In re: The Central India Spinning, Weaving and Mfg. Co. Ltd.

S.C. Pratap, J.—The petitioner-Company - the Central India Spinning, Weaving & Manufacturing Company Limited - was incorporated in 1874. It was, in all probability, the first industrial enterprise of Tatas and the forerunner of their many other pioneering ventures in a variety of fields touching the economic, social, educational and cultural life of this country.

In the course of its career spanning over a century and mere, the Company passed through several vicissitudes. The last twenty years particularly, witnessed its pendulum widely swinging between profit and loss - less profits and more losses. And in these very recent years, matters turned from bad to worse. Efforts to salvage the situation did not cut much ice. Negotiations vis-a-vis government, financial institutions and others also suffered the same fate. All the combined experience and expertise failed to resolve the deepening crisis. According to the management, the Company reached a point of no return. The loss in 1984 was almost 500 lacs and in the succeeding year (]985) 476 lacs. From January 1986 onwards, the Company, as per the management, was making additional loss of about 100 lacs per month. The liability against secured loans was already over 967 lacs and against unsecured loans another about 140 lacs. Its current liabilities far exceeded its current assets. All the assets of the Company were also either mortgaged or hypothecated. There were no free assets left. The capital stood wiped off. The Company was unable to pay even wages; interest; provident fund dues; sales-tax; electricity charges; unable to discharge even its bare statutory liabilities all running into another couple of crores. Still further, the outstanding dues to suppliers exceeded 280 lacs. Finance drawn from the banks exceeded the sanctioned limits by another over 200 lacs. (All figures are in rupees). In the circumstances, the Company was left with no alternative but to proceed to file a petition for its winding up. This was done on April 15, 1986 - followed by the present Judge''s Summons for appointment of provisional liquidator.

The overall position of the Company is thus very disheartening. Brief efforts by this Court at some concrete consensus were to no avail. The State Government, however, informed this Court yesterday that -

...the State Government has decided in principle to initiate the process of takeover of the mill in the interest of the workers on certain conditions." (Emphasis added).

[herein indicated in italics-Ed.]

Though in itself a welcome and encouraging sign, the decision, as it stands conveyed to this Court, is rather vague. It is not a decision to instantly take over but a decision to only initiate a process in that regard. When this process would commence is not disclosed and is thus anybody''s guess. The "certain conditions" on which this process of take-over would be based are also not disclosed. Bonafide though it be, the decision does not measure up to the urgent need for prompt action. The Government would, however, be free to go ahead - and it should go ahead - with its well-intentioned decision aforesaid. And this Court for one has no doubt that the Government will receive due co-operation from all parties in translating the same into reality.

This summons, however, can no longer be kept adjourning and pending, It is not possible to continue to keep waiting and watching. Speed is now of the essence. Delay would for certain defeat justice. The need of the hour is action. From January 1986 the Company has virtually ceased to carry on any manufacturing activities. Production has stopped. Machinery is lying idle. Workers are without work and without wages. The Company is deep in the red. Starved of funds to the bones, financial bankruptcy and commercial insolvency stares it in the face. The substratum is in serious jeopardy. The enterprise built over a century is, like a sinking ship, slowly moving towards the bottom of the sea. The Court can no longer, therefore, compel the Company (or permit it, even if willing;) to continuously live beyond its means and, in the process, incur still further liabilities piling up the fast mounting losses.

What then is the remedy? At this crucial stage I see no better answer than to make the order prayed for and appoint a provisional liquidator. Drastic though this step be, the gravity of the situation well warrants it. Indeed, at the instance of a Company and its management, a provisional liquidator would normally be appointed as a matter of course. But the Court is not always bound to do so. Though its jurisdiction in this respect is discretionary and, unlike that of the executive, not limited or fettered by any particular factor or circumstance (political or otherwise) the Court would nonetheless not act lightly or arbitrarily but exercise its discretionary jurisdiction carefully and judicially. It will consider the pros and cons, the practical benefits of such appointment and the possible consequences otherwise. In this judicial process, the Court will not overlook the dire need of the moment and the attendant'' risk in default of such appointment. So considering this judge''s summons together with the specter of commercial insolvency looming large over the Company and the imminent risk and danger to its assets and the escalating gravity of the financial crisis, a provisional liquidator becomes an urgent need and a must. Reluctance and/or delay may be politically expedient but judicially neither expedient nor prudent. Indeed, none appearing in these proceedings could suggest any effective and convincing alternative to a provisional liquidator.

The appointment is also in public interest - a vital element in modern corporate law. Indeed, it would be prejudicial to public interest to oppose it. The appointment will help redeem the rights and interests of the workers to the maximum possible extent, Their interest deserves top priority, paramount consideration and utmost protection. Their sufferings must at all costs be alleviated. The workers must, all along the way, be helped to survive their current ordeal and come out successfully therefrom. They constitute as much a vital component of the Company as the others. On the touchstone of their welfare also, therefore, a provisional liquidator is well justified.

However, when the State Government has decided in principle to initiate the process of take-over on certain conditions, why then, one may well ask, a provisional liquidator? The simple answer is: Under the currently existing critical exigencies and circumstances, a provisional liquidator is a sine quo non; an absolute necessity for preserving and protecting, for maintaining and safeguarding the Company''s assets and properties; for bringing these in custodia legis; and for supervising, regulating and monitoring the Company''s affairs. His appointment will also arrest the declension, crystallise the position and help accelerate the course of action ahead. It will also assist in expediting the take-over process to be initiated by the State Government. It will also result in a fair and just direction in public interest to the pending winding up proceedings. Therefore, everything is to be gained and nothing to be lost by this appointment.

Of course, a provisional liquidator has no Alladjn''s lamp in his hands nor any magic formula up his sleeve. Nor is his appointment a panacea for all the ills afflicting a company. But in a case as the instant, the benefits of such appointment would far out-weigh all other considerations. Apart from the consequences flowing ipso facto therefrom, it will also open up a new vista, throw up different possibilities and provide diverse means for an amicable way out. There will also be - and this is vital - a rekindling of real hope in the hearts of the workers. The provisional liquidator can examine and explore various proposals in search of a solution to resuscitate the Company. The case of this Company has (vide the order declining closure) been already referred to the Nodal Agency constituted by the Central Government to evolve and manage rehabilitation package qua sick textile mills that are potentially viable. The State Government has also, as seen, decided in principle to initiate the process of take-over of the mills on certain conditions. The provisional liquidator can look and inquire into all these matters in detail. Schemes and arrangements for rehabilitation and revival can be considered. Amalgamation and merger can be thought of. Take-over bids can be; examined. Indeed, the workers themselves can, with the active help and assistance of all, seize the opportunity for their own lasting benefit. Constructive co-operation and practical suggestions may hopefully lead to the dawn of a new era for the Company and its more than seven thousand workers.

Finally, a word before concluding. This is neither the occasion nor the time to delve into and investigate the past. Such post-mortem would be an exercise in futility with only a pyretic victory at the end of it all. Whatever be the unfortunate past and whosoever be all those responsible therefore ,it is now best left abandoned. Let bygones be bygones. Attempts at passing the buck should stop. Cutting the gordian knot, let all concerned get down to brass tacks. Mutual co-operation of a constructive character backed up by requisite will and determination can considerably help bring in positive results. On his part, Mr. Palkhivala, learned Counsel for the Company, assured the Court - and this is a very significant statement - that the Company will not challenge any take-over of the management nor will it challenge any take-over even of the assets and properties of the Company nor claim any compensation in that behalf and, what is more, the House of Tatas, who are secured creditors, would also give up their entire security. These assurances not only remove all possible misgivings qua the management but also reflect their sincerity to the cere. The sacrifice implicit therein is, indeed, of a high order. As said, self-sacrifice is the truest test of sincerity. Hoping then for the best, let the die be cast.

Hence order.

The Official Liquidator attached to this Court is appointed Liquidator provisionally of the Company together with all its affairs, assets, papers, books of accounts, documents and files etc. He is directed to forthwith proceed to act on this appointment. He should also immediately get in touch with the State Government to expedite its valuable decision on take-over. The Judge''s summons is made absolute in terms aforesaid but, in the circumstances, with no order as to costs.