2000-(001)-CLJ -0314 -AAIFR Companies Act Judgements

0
657

2000-(001)-CLJ -0314 -AAIFR

PENGUIN TEXTILES LTD. AND ANOTHER v. BIFR AND OTHERS.

Appeal No. 145 of 1999 (Appeal against BIFR’s order, dated 16.8.99 in Case No. 5/96 (IV)), decided on December 21, 1999.

BEFORE THE APPELLATE AUTHORITY FOR INDUSTRIAL & FINANCIAL RECONSTRUCTION, NEW DELHI

ALOK DHIR, Advocate, for the appellants.

Advertisement

B. V. RAMANA REDDY, Inspector, Customs and Central Excise; N. M. POPLI, Advocate, for Noma-Enterprise; V. U. ERADI, with L. N. TAPARIA and K. K. R. DAS, authorised representatives, for M/s. Ghanshyam Sarda; V. U. ERADI, Advocate, for Vijayalakhmi Cotton Co. and others, secured creditors.

ORDER

This is an appeal against BIFR’s order, dated 16.8.1999, contained in BIFR’s fax message, dated 16.8.1999 to the Indian Bank, Operating Agency (OA), with copy to the CMD of Penguine Textiles Limited (PTL), the first appellant, and Shri Ghanshyam Sarda, respondent No. 5, directing the O.A. to examine both the proposals received from the existing promoters as well as from the prospective co-promoters (respondent No. 5 – Shri Ghanshyam Das Sarda) and also exploring the feasibility of change in management.

2. Shri V. U. Eradi, counsel, appearing for respondent Nos. 5 and 6, stated that he has been personally impleaded as respondent No. 6 instead of impleading the concerned party `Jailakshmi’ Cotton Textiles and others (16 creditors)’. He voiced his grievance against his impleadment personally as respondent No. 6. Shri Alok Dhir, counsel for appellants, expressed regrets and prayed for correcting the list of parties by substituting’ Jailakshmi Cotton Textiles and others (16 creditors) as respondent No. 6. Correction of the name of the 6th respondent is ordered accordingly.

3. Mr. N. M. Popli, learned counsel for Noma Enterprises (NE), respondent No. 4 submitted that by order, dated 27.1.1999 in appeal 65/98 this Authority had ordered PTL to pay a sum of Rs. 100 to NE through the counsel as cost, but the said amount had not been paid. Shri Alok Dhir, counsel for PTL, made a payment of Rs. 100 to Shri N. M. Popli and the payment was received by Shri N. M. Popli on 17.12.99.

4. Shri N. M. Popli, counsel for NE, further submitted by order, dated 8.9.1998 in MA 38/98 in appeal No. 65/98, this Authority had restricted the scope of hearing NE to its interest with respect to Rs. 16.16 lakhs paid by it to PTL, the respective rights and obligations of NE and PTL being subject to the final outcome of the proceedings in the civil court and had further directed that NE would cease to be a party as soon as the bank guarantee is furnished by PTL in accordance with the order, dated 15.4.1998 of the Division Bench of Andhra Pradesh High Court in LPA 83/98; the counsel for appellants committed a fraud on BIFR by stating before BIFR on 1.4.1999 that PTL had since given the bank guarantee to NE which, therefore, had no locus standi any more; in fact, no bank guarantee has been given to NE by PTL. Shri Alok Dhir, counsel for the appellants, argued that statements are made by the counsel only on the basis of the instructions from clients, that the point raised by Shri N. M. Popli is not at issue in this appeal, and that Shri N. M. Popli is free to agitate the matter before BIFR. On this issue, the following facts have emerged from the record before us :

(a) The Board of directors of PTL passed a resolution on 27.1.1999 authorising Shri Ghanshyam Sarda (respondent No. 5 in the present appeal) to submit a revival scheme for PTL as co-promoter to the bank/financial institution/BIFR/AAIFR subject to the company providing a bank guarantee for Rs. 16.16 lakhs as ordered by the Hon’ble High Court of Andhra Pradesh in LPA 83.98. The BoD of PTL further authorised Shri Ghanshyam Sarda to submit clarification/modification/particulars and do all the acts in connection with the revival of the company. A further resolution was passed by the BoD of PTI. on 7.2.1999, authorising Shri Ghanshyam Sarda to submit revival scheme for PTL as co-promoter and also submit clarifications/modifications/particulars and do all acts in connection with the revival of the company. By a letter, dated 5.7.1999, PTL informed the Indian Bank (OA) that the scheme formulated by the proposed co-promoter Shri Ghanshyam Sarda was not acceptable and that BoD of PTL had on 11.6.1999 decided not to take Shri Ghanshyam Sarda as co-promoter and requested the OA not to entertain him in any manner whatsoever as he has no locus standi any more.

(b) In para 6 of BIFR’s order, dated 1.4.1999, it is recorded

“Regarding the issue of NE according to the orders of High Court, they were entitled to be present, if a bank guarantee for their dues of Rs. 16 lakhs was not furnished. Since the company had since given the bank guarantee to them, they had no locus standi any more. Hence, they have not attended the hearing.”

(c) NE is respondent No. 4 in the present appeal. The appellants would not have impleaded NE as a respondent, if the bank guarantee had been provided to NE.

5. As this matter is going back to BIFR, it is open to NE to raise the point at the next hearing before BIFR and also clarify the reason for not attending the hearing on 1.4.1999.

6. Shri Alok Dhir challenged the impugned order on two grounds : BIFR passed the impugned order after considering Indian Bank (OA’s) report, dated 3.8.1999, without giving an opportunity of hearing to the appellants; therefore, there was a violation of regulation 40 of BIFR Regulations, 1987; the appellants had introduced Shri Ghanshyam Sarda as prospective co-promoter by way of resolutions of the BoD of PTL (resolutions dated 27.1.1999 and 7.2.1999 referred to above), but subsequently, on 11.6.1999, the BoD of PTL had decided not to take Shri Ghanshyam Sarda as a co-promoter and had informed the Indian Bank (OA) accordingly by a letter, dated 5.7.1999 and, consequently, Shri Ghanshyam Sarda has no locus standi and, therefore, the proposal of Shri Ghanshyam Sarda cannot be entertained by BIFR; as the proposal of the existing promoters is yet to be considered by OA, BIFR’s direction to the OA to consider the feasibility of change in management must also be set aside.

7. Shri V. U. Eradi, counsel for respondents 5 and 6 contended : Shri Ghanshyam Sarda (respondent No. 5) came in as a co-promoter by virtue of a memorandum of understanding, dated 31.1.1999 between the directors of PTL (in pursuance of the resolution, dated 27.1.1999 passed by the BoD of PTL) and ‘Shri Ghanshyam Sarda and three others’; the BoD of PTL further confirmed the induction of Shri Ghanshyam Sarda and his associates as co-promoters for the revival of PTL by subsequent resolution, dated 7.2.1999; respondent No. 5 and associates had made some payments in pursuance of the memorandum of understanding, dated 31.1.1999. He further submitted that in case the matter is remanded to BIFR in view of regulation 40 of BIFR Regulations, 1987, then BIFR should be directed for an early hearing because respondent No. 5 has made payments under MoU, dated 31.1.1999 and respondent No. 6 (16 creditors) are unable to recover their money from PTL due to the statutory bar under section 22(1) of SICA.

8. Considering the requirement of regulation 40 of BIFR Regulations, 1987, BIFR trust have given an opportunity to all the concerned parties before taking a view on the report, dated 3.8.1999 submitted by the Indian Bank (OA). Moreover, the impugned order speaks of simultaneously considering the proposal of the prospective co-promotor and also exploring the feasibility of change in management in place of joint venture or induction of co-promoter. By order, dated 20.10.1997 in Writ Petition No. 6469/97, the Hon’ble Andhra Pradesh High Court had directed that the OA should examine/promoters and submit a report to BIFR which should ps for change in management, consider OA’s report and accordance with law. BIFR should have proceeded in court’s direction. Now, the appropriate course for BIFR is OA’s report on the proposal given by PTL/promoters and proceed further in accordance with law. If the proposal of PTL/promoters is found acceptable, a draft scheme should be prepared accordingly, and processed further in accordance with law. On the other hand, if the proposal of PTL/promoters is should be issued for inviting proposals for the revival of BIFR’s directions to Indian Bank (OA) to examine the co-promoter and also explore the feasibility of change in management are set aside. If the OA has not already submitted its report to BIFR on the latest proposal of PTL/promoters, it should do so within two weeks from the date of receipt of this order, with copy to appellants and other secured creditors. The matter is remanded to BIFR for taking appropriate decision on OA’s report on the proposal submitted by PTL/promoters and proceed further according to law.

This site uses Akismet to reduce spam. Learn how your comment data is processed.