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It is also admitted that in December, 1999 a Technical Expert K.S.A. Technopak was appointed as consultant to carry out techno-economic viability study of the Company at the instance of some of the lenders, including the objectors. Thereafter, in January, 2000 the Company appointed M/s. Jardine Fleming P. Ltd., a firm of financial consultants to devise the package for revival of the Company. After receipt of the report of the said Consultants in March, 2000, two meetings of the lenders of the Company were held and a Core Group of the major lenders by the name "Steering Committee" ("S.C." for short) was formed to examine reports of the experts of majority lenders, including the objectors. The S.C. which met five times all the representatives of the objectors attended these meetings but refused to be the part of the S.C. as members thereof. Request of the objectors for better terms as it is revealed from Pages 5, 6 and 49 of Document File, Part-I was refused by the S.C. The objectors raised allegation of illegality of sale and lease-back transaction, spin-off garment division and diversion of funds. The objections raised by the objectors did not find favour with the S.C. which consisted of foreign currency lenders also, and the S.C. approved terms of Restructuring.

28. One more objection under the head of Cloak to cover up and legitimise fraud is the Spin-Off of the Garment Division by the Company. It is submitted on behalf of the objectors that between the year 1997-98, 1998-99 and 1999-2000 the Company diverted upto Rs. 395/- Crores to its subsidiaries as loans and investments which in fact amounts to spinning-off of the cash available with the Company. The garment business spin-off is reflected from Para 1 of Exhibit 'C-I' which is at page-327. Perusal of the same suggests the details of Sale of Garment Division by the Company for Rs. 361/- Crores to Arvind Brands Limited (A.B.L.). It further suggests that the Company owns the brands New port, Flying Machine, Ruggers, Excalibur and Ruf-N-Tuf; that the Company under the loan agreement was prohibited, without prior written consent of the agent (Objector No. 2) acting on instructions of the majority of Syndicate other than in the ordinary course of business and for full market consideration, from selling, transferring, lending, surrendering or otherwise disposing of its material undertakings or any of its material assets and despite being such prohibition the petitioner sold the Garment Division to A.B.L. Exhibit 'C-2' at page-332 is in respect of Information Memorandum for Creditors by M/s. Jardine Fleming relating to garment business spin-off. It is suggested therefrom that the garment business spin-off involved three entities, A.M.L's. garment division, Arvind Clothing Limited (A.C.L.) and Arvind Fashions Limited (A.F.L.). The performance of the A.M.L. garment division, A.C.L. and A.F.L. have been detailed on page-333 to 335. It is suggested from the transaction details that the existing Shell Company Evergreen Growfine Pvt. Limited was renamed as Arvind Brand Limited (A.B.L.), which has been taken over by the garment division of A.M.L. and held 100% stake each in A.C.L. and A.F.L. and the A.M.L. engaged the services of Arthur Andersen to assist it in valuation, identifying investors and negotiating the transaction. The transaction structure involving both selling A.M.L.'s garment business to A.B.L. and selling A.B.L's 40% equity to the potential investors. The A.M.L. had two offers, one from an international private equity fund and the other from I.C.I.C.I.I.C.I.C.I's. valuation and terms were superior to the former and the A.M.L. decided to favour the I.C.I.C.I. It has been stated at page-338 which deals with 'Cash Flows from Spin-off that due preference has been shown to I.C.I.C.I. inasmuch as the I.C.LC.I's, debt of Rs. 519 million has been paid off from extra valuation available from I.C.I.C.I.'s offer and the additional benefit to the Company is reduction in debt and consequent interest burden thereon. That during year 1998-99 and 1999-2000 sale and lease-back of fixed assets was done with I.C.I.C.I. for Rs. 491 million of book value of the assets and the purpose could be to pay for project cost. In December, 1998, A.M.L. sold 35% of two of its branded garments unlisted subsidiaries, namely Arvind Clothing Ltd. (Arrow brand of apparels) and Arvind Fashions Ltd. (LEE brand of apparels) to I.C.I.C.I. at an aggregate consideration of Rs. 410 million. That, A.M.L. had a buy-back obligation for these shares at an interest-driven price. That the proceeds helped the Company to beef up its liquidity position to keep servicing debt obligations and continue operations. That remaining 65% holding in each of the subsidiaries to Asman Investments Ltd. (A.I.L.), a wholly owned subsidiary, as part of consolidating all investments in one balance sheet and the A.I.L. pledged 65% holding to I.C.I.C.I. as security for A.M.L's buyback obligation.

30. Exhibit 'D' at page 343 is the letter dated 10th March, 2000 of the petitioner Company to The Bank of Nova Scotia Asia Ltd., Singapore and to Deutsche Bank A.G., Hong Kong (both the objectors). It is suggested therefrom that the meeting of the offshore lenders was convened on 3-3-2000 and some of the lenders present requested for information on certain matter and the information provided related to Assets Cover Ratio. The position of asset cover ratio as on 31-3-1998, 31-3-1999 and 31-12-1999 was attached with the said letter. That the information was also supplied of Directors' Resolutions on Sale and Lease-back thereof. The information provided contain relating to sale of fixed assets and lease-back related to period 24-9-1998 for the first sale & leaseback of September, 1998, 16-3-1999 and 25-3-1999 and both the above transactions were noted by the Board of Directors on 29-5-1999 and 14-9-1999. That the information was also supplied as regards assets, sale and lease-back with the list of plant and machineries in respect of which sale and lease-back transactions were executed with I.C.I.C.I. group also attached with the said letter. The information was also supplied as regards Regulatory Returns on end-use which include details of returns filed with Reserve Bank of India in Form ECB 2, including inter alia the end-use of the USD 75 million syndicated loan also attached, further stating that the end-use amount stated in the returns filed with Reserve Bank of India have been audited by the statutory auditor of the Company. That the details were also furnished as regards two offers of garment spin-off, further stating that the comparative salient features of the two alternative garment spin-off transactions are provided in Annexure-D and the terms offered by I.C.I.C.I. Ltd., were superior in terms of valuation, milder covenants and turnkey financing package. The details were also furnished as regards Security provided on lease transactions with I.C.I.C.I. group. Said letter also states that no security was provided for lease transaction in September 1998. The transaction of March, 1999 and December, 1999 were secured by (1) the Company and its subsidiaries were to pledge certain equity shares they held in erstwhile Arvind Polycot, Arvind Intex and Arvind Cotspin. These companies have now been merged into Arvind Products. Post-merger the holding is 70%, of which 54% has been pledged; (2) the promoters of Arvind Mills were to pledge 5% of their equity holding in Arvind Mills immediately and other 10% as and when released from their current encumbrances and the mill Company was to create charge on certain unencumbered commercial real estate and movable assets of the value of approx. Rs. 376 million.

As observed earlier, a Sub-Committee has scrutinised the books of accounts of the Company and transactions were checked and nothing was found objectionable in any of the transactions entered into by the Company and the Sub-Committee approved the Financial Projections. It is pertinent to note that the objectors though requested to join the Sub-Committee to scrutinise the books of accounts of the Company, have declined to join the Sub-Committee. Document File Part-II (page-271), Appendix II and information memorandum of Document File Part-Ill (page-875) suggests the inventory, advances, other loans and advances, current assets, investments by each of the Company, investment in bonds and investment in other equity shares etc. Perusal of the same suggests that there is no transfer of funds/assets to A.I.L., and that, the Company transferred amount of its investments in A.I.L. for a total consideration of Rs. 1,752.3 million in the financial year 1998-99. Most of the investments were in A.I.L. While total exposure of the Company to A.I.L. was Rs. 2,506 million at the end of December 1999. It is suggested from sub-para 4.2 that major investments transferred included Arvind Products Limited, Arvind Clothing Ltd., Arvind Fashions Ltd., Arvind Intex Ltd., Arvind Polycot Ltd., and Arvind Cotspin Ltd. Convertible debentures, loans and receivables, all from Company paying for acquisition. That, Arvind Intex, Arvind Polycot and Arvind Cotspin were subsequently merged into Arvind Products Limited, as pointed out above. That, neither the merger nor sale of investments had any positive or negative impact on the Company, and after above merger Arvind Products Ltd. will become 70% owned by the Company through A.I.L. All these information relating to all the transactions was available with the members attending the meeting, since information memorandum was circulated to all the members which also included information relating to spin-off of garment business as pointed out above. The record does not suggests any details have been asked by any of the secured creditors or for that matter unsecured creditor or working capital lenders relating to the diversion of funds namely spin-off garment business. It is also suggested that there was discussion in August, 1999 with the Syndicate about transaction entered into by the petitioner Company. The Document File Part-II (page-449) Para 43 suggests that there was sufficient knowledge by correspondence to the Syndicate about the transactions relating to sale/the garments spin-off transactions. It is also suggested that there was extensive correspondence relating to the proposed spin-off of Garment division which would bestow knowledge on the Syndicate about the sale of garment business.