1. The petition for the winding up of the company, the Mysore Electro Chemical Works Ltd., hereinafter referred as the company, was filed by one of its creditors, in Coy Petn. 5/71. The ground on which winding up of the company was sought was that the company was not able to pay its debts. The said petition was admitted by this Court on the 16th of April, 1971. The Directors of the company requested the Court not to pass an order of winding up immediately, so that they could have some time to settle the claims of the creditors. As they were not able to effect any settlement, it became necessary to pass an order of winding up of the company. This Court, therefore, by its order dt. 11th of Feb. 1972 directed the company to be wound up. The Official Liquidator was asked to take charge of the factory belonging to the company. Accordingly, he assumed charge of the assets of the company and submitted his report. After the report of the Official Liquidator was received the Court appointed an Auditor and two Engineers to make a report to the Court regarding the affairs of the company and the market value of the assets belonging to the company. B.K Ramadyani & Co. Chartered Accountants, who were asked to look into the accounts of the company and make a report submitted the report on 14th of Sep. 1972. According to that report the share capital of the company consisted of 5,385 cumulative preference shares of the face value of Rs. 100 each; 68,658 ‘A’ class equity shares of Rs. 10 each (reduced to Rs. 5 each) as per order of this Court passed on 23-11-62) and 2,59,081 shares of Rs. 10 each. In all the total issued share capital of the company was Rs. 34,72,600. According to the Auditors, a sum of Rs. 92,56,948 was due by the company to the secured creditors. A sum of Rs. 19,17,983-91p. was due to Govt. by way of taxes, etc., a sum of Rs. 6,34,599-39p. was due to the employees (inclusive of the contribution payable under the Provident Funds Act and the Employees' State Insurance Act), a sum of Rs. 10,37,604-04p. was due to the foreign collaborators, a sum of Rs. 77,515-98p. was due as unsecured loans and a sum of Rs. 45,87,527-61p. was due to other ??? secured creditors. In all a sum of Rs. 1,75,12,178-93p. was due and payable by the company according to the accounts that had been kept by the company. Sri S.G Ramachandra, Chief Engineer of Kirloskar Electric Coy Ltd., who was requested to make a report regarding the market value of plant and machinery belonging to the company reported to the Court that they were worth Rs. 31,42,000. Sri B. Vittala Murthy, retired Chief Engineer, Govt. of Mysore, who was requested to make a report to the Court regarding the market value of the building and land belonging to the company, reported that they were worth Rs. 15,69,690.

2. The position that emerged from the three reports, namely, the reports of the Auditor and of the two valuers, was that the total assess of the company were insufficient even to meet the claims of all the secured creditors. The Official Liquidator, however, reported, that the factory of the company was in sound working condition and was capable of being restarted. At that stage I made an order authorising the Official Liquidator to find out whether it was possible to lease out the factory in favour of any person who was interested in running the factory. In the meanwhile, I directed notices to be issued to the State Govt. and also to the Central Govt. to find out whether either of them was interested in taking over the company and running it. The State Govt. was not interested in doing so. The Central Govt. however, evinced some interest at the commencement. They deputed their officials to make an investigation into the affairs of the company under S. 15A of the Industries (Development and Regulation) Act, 1951. On receipt of the report of the officials so deputed, the Central Govt. reported to this Court that it was not interested in taking over the management of the company. Pursuant to the notice issued by the Official Liquidator calling for tenders from persons who were interested in running the company on lease, one or two proposals were lodged before the Court. In the meanwhile certain persons proposed certain schemes of reconstruction of the company for acceptance of the Court. When the question of referring those draft schemes for the consideration of the shareholders, secured creditors and unsecured creditors was taken up for consideration, only three persons requested the Court to take further action on the draft schemes proposed by them and others withdrew. The three schemes that were ultimately taken up for consideration by this Court were those proposed by—

(1) Sri Ganesh Narayan Jatia (hereinafter referred to as applicant); (2) Bombay Gas Co. Ltd.; and (3) Kothari & Sons.

3. By an order passed by this Court on 15th Sep. 1972, the meetings of the shareholders of the company, the secured creditors of the company and the unsecured creditors of the company were directed to be called by the Official Liquidator on the 11th Nov. 1972. The Official Liquidator was appointed as the Chairman of the three meetings. After the meetings were held, the Off Liquidator filed his report about the proceedings of the three meetings. It transpired that the draft scheme proposed by Ganesh Narayan Jatia was approved by the requisite majority at the meeting of the shareholders of the company. The said scheme did not secure the requisite majority at the other two meetings. The draft schemes proposed by Bombay Gas Co. Ltd. and Kothari & Sons, did not secure requisite majority in any of the three meetings.

4. After hearing the parties and considering the report filed by the Official Liquidator by my order dt. 35th Dec. 1972, I directed another meeting of the unsecured creditors to be held for reconsideration of all the three schemes which had gone before them earlier. I also directed that the question of placing the three schemes before the secured creditors should be deferred for consideration at a later stage. The meeting of the unsecured creditors was directed to be held on the 17th Feb. 1973. The Official Liquidator was appointed as the Chairman of that meriting. After the meeting was held, the Official Liquidator filed his report before the Court. His report was that the scheme proposed by Ganesh Narayan Jatia had been approved by 96 per cent of the persons present at the time of the meeting and that persons who were entitled to 92.8 per cent of the total unsecured loans due by the company had approved the scheme. The other two schemes did not secure the requisite majority.

5. After the report of the meeting of the unsecured creditors held on 17-2-1973 was filed before this Court the Official Liquidator submitted that he was not willing to file a petition under Rule 79 of the Companies (Court) Rules as the meeting of secured creditors, had not yet been held. At that stage, Bhoopendra Kumar Moolchand, one of the unsecured creditors of the company, prayed for leave of this Court under para 3 of Rule 79 of the Companies (Court) Rules to present a petition for confirmation of the scheme proposed by Ganesh Narayan Jatia. On such leave being granted, a petition was filed by the said creditor in CP. 5/73 requesting the Court to sanction the scheme proposed by Ganesh Narayan Jatia with such modifications as the Court might deem fit in the circumstances of the case. The Court thereafter directed that the filing of the above petition, Company Petition 5/73 should be advertised in all the newspapers in which the notice of the meetings of the shareholders, unsecured creditors and secured creditors had been advertised. It was also ordered that such advertisements should be effected within 24th March, 1973. It was notified that the Coy Pen. 5/73 would be taken up for consideration by this Court on the 5th April 1973.

6. Although at some earlier stages of these proceedings leading to the filing of Coy Petn. 5/73 some persons claiming to be the shareholders or creditors of the company, had entered appearance and lodged their objections, when Coy. Petn. 5/73 was taken up for consideration on April 5, 1973, nobody appeared in this Court and opposed the petition. The two other persons, namely, Bombay Gas Co. Ltd. and Kothari & Sons, who had proposed alternative schemes submitted through their Counsel that they were not interested in participating in the proceedings any further. Hence, the only persons, who ultimately participated in these proceedings, are G.N Jatia, the propounder of the scheme, the petitioner in Coy Petn. 5/73, the petitioner in Coy Petn. 5/71 at whose instance the company was ordered to be wound up, the Official Liquidator, the State Govt. the Mysore State Financial Corpn. the Syndicate Bank, Dept of Defence Supplies, Ministry of Defence and the Director General of Supplies and Disposals, New Delhi.

7. Sri A.B Divan, learned Counsel appeared for G.N Jatia and the petitioner in Coy Petn. 5/73; Sri S. Vijay Shankar, appeared for the Official Liquidator; Sri S.G Sundaraswamy appeared for the petitioner in Coy Petn. 5/71 and for the Mysore State Financial Corpn; Sri N. Venkatachala, Addl. Govt. Advocate appearned for the Govt. of Mysore, Sri Acharya appeared for the Syndicate Bank, Bangalore and Sri B. Ramachandra Rao, Sr. Counsel for Cen Govt. appeared for the Dept of Defence Supplies, Ministry of Defence and the Director General of Supplies and Disposals, New Delhi.

8. As required by S. 394-A, a notice was issued to the Govt. of India to make its representation with regard to the scheme. The Govt. of India has filed its representation in the form of an affidavit d/. 5-12-1972 sworn to by the Regional Director, Company Law Board, Madras. In the said affidavit it is stated that the scheme propounded by G.N Jatia may be sanctioned with necessary safeguards protecting the interest of all concerned.

9. Before going into the merits of the scheme proposed by G.N Jatia, it is necessary to dispose of one matter, namely, whether it was necessary for the Court in the circumstances of this case to have called a meeting of the secured creditors. As already mentioned the question whether the meeting of the secured creditors should be called for was deferred to be considered at a later stage. The secured creditors are four in number. They are the Mysore State Financial Corpn. the Govt. of Mysore; the Syndicate Bank and the Union of India. In the scheme proposed by G.N Jatia which was placed for the consideration of the shareholders and the unsecured creditors, it had been stated that the claims of the secured creditors would be settled by negotiations with each of them. In the course of these proceedings, the negotiated settlements arrived at between the person who had propounded the scheme and the secured creditors have been produced. All the four secured creditors are impleaded as respondents to the Coy Petn. 5/73. Although they are all secured creditors, their rights against the company are different. With regard to the properties of their claims against the company, there is no agreement between the parties. In such a situation, I am of the opinion that it is not necessary to call a meeting of the secured creditors as their claims against the company can very well be disposed of in the course of the order having regard to the negotiated settlements arrived at between the propounder of the scheme and the secured creditors.

10. The above view of mine receives support from page 700 of Palmer's Company Law—21st Edn. The relevant portion reads as follows:

“….. If there are different groups within a class the interests of which are different from the rest of the class, or which are to be treated differently under the scheme, such groups must be treated as separate classes for the purpose of the scheme. Moreover, when the company has decided what classes are necessary parties to the scheme, it may happen that one class may consist of a small number of persons who will all be willing to be bound by the scheme. In that case it is not the practice to hold a meeting of that class, but to make the class a party to the scheme and to obtain the consent of all its members to be bound.”

11. The Counsel appearing for the four secured creditors and the counsel for G.N Jatia have agreed that if the scheme is sanctioned by incorporating negotiated settlements arrived at between them, they would be bound by the scheme. Hence, I hold that there is no necessity to call a meeting of the secured creditors although the scheme ultimately would bind them also.

12. I shall next take up for consideration whether the scheme propounded by G.N Jatia, which has received the requisite majority at the meeting of the shareholders and the unsecured creditors, should be sanctioned by this Court. As already mentioned earlier, no person who is likely to be affected by this scheme if sanctioned by this Court, has entered appearance in this Court and lodged his objection to it. Still there is a duty cast upon the Court, to examine the scheme and find out whether it has been put forward bona fide and in good faith. The Court should also bear in mind the ordinary rule governing reconstruction and amalgamation of companies which requires the Court to examine whether the scheme put forward is a genuine scheme or a scheme in its sinister sense to get over the consequences of acts of misconduct which the persons incharge of the affairs of the company till the date of the winding up might have committed. In other words, the Court should consider whether the acceptance of the scheme would violate ordinary principles of commercial morality. Having these principles in the background, I shall proceed to examine the scheme put forward by G.N Jatia.

13. I have already referred to the reports of the Auditors and the valuers regarding the position of the company on the date of the winding up. The assets of the company are insufficient even to meet the demands of the secured creditors. If the scheme that has been put forward is not accepted and the assets of the company are disposed of in the usual way in the course of the winding up; none of the shareholders or unsecured creditors would get even a pie out of the assets of company. The scheme which has been placed before the Court for its acceptance envisaged a fair return to persons belonging to all classes. In so far as the secured creditors are concerned, they would be paid the entire amount due to them. But the repayment of the amounts would be postponed. In the case of all the secured creditors there is a provision for rescheduling of payments of sums due to them. All the secured creditors have agreed to receive the amounts due to them on the dates specified in the agreement entered into by them with the propounds of the scheme and in such instalments stipulated in the said agreement.

14. In so far as the unsecured creditors (excluding foreign collaborators), are concerned, the scheme provides that on proof of the amount due to them, they would be entitled to receive 50 per cent of the amount due to them without interest within three months of the date of the commencement of production in full and final settlement of their dues and in the alternative to accept payment of the full amount due and payable by the company without interest in four equal instalments of 25 per cent each, the last instalment being payable not later than approximately three years from the date of the commencement of production. In so far as the foreign collaborators are concerned, there is a provision for settlement to be arrived at by negotiations with them. Sri B. Gopalaiah, learned Counsel for the foreign collaborators Accumulatorean Fabric Sonnenchiein Gmbh, West Germany, is aggreable to settle the claim of the foreign collaborators with the propounder of the scheme. In so far as the shareholders are concerned, provision has been made for buying up the shares held by equity shareholders of Rs. 5 at Rs. 3-75 per share and the shares held by equity shareholders of Rs. 10 at Rs. 7-50 per share.

15. The scheme of G.N Jatia has received the requisite majority at the meetings of the shareholders and the unsecured creditors. Ordinarily, the Court, unless there are compelling circumstances, should accept the verdict of the requisite majority at those meetings. I have no material in this case to reject the scheme which has been approved at the meetings of the shareholders and the unsecured creditors. The Official Liquidator also has not placed before the Court any material to hold that the scheme is intended to be a cover to protect the interests of those who were incharge of the affairs of the company and is only a shield against acts of malfeasance, misfeasance and non-feasance committed by them, although the Official Liquidator has been in incharge of the affairs of the company for more than a year. I, therefore, hold that the scheme proposed by G.N Jatia deserves to be sanctioned by the Court with the modifications which are going to be indicated hereafter.

16. The first secured creditor of the company is the Mysore State Financial Corpn. It has obtained a decree against the company in Mis. Case 3/71 on the file of the Dist Judge, Bangalore. It is stated that a sum of Rs. 26,94,912-22p. is due by the company to the Corpn. as on 31st March, 1972. The said sum includes a sum of Rs. 7,95,993-10p. by way of interest. Sriyuths Divan and Sundaraswamy have filed a joint memo stating that the amount payable to the State Financial Corpn. shall be directed to be paid by the company in the fallowing manner: * *

17. There is not much variance between what is stated in Clause I of Annexure A to the scheme approved at the meeting of the shareholders and the secured creditors and the joint memo referred to above. The joint memo contains the necessary details regarding the manner in which the company should pay the amount due to the Corpn. The proposal contained in the joint memo appears to be a reasonable one and deserves to be approved by the Court. It is accordingly approved.

18. The next secured creditor is the Govt. of Mysore. Sriyuths Divan and N. Venkatachala, Addl. Govt. Advocate, have filed a joint memo suggesting certain modifications to paras 2, 3, 4 and 5 of Clause II of the scheme approval at the meeting of the shareholders and the unsecured creditors. I accept the following modified arrangement suggested in the joint memo for the same reasons which persuaded me to accept the joint memo filed on behalf of the Mysore State Financial Corporation: * *

19. The next secured creditor is the Syndicate Bank. The aggreegate liability of the company to the Syndicate Bank as on 12-2-1972 is Rs. 51,40,945,-83 as under: * * *

20. A joint memo has been filed by Sri A.B Divan, learned Counsel for the applicant and Sri Tukaram S. Pai, learned Counsel for the Syndicate Bank indicating the manner in which the said liability should be discharged by the company. It reads as follows: * * * *

21. The liability of the company to the Syndicate Bank shall be discharged in accordance with the terms agreed upon between the parties and incorporated in the abovementioned joint memo.

22. The next secured creditor whose claim has got to be considered is the Union of India. The claim of the Union of India consists of three parts. The first part relates to its claim arising out of a contract entered into by the company with the Director General of Supplies and Disposals. Under the said contract a sum of Rs. 4,00,000 had been advanced by the Director General of Supplies and Disposals to the company and the said amount represents a secured loan. By an order passed today in Coy App. 128/73, the Syndicate Bank has been directed to refund a sum of Rs. 15,457-59p. to the Director General of Supplies and Disposals. In view of the order passed in Coy App. 128/73, the liability of the company is reduced by Rs. 15,457-59 p. The balance payable under this contract is Rs. 3,84,542-41 p. A joint memo has been filed by Sriyuths Divan and B. Ramachandra Rao learned Counsel for the Union of India, that the said sum of Rs. 3,84,542-41p. shall be repaid in the manner set out in paras (i) and (ii) of the said joint memo. This part of the claim of the Union of India shall be settled in accordance with the joint memo as follows * *

23. The second part of the claim of the Director General of Supplies and Disposals relates to the alleged liability of the company to pay a sum of Rs. 14,54,639-31 by way of damages for breach of contract committed by the company. In so far as this claim is concerned, the Union of India does not rank as a secured creditor. With regard to the above claim, there has been a settlement between the Union of India and the propounder of the scheme and it is found in Clauses III(a) to (d) of the joint memo referred to above. Under those clauses, on behalf of the company an undertaking has been given to supply certain quantities of goods at the price referred therein and it is stated that in the event of company fulfilling the said undertaking the claim for damages for breach of the contract referred to above shall stand discharged. It is stated that the terms of the new contract entered into for supplying the goods are commercially advantageous to the company. It is also mentioned that in the event of the company committing default in fulfilling the new contract, the Union of India would be at liberty to prosecute its claim for the sum of Rs. 14,54,639-39; and if and when such a claim is made, the company would be at liberty to defend itself. In the circumstances, I feel that the proposals contained in Clauses III(a) to (d), (which are extracted below), of the joint memo should be ordered to be implemented as a part of the scheme:

24. The third part of the claim of the Union of India is one arising out of a contract under which the company had undertaken to supply certain goods to the Dept of Defence Supplies in the Ministry of Defence, Govt. of India. Under the said contract a sum of Rs. 3,00,000 had been advanced as secured loan to the company by the Dept of Defence Supplies. Out of the said amount, by the order passed in Coy App. 432/72, a sum of Rs. 1,39,291-70p. which is in deposit with the Syndicate Bank, Bangalore, had been ordered to be refunded to the Dept. of Defence Supplies. The balance amount due under this head is Rs. 1,60,708-30 p. It is agreed that the said sum should be paid by the propounder of the scheme in cash for and on behalf of the company within 12 months of the final sanction of the scheme by this Court. A joint memo has been filed to that effect. The terms of the joint memo in regard to the above claim axe as follows. * *

25. The claim of the Union of India on this account shall be settled accordingly.

26. The scheme envisages two alternatives in so far as the unsecured creditors are concerned. They are to be found in Annexure ‘D’ of the scheme. An unsecured creditor is given option to accept 50 per cent of the amount due from the company within three months of the date of commencement of the production in full and final settlement of their dues or to accept payment of the full amount due and payable from the company without interest in four equal instalments of 25% each payable as under:

(i) 25% payable within three months of the commencement of production; (ii) 25% payable within 12 months after thq first instalment; (iii) 25% payable within 12 months after the second instalment; (iv) 25% payable within 12 months after the third instalment.

27. Any unsecured creditor to whom an amount not exceeding Rs. 3,000 (Rupees Three thousand) is due and payable by the company, shall be paid in full within three months of the commencement of production of the company's factory.

28. The said proposal is accepted at the meeting of the unsecured creditors. The petitioner, however, seeks certain directions with regard to the payments to be made to the unsecured creditors. As it is stated that the claims of the unsecured creditors require to be scrutinised by the company before payments are made. The directions sought in this behalf are—

(i) The company to advertise in two newspapers and give notice to unsecured creditors within one month of the final order sanctioning the scheme inviting claims of the unsecured creditors;

(ii) The unsecured creditors who have filed their claims before the Court shall file their claims separately before the company within one month thereafter; and

(iii) The unsecured creditors after their respective claims are admitted by the company be entitled to the amount mentioned in Annexure ‘D’. The directions sought appear to be reasonable and they shall form part of the scheme. It is however, made clear that it is open to any unsecured creditor whose claim is rejected by the company to approach this Court for adjudication of his claim and if on such adjudication it is found the company is liable he shall be paid accordingly.

29. At this stage, it is necessary to make a reference to a submission made by the learned Addl. Govt. Advocate with regard to the claim of the Govt. of Mysore for Sales Tax due and payable by the company. It was submitted by Sri N. Venkatachala, that the company should be directed to pay penalty and interest as required by the Mysore Sales Tax Act on the arrears of sales tax. The position of the Govt. in so far as this claim is concerned, is that of an unsecured creditor. The nominee of the Govt. participated in the meeting of the unsecured creditors. Annexure ‘B’ Clause I of the scheme, which is approved by the requisite majority at the meeting of the unsecured creditors states that the amounts due and payable by the company towards Sales Tax (State and Central) will be paid in full (without penalty or interest) in instalments as mentioned therein or as otherwise may be agreed by the concerned authorities.

30. The resolution passed at the meeting is binding on the Govt. when once the scheme is approved, the terms of the scheme would supersede the claims of the parties based on any agreement or status. Hence, the Govt. is not entitled to claim penalty or interest on the arrears of sales tax due and payable by the company up to the date of the meeting. The contention of the learned Addl. Govt. Advocate, in this behalf, is therefore rejected.

31. With regard to the arrears payable by the company under the Employees' Provident Fund Act, it is ordered that the payments may be made in accordance with Annexure ‘B’ of the scheme. The paras in Annexure ‘B’ shall be renumbered. Para 4 in Annexure ‘B’ shall be deleted as the matter dealt with in that paragraph has been disposed of otherwise earlier in the course of this order. Para 5 of Annexure ‘B’ shall be numbered as para 4.

32. There is no necessity to issue any further direction with regard to the claim of the Foreign Collaborators. In so far as they are concerned their rights are governed by the scheme, which are as follows:

33. I shall now take up for consideration the claims of the shareholders and the directions that may have to be given to the Directors and Auditors of the company. The claims of the shareholders shall be settled in accordance with Annexure ‘F’ of the proposed scheme.

34. It is prayed that the present pattern of the share capital shall be retained and it need not be converted into 40,00,000 (Forty lakhs) enquity shares of Re. 1 each. There is no intrinsic difference between what is now suggested and what is stated in the scheme. The company need not, therefore, alter the unissued share capital into 40,00,000 (Forty lakhs equity shares of Re. 1 each. In view of the above the penultimate para in Annexure ‘F’ shall stand suitably amended. It shall read as follows:

35. With regard to the Directors of the company, it is prayed that they should be called upon to sign the profit and loss account and the balance sheet of the company for the accounting year ended 31st March, 1971 and resign from the office of the Directors. They shall do so.

36. Similarly, Auditors, of the Coy Mandra & Co. shall after signing the profit and loss account and the balance sheet for the accounting year ended 31st March, 1971 as required by law resign from the office of Auditors. The Board of Directors shall appoint a new Auditor to fill the casual vacancy.

37. The company shall appoint a new set of Directors. It is proposed that the following members shall constitute the Board of Directors: * *

38. In the circumstances of the case, I feel that it would be necessary for ensuring the performance of the obligations of the propounder of the scheme, to appoint one more person as a member of the Board of Directors atleast for one year from today. I, therefore, order that the Secretary to the Govt. of Mysore Commerce and Industries Dept. or his nominee shall also be a member of the Board of Directors for one year. He need not be a shareholder. I am informed by Sri N. Venkatachala, learned Addl. Govt. Advocate that the Secretary to the Govt. of Mysore, Commerce and Industries Dept. is willing to act as a Director or to nominated person to function as a member of the Board of Directors. The above ten persons shall, therefore, constitute, the Board of Directors.

39. Sri G.N Jatia, is appointed as the Managing Director of the company for 5 years. The terms and conditions, in so far as his remuneration and perquisities are concerned, shall be subject to the approval by the competent authority under the Companies Act.

40. I shall now deal with the question relating to the staff and labour who had been employed by the company. Annexure ‘C’ reads as follows:

“The applicant proposes to re-employ as many old workers as possible and undertakes that in case there are any arrears of salaries and wages far the period prior to 16th Feb. 1972, the same will be paid in full within three months from the date of commencement of production by the company's factory.

No salaries or wages will be paid for the period from 16th Feb. 1972 till the date of re-employment of any workers, and the period during which the factory remained closed will also not be counted while calculating the total period or length of service of any employee.”

41. I feel that the clause in Annexure ‘C’ is vague. It does not enjoin the applicant to employ any definite number of workers or members of staff. It is stated that it may not be possible to employ all the workers who were on the rolls of the company at the time of the winding up, because some of them may also since become disabled or unfit to rejoin duty or some of them may have found employment elsewhere. It is the duty of the Court to see that the workmen and the members of the staff do not get a raw deal at the hands of the applicant. Hence, I make an order in so far as re-employment of the workmen and members of the staff to whom provisions of Industrial Disputes Act are applicable as follows:

42. The company shall employ as far as possible all the workers and members of the staff to whom provisions of Industrial Disputes Act are applicable, but not less than 75 per cent of such workers and members of the staff. If the company finds that it is not in a position to employ all the workmen and members of the staff, those persons who are not re-employed shall be entitled to the benefits available to the workers on retrenchment under the Industrial Disputes Act. The cases shall be dealt with in all respects including re-employment of retrenched workmen in accordance with the provisions of the Industrial Disputes Act. It was contended that an occasion may arise that the company would not be able to employ the minimum of 75 per cent of the workmen and members of the staff on account of so many persons not being willing to accept employment in the company. In such a case, the company is not bound to re-employ 75 per cent as stated earlier. It is, however, made clear that all persons and members of the staff to whom the Industrial Disputes Act applies and who were on the rolls of the company at the time of the order of winding up, shall either be re-employed or be paid retrenchment benefit as required under the Industrial Disputes Act, as the case may be. The persons who are re-employed will not be entitled to wages for the period between the date of the winding up and the date of re-employment. They will also not be entitled to treat the said period as part of their length of service. Those who are re-employed are, however, entitled to claim the benefit of previous service put in by them prior to 16th of Feb. 1972. In the case of workmen who are not rev-employed, but retrenched, the retrenchment benefit shall be calculated upto 16th of Feb. 1972. The company shall reemploy all persons as mentioned above within a period of four months from the date on which the Official Liquidator hands over the possession of the factory to the applicant and those who are not so re-employed shall be paid retrenchment benefit on the expiry of the period of 4 months from the date on which possession of the factory is handed over by the Official Liquidator. If there is any dispute with regard to the implementation of the scheme in so far as workmen and members of the staff are concerned, it is open to the company or the concerned workmen to approach the Court for necessary directions.

43. In so far as members of the staff of the company who were in its employment on 16th Feb. 1972 and who were not considered as workmen within the meaning of the Industrial Disputes Act, it is ordered that services of such of them who are not re-employed shall be deemed to have been terminated by the company on 16th Feb. 1972 unilaterally. Whatever rights or liabilities flow from such unilateral termination may be availed of or enforced by the concerned parties against each other. If any of them is re-employed he would not be entitled to any salary or allowance for the period between 16-2-1972 and the date of re-employment. He will also not be entitled to count the period between 16-2-1972 and the date of re-employment as part of the length of his service under the company for any purpose whatsoever.

44. It is ordered that none of the employees of the company would be entitled to claim any arrears of bonus either in respect of the period prior to 16-2-1972 or for the period between 16-2-1972 and the date of their re-employment in the case of those who are re-employed or for any period subsequent to 16-2-1972 in the case of those who are not re-employed.

45. The company is, however, directed to pay all the arrears of salary and allowances which had become due and payable by 16-2-1972 to all the employees of the company within three months from the date of commencement of production in the factory belonging to the company.

46. Sri G.N Jatia (the applicant) who has been appointed as the Managing Director is authorised to exercise all powers and to do all acts for the due implementation of the scheme and running of the factory, including the power to open and operate accounts with bank or banks in the name of and on behalf of the company. Such powers and acts exercised or done by the Managing Director are subject to the superintendence and control of the Board of Directors.

47. In Annexure ‘F’ to the proposed scheme the applicant had undertaken to purchase either in his name or in the name of his nominees equity shares of the face value of Rs. 15,00,000 of Rs. 5 each at the rate of Rs. 3-75 per share—and other share of Rs. 10 each at the rate of Rs. 7-50 per share.

******

48. In the result, I accord sanction to the scheme propounded by Sri G.N Jatia subject to the modifications indicated above. The order dt. 11-2-72 passed by this Court for the winding up of the company is hereby rescinded. The winding up proceedings are permanently stayed and the company is taken out of liquidation proceedings. All costs and charges and expenses of the applicant incidental to the preparation, formulation and negotiation of the scheme of reconstruction and all costs, charges and expenses incurred by him in the course of the winding up proceedings leading to the sanction of the scheme including the fees of the legal advisers and chartered accountants shall be borne and paid by the company prior to the order of winding up except those dealt with earlier in this order, shall stand discharged. Any further expenditure incurred by the applicant in the course of the implementation of the scheme shall be borne by the company.

49. The Official Liquidator is directed to hand-over possession of the entire undertaking of the company and all its assets including the books of account and all records to the applicant, Sri G.N Jatia, within a week from today.

50. The applicant shall pay all the winding up expenses to the Official Liquidator. Liberty is reserved to all concerned to apply to this Court if there is any difficulty in the implementation of the directions contained in this order.

51. A copy of the amended scheme which has received the sanction of the Court is appended herewith.