters is in HIFCO Consumer Credit Ltd. Vs. Midland Industries Ltd. and others, 1998(93) Company Cases 502. In this case, after the scheme of amalgamation was approved, an application under Section 392 of the 1956 Act seeking direction that the shares be issued according to the scheme of amalgamation, was held to be not maintainable. It is evident that the Court, in the facts of the aforesaid case, held that the dispute is with regard to the shares of the Company which has already amalgamated with some other Company. It was found that the dispute between the applicant and the Company which stood merged was not required to be decided in an application under Section 392 of the 1956 Act. In the considered view of the Court, the aforesaid three judgments do not advance the case of the promoters.
14. Keeping in view the aforesaid discussion, no further order is required to be passed in CA-118 & 119 of 2019.
15. With these observations, the applications are disposed of.
09.06.2022 (ANIL KSHETARPAL)
Ay JUDGE
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