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14. By affidavit dated 4th December, 2006, HDFC Bank has again raised certain objections and submitted that ARCIL is a part of Class-B lenders to the extent of Rs. 3,676.63 lacs and Niya Finstock Pvt. Ltd. Company for sum of Rs. 10,385.00 lacs and Astramid Technologies Limited for sum of Rs. 5,371.60 lacs. They submit that the said amount cannot be reconciled with the amounts shown in the balance sheet of the petitioner. According to them, ARCIL would be getting much more and would be making very small sacrifice in comparison to those who have not agreed to the Scheme. According to HDFC Bank, it would have to forego 96.2% of its claim, while sacrifice of ARCIL, which is the purchaser of the debts would not be to such an extent. It is reiterated that the explanatory statement circulated by the petitioner was incomplete, vague and was not providing required material. The petitioner filed its affidavit dated 5th December, 2006 in reply to objections raised by the HDFC. They submit that M/s.ICICI, IFCI, IDBI, SBI, SBM and SBT had assigned debt to the extent of Rs. 37,191.00 lacs in favour of ARCIL, Dena Bank assigned debt of Rs. 5,932.57 lacs in favour of M/s. Niya Finstock Pvt. Ltd., and M/s. Indus Ind Bank assigned debt of Rs. 1,289.56 lacs in favour of Astramed Technologies Limited. Their submission is that purchaser of the debt, specially, ARCIL has acquired financial assets from the banks and financial institutions under Section 5 of the SARFAESI Act and it has become lender. It is further submitted that minority was not forced to accept the settlement in order to promote interest of ARCIL. Core had filed yet another affidavit dated 13/14th December, 2006, wherein, they had submitted that Core did not know that for what amount financial institutions had assigned their debt in favour of ARCIL, but the said institutions had informed the petitioner that the debts were assigned. By further affidavit dated 5th January, 2007, it is submitted by them that the Board of Directors of the company at its meeting held on 27th June, 2006 passed a resolution for extending time up to 31st December, 2006 and ARCIL had granted its approval and thereafter Board of Directors of the Company again extended the time up to 31st June, 2007. They have also submitted that IDBI, ICICI, IFCI, SBI, SBM and SBT had assigned their debt of Rs. 82270.64 lacs in favour of ARCIL. On 9th January, 2007, HDFC Bank again filed its affidavit wherein they informed that certain bank guarantees were issued in favour of the petitioner and some of the bank guarantees have already been invoked. According to them, since the bank guarantees invoked were outside the purview of the Scheme and the corresponding assets, i.e. refund is lying with Customs, the resulting company should take over the liability and issue counter indemnity for guarantee in lieu of counter indemnity for guarantee of the petitioner company. They also submit that the appointed date for demerger is mentioned as 1.12.04 and therefore, any transaction subsequent to 1.12.04 would not be covered under the said Scheme of compromise or arrangement. They submit that the bank was required to pay amount of Bank Guarantee to the Customs on or about 15.12.04 and as it was paid beyond the appointed date, money should be refunded back to them.

18. Nobody appeared for Gannon Dunkerly to support their objections, therefore, the same are rejected.

19. HDFC Bank says that creditors of Core have not been properly classified, Core had clubbed secured creditors other than Class 'A' lenders, unsecured creditors and debenture holders in the category of Class 'B' lenders. The said creditors have different interests and are not homogeneous. Class-B lenders include assignees of the debt being ARCIL, Niya Finstock Pvt. Ltd. and Astramed Technologies Ltd. representing Rs. 3,676.63 lacs, Rs. 10,385.00 lacs and Rs. 5,371.60 lacs of value of debts of Class 'B' lenders. Since the debts had been purchased at a fraction of the value by the assignees, the compromise offered under the Scheme to the Class 'B' lenders [3.8% of the outstanding amount as on the cut off date] is effectively and in substance different, for the original lenders would have to sacrifice 96.2% of their claim. According to them, assignees being the majority would ride rough shod over the original lenders-minority representing a distinct interest, despite which they have been clubbed together. Explanatory statement issued by Core does not disclose necessary facts and material in relation to the Scheme as provided under Section 393[1][a] of the Act. It was necessary to disclose relevant material facts inter alia being that ARCIL got assigned to itself substantial debts of Core of various banks/financial institutions and ARCIL took possession of the assets of Core under the SARFAESI Act. According to them, ARCIL having purchased debt at a very low price would be entitled to 18.21% of the total value of the assigned debt and not its value of debts as Class 'A' creditor and 3.8% of the total value of the assigned debt as Class 'B' creditor. The Debt Recovery Tribunal, Ahmedabad, vide its order dated 12.5.05 rendered in O.A. No. 77 of 2005 restrained Core from transferring its assets in any manner. The Scheme, in fact, is for winding up/dissolution of Core since its Rajpur Unit is lying closed and assets are being disposed of. The Scheme envisages reconstruction of Core by reduction of Securities Premium Account, which amounts to reduction of capital under Section 78 of the Act, despite that, a special resolution as contemplated under Section 100 read with Section 189 of the Act has not been passed for the purpose. Repeating their objection regarding bank guarantee, it is submitted that they are entitled to recover the said money and Core or Nirma would not be entitled to retain benefits of refund, if they complete their export assurance. Transferor and transferee have not disclosed any basis for share exchange ratio fixed under the Scheme regarding issuance of new equity shares and therefore, the Scheme is bad. Demerged undertaking has not been transferred at a fair value since the same has been valued by Core at Rs. 596.22 crores and the transferee would also avail benefit of carrying forward of accumulated losses and unabsorbed depreciation of Rs. 1,200 crores entailing a tax saving of Rs. 400 crores. The shares above 50% are held by directors/promoters of Core and each of them would be benefited. ARCIL had taken over possession of Sachana unit from Core and transferred the same to Nirma under the provisions of the SARFAESI Act. Under Section 13[4] and Section 13[6] of the SARFAESI Act, transferee is vested with all rights as if the transfer had been made by the owner of such secured assets. Therefore, the Scheme seeking demerger of the said unit is wholly misconceived. Company Petition No. 48 of 1999 filed by Jost's Engineering Company Limited has been filed for winding up of the company and the same has already been admitted for hearing. They submit that under the circumstances, the Scheme be rejected.

20. Oman International Bank has also summarized their arguments and has submitted written arguments after completion of the oral hearing. They submit that the Scheme is neither legal nor fair and reasonable. Before the Scheme came to be proposed, notices were served and possession of the secured assets was taken by ARCIL under the SARFAESI Act and the said Act has to prevail over the provisions of the Companies Act. Once the possession has been taken under the SARFAESI Act and such action has not been challenged by Core, assets are required to be disposed of in accordance with the provisions of the SARFAESI Act and sale proceeds are required to be distributed as per the provisions of the SARFAESI Act. According to the objections, the SARFAESI Act does not contemplate disposal of assets in the form of scheme of compromise and/or arrangement. According to them, the SARFAESI Act proceeds for liquidating assets to realize debts of secured creditors which would mean that compromise and/or arrangement was not found possible and therefore, secured creditor has proceeded further to liquidate the assets. 75% of the secured creditors in value take a decision to liquidate the assets of debtor by enforcing security would imply that 75% of the secured creditors take a decision not to compromise the debt and decide to liquidate the assets. According to their objection, a secured creditor cannot be forced to compromise its debts in view of the provisions of Section 13[13] of the SARFAESI Act. It is submitted that once an action is taken under the SARFAESI Act, a borrower cannot deal with the assets of the company nor can he bind the secured creditors and nothing can be done without the consent of the secured creditors. According to them, the Scheme is inconsistent with the rights of the secured creditors. Their further submission is that apart from the Scheme being in violation of statutory right conferred upon the objector under the provisions of the SARFAESI Act, it is not a Scheme of compromise and/or arrangement but in the guise of a Scheme of compromise and/or arrangement, alternate method of winding up of the company to avoid accountability to this Court is ruled out. They submit that the company is not retaining any business as such except Core Logo. Therefore, the Scheme is not for revival of the business of the company but it is for winding up business of the company. The Scheme is not legal qua objector in view of the recovery proceedings pending before the Debt Recovery Tribunal. The Scheme is in two parts, the first part deals with disposal of assets with liability and the second part deals with waiver of debts in full by the secured creditors. According to them, no reason worth the name is offered for the second part of the Scheme; why debt is to be waived off and what is the nexus of the waiver of debt with the first part of the Scheme. They submit that in the guise of the Scheme, defaulting borrower wants to force upon secured creditor to waive its debts without any reason or rhyme which is nothing but coercion by majority over the minority. According to them, the report of M/s.Ernst & Young, was not produced in the meeting dated 10th January, 2005 and the Company's explanation that, it was sent to the consortium leader would amount to service would be a bad argument. They submit that even if the objector knew about the report, then too, the question that whether proper informations were supplied or not would be a material question. They submit that there was no offer on the part of the company to get the report produced and concept of adverse inference in case of statutory requirement has no room. They submit that ARCIL cannot be considered in the category of secured creditors, because it never lent money to the company but in fact, it had purchased debts and the assignment is secured at a price much less than the amount of debts. Under the circumstances, consideration for sanctioning the Scheme of compromise for ARCIL would be different. It is also submitted by them that the Company Court has no jurisdiction to pass an order taking away effect of O.A. [DRT proceedings] and the reliefs claimed thereunder. They are placing their reliance upon the judgment of the Supreme Court in the matter of Allahabad Bank v. Canara Bank, . They also rely upon a judgment in the matter of Fidelity Investment International PLC v. My Travel Group PLC reported in [2006] 1 Comp.LT 152 [CA]. They also submit that the petitioner has approached this Court with tainted hands by suppressing and without placing valuation report of the assets of Core. They submit that the petitioners are not entitled to any of the reliefs from this Court. They place reliance upon the judgment in the matter of Rajasthan State Financial State Corporation, reported in [2005] 8 SCC 190. They submit that demerged undertaking is not being transferred for fair value and Nirma would be receiving undue benefits. In case, the company is put under liquidation and the property is sold in the market, then it would be sold for higher price and the amount which is proposed to be paid to the unsecured creditors and the shareholders would also come to the share of the secured creditors and as such objector would be entitled to much more than what he is being offered. Sections 391 to 394 of the Companies Act cannot be used as a tool to escape from criminal liability of the delinquent directors/officers of the company.

It is also an argument of the objector that ARCIL would have no right to vote at both the meetings of lenders or if it had any right of voting, then value of its vote should have been reduced to the price at which the debt is assigned to it and not to the value of the debt which has been assigned in its favour. I have already referred to the arguments of the parties in detail. The argument in fact, is that if ARCIL had purchased right to recover the debt at much low a price than its face value, then according to the objectors, the value at which ARCIL had purchased the debt should be the value of ARCIL's right and not the right on its face value which has been purchased at much low a price. The objection further is that ARCIL not being the lender would not be entitled to vote at all. I will take up the objections one by one. It is undisputed that five lenders of Class-A and one lender of Class-B had assigned their debt to ARCIL under the provisions of the SARFAESI Act. It is undisputed that on receipt of smaller amount by lending banks, they had assigned their right in favour of ARCIL. Neither the Companies Act nor the SARFAESI Act nor the Contract Act nor the Sale of Goods Act provide that if right to recover debt is purchased at a lower price, the right to recover would stand reduced to the price paid for acquiring the rights. In the present matter, undisputedly, ARCIL had paid lower price for acquiring greater right but if a person voluntarily without any pressure, duress or coercion taking into consideration the hard realities of life, sells his property at a lower price, then the law does not stop him from doing so. Any person who purchases valuable property for a lower price and element of fraud or dishonesty is not associated with it, then he becomes absolute owner of the right purchased by him. In case, property was to be sold by ARCIL under the provisions of the SARFAESI Act, could objectors say that there money should be paid to them in full and ARCIL be paid in proportion to the money which they have paid to purchase the entire right. If the SARFAESI Act does not provide for such bar nor creates any ban against any lender, to say, that ARCIL would not be entitled to recover full money, then in these proceedings, one cannot be allowed to say that ARCIL purchased the right of greater value but lower price was paid, therefore, value of the purchased or assigned right should be reduced proportionately taking into consideration the price paid by the purchaser.