Niranjan B. Shah vs Suresh Steel Corporation and Others

S.R. Brahmbhatt, J.—The applicant, a former managing director of and a contributory to M/s. Asian Transformers Export P. Ltd. (hereinafter referred to as "the company" for brevity) a company under liquidation, has filed this application for recalling the winding up order dated November 22, 1976, passed by this court in Company Petition No. 34 of 1976 for winding up of the company and appointing the official liquidator ("the OL") as liquidator of the company to take charge of all the properties and assets of the company. The applicant has, in the affidavit filed in support of the judge''s summons, stated that he was the managing director of M/s. Asian Transformers Export P. Ltd. (the company in liquidation) against which Company Petition No. 34 of 1976 came to be filed by M/s. Suresh Steel Corporation, a partnership firm, under the provisions of the Companies Act, 1956, for winding up, alleging that the company had failed and neglected in paying Rs. 77,054.72 to the petitioner. The court vide its order dated August 16, 1976 (Coram; D.A. Desai, J. (as he then was)) admitted and ordered issuing of advertisement. On November 22, 1976, the court ordered winding up of the company and appointed the official liquidator as the liquidator of the company for taking charge of the properties and assets of the company. On issuance of notification dated November 23, 1976, the official liquidator took charge of the assets of the company.

The applicant has further stated in his affidavit in support of the judge''s summons that the company was in the business of electrical transformers. The company is a private limited company consisting of four shareholders of his family and friend. The plant and machinery of the company were situated at plot adjoining Shed No. A2/14, GIDC, Phase I, Vapi, District Bulsar, Gujarat. The company had availed of term loan and cash credit facilities from the State Bank of India. The bank filed Special Civil Suit No. 68 of 1976 in the Court of the Civil Judge (SD) at Navsari for recovery of Rs. 77,50,592.95. The learned judge in the suit ordered appointment of a receiver who had also taken the charge of the assets of the company. After taking over the charge of the assets of the company the official liquidator attempted to sell the assets. He could so far, sell only 22 transformers lying in the godown of Jeens and Co., at Bombay for a sum of Rs. 20.30 lakhs plus deposit of Rs. 50,000 from the purchaser. No other assets of the company could be sold.

The applicant has further stated in his affidavit in support of the judge''s summons that the company, apart from the State Bank of India, was not indebted to any secured or unsecured creditors except the following:

The applicant has further stated in his affidavit in support of the judge''s summons that the workmen of the company have been paid their dues and no workman has filed any claim till date.

The applicant has further stated in his affidavit in support of the judge''s summons that the State Bank of India has assigned its dues against the company in favour of the Asset Reconstruction Co. (India) Ltd., a company incorporated under the Companies Act, 1956 and u/s 3 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002. Asset Reconstruction Co. (India) Ltd., has assigned all its rights, titles, benefits and interests in respect of the assets of the company to Pegasus Assets Reconstruction P. Ltd. A company incorporated under the Companies Act, 1956 and registered as a securitisation and asset reconstruction company pursuant to section 3 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002. The Pegasus is respondent No. 4 in the present application.

The applicant has further stated in his affidavit in support of the judge''s summons that in view of the changed circumstances it is possible for the erstwhile management of the company to pay its creditors and make a come back. The company has good chance of revival. It is stated that M/s. Suresh Steel Corporation has settled its outstanding amount for Rs. 1,50,000 and has agreed to co-operate and withdraw the winding up petition. Their letter dated May 12, 2009, is also placed on record at annexure D to the application.

The applicant has further stated in his affidavit in support of the judge''s summons that pursuant to negotiations, Pegasus has also agreed to accept Rs. 70,00,000 (rupees seventy lakhs only) in full and final settlement of claims and counter claims between the State Bank of India and the company, its directors/guarantors. A copy of letter dated April 29, 2009, issued by Pegasus accepting the offer of Rs. 70,00,000 as full and final settlement is also placed on record at annexure E on this application.

The applicant has further stated in his affidavit in support of the judge''s summons that apart from the aforesaid creditors for a sum of Rs. 14,43,434 there are no other creditors of the company. He himself being the creditor of the company for a sum of Rs. 14,42,074 out of the aforesaid sum of total creditors of Rs. 14,43,434. The balance of creditors amounts to only Rs. 1,360 he has assured that the same would be discharged. The company does not have any other liability. In view of these circumstances the order of winding up is prayed to be recalled.

Learned senior counsel Shri Mihir Thakore with Ms. Megha Jani for the applicant have submitted that this court have the power to recall an order of winding up u/s 466 of the Companies Act, 1956, read with rules 6 and 9 of the Companies (Court) Rules, 1959 and section 151 of the Code of Civil Procedure, 1908. To support his submission learned counsel has cited the following authorities and case laws:

(a) G.T. Swamy and Another Vs. Goodluck Agencies and Another, ;

(b) Shreeji Concast Ltd. Vs. Shreeji Oxygen P. Ltd. and Another, ;

(c) Shaan Zaveri and Others Vs. Gautam Sarabhai Private Limited, ;

(d) The judgment and order dated May 5, 2008, passed in M.C.A. No. 18 of 2008 with O.J.C.A. No. 136 of 2008 with O.J.M.C.A. No. 136 of 2008 with O.N.M.C.A. No. 54 of 2008 (Coram: K.A. Puj, J.); and

(e) The judgment and order dated March 25, 2008, passed by the High Court of Gujarat in Company Application No. 325 of 2005 (Coram: K.A. Puj, J).

As per the figures suggested by the official liquidator, details of secured and unsecured creditors are as under:

In respect of secured creditors, learned counsel has submitted that the State Bank of India is the only secured creditor having assigned its secured as well as unsecured debt to ARCIL and ARCIL is now the only secured creditor of the company. In view of the settlement arrived at with Pegasus Assets Construction P. Ltd., constituted attorney of ARCIL, with respect to the secured debt, as well as its unsecured debt, ARCIL has agreed to accept a sum of Rs. 70,00,000 in full and final settlement of its claims. The said amount shall be paid to ARCIL immediately on the revival of the company or during the present proceedings, as may be ordered by this court.

With respect to unsecured creditors, learned counsel has submitted as under:

(a) The secured debt of ARCIL, the assignee of the State Bank of India is already settled and would be immediately paid on the revival of the company or as may be ordered by the court.

(b) The unsecured debt of the applicant in his capacity as director and shareholder of the company is Rs. 2,30,441 and the unsecured debt of the applicant in his capacity as proprietor of M/s. Asian Transformers is Rs. 14,19,274.

(c) The applicant has undertaken not to press for recovery of any amount due to him in any capacity from the company.

(d) The dues of the company towards the petitioner Suresh Steel Corporation (Rs. 77,054.72) have already been paid.

(e) The remaining dues of the company are Rs. 35,032.28 and Rs. 61,863. No person has come forward to claim the same. However the applicant undertakes the same would be paid by the company in case any one comes forward to claim the same.

Learned counsel has submitted that in view of the above said facts there would be no secured or unsecured debts of the company, except to the extent stated above and for which also settlement is made or undertaking is given.

It is further submitted that no claim has been made by any worker or creditor since the last 33 years. M/s. Ambubhai and Diwanji Solicitors of the applicant had published notice in the Indian Express dated August 23, 1976 and Gujarat Government Gazette dated August 26, 1976, inviting any creditor, contributory or other person desirous of supporting or opposing the making of the order of winding up. No one has come forward for the same. The official liquidator had widely advertised the offer for disposal of assets of the company as mentioned in paragraph 4 of the report dated August 8, 2009, filed in this application. No one has come forward to lodge its claim against the company before the official liquidator. The manufacturing activities of the company were stopped in June, 1975 and all the employees and workers were discharged almost 18 months before the date of winding up. It is a matter of fact that during this long span of 33 years the official liquidator has not received till date a single claim from any class and type of creditor whatsoever.

The applicant states that in compliance with the order dated May 15, 2009 passed by this court (Coram: K.A. Puj, J.) in the company application, the applicant had published an advertisement in The Times of India, Ahmedabad edition dated May 23, 2009 and in Gujarat Mitra, Surat edition dated May 23, 2009, inviting objections to the revival of the company. The applicant states that despite the fact that more than ten months have passed since the publication of the advertisements, no person has come forward raising any objection against the revival of the company. In view of this, it is submitted that the company has no debt other than the ones stated above, the settlement of each of which has been done as narrated in the preceding paragraph. It is further submitted that though there is no possibility of claims being made against the applicant-company, the applicant agreed that out of the total amount of money lying with the official liquidator towards the credit of the company, an amount of Rs. 5,00,000 or any amount that may be deemed fit by this court, may be retained and kept aside for a period of 3 months, or for the period that may be deemed fit by this court, from the date of revival of the company for the payment of any possible legally enforceable claims that may be made against the company after its revival. In addition thereto, it is undertaken by the applicant that even hereafter, in the event that a legally enforceable claim is made against the company, same will be discharged through the company.

In view of above said facts, learned counsel for the applicant has submitted that the order of winding up dated November 22, 1976, passed by this court in Petition No. 34 of 1976 be recalled, and the company M/s. Asian Transformers Export P. Ltd., be ordered to be revived and the official liquidator be directed to hand over possession of all the assets of the company, including the amount realised by the official liquidator on sale of part of assets of the company.

Shri J.S. Yadav, learned counsel representing the official liquidator has contested the company application and submitted that the applicant is now aged 67 years and has filed this application for recall of the order of winding up after 33 years as the winding up order was passed on November 22, 1976. He submitted that on account of such delay and also on the fact that the order of winding up did not suffer from any illegality, the same cannot be recalled.

The learned advocate Shri Yadav for the official liquidator has further submitted that the applicant has submitted the present application mainly on the basis of settlement of dues of the known creditors like the State Bank of India (whose credit has been assigned to ARCIL by the State Bank of India, which in fact is proposed to be paid) and another petitioning creditor M/s. Suresh Steel. It is stated that the official liquidator has not invited the claims of any creditors nor the applicant, therefore, it is not possible for the office of the official liquidator to agree to or admit to whether who are the secured creditors and what are their claims, etc. This process have to undergo statutorily and the due procedure mandated under rule 149 of the Companies (Court) Rules, 1959. Learned counsel has submitted that even while issuing notice vide order dated May 15, 2009, this court (Coram: K.A. Puj, J.) has directed that before passing any order of revival, it has to be ascertained as to whether there are secured, unsecured or statutory creditors. Keeping this in mind, the applicant is hereby permitted to issue advertisement in two newspapers, namely, Gujarat Mitra and The Times of India, etc. Shri Yadav has further stated that in the above order there is only invitation to creditors and their ascertainment. He has also stated that the advertisement vide above said order is not issued as per the order passed by this court.

Shri Yadav has further submitted that as per rule 24 of the Companies (Court) Rules, 1959, as framed by the apex court, issuance of the advertisement one in English and one in regional language is necessary. In the present case the applicant has issued advertisement as per his affidavit dated June 17, 2009, both in English daily only, i.e., even in Gujarat Mitra which is a Gujarat daily the advertisement is published in English language. Rule 24 of the Companies (Court) Rules, 1959, therefore stands violated and there has not been any advertisement as per the order passed by this court. Shri Yadav has submitted that "revival" necessarily does not mean payments/repayment to all creditors even the same should be as per the scheme u/s 391 of the Companies Act, 1956. That, public (creditors) at large may not take "revival" as an occasion for them to claim their own past dues. This becomes clear only when their claims are invited.

Shri Yadav has submitted that there is no delay in disposal of the assets by the office of the official liquidator as details are submitted in the reports in respect of the cases pending before this court up to the year 2000 and in view of this, no premium can be given to the applicant to ignore the procedure, rules and the law.

Shri Yadav has further submitted that as per the records of the official liquidator the debts are assigned to ARCIL, a securitisation company. Under the Act recall of winding up order therefore will not be a proper procedure but the applicant should have moved a scheme of reconstruction/revival u/s 391 of the Companies Act, 1956, which would have been a proper procedure and competent way. The applicant will not have any strength, power to oppose ARCIL''s powers under the Securitisation Act which in case prevails over the Companies Act, 1956. Further, the memorandum of understanding executed by the ex-director of the company, who is the present applicant, with ARCIL has no legal strength.

It is further submitted that without inviting claim by public advertisement, it is not possible to ascertain and agree that the ARCIL is a secured creditor and it is having a valid payable claim and further the assignment executed to ARCIL by the State Bank of India is valid one. He has stated that in the eye of law ARCIL is the party/beneficiary in the case with whom the proposed settlement is made for repayment.

Learned counsel for the official liquidator has further submitted that the applicant is praying for recall of the winding up order, in fact what is averred in the entire application is the proposed scheme which is not permissible because for the scheme under the Companies Act, 1956, the proper procedure is laid down u/s 391 of the Companies Act, 1956, as prima facie observed in the order dated August 24, 2009, in this very matter (Coram: Jayant Patel, J). He has submitted that when the statute has provided a distinct remedy, no short cut should be permitted and inherent power cannot be exercised de hors the existing provision of law.

I have heard learned counsel for the parties. From the arguments advanced and the documents produced on record of the application, following facts emerge:

(a) That the production activity of the company was stopped with effect from June 1, 1975, under the supervision of the secured creditor the State Bank of India (SBI), and all the workers were discharged after payment of their legal dues.

(b) Company Petition No. 34 of 1976 was filed on June 9, 1976, by M/s. Suresh Steel Corporation for winding up of the applicant-company on the ground that the applicant-company had failed to pay Rs. 77,054.72, which came to be admitted on August 16, 1976.

(c) Winding up order was passed on November 22, 1976. While passing the order for winding up, property of the company at Vapi was in the possession of receivers appointed by the Court of Civil Judge (S.D.), Navsari in Special Suit No. 68 of 1976 filed by the SBI against the company in liquidation and the property of Asian (a proprietorship concern of Niranjan B. Shah) was in the possession of receivers appointed under Civil Suit No. 69 of 1976 filed against Niranjan B. Shah the sole proprietor of Asian. The Commissioners did not segregate the assets of the two different entities and maintained joint possession of the same till it was taken over by the official liquidator. The total liability of the company was Rs. 18,23,664.42 out of which unsecured amount was only Rs. 96,895. Therefore on settlement with the present applicant, secured creditors, the only liability that will remain of Rs. 96,895 and in respect of which no one has lodged any claim till date.

(d) Possession of the properties of the company and M/s. Asian Transformers were taken by the official liquidator on January 24, 1977 and February 4, 1978, along with the assets.

(e) Representative of Pegasus approached the applicant-company in June, 2008 claiming that Pegasus is the holder of special power of attorney of the ARCIL and after negotiations Pegasus confirmed the amount due which they were ready to accept in full and final settlement.

(f) Company Application No. 225 of 2009 is filed in Company Petition No. 34 of 1976 by Niranjan B. Shah seeking recall of the winding up order dated November 23, 1976, passed in Company Petition No. 34 of 1976.

(g) On May 15, 2009, this court (Coram: K.A. Puj, J.) passed an order for inviting objections against the proposed revival of the company as prayed for in this application.

(h) The applicant issued advertisement in The Times of India, Ahmedabad edition dated May 23, 2009 and in Gujarat Mitra, Surat edition dated May 23, 2009, inviting objections to the revival of the company. No one has filed any objection or made any claim.

(i) Pursuant to the advertisement released on May 23, 2009, in The Times of India and Gujarat Mitra inviting objections to revival of the company, no one has filed any objection or made any claim.

(j) The official liquidator report was filed on August 8, 2009, in company application objecting to the revival of the company application on various grounds.

(k) Affidavit in reply to the official liquidator report is filed on September 2, 2009, in support of the application.

Learned senior counsel for the applicant has placed reliance upon various decisions of this court, wherein this court has in fact permitted revival of the company after recalling the winding up order. The recalling of the winding up order in fact amounts to staying the proceedings and except that it may not have any substantial difference. Learned senior counsel for the applicant has also relied upon the provisions of the Companies Act and submitted that even when the revival scheme u/s 391 of the Companies Act is resorted to, then, on the majority of the secured creditors agreeing for revival terms and accepting a little less than what was due to them, then also, irrespective of non-agreement on the part of the minority or the secured creditors in minority, the revival scheme is to be sanctioned by the court. Whereas in the instant case there is absolutely nothing on record to show which can be said that anyone would object to the prayer for recalling the order from among the creditors of the company.

The applicant''s counsel has stated under instructions of the applicant that the part of the amount which is lying with the official liquidator be kept for a period of 3 years and not for only three months as submitted earlier, in a fixed deposit so as to meet with the admissible claim of any creditor of the company who could not claim so far. Moreover the applicant is prepared to file an undertaking to this effect before this court and on that ground it is submitted that the application deserves to be allowed.

Counsel for the official liquidator has mainly urged that rules 149 and 24 of the Companies (Court) Rules, 1959, have not been completely complied with especially on account of the fact that the advertisement issued pursuant to the order of this court dated May 15, 2009, though issued in Gujarati daily also, but is issued in English language. Counsel for the official liquidator has further submitted that the said advertisement cannot be said to be an invitation to claimants for lodging their claims, it merely invited objections from the public against proposed revival. The applicant cannot seek revival without resorting to the provisions of section 391 of the Companies Act, 1956, the applicant has to resort to section 391 of the Act for seeking such prayer. When statutory remedy is available no inherent powers could be exercised by the court. These contentions of the official liquidator are required to be examined in light of the development since the order of winding up was passed, i.e., from November 22, 1976, till date. The official liquidator and all the concerned should be conscious of their obligations under the law. It is a fact that till the application was filed no dues were paid to the secured creditors or unsecured creditors. As per the submission of the official liquidator even claims were not invited. In such a situation when as per the say of the applicant and as it has come on record, when only one secured creditor is there and when its getting its dues as could be seen from the proceedings and when the applicant has shown willingness to file appropriate undertaking that the company would honour all legally admissible claims and when sizeable amount is agreed to be deposited in scheduled bank for a period of three years then the official liquidator''s objections pale into insignificance. This becomes all the more so from the fact that despite the winding up order being in existence since November 23, 1976, the official liquidator could not complete the winding up proceedings so as to pay up the dues of even known secured creditors or including the original applicant at whose instances the winding up order had been passed, of course the delay is on account of pending litigations as stated by the official liquidator in its report, be that as it may, the fact remains to be noted that the dues had not been cleared and the winding up proceedings could not be completed. The submissions of the official liquidator also need to be viewed in juxtaposition of the relevant provisions of the Companies Act, 1956. The official liquidator''s objection with regard to applicant not resorting to the provisions of section 391 of the Companies Act, 1956, also needs to be examined from the said section''s real purport and its effect.

The court has express powers u/s 391 of the Companies Act, 1956, to decide and accept any genuine viable proposal of revival of the company under liquidation. The proposal needs to be genuine and viable. Section 391 of the Companies Act, 1956, reads thus:

Power to compromise or make arrangements with creditors and members.--(1) Where a compromise or arrangement is proposed--

(a) between a company and its creditors or any class of them; or

(b) between a company and its members or any class of them;

the Tribunal may, on the application of the company or of any creditor or member of the company, or, in the case of a company which is being wound up, of the liquidator, order a meeting of the creditors or class of creditors, or of the members or class of members, as the case may be, to be called, held and conducted in such manner as the Tribunal directs.

(2) If a majority in number representing three-fourths in value of the creditors, or class of creditors, or members, or class of members, as the case may be, present and voting either in person or, where proxies are allowed under the rules made u/s 643, by proxy, at the meeting, agree to any compromise or arrangement, the compromise or arrangement shall, if sanctioned by the Tribunal be binding on all the creditors, all the creditors of the class, all the members, or all the members of the class, as the case may be, and also on the company, or in the case of a company which is being wound up, on the liquidator and contributories of the company:

Provided that no order sanctioning any compromise or arrangement shall be made by the Tribunal unless the Tribunal is satisfied that the company or any other person by whom an application has been made under sub-section (1) has disclosed to the Tribunal, by affidavit or otherwise, all material facts relating to the company, such as the latest financial position of the company, the latest auditor''s report on the accounts of the company, the pendency of any investigation proceedings in relation to the company under sections 235 to 251, and the like.

(3) An order made by the Tribunal under sub-section (2) shall have no effect until a certified copy of the order has been filed with the Registrar.

(4) A copy of every such order shall be annexed to every copy of the memorandum of the company issued after the certified copy of the order has been filed as aforesaid, or in the case of a company not having a memorandum, to every copy so issued of the instrument constituting or defining the constitution of the company.

(5) If default is made in complying with sub-section (4), the company, and every officer of the company who is in default, shall be punishable with fine which may extend to one hundred rupees for each copy in respect of which default is made.

(6) The Tribunal may, at any time after an application has been made to it under this section, stay the commencement or continuation of any suit or proceeding against the company on such terms as the Tribunal thinks fit, until the application is finally disposed of.

Learned counsel Ms. Jani in support of her submission cited a decision of the Karnataka High Court in the case of G.T. Swamy and Another Vs. Goodluck Agencies and Another, , paragraph Nos. 24 and 25 of the said decision reads thus:

The law laid down by the Supreme Court has to be ascertained from the judgment in Sudarsan Chits (I) Ltd. Vs. O. Sukumaran Pillai and Others, . The Supreme Court has declared the law as noticed earlier in paragraph 7 (see page 824 supra) above. This declaration presupposes two things: that the question whether the High Court could recall the order of winding up was in the mind of the Supreme Court in paragraph 14 (see page 832 supra) of the judgment and perhaps this question had come up earlier before the Supreme Court and the Supreme Court would have taken the view that the High Court has the power of recalling its order. It may be that those earlier decisions of the Supreme Court in which they have taken that view are not reported. But it does not mean that for the first time the Supreme Court has laid down the proposition per incuriam in Sudarsan Chits (I) Ltd. Vs. O. Sukumaran Pillai and Others, , that the High Court has power to recall its order of winding up. This is also made clear by the Supreme Court in S. L. A. (Civil) No. 2583 of 1987 preferred against the order of winding up which was affirmed in appeal by the Division Bench.

For these reasons, taking a contrary view would be to ignore the declaration of law made by the Supreme Court. It would not be proper for this court to take such a stand because these decisions of the Supreme Court do not indicate that there was a proposition by one side and opposition by the other and a decision rendered on the basis of discussion before the Supreme Court. Mr. Vijayashankar has relied on certain commentaries on the English Companies Act like Pennington and Halsbury''s Laws of England. No doubt, in those authorities, we do not find any cases relating to the power of the company court in England to recall the order of winding up. In Halsbury''s Law of England, volume 7, in paragraph 1375, it is observed as follows:

Power to stay winding up proceedings.--The court may, at any time after an order for winding up, make an order staying the proceedings, either altogether or for a limited time, on such terms and conditions as it thinks fit, on the application either of the liquidator or the official receiver or of any creditor or contributory, and on proof to its satisfaction that all proceedings in relation to the winding up ought to be stayed. On any application, the court may, before making the order, require the official receiver to furnish to the court a report with respect to any facts or matters which are, in his opinion, relevant to the application. The validity of the winding up order cannot be questioned on such an application. The order to stay may reserve liberty to any dissentient creditor or the official receiver to apply within a limited time to remove the stay. If no creditor objects, the proceedings on a compulsory order made after the commencement of a voluntary winding up may be stayed so as to allow the voluntary winding up to continue. Frequently, a stay is applied for in pursuance of a scheme of arrangement sanctioned by the court.

In support of recalling of winding up orders learned counsel for the applicant has further cited the decisions (1) in the case of Shreeji Concast Ltd. Vs. Shreeji Oxygen P. Ltd. and Another, ; (2) judgment and order dated May 5, 2008, passed by this court (Coram: K.A. Puj, J.) in M.C.A. No. 18 of 2008 with O.J.C.A. No. 136 of 2008 with O.J.M.C.A. No. 136 of 2008 with O.J.M.C.A. No. 54 of 2008; and (3) judgment and order dated March 25, 2008, passed by this court (Coram: K.A. Puj, J.) in Company Application No. 325 of 2005.

Thus from the foregoing, it becomes clear that the court has power to consider revival scheme at any stage provided the court is satisfied about its genuineness. The court is even empowered to accept majority secured creditors'' view against minority secured creditors and despite their objections the court in a given case to sanction the revival scheme. In view of this the official liquidator''s objection that the applicant ought to have moved the court only u/s 391 of the Companies Act, 1956, only amounts to a technical objection based upon his apprehension that recalling of winding up order might affect adversely any claimant or creditors who could not make his claim for all these years for want of specific invitation to lodge claim. This apprehension may be taken care of by issuing appropriate directions while passing the order of staying or recalling the winding up order in the interest of justice. The official liquidator has not pointed out as to how and in what way the revival of the company would affect any creditors or it is merely a facade for receiving back the valuable assets of the company. In the absence of any such plea and its establishment and in view of the fact that no objections have been received so far from any quarters and in view of the fact that sufficient precautions could be ordered for taking care of those creditors and claimant, if any, who despite two earlier notices have chosen to refrain from lodging their claim, the court is unable to accept the official liquidator''s objections against allowing this application. The peculiar facts and circumstances of the case on hand and specific stand taken by the applicant in respect of the company''s creditors or claimants and the assurance to honour the legitimate claims of any other claimant or creditors and willingness to keep aside a sum to meet with such claims, militate against the plea of the official liquidator for rejecting the application only on the ground of applicant''s non resorting to section 391 and invoking powers for recalling the winding up order.

At the same time this court needs to be mindful of the fact that while recalling of the order of winding up and permitting the applicant to revive the company the claimants and creditors, if any, whose interest is likely to be affected on account of such recalling needs to be safeguarded adequately. The effect of recalling of order of winding up need not result into absolving the company or its directors of any of their statutory and other liabilities nor is it to result into depriving any creditor or claimant from pressing and realising his legitimate legally admissible claim and dues. The court shall have to make appropriate observations and provide appropriate safeguards in the order itself. Counsel for the applicant have under the instructions of the applicant already made submission for safeguarding the interest of those creditors and claimant whose interest was likely to be prejudiced on account of recalling of the order of winding up.

Ms. Jani, learned counsel for the applicant submits that as mentioned in the order dated March 18, 2010, the applicant had kept ready the demand drafts/bankers'' cheques for Rs. 70,00,000 and they have already been handed over to learned counsel for the secured creditor, Shri Pahwa, learned counsel for the secured creditor confirms the said fact.

Shri Motiramani, learned counsel who represents the original petitioner in Company Petition No. 34 of 1976 is also present and he submits that as no grievance is surviving as on date he would not object if the order is passed allowing this application filed by the applicant, and he in that view of the matter would seek permission to withdraw Company Petition No. 34 of 1976. He further states that necessary letter to that effect has already been produced on page 20 of the present application.

Shri Pahwa, learned counsel hands over documents which were lying with the bank to learned counsel Ms. Jani for the applicant in lieu of acknowledgment towards acceptance of the banker''s cheques and fulfilment of the company''s liabilities towards the SBI and its assignees.

Shri Yadav, learned counsel appearing for the official liquidator at this stage submits that the amount which is lying as mentioned on page 34 be considered while passing appropriate order. He further submits that if this court is inclined to accept the application, then sufficient care be taken in view of the fund position as mentioned in page 34 and the expenses so far incurred by the office of the official liquidator be permitted to be deducted and rest of the amount be ordered as may be deemed fit by the court. The fund position mentioned on page 34 of the application as on May 28, 2009, is as under:

Counsel for the applicant has reiterated its earlier stand and submitted that the applicant is prepared to file an undertaking to this court, that if the order of winding up is recalled and assets are handed over back to the company and after this company is revived, then any legally enforceable claim and admissible debt against the company would be honoured and the court may order deducting of an amount that may be deemed fit and proper by the court, from the aforesaid amount of Rs. 27,27,960 plus accrued interest thereon after the official liquidator''s deduction of its expenses so far incurred, to be deposited in the scheduled bank for a period of 3 years so that the same may earn interest, and out of said amount if any creditor or claimant comes forward for admissible claim then the same should be met out of that. Independent of this amount also, the creditor, if any, lodges claim directly with the company and if it is admissible in law, the same will be honoured. This undertaking may be ordered to be filed within a period of one week after a copy of the order is received.

This court, in view of the aforesaid facts and circumstances, is of the opinion that the application deserves to be allowed and the order of winding up deserves to be recalled on issuance of proper and adequate safeguards in the interest of creditors and claimant if any. This court is of the view that the official liquidator shall issue appropriate advertisement in two languages namely in English and Gujarati in at least two daily newspapers of good circulation in the area where the company was situated containing gist of this order and safeguards provided hereinafter in this order so as to put to notice all the concerned and making them aware about the safeguards, otherwise the willingness of applicant to keep aside a sum for three years by the official liquidator in fixed deposit for meeting any legally admissible claim of any claimant or creditor would be merely a paper arrangement without any meaning, as there would not be any occasion for such claimant or creditors if any to know that there exists such arrangements. In view of the aforesaid the following order and directions are issued in the interest of justice:

(a) The official liquidator is directed to deduct the amount towards expenses incurred so far including the expenses that would be incurred for releasing advertisement as stated hereinabove for intimating the claimants and creditors if any about the safeguard being provided hereinafter, and after arriving at an exact figure (including interest earned on the total amount of Rs. 27,27,960) same be notified to the other side or its advocate. From the amount, thus arrived at, 50 per cent. thereof be deposited in any scheduled bank by the official liquidator himself and that amount shall be kept for a period of 3 years. If any admissible claim is lodged, during the period of these three years then after honouring the same, the remaining amount if any, shall be returned to the applicant-company. The official liquidator is to function as the official liquidator qua the sum in fixed deposit and disburse the same to the claimant or creditors in accordance with law and in case the claim amount exceeds the amount so fixed deposited then the company would be liable to make good the deficit if it fails to meet with this liability then the same would be realised from its assets as if the company is under liquidation. If no claim is lodged by any one then the entire amount so deposited with interest accrued thereon be returned to the company.

(b) After effecting the aforesaid deductions namely expenses so far incurred and to be incurred for advertisement by the official liquidator and after depositing 50 per cent. of the remaining amount in fixed deposit for three years as ordered hereinabove the remaining 50 per cent. amount be handed over by account payee cheque to the applicant for the company.

(c) The applicant shall file an undertaking to this court within a week from the receipt of the order that:

(1) He has given up his claim to recover any outstanding claim and dues from the company in any capacities and hereafter he or his legal heirs, and assignees shall have no right or entitlement to recover any past dues, amount or past claim from the company on its revival.

(2) All legally admissible claims if made against the company then the same would be accepted and fulfilled by the company or even from the assets of the company as legally admissible claim of any creditor or claimant cannot be prejudiced in any manner on account of the recalling of the winding up order.

(3) The creditor or claimant against the company shall also have right to move this court for realising his or her legally admissible claim and dues from the amount ordered to be placed into fixed deposit by the court under this order. If such claims or dues are paid then the company, its assignees or the applicant shall have no objection and to that extent the deposit amount will get reduced and in turn the company will receive only the remaining amount of the total amount deposited. In case such claim or dues adjudged to be higher than the amount deposited then the balance amount would be recoverable from the assets of the company as if the company is still under liquidation.

(4) The applicant and company or its management shall not alienate or encumber the assets of the company for any other purpose except for and in order to keep the company going and for helping the company being revived.

(5) The company and its management would honour all the statutory and legal liabilities and would not seek any exemption therefrom on account of the recalling of winding up order.

(d) The official liquidator shall on receipt of copy of such undertaking from the applicant handover possession of the assets of the company to the applicant for the company without any delay.

(e) The official liquidator shall issue an advertisement in two languages, namely, English and Gujarati in atleast two daily newspapers of having good circulation in the area where the company was situated and functioning. The advertisement shall contain specifically the safeguards provided by this court, so that the claimants and creditors, if any, and also by the company may know that their legally admissible claim against the company would be entertained by the official liquidator, despite the winding up order being recalled, as an amount is being kept in fixed deposit for a period of 3 years.

The winding up order dated November 22, 1976, passed in Company Petition No. 34 of 1976, in view of the aforesaid facts, circumstances and directions, is recalled. The company petition is restored to file and is permitted to be withdrawn.

Allowing this application would not be absolving the company and its directors of their legal and statutory liabilities, if any, arising out of and under the winding up proceedings.

This company application is disposed of in above terms. A copy of this order be placed in Company Petition No. 34 of 1976 and thus also be a part of those proceedings.