Kerala High Court
Present vs Board For Industrial And Financial ... on 1 November, 2006
IN THE HIGH COURT OF KERALA AT ERNAKULAM
(Original Jurisdiction)
In the matter of the Companies Act, 1956
and
In the matter of M/S.HINDUSTANY CYLINDER COMPANY LTD.
(Letter and proceedings received from BIFR is numbered as Company
Petition No.30/2006 as per the order dated 1/11/2006 of the Hon'ble
Court)
Co.Pet.No.30/2006
Present:
THE HONOURABLE MR. JUSTICE ALEXANDER THOMAS
Thursday, the 2nd day of November 2017/ 11th Karthika, 1939
---------------------
PETITIONER
BOARD FOR INDUSTRIAL AND FINANCIAL RECONSTRUCTION
JAWAHAR VYAPAR BHAWAN,1 TOLSTOY MARG, NEW DELHI.
RESPONDENTS
1. THE MANAGING DIRECTORS,M/S.HINDUSTANI CYLINDERS CO.LTD.,
24/1690,DRAINAGE ROAD, KONNETTMUKKU,
THIRUVNANTHAPURAM 695 014.
2. THE SECRETARY,
INDUSTRIES DEPARTMENT,
GOVERNMENT OF KERALA,THIRUVANANTHAPURAM.
3. THE GENERAL MANAGAR,CANARA BANK,
INDUSTRIAL ADVISORY DIVISION,
R.M.WING, H.O.112,J.C.ROAD, BANGALORE 560 002.
4. THE GENERAL MANAGER
IDBI,IDBI TOWER,WTC COMPLEX,CUFFE LARADE,MUMBAI 400 005.
5. THE CHAIRMAN & MD
KSIDC,TC 10/402-1,KESTON ROAD,KOWDIAR,
THIRUVANANTHAPURAM 695 003.
6. THE GENERAL MANAGER,KERALA FINANCIAL CORPORATION,
VELLAYAMBALAM,THIRUVANANTHAPURAM 695 033.
7. THE DIRECTOR GENERAL
ESIC,RAJENDRA BHAWAN,RAJENDRA PLACEN,NEW DFLHI 110 018.
8. THE CENTRAL PF COMMISSIONER
HUDCO VISHALA 14,BHIKAJI CAMA PLACE,
R.K.PURAM,NEW DELHI 110 066.
Co.Pet.No.30/2006
9. THE CMD,HINDUSTANY CYLINDERS CO.LTD.,25/1620,KUMILY
LANE,S.S.KOVIL ROAD,THAMPANOOR,
THIRUVANANTHPURAM,PIN 695 001,(KERALA)
10.THE MANAGING DIRECTOR,
M/S.HINDUSTANI CYLINDERS COMPANY LTD.,
KODAVILAKAM,PARASSALA, THIRUVANANTHAPURAM, KERALA-695 002
11.THE MANAGING DIRECTOR,
M/S.HINDUSTANI CYLINDERS CO.LTD.,LAISON
OFFICE, 29/692,CHAMPAKADA, KAITHAMUKKU,
THIRUVANANTHAPURAM -24.
BIFR Case No.106/1998 transferred to the High Court and
re-numbered as CP No.30/2006 under Section 16 and Section 20(1) of
the Sick Industrial Companies (Special Provisions) Act, 1985 praying
for an order to woundup M/s.Hindustany Cylinder Company Ltd.
This Company Petition coming on for orders on this day upon
hearing SRI.N.NAGARESH, Assistant Solicitor General of India
appearing along with SRI.SUVIN MENON,Advocate for the petitioner and
M/S.VAKKOM N.VIJAYAN,REEJA HARI, ANIYAN P, A.S.SACHIN, Advocates for
R1, GOVERNMENT PLEADER for R2, P.GOPINATH MENON, SC FOR Canara Bank,
Standing Counsel for KSIDC,SRI.MILLU DANDAPANI, Standing Counsel for
K.F.C.,SRI.P.SANTHALINGAM (SR.) along with SRI.S.SHARAN, Standing
Counsel for KSEB, the court delivered the following:-
'C.R.'
ALEXANDER THOMAS, J.
....................................................................
CP No.30 of 2006
and
CA No.714 of 2007 in CP 30/06,
CA No.840 of 2007 in CP 30/06,
CA No.369 of 2014 in CA No.840/07 in CP 30/06,
&
CA No.501 of 2014 in CA No.840/07 in CP 30/06
....................................................................
Dated this the 2nd day of November, 2017.
J U D G M E N T
CP No.30 of 2006
The aforecaptioned Company Petition has been initiated by this Court, pursuant to a reference by the Board for Industrial and Financial Reconstruction (BIFR) recommending winding up of the Company in question, viz., M/s.Hindustany Cylinder Company Ltd., (hereinafter referred to as the 'Company', for short). Having conducted an enquiry under Section 16 of the Sick Industrial Companies (Special Provisions) Act, 1985, (hereinafter referred to as 'SICA', for short) in accordance with the procedure laid down in the said Act, the BIFR recorded an opinion under Section 20(1) of the SICA that it is just and equitable that the Company should be wound up and the said opinion of the BIFR has been placed before this Court in terms of Section 20(1) of the SICA, which has resulted in the institution of the above winding up case as CP No.30/2006 on the file of this Court.
2. The above Company is a joint sector company with equity participation of KSIDC (Kerala State Industrial Development CP 30/06 -2- Corporation) and was incorporated on 28.2.1985 and was originally promoted by Sri.R.Martin Joseph, Sri.Crispin Roy, Sri.C.Johnson and Sri.P.Marikani with equity participation of 40% by the KSIDC with a paid up capital of Rs.34.17 lakhs. The Company was engaged in the manufacture of Dissolved Acetylene (DA) Cylinders and is stated to have functioned well up to the year 1992. Later, the Company diversified its production from DA Cylinders to Liquid Petroleum Gas (LPG) Cylinders, and gone into financial crisis along with labour related problems. So the Company was declared as a Sick Industrial Company under Section 3(1)(o) of the SICA by the BIFR on 11.6.1998. The Canara Bank was appointed as the operating agency and proceedings were initiated as Case No.106/1998. The BIFR sanctioned scheme No.SS-99 for rehabilitation of the Company as per order dated 28.5.1999 under Section 18(4) read with Section 19(3) of the SICA. Later, BIFR modified the scheme and numbered the scheme as MS-00 as per order dated 25.7.2000 and had shifted the cut of date from 31.12.1998 to 31.12.1999. The modified scheme envisaged modernization-cum-expansion programme in respect of the existing facilities. The cost of the scheme was estimated at Rs.77.43 lakhs. The BIFR had appointed Canara Bank as the monitoring agency to monitor the progress of the scheme and the net CP 30/06 -3- worth of the Company was expected to become positive by 2003-04 and its accumulated losses were expected to be wiped out by 2007-08. The said scheme was expected to be funded by the promoters. The BIFR periodically reviewed the scheme and on the last review hearing held on 31.05.2006, the BIFR noted that the company and the promoter are neither serious enough nor resourceful enough to revive the company on a long term basis. The BIFR also observed that the Company's operations remain suspended for the previous three years even after sanctioning of the scheme for the revival of the Company. Accordingly, the BIFR declared the scheme, namely SS-98/MS-2000, as failed and formed a prima facie opinion that it would be just and equitable and in the public interest that the Company should be wound up under Section 20(1) of the SICA. Accordingly, winding up notice was issued, fixing the date of mandatory hearing as 22.8.2006 for hearing objections/suggestions to the winding up notice. Later the date of hearing was changed from 22.8.2006 to 30.8.2006. On 30.8.2006, after hearing the Company and the secured creditors, the Board opined that the Company should be wound up. Accordingly, the opinion has been referred to this Court under Section 20(1) of the above Act and the reference has been numbered as the captioned Company Petition. On 01.11.2006, this Court has issued CP 30/06 -4- notice to the 1st respondent Company and to the Canara Bank, Bangalore Branch.
3. The Managing Director of the Company, one Sri. R.Hari, had filed objection dated 8.5.2007. The Managing Director of R-1 submitted before this Court that he had approached Government of Kerala to revive the Company and accordingly One Time Settlement (OTS) was arrived at with the creditors to the Company, and that before the OTS, the liability of the Company was Rs.1737 lakhs, whereas if the OTS is worked out, the total liability will be only Rs.375 lakhs. It was also pointed out that the estimated assets of the Company is Rs.235 lakhs only. The 1st respondent has produced Annexure-R1(e) minutes dated 26.8.2006 of the meeting chaired by the Principal Secretary (Industries & Commerce), Government of Kerala to fortify the above claim. As per Annexure R1-(e) minutes, the Canara Bank, KSIDC and KFC (Kerala Financial Corporation) have agreed that their secured loans to be settled by way of OTS for the principal outstanding, and the Canara Bank agreed to settle the unsecured working portion of that Bank at 50% of the principal amount. The Kerala State Electricity Board (KSEB) also had agreed to settle their dues to the actual power consumed and the decision on settlement of the sales tax arrears was deferred. As per Annexure-R1(g) dated 9.1.2007, the KFC stated that CP 30/06 -5- it could forego interest amounting to Rs.474.27 lakhs and reduce the liability to Rs.66.82 lakhs (principal amount). As per Annexure-R1(i), which is the draft minutes of the meeting chaired by Deputy Labour Commissioner produced by the 1st respondent, the disputes between the management and workers were agreed to be settled. The 1st respondent further stated in the objection that the dues to 4th respondent, IDBI (Industrial Development Bank of India), were also included with the dues towards the 5th respondent, KSIDC. So the 1st respondent prayed before this Court to permit it to submit a revival proposal of the company on the basis of the decision arrived at with the State Government level and to reject the recommendation of the BIFR.
4. Thereafter, the 1st respondent filed Company Application No.328/2007 dated 8.5.2007, seeking a direction to the KSEB to reconnect the electricity connection of the Company. According to the 1st respondent, the KSEB has demanded Rs.1,57,00,764/- as dues as on 28.02.2007 from the Company as per Annexure-R1(c) letter dated 17.04.2007 produced along with CA No.328/2007, which is said to be against the spirit of the decision of the meeting held on 26.8.2006. However, the KSEB had not attended the meeting held on 26.8.2006, as can be seen from the minutes. The 8th respondent - KSEB filed objection CP 30/06 -6- dated 17.11.2007 to the prayer in Company Application No.328 of 2007 stating that the KSEB had agreed to waive the minimum due charges amounting to Rs.35,33,116/- (from April, 2002 to February, 2006) on the condition that the Company shall clear the arrears of Rs.1,02,76,993/- and shall also open the unit on or before 31.03.2006. Since the Company had not complied with the said condition, the KSEB sought for dismissal of Company Application No.328/2007. The 1st respondent filed reply affidavit dated 20.11.2007 in Company application No.328/2007 stating that the minutes dated 26.8.2006 is binding on it for the reason that the Secretary of the Government has chaired the meeting. It was also pointed out that inspite of the issuance of the request of the KSIDC, the KSEB has not yet given the concession. The 1st respondent further submitted that the offer given by the KSEB is not a workable one for the reason that the unit can be started only when the power supply is restored and for restoration of the power supply, the KSEB is insisting for the functioning of the Unit. An additional reply affidavit dated 25.11.2007 was also filed by the 1st respondent in Company Application No.328 of 2007, stating that similarly situated other private companies were allowed to be revived, whereas the present Company has not been granted similar benefits by the KSEB and thus hostile discrimination has been alleged. Additional CP 30/06 -7- counter affidavit dated 15.7.2008 has been filed by the KSEB in Company Application No.328/2007, as per which the KSEB has pointed out that the supply to the company was disconnected on 17.10.2005 and dismantled on 22.09.2006 for non-payment of arrears of current charges. According to the KSEB, the total amount due to the KSEB was Rs.1,70,32,008/- as on 31.01.2008. It was also pointed out that the KSEB can waive the maximum demand charges for the period from April, 2002 to February, 2006 and offered to reduce the interest rate to 12% instead of 24%. Accordingly, the KSEB submitted that the same is the maximum benefit which they could extend to the Company. Even in the affidavit dated 12.8.2008 filed by the KSEB as directed by this Court, the said party has reiterated their earlier stand.
5. Thereafter, the 1st respondent had filed Company Application No.714/2007 dated 17.10.2007 seeking stay of Annexure A1 sale proclamation notice dated 05.09.2007 issued by Employees' Provident Fund Organisation (EPFO). As per order dated 25.10.2007, this Court had granted interim order staying Annexure-A1 sale for a period of six weeks. As per order dated 28.3.2008, this Court had revived and extended the stay until further orders.
6. The 1st respondent then filed Company Application CP 30/06 -8- No.840/2007 before this Court seeking an order to permit the applicant to revive the company on the basis of Annexure R1(n) scheme and also seeking an order to stay the commencement or the continuation of suits or other proceedings against the Company. In the affidavit which accompanied the said company application (CA 840/2007), the 1st respondent had averred that he was having experience in the business activities for 42 years and had performed government contracts for 15 years, and that as per the decision in the Board Meeting of the Company held on 29.7.2005, the aforesaid Sri.Hari was appointed as the Managing Director and accordingly a new Board was constituted. Annexure R1(b) is the intimation given to the ROC regarding the aforesaid appointment of Sri.Hari as the Managing Director of the Company. It is on this basis that the 1st respondent had sought permission for revival of the Company as per Annexure R1(n) revival scheme. Thereafter, the 1st respondent had filed CA No.369/2014 in CA No.840/2007 in the above company petition. The 1st respondent stated that the name of the Company has been changed to "M/s.Jwala Containers Ltd.". Thereafter the 1st respondent had produced Annexure R1(aa) file noting to show that the Government is considering the case of the company for providing Sales Tax exemption. Accordingly, the 1st respondent prayed for a stay of Annexure R1(z) demand notice CP 30/06 -9- dated 19.6.2014 issued by the Deputy Tahsildar, Thiruvananthapuram for and on behalf of the KSIDC. The KSIDC filed statement dated 21.11.2014 in the above company application. The KSIDC has submitted that an amount of Rs.10,91,15,536/- together with interest is due from the company and also had asserted the finding of the BIFR against the Company. In compliance with this Court's order, State Government filed statement dated 6.3.2017 in CA No.369/2014 in CA 840/2007 in the above CP, stating that the KSIDC had initially provided the share capital assistance of Rs.13.67 lakhs during 1985 to the Company and that KSIDC had sanctioned financial assistance totalling to Rs.102.53 lakhs during 1985-1997. Thus the promoter-directors of the Company viz. Sri.A John Maris (then Managing Director) Sri.Martin Joseph, Sri.C.Johnson, Smt.Florence Crispin, Sri.ASK Newtron, Sri.MLV Arasu, Sri.Marikani, Sri.P.R.Premkumar and Sri.AST Miltan had executed personal guarantees in favour of KSIDC for the above loans. According to the KSIDC, the original promoters informed KSIDC about the appointment of Sri.Hari as the Managing Director of the Company, in the year 2003 and the name of the company was changed without the approval of KSIDC. It was also pointed out that the OTS facility provided by the KSIDC has not the availed by the Company and accordingly all the OTSs were cancelled. It CP 30/06 -10- has also been pointed out that as on 01.11.2016 the total outstanding amount is Rs.20,18,05,692/- and the KSIDC had initiated revenue recovery proceedings against all the nine guarantors of the Company and had sent revised requisition in the year 2013. As per order dated 30.10.2014, this Court passed an interim order staying the revenue recovery proceedings and the said order was extended as per orders dated 26.11.2014, 04.12.2014 and 11.12.2014. Thereafter, as per order dated 18.12.2014 this Court had vacated the aforesaid interim order.
7. Company Application No.21/2009 has been filed by the 1st respondent in CA No.840/2007 in the above CP. The prayers therein are as follows:
"(i) To permit the applicant company to revive the Company and to start production on the basis of the revival scheme submitted by the applicant-Company.
(ii) To allow the applicant-company to pay the entire amount agreed as one time settlement within one year, from the date of reconnection of electricity to the Financial Institutions viz. Canara Bank, KFC and KSIDC.
(iii) To direct the Assistant Commissioner of Commercial Taxes, Trivandrum to withdraw the Revenue Recovery Proceedings initiated against the applicant-Company on obtaining necessary security bond from the Applicant-Company as admitted in his letter dated 6.1.2009.
(iv) To direct the Registrar of Companies, Ernakulam to accept 25% of the amount due towards fees in connection with the increasing of authorised Capital as agreed before the BIFR as per letter dated 25.7.2000.
CP 30/06 -11-
(v)To direct the 7th respondent to defer further action to realise the amount due towards Provident Fund for a period of one year from the date of reconnection of electricity."
8. In the affidavit of the 1st respondent dated 10.01.2009, that accompanied the above CA No.21/2009, it is averred that a meeting was conducted to resolve the disputes between the large scale power consumers and KSEB. In that regard, the 1st respondent had placed Annexure-A1 minutes and that as agreed in Annexure-A1 minutes, the 1st respondent will deposit the agreed Rs.21 lakhs as and when the same is demanded by the KSEB. As per order dated 20.01.2009, this Court directed the 1st respondent (petitioner in CA No.21/2008) to deposit an amount of Rs.21,42,000/- on or before 31.01.2009 with KSEB pursuant to Annexure-A1 without waiting for any further demand being made. Since the 1st respondent did not deposit the abovesaid amount, this Court passed order dated 03.02.2009 dismissing CA No.21/2009 filed in CA No.840/2007.
9. As per CA No.501/2014 in CA No.840/2007 dated 04.12.2014, one Sri.J.S.Jayakumar a former employee of the Company and an associate of Hindustany Cylinder Company Employees' Association (INTUC) has sought impleadment in CA No.840/2007 in the above CP. In his affidavit which accompanied in the said application, he expressed CP 30/06 -12- his support to the efforts taken by the Managing Director of the 1st respondent to revive the company.
10. Later, Sri.Premkumar, former shareholder of the Company filed CA No.273/2017 in the above CP seeking to implead himself as additional 14th respondent in the CP. It is brought to the notice of this Court that Sri.R.Hari, the Managing Director of the Company, had died during the pendency of this proceedings. In the affidavit filed by Sri.Premkumar in CA No.273/2017, it is alleged that the abovesaid Sri.Hari, who was the Managing Director of the Company till his death, had made several manipulations and fraudulently transferred the shares, which were in the name of Sri.Premkumar, to the credit of Sri.Hari and wife and two daughters of late Sri.Hari. Sri.Premkumar has also averred that since the Company Petition is being delayed, the creditors are proceeded against his personal properties for the reason that he stood as a guarantor for the loan availed by the company. This Court had disposed of the said company application accepting the objection of the KSIDC that the petitioner is not a necessary party. However, this Court had permitted the said applicant to participate as an intervenor if he so desires, and had also granted liberty to file an application at a later stage, if his impleadment is found to be necessary etc. CP 30/06 -13-
11. After the death of Sri.Hari, the aforesaid Managing Director of the Company, no other revival scheme is proposed in this case and no other person has shown any active interest for the revival of the company, as can be seen from the materials on record.
12. Heard.
13. As pointed out hereinbefore, the BIFR had given its opinion for winding up of the Company and had accordingly forwarded its recommendations to this Court under Section 20(1) of the SICA. As per Section 20(2) thereof this Court shall, on the basis of the opinion of the BIFR, order winding up of the company. Section 20(2) of the SICA provides as follows:-
"20(2) The High Court shall, on the basis of the opinion of the Board, order winding up of the sick industrial company and may proceed and cause to proceed with the winding up of the sick industrial company in accordance with the provisions of the Companies Act, 1956 (1 of 1956)."
14. It is also relevant to note that the SICA has now been repealed as per the Sick Industrial Companies (Special Provisions) Repeal Act, 2003. Section 1(2) of the Sick Industrial Companies (Special Provisions) Repeal Act, 2003 (Act 1 of 2004) provides that the said Act shall come into force on such date as the Central Government may, by notification in the Official Gazette, appoint.
CP 30/06 -14-
15. Section 5 of the said Act 1 of 2004 dealing with savings, provides as follows:-
"5. Saving.--(1) The repeal by this Act of the repealed enactment shall not--
(a) affect any other enactment in which the repealed enactment has been applied, incorporated or referred to;
(b) affect the previous operation of the repealed enactment or anything duly done or suffered thereunder;
(c) xxx xxx xxx
(d) affect any order made by the Board for sanction of
the schemes;
(e) xxx xxx xxx
(f) xxx xxx xxx
(g) xxx xxx xxx
(h) xxx xxx xxx"
16. Section 6(b) of the General Clauses Act, 1897 stipulates that where the said Act, or any Central Act or Regulation made after the commencement of the aforesaid Act, repeals any enactment hitherto made or hereafter to be made, then, unless a different intention appears, the repeal shall not, affect the previous operation of any enactment so repealed or anything duly done or suffered thereunder. As mandated in Section 1(2) of the Sick Industrial Companies (Special Provisions) Repeal Act, 2003 (Act 1 of 2004), the Central Government as per notification dated 25.11.2016 has appointed the 1st day of December, 2016 as the date on which the provisions of the aforesaid Act (Act 1 of 2004) have come CP 30/06 -15- into force. So the Sick Industrial Companies (Special Provisions) Act, 1985 (SICA) has now been repealed with effect from 01.12.2016. It is also relevant to note that the Companies Act, 1956 which confers power to this Court to order winding up of the Company, has been repealed as per Section 465 of the Companies Act, 2013. However, the proviso to Section 465 of the Companies Act, 2013 has mandated that until a date is notified by the Central Government under sub-Section (1) of Section 434 for transfer of all matters, proceedings or cases to the Tribunal, the provisions of the Companies Act, 1956 (1 of 1956) in regard to the jurisdiction, powers, authority and functions of the Board of Company Law Administration and court shall continue to apply as if the Companies Act, 1956 has not been repealed. In exercise of the powers conferred under sub-Sections (1) and (2) of Section 434 of the Companies Act, 2013, read with sub-Section (1) of Section 239 of the Insolvency and Bankruptcy Code 2016, the Central Government has notified Companies (Transfer of Pending Proceedings) Rules, 2016. As per Rule 5(2) of the Companies (Transfer of Pending Proceedings) Rules, 2016, all cases where opinion has been forwarded by the BIFR, for winding up of a company to a High Court and where no appeal is pending, the proceedings for winding up initiated under the Act, pursuant to Section 20 of the SICA shall continue CP 30/06 -16- to be dealt with by such High Court in accordance with the provisions of the Companies Act, 1956. Rule 5(2) of the above said Companies (Transfer of Pending Proceedings) Rules, 2016 provides as follows:-
"5 Transfer of pending proceedings of Winding up on the ground of inability to pay debts.
(1) All petitions relating to winding up under clause
(e) of Section 433 of the Act on the ground of inability to pay its debts pending before a High Court, and where the petition has not been served on the respondent as required under Rule 26 of the Companies (Court) Rules, 1959 shall be transferred to the Bench of the Tribunal established under sub-section (4) of Section 419 of the Act, exercising territorial jurisdiction and such petitions shall be treated as applications under Sections 7, 8 or 9 of the Code, as the case may be, and dealt with in accordance with Part II of the Code:
Provided that the petitioner shall submit all information, other than information forming part of the records transferred in accordance with Rule 7, required for admission of the petition under Sections 7, 8 or 9 of the Code, as the case may be, including details of the proposed insolvency professional to the Tribunal within sixty days from date of this notification, failing which the petition shall abate.
(2) All cases where opinion has been forwarded by Board for Industrial and Financial Reconstruction, for winding up of a company to a High Court and where no appeal is pending, the proceedings for winding up initiated under the Act, pursuant to Section 20 of the Sick Industrial Companies (Special Provisions) Act, 1985 shall continue to be dealt with by such High Court in accordance with the provisions of the Act."
A reading of Rule 5(2) would make it clear that the Act referred to in the Rules, is the Companies Act, 1956.
17. Later, Government of India, Ministry of Corporate Affairs has issued an amendment to the above said Rules as per notification dated CP 30/06 -17- 29.6.2017 in GSR 732 (E) and Rule 3 of the said amended Rules, which reads as follows:-
"3. In the principal rules, for rule 5, the following rule shall be substituted and shall be deemed to have been substituted with effect from the 16th day of June, 2017, namely:-
"5. Transfer of pending proceedings of Winding up on the ground of inability to pay debts.-- (1) All petitions relating to winding up of a company under clause (e) of section 433 of the Act on the ground of inability to pay its debts pending before a High Court, and, where the petition has not been served on the respondent under rule 26 of the Companies (Court) Rules, 1959 shall be transferred to the Bench of the Tribunal established under sub-section (4) of section 419 of the Companies Act, 2013 exercising territorial jurisdiction to be dealt with in accordance with Part II of the Code:
Provided that the petitioner shall submit all information, other than information forming part of the records transferred in accordance with rule 7, required for admission of the petition under sections 7, 8 or 9 of the Code, as the case may be, including details of the proposed insolvency professional to the Tribunal upto 15th day of July, 2017, failing which the petition shall stand abated:
Provided further that any party or parties to the petitions shall, after the 15th day of July, 2017, be eligible to file fresh applications under sections 7 or 8 or 9 of the Code, as the case may be, in accordance with the provisions of the Code:
Provided also that where a petition relating to winding up of a company is not transferred to the Tribunal under this rule and remains in the High Court and where there is another petition under clause (e) of section 433 of the Act for winding up against the same company pending as on 15th December, 2016, such other petition shall not be transferred to the Tribunal, even if the petition has not been served on the respondent.""
18. Aharon Barak, eminent jurist and former President of the Supreme Court of Israel, in his illuminating treatise on, "Purposive Interpretation In Law" has opined regarding correcting mistakes in the CP 30/06 -18- language in the text and correcting mistakes in statutes, as follows: (see pages 77-78 thereof) '4.CORRECTING MISTAKES IN THE LANGUAGE OF A TEXT Is a Judge Authorized to Correct Mistakes in a Text?
The author of a text is generally "authorized" to correct a mistake in it. The legislature may correct a mistake in a statute; the parties to a contract may correct a mistake in the formation of a contract; testators may correct their wills. May judges, however, correct mistakes in texts they did not write, like statutes, contracts, or wills? (64)* Answering in the affirmative is uncontroversial as long as judges are permitted to make the correction within the framework of the text's language, without having to add to it or subtract from it. Such activity is just ordinary interpretation, in which judges consider the correct reality surrounding the text, rather than the mistaken one. Of course, a given legal system may not allow judges to treat the text as mistaken. That question is an internal one, and each legal system has its own answer.
What happens, however, when judges must change the text in order to fix the mistake? May judges make the changes? Take an example from French law: A statutory provision states that "It is forbidden to embark or disembark while the train is not in motion." (65)* Must interpreters determine the legal meaning of the text according to its semantic meaning, or may they change the language of the statute by eliminating the word, "not"? Take a second example: A state of the United States bars the use of weapons on a public highway, "except for the purpose of killing some noxious or dangerous animal or an officer in pursuit of his duty." (66)* Should a judge determine that the use of weapons in public highways is permitted for the purpose of killing an officer in pursuit of his duty, or may the court correct the mistake and decide that the word "by" comes after the word "or"?
These may be extreme examples, but the issue arises in moderate cases, too. The question is whether a judge may correct the language of a text. We might say that judicial alteration of a text that someone else created infringes on the autonomy of private actors (in the case of a contract or will) and on separation of powers (in the case of a constitution or statute). Lord Esher, M.R., had this to say about correcting a mistake in a statute: "If the words of an Act are clear, you must follow them, even though they lead to a manifest absurdity. The Court has nothing to do with the question whether the legislator has committed an absurdity." [R. v. Judge of City of London Court [1892] 1 Q.B.273, 290].
Esher's approach is harsh. Take a will in which the testator by mistake wrote Simon's name instead of Richard's. Correcting the mistake allows the judge to realize the testator's intent. The same is true of a mistake in a contract. Its correction realizes the parties' joint intent. Similar explanations would seem to apply to a mistake in a statute. The CP 30/06 -19- mistake frustrates the legislature's intent or the statute's purpose. Why should the judge not have the power to correct the statute and realize the legislative intent or statutory purpose? Correcting the mistake would not interfere with reasonable expectations, because most people who read the text realize that it contains a mistake. In any case, the damage done to reasonable expectations, if any exist, from correcting the mistake is no greater than the damage to reasonable expectations wreaked by any act of interpretation. With that in mind, we discuss correcting mistakes.
Correcting Mistakes in Statutes The English legal tradition authorizes a judge to correct blatant errors in a text that has been enacted. The legislature is presumed to have wanted judges to correct blatant errors in statutes, particularly in order to realize its intent.(68)* As Lord Reid said:
Cases where it has properly been held that a word can be struck out of a deed or statute and another substituted can as far as I am aware be grouped under three heads: where without such substitution the provision is unintelligible or absurd or totally unreasonable; where it is unworkable; and where it is totally irreconcilable with the pain intention shewn by the rest of the deed or statute [Federal Steam Navigation Co. Ltd. v. Department of Trade and Industry [1974] 2 All E.R. 97, 100. See also Western Bank Ltd. v. Schindler [1977] ch.1, 18.] American law adopts a similar approach (70)*.
(64)* F.A.R. Bennion, Statute Law 14 (2d ed. 1983). (65)* P.A. Cote uses this example, among others, in The Interpretation of Legislation in Canada 326 (2d ed. 1991).
(66)* Dickerson cites this example, supra p.3, note 3 at 231, n. 43. (68)* See Bennion, supra p.6, note 13 at 676, claiming that a judge may give a text "a rectifying construction." Bennion includes the following categories in that phrase: "(1) the garbled text (which is grammatically incomplete or otherwise corrupt); (2) the text containing an error of meaning, (3) the text containing a casus omissus; (4) the text containing a casus male inclusus, and (5) the case where there is textual conflict." See also Cross, supra p.3, note 3 at 36; A. Samuels, "Errors in Bills and Acts," [1982] Statute L. Rev. 94.
(70)* A Sutherland, Statutes and Statutory Construction 284 (N.Singer ed., 5th ed. 1992)."
19. On a comparison of the original Rule 5 contained in sub- Rules (1) and (2) thereof as notified in GSR 1119(E) dated 7.12.2016 with the provisions contained in the amended provisions as per notification dated 29.6.2017 in GSR 732(E), it appears that what has been sought to be amended is only sub-Rule (1) of Rule 5. Therefore, on and with effect CP 30/06 -20- from the commencement of the amended Rules, Rule 5(1) will stand modified and substituted in the manner shown in the amended Rules. Though the amended Rule says that the entire Rule 5 will stand amended in the manner shown in the amended Rules, a perusal of the amended Rule 5 would make it clear that still Rule 5(1) has been referred to therein and Rule 5(2) has not been mentioned therein. It cannot be the intention of the rule making authority that Rule 5(2) of the original text has been completely taken away and deleted from the statute book. The intention of the rule making authority is only that Rule 5(1) will stand amended in the manner shown in the amended Rules and that Rule 5(2) will continue to be in the manner already promulgated in the original text of the Rules. Any other interpretation would lead to unnecessary confusions and anomalies. If the contrary interpretation is accepted, then even going by the text of the amended Rules, it would look quite anomalous and awkward inasmuch as even now Rule 5(1) has been retained and there is no mention whatsoever about Rule 5(2). If sub-Rule (2) had to be totally deleted from the text of the Rule, then, there is absolutely no necessity to mention about Rule 5(1) and it would have mentioned only about a composite Rule 5, without any sub rule thereof. Therefore, obviously the above said aspect is an anomaly in the drafting of the above said amended CP 30/06 -21- Rules. The matter could be examined from another important aspect that if, as a matter of fact, it is taken that the rule making authority has intended to delete altogether the text of Rule 5(2), then in such a situation, there is no provision for continuance of the pending proceedings before the High Court consequent to the BIFR recommendations, and it would go against the mandate of the plenary provision of law made in the Sick Industrial Companies (Special Provisions) Repeal Act, 2003 (Act 1 of 2004) whereby Section 5 thereof expressly says not only the previous operation of the repealed enactment but also anything duly done or suffered thereunder. It also goes against the aforementioned provisions of Section 465 of the Companies Act, 2013. Moreover, such an interpretation would also go against the spirit and substance of the provisions contained in clauses (b) and (c) of Section 6 of the General Clauses Act, 1897. Therefore, the only reasonable and purposive way to resolve the aforesaid situation is to hold that the above said amended provision of the Rules has only the effect of amending Rule 5(1) and that Rule 5(2) will continue as notified in the original text of the Rules. Since that is the position, this Court has jurisdiction to continue with adjudication of all pending matters in respect of references made by the BIFR for winding up of sick companies.
CP 30/06 -22-
20. After going through the materials on record, this Court is convinced that no viable option is there for the revival of the Company. All efforts taken by the Company have been turned to be failure. The Managing Director of the Company, Sri.R.Hari, who was interested for the revival of the Company, is also now no more. No other effective schemes are before this Court. The matter has been pending before this Court for quite a long time. Therefore, this Court is of the considered opinion that there is no other option for this Court but to order winding up of the Company. Accordingly, it is ordered that the above said Company be wound up in terms of the provisions contained in Section 20(2) of the SICA read with the enabling powers conferred on this Court in terms of the provisions contained in the Companies Act, 1956.
21. The Official Liquidator is appointed as the Liquidator for the winding up of the Company and the Official Liquidator shall take over all the assets and records of the company under liquidation, forthwith. The Canara Bank is directed to pay an amount of Rs.20,000/- as initial expenses to the Official Liquidator within a period of three weeks from the date of receipt of a copy of this judgment. Since the Canara Bank was the monitoring agency appointed by the BIFR, it is also ordered that the Canara Bank will ensure that the winding up order is published in one CP 30/06 -23- issue of all Kerala editions of Kerala Kaumudi Malayalam Daily as well as in one issue of all Kerala editions and Madurai edition of the New Indian Express English Daily. The winding up order shall be drawn in Form No.52 of the Companies (Court) Rules 1959. Registry shall forward certified copies of this judgment as well as Form No.52 winding up order to the Registrar of Companies (Kerala) as well as to the Official Liquidator attached to this Court.
22. This Court would place on record its deepest appreciation for the able assistance rendered to this Court by Sri.Suvin R.Menon, learned Central Government Counsel.
With these observations and directions, the aforecaptioned Company Petition stands finally disposed of.
CA Nos.714 of 2007, 840 of 2007, 369 of 2014 in CA No.840/07 & 501 of 2014 in CA No.840/07 In the light of the judgment rendered by this Court today in CP No.30/2006, all these Company Applications will stand closed.
ALEXANDER THOMAS, JUDGE jg/sdk+