Jammu & Kashmir High Court
Essem Coated Steels (J&K) Ltd vs Board Of Industrial & Financial ... on 19 September, 2023
Author: Rahul Bharti
Bench: Rahul Bharti
HIGH COURT OF JAMMU & KASHMIR AND LADAKH
AT JAMMU
APPLE No. 4/2008
IA No. 99001/2013 [D-2/2013]
CM No. 2045/2022
IA Nos. 1/2018, 1/2014, 1/2013 &
1/2017
Essem Coated Steels (J&K) Ltd. .....Petitioner(s)
Through: Mr. Inderjeet Gupta, Advocate with
Mr. Yatin Mahajan, Advocate
Vs
Board of Industrial & Financial Reconstruction ..... Respondent(s)
Through: Mr. B. B. Bakshi, Advocate
Mr. M. P. Gupta, Advocate
Mr. Akash Gupta, Advocate
Mr. Ajay Abrol, Advocate
Coram: HON'BLE MR. JUSTICE RAHUL BHARTI, JUDGE
ORDER
19.09.2023
01. This case is in its litigious journey starting in this Court from June, 1995 awaiting its destination to reach that is not yet seen arriving. In fact, the case and the court are, perhaps, left in each other's courtship during this long travel.
02. This is a case relating to winding up of a company namely M/s Eseem Coated Steels (J&K) Ltd. (hereinafter to be referred in short as "the petitioner-company").
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03. Before coming to deal with the stage at which the proceedings in this case are found held up, a resume of the case as well as the proceedings taken place here-to-before needs to be drawn out.
04. The petitioner-company came to be incorporated as a company in April, 1996 under the Companies Act, 1956. As per the information gatherable from the record of this case, the last known Directors of the petitioner-company were as under:-
1. Dr. Mustafa Kamaal, the then Minister for Industries & commerce, Govt. of J&K,
2. Mr. M. S. Pandita, IAS, the then Principal Secretary, Govt. of Industries & Commerce, Govt. of J&K,
3. Mr. Mohd. Saleem Beg, the then Director Industries & Commerce Department,
4. Mr. G. Q. Wani, the then Managing Director, J&K SIDCO Ltd.,
5. Dr. V. C. Shah,
6. Mr. K. R. Padha,
7. Mr. Salmann Moloobhoy.
8. Field Marshal S.H.F.J. Manekshaw,
9. Mr. Mohd. Jaffar Rajabali Varteji.
05. This Court has reasons to believe that the petitioner- company happened to be a government company of the Govt. of J&K though there is no such reference being found on the record of this case file but given the mention of the directors above named, majority of whom happened to be by virtue of their position in the 3 APPLE No. 4/2008 Govt. of UT of Jammu & Kashmir, this court is drawing an inference to this effect.
06. From the record, it is forthcoming that the J&K State Industrial Development Corporation Ltd. (in short "SIDCO") was holding 28.7 percent of the shares while the promoters and their associates were holding 27.70 percent of the shares.
07. The petitioner-company came to set up its registered office at SIDCO Industrial Complex, Khonmoh, Phase-II, Srinagar (J&K) and factory on a leasehold premises to engage in manufacturing business of galvanized plain coils, sheets and corrugated sheets.
08. In terms of its factory location and premises, the petitioner- company came to acquire leasehold rights for a period of 90 years with respect to 20 acres (160 kanals of land) in SIDCO Industrial Complex, Khonmoh, Phase-II, Srinagar by virtue of a registered lease-deed dated 16.03.1986 and whereat an industrial infrastructure came to be set up leading the petitioner-company to its business activity.
09. By the coming of 1990, the petitioner-company seems to have run in troubled waters which gradually deteriorated the administration, management, working and business of the petitioner-company to the brink of being a sick company constraining the petitioner-company came to approach the Board for Industrial & Financial Reconstruction (in short "BIFR") for its revival and rehabilitation.
4 APPLE No. 4/2008
10. In this regard BIFR came to entertain on 20.05.1994 a reference in Form-A under section 15(1) of the Sick Industrial Companies (Special Provisions) Act, 1985. The proceedings in this matter remained before BIFR for a period of almost one year when BIFR came to a conclusion that the petitioner-company was not a prospect for revival and warranted its winding up.
11. Thus, by virtue of an order dated 02.05.1995 on file no. 26/1994, BIFR came to refer the matter to the concerned High Court that being this High Court, the then High Court of Jammu & Kashmir, for winding up proceedings of the petitioner-company.
12. In terms of its order dated 02.05.1995, the case came to be referred by BIFR vide its letter dated 16.05.1995 addressed to the High Court of Jammu & Kashmir (now High Court of UT of J&K and Ladakh).
13. This reference came to be to be received by this Court on 03.06.1995 resulting in diarizing of present case first as Case no. 1/1995 Companies Act. Thus, this court came to be seized of the matter from 03.06.1995 onwards. The case was registered in the Srinagar Wing of this Court.
14. It seems that from June, 1995 till ending 2000 no proceedings of any effect took place in the case before the Srinagar Wing of this Court when by an order of the Hon'ble Supreme Court of India, the Hon'ble Chief Justice of this Court, vide an order dated 08.08.2000, transferred the case to the Jammu Wing of the High 5 APPLE No. 4/2008 Court. Accordingly, the Registrar Judicial, Srinagar Wing vide his letter dated 19.03.2001 transmitted the record of the case to the Registrar Judicial, Jammu Wing of this Court.
15. It is upon transfer of the case to the Jammu Wing of this Court that the case came to be diarized as petition AUCA no. 2/2001 with date of institution 28.03.2001 and is now so bearing its number.
16. On account of appearance of no one in the matter, the petition came to be dismissed for non-prosecution on 27.11.2001, for seeking restoration of which an application came to be filed on 30.05.2002 on behalf of the petitioner-company which was not aware of the dismissal in default of the proceedings in the case and only came to know about its dismissal in default at the time of filing an application CMP no. 50/2002 on 21.05.2002 for seeking stay of the civil suits filed against the petitioner-company by the State Bank of India ("SBI" in short) and J&K Bank before the learned Court of Additional District Judge (Bank Cases), Srinagar.
17. The Company Bench of this Court, vide its order dated 09.07.2003, came not only to restore the matter and but also simultaneously granted it a final disposal by accepting the opinion of BIFR for winding up of the petitioner-company and accordingly the petitioner-company was declared would up with immediate effect.
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18. The Official Liquidator attached to the High Court of Jammu & Kashmir came to be appointed as liquidator of the petitioner-company with a direction to immediately take charge of the affairs of the petitioner-company, its assets forming account books, papers, vouchers and other documents so as to proceed in accordance with law for winding up affairs of the petitioner- company. The suit proceedings against the petitioner-company were revived and the trial court was directed to try the suits without further delay by issuance of notice to the official liquidator for enabling him to represent the petitioner-company in the suits.
19. Thus, the order dated 09.07.2003 brought the official liquidator attached with the High Court of Jammu & Kashmir into play vis-à-vis the petitioner-company and to the official liquidator it is stated that all the company's related documents came to be delivered on 30.09.2005.
20. The then Official Liquidator, made as liquidator of the petitioner-company, was Mr. O. P. Sharma who in his own discretion came to seek valuation of the assets of the petitioner- company from a valuer concern M/s Motley Consultancy Services.
21. The Official Liquidator - Mr. O. P. Sharma came forward with filing of an application on 29.12.2007 seeking recall of the order dated 09.07.2003 vide which the company court had closed the proceedings in the case by disposing of the company petition. 7 APPLE No. 4/2008
22. This application, being defect ridden upon getting corrected, came to be diarized as application no. 03/2008. First appointed Official Liquidator - Mr. O. P. Sharma came to be succeeded in office by Mr. Sudhir Kapoor coming into office on and with effect from 12.05.2008.
23. In view of the fact that the civil suits against the petitioner- company before the court below had got revived in terms of an order dated 09.07.2003 of this Court, the petitioner-company came to submit an application on 30.06.2008 for seeking stay of civil suits filed by the SBI & J&K Bank undergoing trial before the court below.
24. The company bench of this court, in terms of its order dated 19.09.2008, came to allow the revival of the petition AUCA no. 2/2001. Vide same very order, the company bench came to implead, on an application no. 4/2008, the SBI and the J&K Bank as party respondents in the revived company petition and the official liquidator in office was directed to submit the periodic reports of winding up proceedings qua the petitioner-company.
25. From September 2008 to ending 2010, no effective proceedings on the file of this case or at the end of the official liquidator in relation to the winding up of the petitioner-company seem to have taken place.
26. On 20.05.2011, SBI came to submit its objections to the application of the petitioner-company made on 30.06.2008 seeking 8 APPLE No. 4/2008 stay of the ongoing proceedings of the civil suits for recovery against the petitioner-company.
27. On 23.11.2011, J&K Bank came to submit an application in the case seeking auction of the assets of the petitioner-company.
28. In the meantime, the Official Liquidator -Sudhir Kapoor came to be succeeded by Mr. M. K. Bagri.
29. SBI came to file on 06.12.2015 an application CMP no. 1/2013 also seeking auction of the assets of the petitioner- company. Thus, both SBI as well as J&K Bank, being the lender institutions to the petitioner-company, came to seek auction of the assets of the petitioner-company so as to realize their respective loans.
30. The petitioner-company came to submit on 17.12.2013 its objections to the plea of auction of assets whereas the Official Liquidator - Mr. M. K. Bagri also made an application on the very same date 17.12.2013, inter alia, for a direction to stay the proceedings before the Debt Recovery Tribunal in the case IFCI/IDBI/ICICI against the petitioner-company in Case nos. 266/2001 and 133/2009.
31. In response to the applications so filed by the SBI & the J&K Bank for auctioning of the assets of the petitioner-company, this Court, in terms of its order dated 17.12.2013, came to call upon the parties in the case to recommend the names of valuers in 9 APPLE No. 4/2008 response where to SBI vide its application submitted on 27.01.2014 and the J&K Bank vide its application submitted on 29.01.2014 came to recommend the names of prospective valuers.
32. In terms of an order dated 11.06.2014 for the purpose of considering approval of name of a valuer so proposed by the SBI & the J&K Bank, this Court directed production of lease-deed of the demised premises vested in the petitioner-company by SIDCO. The petitioner-company, acting through one of its directors namely Mr. Mohd. Jaffar Rajabali Varteji, came to produce a copy of the lease- deed on the record of this Court stating that the original is with SBI.
33. In terms of an order dated 25.09.2014, this Court came to approve, out of list of valuers proposed by SBI & J&K Bank, M/s Mir & Associates as valuer for the purpose of assessing the valuation of the petitioner-company's assets. In the course of proceedings, Mr. O. P. Sharma again came to be in the position of the Official Liquidator.
34. The valuer M/s Mir & Associates came to submit its report dated 14.11.2014 in a sealed cover when this Court in terms of an order dated 10.04.2015 afforded an opportunity to the SBI & the J&K Bank to obtain copies of said report and file their respective response.
35. On the record of the case, two valuation reports i.e. first report submitted on 03.03.2007 by M/s Motley Consultancy Services and other on 14.11.2014 by M/s Mir & Associates came to 10 APPLE No. 4/2008 obtain. This Court came to take cognizance thereof in the proceedings in the case in terms of an order dated 30.04.2015 and vide same very order this Court came to implead SIDCO as a party respondent along with already impleaded the SBI & the J&K Bank.
36. To the valuation report so submitted with respected to its assets valuation, the petitioner-company came to submit response on 01.06.2015 followed by a response on 29.10.2015 by the SBI.
37. SIDCO, as being a party impleaded in the case, came to submit its status report on 16.04.2016, the import of which is to claim the leasehold premises back and keep it out of liquidation proceedings. To this SIDCO report, the petitioner-company came to submit its response on 21.07.2016, SBI on 20.09.2016.
38. On the basis of intervening proceedings, this Court, vide its order dated 12.09.2017, came to direct the Official Liquidator to initiate auction proceedings with respect to the assets of the petitioner-company obtaining in the form of its leasehold premises with building, plant and machinery with valuation as done by M/s Mir & Associates as being the base price.
39. It has been made clear in this order dated 12.09.2017 that the auction of the premises of the petitioner-company would be in the context of leasehold rights only and in the event of auction going through SIDCO is left entitled to charge transfer charges from the highest bidder. Thus, vide said order dated 12.09.2017, the auction exercise came to be set on course with respect to the petitioner- 11 APPLE No. 4/2008 company's assets to be carried out by the Official Liquidator but that has not so far matured or even take off.
40. The auction notices came to be issued in the Newspapers as mentioned in the order dated 12.09.2017. In the auction notice the official liquidator Mr. O. P. Sharma came to mention price of Rs. 6,40,00,000/- with respect to leasehold land asset of 160 kanal, Rs. 7,82,43,000/- for plant, building and machinery etc and Rs. 14,22,43,000/- for factory as a whole.
41. It is pertinent to mention here that the valuer M/s Mir & Associates in its report with respect to the land and building related to the petitioner-company has described the physical status that it is a vast area of land in an unattended condition with a forest grown thereupon in the form of lot of shrubs and trees making it jungle like, very difficult to move around and as per the assessment the span of the land was 90 kanals. Insofar as building part is concerned, foundation, plinth, super structure, ceiling, doors & windows and other features were found obtaining in an abandoned condition and disused machinery lasting for about 28 years found installed thereat literally reduced into scrap.
42. As per the said valuer M/s Mir and Associates assessment, the value of 160 kanals of leasehold land asset of the petitioner- company was @ Rs.2,40,00,000/-, building and boundary wall @ Rs.7,62,00,000/-, plant and machinery @ Rs.20,00,000/- and two 12 APPLE No. 4/2008 vehicles @ Rs.43,000/-, thus, totalling to Rs.10,22,43,000/-(ten crore twenty two lacs forty three thousands).
43. It seems that the auction exercise undertaken by the Official Liquidator failed to evoke any interest or response from prospective/interested bidders for reasons one of which being the existing physical condition of the leased premises which has reported in 2014 itself by M/s Mir & Associates as obtaining in the form of a jungle and now. Now it is 2023 and one can safely imagine the state of things so obtaining thereat, making it impossible for any prospective bidder to have the display of the premises for the purpose of physical inspection.
44. The proceedings in the case has remained in status quo as it is from the date of order dated 12.09.2017 bearing direction for auction of the assets of the petitioner-company with no forward movement taking place at the end of all the stakeholders i.e., this Court, the Official Liquidator, the petitioner-company, the SBI, the J&K Bank and the SIDCO.
45. On 24.03.2022, the SIDCO came forward with an application dated 18.03.2022 bearing CMA no. 2045/2022 seeking retrieval of its land under lease of the petitioner-company which application came to be responded by the Official Liquidator on 07.12.2022, by the SBI on 08.12.2022 and the petitioner-company on 08.02.2023 acting through Mr. Mohd. Jaffar Rajabali Varteji. 13 APPLE No. 4/2008
46. It is this state of proceedings at which this court is held up for way forward. This Court has made it clear to the parties appearing before it that the proceedings in the case can no more afford to take place in a routine manner and that an effective and corrective measures need to be taken before it is too late in the case to the prejudice of all the stakeholders leaving everyone to be the lower.
47. It is in this context that Mr. Inderjeet Gupta, learned counsel for the ex-director of the petitioner-company, learned counsel for the SBI, the learned counsel for the J&K Bank and the learned counsel for the SIDCO and the Official Liquidator namely Mr. Sudhir Phaye assisted by Advocate Mr. B. B. Bakshi are found in consensus for a court appointed Commissioner to engage in an exercise to get the entire leasehold premises of the petitioner- company cleared of all wild growth and waste obtaining thereat for enabling the leased premises to come up in a presentable condition and form for the purpose of carrying forward the auction exercise to a logical conclusion so as to invite the bidders in the auction exercise with clarity of the physical position of the property in reference so as to invite best possible bids for auction of said asset.
48. The Official Liquidator refers to a judgment dated 29.03.2013 of the Hon'ble Supreme Court of India in Civil no. 3147- 3149 of 2016 in the case of "Jabal C. Lashkari and others Vs Official Liquidator and others" to submit that the leasehold property is an 14 APPLE No. 4/2008 asset of a company under winding up as a company in a liquidation continues to maintain its corporate existence until it stands dissolved upon completion of the liquidation proceedings in the manner contemplated by the Companies Act.
49. By bearing in mind this precept, this Court deems it appropriate to appoint a Commissioner for undertaking the exercise of getting the leased premises of the petitioner-company located in SIDCO Industrial Complex, Khonmoh, Phase-II, Srinagar (J&K) free from all wild and waste growths and dumps in whatsoever form obtaining thereat except standing trees.
50. This Court, therefore, appoints Mr. Mohd. Nazir Fida (Retired District & Sessions Judge) as a Commissioner for carrying the commission of clearing the leasehold premises of the petitioner- company by engagement of men and machinery as required for the requisite purpose.
51. This Court appoints Mr. Mohd. Nazir Fida as Commissioner on the commissioner fee of Rs. 2.50 lac to be payable by the Official Liquidator out of the funds of the petitioner-company in hand. In addition, the Official Liquidator shall provide at the disposal of the Commissioner-Mr. Mohd. Nazir Fida an amount of Rs.8 (eight) lac towards expenses for the purpose of hiring men and machinery for undertaking the exercise of clearing the leasehold premises and in case of said amount of Rs. 8 (eight) lac falling short of carrying out 15 APPLE No. 4/2008 the task then the commissioner shall be entitled to make an application to this court for seeking requisite additional fund.
52. Compliance with respect to payment of Commissioner fees and expenses be carried out by the Official Liquidator within a period of 15 days from the date of this order, whereupon the Commissioner- Mr. Mohd. Nazir Fida (Retd. District & Sessions Judge) shall undertake the requisite exercise and make an effort to conclude it, if possible, before onset of forthcoming snow season in Kashmir. The Official Liquidator shall submit its compliance report with respect to payment of amount as directed on the file of this Court within the period aforementioned.
53. The official liquidator and the MD J&K SIDCO to provide all requisite assistance and cooperation to the Commissioner - Mr. Mohd. Nazir Fida (Retd. District & Sessions Judge).
54. Copy of this order be forwarded to the Registrar Judicial, Srinagar for purpose of its delivery to Mr. Mohd. Nazir Fida (Retired District & Sessions Judge).
List this case on 15.11.2023.
(Rahul Bharti) Judge Jammu 19.09.2023 Muneesh