Gujarat High Court
O.L. Of A'Bad Mfg. And Calico Printing ... vs I.D.B.I. And 10 Ors. on 17 August, 2005
Author: K.A. Puj
Bench: K.A. Puj
JUDGMENT K.A. Puj, J.
1. The O.L has filed this report seeking permission of this Court to transfer an amount of Rs. 1,32,38,600/- from the sale proceeds of the assets of the Company, to the SCompany Paid Staff Salary Reserve Funds A/c towards reimbursement of security expenses incurred from Company Paid Staff Reserve Funds A/c upto November, 2003 on adhoc basis, being the cost of liquidation. The O.L. has further sought permission to pay the security expenses bills for the month of December, 2003 onwards from the sale proceeds of the assets of the company as cost of liquidation till all the assets of the Company are sold. He has further sought for the permission to encash the FDR's to the extent necessary for the purpose of transferring the amount from the sale proceeds of the assets of the Company to the SCompany Paid Staff Salary Reserve Funds A/c. and for making payment of the security expenses bills for the month of December, 2003 onwards.
2. The O.L. has submitted in his report that Calico Mills and llac, a 100% subsidiary company of Calico Mills were ordered to be put in his charge and he was appointed as Provisional Liquidator vide an order dated 20.4.1998/22.4.1998. Thereafter vide order dated 15.7.1998, the Company was ordered to be wound up and he was appointed as liquidator of the Company. Pursuant to the aforesaid winding up order, the O.L. had taken over possession of the assets and properties of the Company located at Ahmedabad, Baroda and Mumbai and deployed security guards at all the locations to safeguard the assets of the Company. He has filed a compliance report before this Court and since he did not have money in the Company's Account to defray the security expenses of safeguarding the assets of the Company, this Court vide order dated 15.7.1998 directed ICICI to deposit a sum of Rs. 5 lacs with the O.L. provisionally and has further directed to all the Secured Creditors of the company to deposit Rs. 2 lacs every month with him, sharing amongst themselves on pro-rata basis, so as to enable him to meet with the security expenses. He has further submitted that the Secured Creditors deposited with him an aggregate amount of Rs. 22,92,843/- upto 20.9.1999 as against the aggregate security expenses of Rs. 41,30,005/- incurred by him till then. He has further submitted that while OLR No. 89/1999 was pending for disposal, the outstanding security expenses bills were piling up since the secured creditors were not depositing sufficient funds with the O.L. to defray the security expenses. He has filed further report being OLR No. 19/2000, before this Court and this Court has permitted him to pay the security expenses out of the SCompany Paid Staff Salary Reserve Fund Account on ad hoc basis subject to condition that the amount of security expenses paid out of SCPSSRF Account shall be reimbursed by the secured creditors, out of the sale proceeds, when assets of the company were sold. He has further submitted that he has paid the outstanding security expenses bills upto February 2000 and thereafter he has been paying the monthly security expenses bills out of the CPSSRF Account. He has thus paid an aggregate amount of Rs. 1,32,38,600/- towards security expenses upto November, 2003.
3. The O.L. has further submitted in his report that the assets (except land) of the Ahmedabad Unit of Calico Mills situated at Jamalpur, Ahmedabad have been sold by the Sale committee for a consideration of Rs. 24,84,00,000/- and the sale of assets has been confirmed by this Court vide order dated 9.5.2003. He has further submitted that he is having with him sufficient money in the Company's Account and hence he may be permitted to transfer an amount of Rs. 1,32,38,600/- out of the sale proceeds of the assets of the company to the CPSSRF Account, by encasing the FDR to the extent necessary, as reimbursement of security expenses paid on ad hoc basis out of CPSSRF Account and also from now onwards continue to pay the security expenses every month out of the sale proceeds till all the assets of all the units of the Company are sold.
4. This Court has issued notice in OLR on 23.12.2003. Mr. Rajesh P. Mankad appeared and an affidavit in reply was filed by the General Secretary of Calico Fibre Employee's Association respondent No. 8 herein, wherein it is stated that though the O.L. has sought permission to transfer an amount of Rs. 1,32,38,600/- from the sale proceeds of the assets of the Company, to the Company Paid Staff Salary Reserve Funds Account towards reimbursement of security expenses from the said account, no unit vise expenses details were provided. Similarly, no unit vise breakup was provided for unpaid security expenses. It is further stated that even unpaid amount was not shown in the OLR. It is further stated that the O.L. has not disclosed the facts of theft, which was taken place at Vadodara unit and due to which huge loss has caused to the Company in liquidation. It is stated that a theft had taken place at Vadodara unit of Company in liquidation on 15.6.2003 and in this connection police had arrested three security Watchmen and offence CR No. 32 of 2003 has been registered. The said matter was discussed in Sale Committee meeting of 19.7.2003 and it was decided to take reinventory and work out the loses due to theft. It is, therefore, stated in the said affidavit that amount of losses due to theft be first worked out and thereafter order for payment of security charges for Vadodara unit may be passed. The Court therefore passed an order on 19.7.2004 directing the O.L. to place on record as to what happened after the Sale Committee meeting held on 19.7.2003 and what steps were taken pursuant to the decision taken in the said meeting.
5. The O.L. has thereafter filed his further report on 2.8.2004, wherein he has stated that as per decision taken in the Sale Committee meeting held on 19.7.2003, he has assigned the work of carrying out the reinventory of the assets of the Baroda Unit, to Mr. R.R.Shah -Valuer, who had worked out the inventory at the time of taking over the possession in the year 1998. He has further stated that he also wrote a letter to all the secured creditors on 17.7.2003 requesting them to intimate whether any insurance was taken for the Plant & Machineries of the Baroda Unit of the Company in respect of which theft was committed, to charge and also to furnish the details of Insurance Policies so as to enable the Sale Committee to lodge claim with the Insurance Company. He has further stated that vide his letter dated 21.7.2003 he sent a copy of the original inventory of the assets of the Baroda Unit to the Jawaharnagar Police Station, whereat offence under Sections 457, 380 and 120B of IPC was registered, so as to enable the police to conduct further investigation in the matter, and also directed the security agency to provide all necessary assistant, help and information / details to the police as may be required by the Jawaharnagar Police Station, for further investigation of the offence. He has further stated that on receipt of the reinventory report of the assets of Baroda Unit of the Company from Shri R.R.Shah valuer, he vide his letter dated 20.10.2003 furnished a copy of reinventory report to the police to proceed further in the investigation exercise. Based on this report of the O.L., the Court has passed an order on 2.8.2004 directing the O.L. to inquire about the progress in the complaint pending before the Criminal Court and has further directed him to ascertain, on the basis of the original inventory report as well as reinventory report as to which items were missing and what was the value of these items and place the details of the report on the record of this Court.
6. The O.L. has filed his further report on 4.1.2005, wherein he has stated that he wrote a letter to the valuer on 13.8.2004 to place on record of his office the comparative statement of articles missing and value thereof. He has also stated that he wrote a letter to the Jawaharnagar Police Station requesting them to forward the progress made with regard to the criminal case No. 152 of 2003. He has further submitted that the valuer vide his letter dated 26.12.2004 has submitted a list of items found missing on comparing the inventory taken in 1999 and reinventory done in 2003. The valuer however, informed that the assets were not valued on the earlier occasion and therefore it was not possible for them to ascertain the value of the assets which were missing. He further stated that he had convened a meeting of the sale committee on 17.7.2003, wherein it was decided to call upon explanation of the security agency posted at the Baroda Unit of the Company and was also called to submit the details with regard to guards posted at the said premises with their full address. The security agency, namely, Industrial Personnel & Security Services had forwarded the details vide its letter dated 23.12.2004 which are attached alongwith the said report. Based on this report, the Court has passed further order on 14.2.2005 directing the O.L. to place the valuation report which shows the value of the items including the missing items which have been estimated by the valuer vide report dated 26.12.2004. The O.L. was also directed to place on record the payments made to the security agency till the date of the said order. The O.L. was also directed not to make payment to the security agency deployed at Baroda Unit without obtaining order from this Court. He was also directed to inform the security agency to depute some authorised person to remain present before this Court on 28.2.2005.
7. Pursuant to the order dated 14.2.2005, Mr. T.V. Singh, the partner of M/s. Industrial Personnel & Security Services was personally present before the Court on 28.2.2005. The Court observed that there were serious allegations against the Security agency with regard to the theft taken place in Baroda Unit of the Mills Company. The O.L. was also directed to file his report before the Court on the next date of hearing. Accordingly he filed his report on 10.3.2005, wherein he has stated that since the assets were not valued in 1999 the value of missing items could not be assessed in absence of missing items being not physically available for inspection. With regard to details about payment made to the security agency, he has submitted that an amount of Rs. 35,05,470 has been paid to the security agency for the period from 25.5.1998 to May, 2003. Due to incidence of theft he has already stopped making payment to the security agency from the month of June, 2003 and no payments have been made since then. He has further submitted that the total outstanding bill for the security agency for the period from June, 2003 to 31.1.2005 works out to Rs. 11,61,000/-. Based on this report, this Court has passed an order on 11.3.2005 recording the submission of Mr. Rajesh P. Mankad, learned advocate appearing for the respondent No.8 Union, that the value of the missing items is more than Rs. 3.39 crores. The Court has also directed the O.L to convene the sale committee meeting immediately and take the decision as to whether the said security agency should be continued or other security agency should be appointed in its place. The Court has further observed that since the value of the missing items is about Rs. 3.39 crores, there is no question of making any payment to the security agency towards its outstanding claim till such issue is resolved.
8. The O.L. has filed his further reported on 18.4.2005, wherein he has stated that pursuant to the direction issued by this Court on 11.3.2005 and 4.4.2005 a meeting of sale committee was held on 7.4.2005 wherein it was suggested that Mr. T.V. Singh - partner of the security agency should give a Bank guarantee of a Nationalised Bank for an appropriate amount so that recoveries can be made from him for loss arising due to thefts at the Unit. Only on furnishing such Bank guarantee, the sale committee may consider to continue the said security agency at Baroda Unit. However, the said suggestion was not acceptable to Mr. T.V. Singh and hence the sale committee has taken a decision to remove the said security agency from the Baroda Unit of the Company with effect from 12.4.2005. He has further stated that the sale committee has decided not to make any payment to the said security agency and it should be removed from all the Companies where-ever the said security agency was deployed by the O.L. It is further stated that the sale committee has also taken a decision not to make any payment to the said security agency in respect of all the Companies / Units where-ever this security agency was deployed by him. It is further stated in the report that in place of the said security agency the sale committee has taken a decision to deploy new security agency from Baroda, namely, M/s. National Security Force. He has further stated that while appointing M/s. National Security Force as the security agency for Baroda Unit, he has informed the members of the sale committee that the owner of the security agency is a Ex-partner of Mr. T.V. Singh and they have certain disputes. He has further informed to the members of the sale committee that M/s. National Security Force has already been given a work of M/s. Jalan Ispat Casting Ltd., and Wind Mills of M/s. Motorol (India) Ltd., company in liquidation. The sale committee has, therefore, taken the decision to deploy M/s. National Security Force at Baroda Unit of the company in liquidation with effect from 12.4.2005 in place of IPSS security agency. He has therefore sought for the ratification of his action in appointing M/s. National Security Force at the Baroda Unit of the Company in liquidation and also of not making any payment to IPSS against its outstanding bill in respect of Baroda Unit of the Company and also to remove the said security agency from all the Companies of the Units where-ever it is deployed by him, and also sought permission to make payment to M/s. National Security Force for payment of security charges at Rs. 58,050/- p.m. From 12.4.2005 onwards.
9. Heard Mr. M.A. Kuvadia the O.L. and learned advocate, namely, Ms.Poonam Mathur for Singhi & Co., for respondent No. 7 ICICI Bank Ltd., Mr. Rajesh P. Mankad, for respondent No. 8, i.e Calico Fibre Employee's Association, Mr. D.S. Vasavada for respondent No. 9 Textile Labour Association and M/s. Trivedi & Gupta for respondent No. 11 ONGC. Despite service of notice, nobody appeared on behalf of respondent Nos.2, 3, 4, 5, 6, 7 and 11. Mr. T.R. Mishra the learned advocate appeared on behalf of the security agency, namely Industrial Personnel & Security Services.
10. From the facts narrated and discussions made above on the basis of the reports and affidavits filed, documents and materials produced and submissions made by the learned advocates appearing on behalf of the respective parties, the Court found that though the present report is filed by the O.L. before the Court on 16.12.2003, there is no whisper about the theft that has taken place on or around 15.6.2003 in the premises of the Baroda Unit of the Company in liquidation. Not only this, the said fact has not been disclosed before the Court and the Court was not made aware about it till the affidavit in reply was filed on behalf of the respondent No. 8 Union on 21.6.2004. Despite the fact that three security guards were involved and arrested by the Police, the security agency, namely Industrial Personnel & Security Services continued till 12.4.2005. The payment of security charges to this security agency was stated to have been made to the tune of Rs. 35,05,470/- upto May, 2003 and because of the incidence of theft, no payment was made since June, 2003. But for the connivance or collusion of the security agency with the O.L. and/or persons from his office, these things would not have happened.
11. One more startling thing is that looking to the quantum or volume of missing items, theft could not have taken place in a day i.e. On 15.6.2003. It must have been a continuous process and that too, in the presence of security guards. From the reinventory report of the valuer, Shri Rajendra R. Shah dated 26.12.2004, as many as 106 items were not found while comparing with the first inventory report. The value of these missing items as determined by the respondent No. 8 Union comes to Rs. 3,39,04,660/-. The missing items, inter alia, include electric motors, wet Polymer Batch Storage Vessels Caps, Centrifugal Pumps with Motors, Alluminium Polymer Drums, Compressor of chilled water plant, main power distribution system with transformed switch gears, HT and LT Panels etc., Staple Fibre Pack, Transfer Hoppers etc. The valuer has further observed that one SZimmer plant imported, packed and untouched plant / equipment assessories etc., packed in Sea worthy 58 wooden boxes were stored in the ware-house. Out of this, 17 boxes were totally missing, 21 boxes with lot of parts and assessories were missing and 10 boxes with few parts / equipments were missing. The union has put the value of this complete plant at about Rs. 4 crores and 70% items of this plant were missing, value of which comes to about Rs. 2,80,00,000/-. It is practically impossible for any one to take out all these items in a day or two. On the one hand thefts and pilferages were continued on a large and on the other hand, the O.L. went on making payment to the security agency and upto May, 2003. Such payment was made to the tune of Rs. 35,05,470/- for Baroda Unit. In this report, the O.L. is very keen to seek the direction for transfer of Rs. 1,32,38,600/- from the sale proceeds of the assets of the Company to the CPSSRF A/c and to recommend the payment to the security agencies. He, however, has not thought it fit to draw the attention of the Court about theft at the first instance in this report and not suggested any way out for recovery of the lost items. The apathy of the secured creditors has also caused concern to the Court. Many of them neither attended to the sale committee meetings nor filed their appearance before the Court. Because of their indifferent approach and attitude there were no proper checks and balances on the working of the office of the O.L. Assets of the Company must have been pledged, hypothecated or mortgaged with the secured creditors. It is obligatory on their part to protect or safeguard these assets till they are disposed off. It is not enough for them only to contribute towards expenses and to claim their pro-reta share at the time of disbursement of sale proceeds. Had there been an active participation of the secured creditors and workers in preservation and protection of the assets of the Company in liquidation and thereafter in the assets disposal process, many draw backs and short comings either intentional or otherwise, found now-a-days in the various functions of the O.L., could have been avoided.
12. The Court is, therefore, of the view that various issues discussed hereinabove more particularly, deployment of the security agency, involvement of security guards in commission of theft, role of office of the O.L. in deployment of security agency and not taking proper and adequate steps in safeguarding the assets of the Company are required to be closely scrutinised and proper inquiry and investigation is necessitated in the matter. The Court could have ordered to hold separate inquiry. However, the Court has already directed the Central Government to investigate the affairs of the office of the O.L. over the period of last 10 years while passing an order in OLR No. 61 of 2005 on 18.7.2005. These issues can also be looked into while undertaking such inquiry. Hence no separate order of inquiry is made in the present application. A writ of this order shall, therefore, be sent to the same authority forthwith.
13. As for as the prayer made in the present OLR is concerned, since the O.L. has already made the payment of Rs. 1,32,38,600/- to the security agencies out of CPSSRF A/c he is permitted to transfer this amount from the sale proceeds of the Company to the said CPSSRF A/c. However, he is hereby directed to call for the details of deployment of actual security guards right from beginning their names and addresses with period of their services, explanation for theft committed and initiate proceedings for recovery of the amount of loss suffered by the Company in liquidation. As far as outstanding payment of the security agencies is concerned, there is no question of making any payment to those security agencies deployed at any of the three units of the Company in liquidation, during whose tenure theft has been committed and till they offer any explanation in this regard. As far as payment to any new security agency is concerned, the O.L. is directed to collect all requisite details from the said security agency, alongwith an undertaking that if there is any theft or the properties of the Company are not satisfactorily protected, they will loose their right to claim security charges and will also be answerable to any loss that may be suffered by the Company as a result of such theft.
14. With the above directions and observations this OLR is accordingly disposed off.