Landesbank Badenwurttemberg vs Nova Petorchemicals Ltd.

K.A. Puj, J.—The applicant-company, namely, Landesbank Baden-wurttemberg has taken out this judge''s summons praying for the direction to the respondent-company to furnish the particulars of interest as related party in the list of creditors for unsecured loans shown in Schedule V to the scheme, with the respondent-company, the resulting company, its promoters and directors. The applicant has also prayed for the direction that on receipt of the above particulars, the respondent should reclassify the list of creditors for unsecured loans into two groups, namely, creditors for unsecured loans of related parties and creditors for unsecured loans by non-related parties. The applicant has prayed for the interim relief to the effect that proposed meeting of the creditors for unsecured loans to be held on January 11, 2008, should be postponed and be held only after further direction of this Court on receipt of the abovementioned information.

An affidavit is filed by one Mr. Pankaj Inder Mohan Sachdeva, constituted attorney of the applicant-company. Mr. A.C. Gandhi with Mr. Anip A. Gandhi, learned advocates appearing for the applicant has submitted that the respondent-company has filed Company Application No. 529 of 2007 for proposing a composite scheme of arrangement in the nature of demerger, reorganisation of capital and transfer of demerged undertaking from the respondent to Nova Polyyarn Ltd., and respective shareholders and creditors of demerged company. By an order dated November 26, 2007, passed in Company Application No. 529 of 2007, this Court has directed the respondent-company to convene inter alia the meetings of creditors for unsecured loans on January 11, 2008. Notice convening the said meeting was published in English and Gujarati newspapers as well as individual notice was served by the applicant-bank along with statement u/s 393 of the Act and the proposed scheme of arrangement. He has further submitted that the applicant-company is a creditor of the respondent-company for the amount of euro 8,69,984.82 equivalent to Indian Rs. 5,04,59,119.56 as on December 1, 2007. As the respondent-company failed and neglected to pay the outstanding amount to the applicant-bank, the applicant-bank has filed Company Petition No. 224 of 2007 for winding up of the respondent-company. In the said petition, notice has been issued by this Court on December 19, 2007.

Mr. Gandhi has further submitted that from the notice of convening the meeting of the creditors for unsecured loan received by it, it has come to the notice that as per the provisions contained in paragraph 16B of the proposed scheme, the respondent-company has proposed the repayment of the loans to unsecured creditors mentioned in Schedule V of the said scheme. On perusal of the said Schedule V giving the names of creditors for unsecured loans are for the total value of Rs. 3026.27 crores. Most of the said creditors are companies or firms of the present promoters of the respondent-company, namely, Chiripal Group and Gupta Group and their associates. The clubbing of those interested creditors along with independent creditors is not legal and proper and, therefore, the classification of the creditors for unsecured loans is basically wrong and illegal and is being objected by the applicant. He has further submitted that the applicant is shown as a creditor for Rs. 480.55 lakhs which is also not admitted by the applicant. By including the interested parties in the said class of unsecured creditors, the independent unsecured creditors like the applicant are put to minority and, therefore, their objections can be overruled. He has, therefore, submitted that the respondent should first furnish the details of interest of the promoters in all the said creditors for unsecured loan before the scheme is placed before the creditors for consideration. He has, therefore, submitted that this Court should direct the respondent to furnish the relevant particulars about the interest of the promoters in the said list of creditors for unsecured loans.

Mr. Gandhi further submitted that the respondent in the statement u/s 393 of the Act annexed to the scheme has not disclosed such particulars and has thereby suppressed material facts from this Court as well as from the creditors. Therefore, the said statement u/s 393 of the Act is violative of the provisions of Section 393. He has further submitted that out of the eight directors of the respondent-company, four directors are common directors in the resulting company and, therefore, the said directors/promoters are interested in getting the scheme passed through their related parties as the creditors for the unsecured loans, which should not be permitted by this court. He has, therefore, submitted that the proposed meeting of the creditors for unsecured loan is required to be postponed and in the meantime, the respondent-company should be directed by this Court to place on record the interest of the respondent-company, the resulting company and their promoters and directors in the said list of creditors for unsecured loans. On receipt of this information, such interested creditors should be separated from the said group and the meeting of only that class of creditors for unsecured loans should be convened, who are not related with the said companies or their promoters or directors.

In support of his submissions, Mr. Gandhi has relied on the decision of this Court in the case of Sidhpur Mills Co. Ltd., In re AIR 1982 Guj 305 (sic), wherein this Court has observed that the second part of Clause (a) of Section 393(1) requires two things to be mentioned in the statement, viz., (i) the material interests of several persons, and (ii) the effect of the scheme on those interests, if, and in so far as, it is different from the effect on the like interests of other persons. Every kind of interest is not to be mentioned. Only material interests are to be so done. Based on this judgment, he has submitted that the information which is sought for squarely falls within the category of "only material interest" which has not been disclosed and hence, unless and until their disclosure is made, the meeting should not be held.

Mr. P.C. Kavina with Mr. Sudhir M. Mehta, learned advocates appeared for the respondent-company on advance copy being served on them and submitted that this is not proper stage to consider the objections raised by the applicant. The motive behind filing this application is to stall the scheme proceedings as the notice for convening the meeting was published on December 12, 2007. He has further submitted that the applicant is aware about this fact and filed winding up petition against the respondent-company on or about December 18, 2007. The present application is moved only two days before the date of convening of the meeting. He has, therefore, submitted that such application cannot be entertained. Even otherwise, it is open for the applicant to raise all objections either at the meeting or even when the substantive petition is filed before the court after the scheme is approved by the majority of the unsecured loan creditors at the meeting. He has, therefore, submitted that no interference be called for at this stage and the application be summarily rejected.

Having heard learned advocates appearing for the respective parties and having considered the application along with the documents attached therewith, the court is of the view that once the order for convening the meeting is passed and meeting is to be held on January 11, 2008, it is premature at this stage to consider the objections raised by the applicant in the present application. It is open for the applicant to raise all these objections at the meeting and despite these objections, if the resolution is passed by the requisite majority, it is still open for the applicant to raise objection before this Court when the substantive petition is filed seeking sanction of this Court to the scheme. The respondent-company is taking risk of classification made. The court''s powers are wide enough to consider the scheme on its own merits even if the scheme is approved by the members or creditors at the meeting with requisite majority.

Since this is not the proper stage to consider the objections raised by the applicant, the court has not gone into the merits and demerits of these objections and all these objections would be considered by the court at the appropriate stage when substantive petition is filed for sanction of this Court to the scheme.

Subject to the aforesaid observations, this application is accordingly disposed of.