In The Matter Of Punjab Maize Products Ltd.

M.S Liberhan, J.:— Implementation of 1977 sanctioned processing plant in joint sector by Govt. of India, taken in 1979, commissioned Glucose plant in 1980, Destrose Monohydrate and Starch units became operative some where in 1981 and 1982. The company was closed down in June, 1983. Rehabilitation of the company was proposed at Rs. 187.00 lacs. Mr. T.S Rai and Associates applicants proposal for rehabilitation of the company was accepted in 1985. Petition for winding up by M/s. Universal Starch Chem Allied Ltd. on company's being unable to pay admitted debts, was allowed in 1986. Winding up order was affirmed in appeal vide order dated 24.2.1992

2. The petitioners sought the revocation of the winding up approval of the revival scheme proposed and interim stay during the winding up proceedings, and further restraining the official liquidator from taking possession of the company during the pendency of the proceedings. Petitioner T.S Rai's proposal by his scheme 1985 for rehabilitation and revival of company was approved by Industrial Finance Corporation of India.

3. In the meanwhile the Govt. of India approved and allowed dis-investment of the share-holding of Indian Drugs & Pharmaceuticals Ltd. (IDPL) in Punjab Maize Products Limited (PMPL) under liquidation, in favour of Punjab State Industrial Development Corporation (PSIDC). Promoters too approved T.S Rai's scheme of revival. Share holding of promoters on payment 10% of share money transferred in favour of T.S Rai & Associates who were allowed to take over the company subject to their incurring expenditure of 2 lacs per month. Apart from ploughing in 5.00 crores, alternative, basic material found i.e rice machinery etc. for it installed and successfully experimented. It got a sanction of financial institutions like IDBI, IFCI, Oriental Insurance Company and Canara Bank. Memo of understanding dated 15.3.1991 with financial institutions and secured creditors as permitted by the High Court, for repayment of secured loans with bank guarantee by Standard and Chartered Bank was signed. It is averred that in the eventuality of company being liquidated, no assets shall left for payment to un-secured creditors, after the liability of secured creditors is met out.

4. During the course of proceedings vide order dated 4.4.1993 applicants were allowed to sign the memorandum of understanding without prejudice to the rights of creditors or other parties subject to the final order, applicants were injuncted from alienating or disposing of assets of the Company and the usual business of the company was allowed to be carried on.

5. Notice was served on the industrial and financial institutes, as well as on the public at large. Notice was also duly published in daily news papers on 23.1.1994, and in the official gazette on 7.1.1994 Notice under Rule 86 for report of the official liquidator was served on the official liquidator. A similar notice was sent to the Govt. of India through Regional Director. The Central Govt. and the Official Liquidator filed their reports.

6. It may be noticed that similar claim was declined on 27.10.1989 in C.P No. 126 of 1986. Another similar request made by the petitioners was dismissed as withdrawn in C.P 47 of 1992 vide order dated 20.11.1992 The respondents contend that said judgment operates as resjudicata. The assets of 370 lacs have been given to Mr. T.S Rai and Associates for a paltry sum of Rs. 37 lacs which is against public interest. The unsecured creditors have been offered only 20% of their debt and that too in three, six monthly instalments without any interest. Thus the scheme is not bonafide apart from the fact that it is not feasible and is against the public interest.

7. On hearing the learned counsel for the parties this Court vide its order dated 12.4.1994 directed to hold meetings, under the Chairpersons appointed by the Court, of the secured, unsecured creditors and the shareholders to consider the scheme put-forth by the applicants for rehabilitation of the company.

8. In compliance with the order of this Court the shareholders Jaswant Singh Rai, Iqbal Singh Rai, Mrs. Surjit Kaur, Tarlochan Singh Rai, Rai Management, and Tech. Services Limited Channel Island, U.K holders of 25 lacs shares approved the scheme. I may hasten to add that Rai family is holder of 16 shares while Rai Management & Tech. Services Ltd. U.K is holder of 99.9976 shares. It may be noticed that it is a virtual taking over of the company by family of Mr. T.S Rai.

9. The meeting of the secured creditors was attended by five out of 10 secured creditors entitled to the total value of the company amounting to 4 cores 25 lacs to approve the memorandum of understanding already signed on 26.7.1993

10. It would be expedient to note few facts with respect to the meeting held by the unsecured creditors. There are total 106 unsecured creditors, out of which only 13 of them attended the meeting either being present in person or through proxies. Out of unsecured creditors, 8 holding 83,731” of the unsecured debt approved the scheme. I may hasten to add that PSIDC which has already transferred its shares to the proposal owes as to creditor Rs. 1,94,17,715 which makes 76,3200%. The other creditors who have got some substantive amounts due is National Small Industrial Corporation Ltd. which has got to its credit 14,23,694.48 i.e 5,5958% of the debt. The creditors Karam Chand Thapar and Shakti Coal Traders, Raja Ram to whom Rs. 30,06076, 255872 and 159097 respectively are due. It makes them creditors to the extent of 3,3297%.

11. It is well established that Court has to address itself before approval of scheme of revival of: Feasibility and viability of the scheme bonafide of the applicants and the application, solvency of applicants, ensure that scheme is not a cloak or a device to cover the misdeeds of promoters or shareholders, compunction of commercial morality public interest, the circumstances likely to result in perilous consequences affecting members of the public at large with no possibility of the same being compensated with cost, reasonableness of the compromise, public interest as well as of the creditors interest, and the circumstances necessitating the proposed arrangement, the objects to be achieved at by the said arrangement, the effect of it on the material interest of creditors, debenture holders, trustees of the debenture holders, justness of the scheme, the latest financial position of the company, the pendency of any investigating proceedings, smooth and satisfactory working of the scheme, violation of any law or deposits etc. The role of the Court is vital and of vigilant participant. The approach for revival is of pragmatic. S.M Holding Finance Private Ltd. v. Mysore Machinery Manufacturers Ltd., (In Liquidation) . 1993 78 Company Cases 432 Gulabchand Chhotajal Parikh v. State of Gujarat,2 Sakamari Steel & Alloys Ltd.,3 In re. (Bombay) Minerva Mills Ltd. v. Union of India,4,5 and 6 may be referred to for drawing support for various considerations spelled out above.

12. Under orders of this Court separate meetings of share holders, secured creditors and unsecured creditors were held on 12.4.1994 Share-holders and secured creditors approved the scheme of rehabilitation on its entirety particularly keeping in view the memo of understanding signed by them as well as the guarantee furnished. Interest on secured loan/amount till the date of signing memo of understanding i.e 26.7.1993 was waived off.

13. Out of 106 unsecured creditors 12 attended the meeting. Eight out of 12 constituting 83.7318% unsecured credit supported the scheme annexure ‘X’. Fourt constituting the credit to the extent 3,2777% opposed the compromise. Official liquidator reported that payments are being made per schedule to memo of under standing. Regional Director reported that the affairs of the company do not appear to have been conducted in any manner prejudicial to the interest of members of public.

14. In totality of circumstances i.e investment made by the non-resident Indians, company based in foreign country, welfare of labour, change of raw material for the plant as well as change in plant brought, substantial/large number of creditors, secured & unsecured for substantial amount supported by the scheme of rehabilitation, it would be in the interest of company to give a chance of rehabilitation. I may add that in spite of wide publication of notice neither any un-secured creditor has come forward to oppose the scheme nor I find any commercial immorality or it being against public interest under the garb or a cloak of rehabilitation is likely to defraud the general public or the persons interested. There is no gainsaying in the eventuality of the company being wound up the assets of the company would hardly be able to clear the liabilities of the secured creditors only. Nothing would survive for un-secured creditors or the share holders. There is not an iota of evidence on record even a suggestion on the part of official liquidator or Central Government or any creditor, share-holder, debenture holder that the scheme is either not feasible or not viable or it lacks bonafides.

15. Sordid fact that un-secured creditors the value of percentage is opposed to compromise cannot be permitted to hold the other creditors or the company to ransom particularly when small creditors to the tune of Rs. 5000/- are to be paid in full. I may hasten to add that out of un-secured creditors for Rs. 2,54,42,421.00 creditors of Rs. 1,94,17,715/- has already accepted the compromise. Petitioner has also undertaken that the unsecured creditors except the promoters shall be paid 20% of their amount due.

16. In view of this undertaking given by the petitioner the arrangement (Annexure P1 in C.P 29 of 1993) is accepted. The winding up order dated 25.11.1986 passed by this Court in C.P.No 66 of 1993 is recalled. Operation of the winding up order has already, been stayed by this court vide orders dated 19.3.1993 passed in C.A No. 80 of 1993. The Official Liquidator is further directed to hand back the possession of the assets and books of accounts etc., if any, to the company through its Managing Director.

R.M.S

Arrangement accepted.