Thermopack Industries vs Ajay Electrical Industries Ltd.

Sudershan Kumar Misra, J.—The applicant was a promoter, as well as an Ex-Director, of the company - M/s Ajay Electrical Industries Ltd. In 1994, after it had incurred heavy losses, the company filed a reference to the Board of Industrial and Financial Reconstruction (BIFR) u/s 15(1), SICA. The BIFR ordered the winding up of the company on 25th September, 2000. In appeal, the AAIFR affirmed that order. Consequently, on 9th March, 2004, this Court ordered the winding up of the company and appointed the Official Liquidator attached to this Court, as the provisional liquidator to take over its assets. Pursuant to this order, the factory of the company at Mohali is lying sealed under the custody of the provisional liquidator. The ex-management of the company has also filed Co. Appln. No. 1310/09, proposing a scheme for revival of the company, which is pending consideration in this Court.

By the instant application, the applicant prays for de- sealing of the factory premises of the company at Mohali, since the company has taken various steps towards settling the claims of its secured and preferential creditors and all the unsecured claims admitted by the provisional liquidator, details whereof have been given in the instant application. It is stated that the ex-management has already settled claims to the tune of Rs. 1163.18 lakhs, and that the only remaining claim that is yet to be settled is that of the Provident Fund Commissioner, Chandigarh, of Rs. 47,59,197/-. It is also alleged that the instant application has been necessitated so that the ex- management may be given an opportunity to also repair the premises that have become dilapidated and run down. It is also averred that in this way, if the scheme for revival is sanctioned by this Court, the same may be in working condition without any further delay.

In reply, the Official Liquidator states that apart from the bill of the security agency for the period up to 31st December, 2009, amounting to Rs. 10,11,191/- and the aforesaid claim of the Provident Fund Commissioner, Chandigarh, which has been admitted as a preferential claim, no other claims are pending adjudication in respect of the respondent company.

In addition, on 4th December, 2009 in Co. A.(SB) No. 41 of 2009, this Court has directed the Official Liquidator to examine the claims of certain workers, who had instituted that appeal through the Secretary of their Union, namely, M/s Ajay Electrical Industries Workers Union (Regd.), afresh on merits. This claim is stated to be for an amount of Rs. 4,19,02,477/-. It may be noted that these workers have also moved Co. Appln. No. 1391/09, praying for impleadment in this application, as well as for leave to file their objections to the proposed scheme of revival. That application is still pending. However, since Mr. Rai has been heard extensively on behalf of those workers over a number of days, and the directions that follow have also been made, inter alia, with his consent, the prayer for impleadment in this application is rendered infructuous and does not survive.

Counsel for the applicant states, on instructions, that notwithstanding the provisions for labour dues, as set down in the estimated fund outlay and means of financing dated 7th October, 2009 in Annexure "A. to the proposed Scheme of revival that is detailed in Co. Appln. No. 1310/09, and as a condition of the grant of orders sought by the applicant, the applicant undertakes to pay all further dues of all workmen who are found entitled to the same in law at any later stage.

Counsel for the applicant has undertaken to pay the full amount payable to the Provident Fund Commissioner, Chandigarh, to the Official Liquidator within two days of the date of this order. He also undertakes that the charges of the security agency shall be paid as soon as the same are certified as payable by the Official Liquidator after scrutinizing that claim.

In In Re.: Wearwell Cycle Co. (I.) Ltd. (In Liquidation), , this Court has held in para 31 thereof as follows:

Whenever a choice is available to the court between the revival of the company and its winding up, the court must as far as possible lean in favour of the revival of the company for that will have the prospect of generating jobs and putting the assets of the company to productive use as against auction of assets and distribution of the proceedings by the Official Liquidator to various parties.

Here, apart from the need to ensure payment of unpaid dues that stand admitted by the Official Liquidator, and to secure the premises and machinery, the chief cause for concern was the need to safeguard the dues of any workers who may be found entitled to relief later on. On this aspect also, Mr. L.B. Rai was heard extensively and these directions are being given with his consent. In my view, looking to the circumstances of the case, since the interests of the workers are reasonably safeguarded, and the fact that the ex-Management has undertaken to pay all current dues immediately, and keeping in mind the ratio in Wearwell Cycle Co. (supra), there can be no impediment in permitting the factory premises to be de-sealed and handed over to the ex-Management, subject to the following conditions that have been not only suggested but also agreed to by all the parties present.

Consequently, the factory premises shall be de-sealed and handed over to the ex-Management subject to the following conditions:

i) The possession of the plant and machinery shall be handed over to the ex-management of the company (in liquidation) to enable the ex-management to run the factory. The ex-management shall be responsible for the repair, maintenance and upkeep of the factory premises, as well as that of the machinery, at its own expense. Furthermore, since the scheme of revival propounded by the ex-management is sub judice, therefore, it is made clear that all expenses incurred, including any capital expenses, shall be solely at the risk of the ex-management, who shall not be entitled to any reimbursement in case the scheme, or any part thereof, as propounded, either fails or is not accepted by this Court.

ii) The ex-management shall hand over the full amount payable to the Provident Fund Commissioner, Chandigarh, in Court, within two days of the date of this order.

iii) The ex-management shall also undertake to pay the charges of the security agency, which may be certified by the Official Liquidator, who is currently in the process of scrutinizing that claim.

iv) The ex-management shall not sell, alienate, part with possession or otherwise encumber the plant and machinery, which may be handed over by the Official Liquidator to the ex-management.

v) The ex-management shall maintain and file a monthly statement of accounts, reflecting the production, nature of business and every other relevant aspect, to the Official Liquidator, by the 7th of each calendar month for the previous month.

vi) As regards the bank accounts, for the time being, instead of being permitted to operate any existing bank account, the ex- management shall be permitted to open a fresh bank account. The account statements, showing up-to-date transactions, shall be furnished to the Official Liquidator by the 7th of every calendar month.

vii) A proper, up-to-date inventory of the material lying at the premises, or acquired during the course of business, shall be maintained and a copy of this up-to-date stock statement shall be furnished to the Official Liquidator by the 7th of every calendar month.

viii) Before handing over possession to the ex-management, an inventory is to be made of the plant and machinery available at the site, one week from today. A representative of the ex- management shall be associated with the preparation of this inventory, which is to be made by the Official Liquidator. It is also open to the Official Liquidator to take photographs and video recording of the premises, as well as of the plant and machinery, for better identification of whatever is found at the site, at the expense of the ex-management.

ix) Possession, in terms of this order, shall be handed over to Mrs. Shyama Aggarwal, ex-Managing Director of the company (in liquidation).

x) It is open to the Official Liquidator to apply for taking over the premises with all assets, if any of these directions are violated, or if he is otherwise of the opinion that it is necessary.

The application stands disposed of.