2005 (12) TMI 291 – HIGH COURT OF GUJARAT – [2006] 69 SCL 151 (GUJ.) – – Winding up – Power of liquidator – COMPANY APPLICATION NOS. 16, 26, 43, 44, 186, 257 OF 2000, 52 OF 2002, 19 OF 2003, 237 AND 268 OF 2004 COMPANY PETITION NO. 205 OF 1996 OFFICIAL LIQUIDATOR REPORT NOS. 3 OF 2000, 23 OF 2004 AND 72 OF 2005 Dated:- 23-12-2005 – K.A. PUJ, J. S.N. Shelat, A.S. Vakil, B.T. Rao, Harin P. Raval and Y.N. Ravani for the Applicant. Ashok L. Shah, J.R. Nanavati, Pranav G. Desai, Anshin H. Desai, Ms. P.J. Davawala, S.N. Soparkar, Mrs. Swati Soparkar and B.R. Rao for the Respondent. JUDGMENT 1. Since all these Company Applications and O.L. Reports are inter related and they centre round the properties of M/s. New Jahangir Vakil Mills (in liquidation), they are heard and being disposed of by this common judgment and order. 2. Before the Court proceeds to deal with each of these applications and reports, it is necessary to have a close look at the factual background of the entire issue raise
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uidation or otherwise. NJVM became a part of a Unit of GSTC by virtue of the provisions of the Gujarat State Textile Undertakings (Nationalization) Act, 1986. The said Act provided for nationalization of total four Textile undertakings of which one was NJVM. Although the ordinance was promulgated on 1-7-1986, it provided for nationalization of the textile undertakings with retrospective effect from 1-1-1986. Even prior to such nationalization of the NJVM, GSTC was connected with NJVM as a lessee. NJVM got closed in the year 1980. GSTC took over the affairs of NJVM on lease from the Official Liquidator in September, 1982 on a lease rental of Rs. 1 lakh per month. Day-to-day affairs of the Mill were conducted and managed by GSTC till 31-12-1985. On 1-1-1986, NJVM was merged into GSTC as its unit by virtue of the retrospective effect of the Provisions of Nationalization Ordinance. After 1-1-1986 i.e., after nationalization of the unit, all business affairs were managed by the GSTC as its
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elevant parties including the Banks, Labour Unions and other financial institutions whose interest was going to be affected in the said proceedings, this Court vide its order dated 6-2-1997 has passed an order to wind up GSTC and the Official Liquidator attached to this Court was appointed as the Liquidator of the Company and he was directed to take over the charge of all the assets and properties of GSTC including possession thereof and the Gujarat Industrial Development Corporation was appointed as an agent of Official Liquidator under section 457(2)(v) of the Companies Act, 1956 for the purpose of preservation, protection and disposal of the property of the Company in liquidation. 5. Upon winding up order having been passed, statement of affairs was filed by the Director of GSTC before the Official Liquidator and the symbolic possession of all the textile mills units and head office have been taken over by the Official Liquidator at the relevant time. 6. Company Application No. 16 o
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akil Mills (in liquidation), a Unit of Gujarat State Textile Corporation Ltd., at the total price of Rs. 11 crores, on such terms and conditions as this Court deems just and proper. 8. Company Application No. 43 of 2000 is filed by State Bank of Saurashtra praying for the direction to the Official Liquidator to the effect that the amounts realised from the sale of the assets of the New Jahangir Vakil Mills (a Unit of Gujarat State Textile Corporation Limited) (in liquidation) and more particularly pursuant to the two advertisements dated 23-12-1999 and 6-2-2000 issued in the Newspaper Saurashtra Samachar , published from Bhavnagar, may not be disbursed except after first making the payments due to the applicant, with respect to loans, inclusive of interest advanced by the applicant to the New Jahangir Vakil Mills. 9. Official Liquidator report No. 3 of 2000 is filed by the Official Liquidator on 2-2-2000 giving particulars about the offers received and auction proceedings to be held an
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)7, Sheet No. 166, Survey No. 5586 admeasuring approximately 67,000 Sq. Mts. given on lease by former Ruler of Bhavnagar by virtue of lease-deed dated 10-10-1916 and approximately 7762.6 Sq. Ft. given on lease by the former Borough Municipality by Resolution No. 248, dated 12-1-1931 over which there is a building and the factory premises of New Jahangir Vakil Mills, Bhavnagar (in liquidation). The applicant has also prayed for quashing and setting aside the auction held on 16-2-2000 by the order of this Court in O.L.R. No. 3 of 2000. The applicant has further prayed for handing over the possession of the said properties to the applicant on winding up of the Company. 12. Company Application No. 257 of 2000 is filed by the applicant, namely, Satishbhai Chavda praying for quashing and setting aside the action of the Official Liquidator of initiating auction of the land occupied by the New Jahangir Vakil Mills, Bhavnagar (in liquidation). 13. Company Application No. 52 of 2002 is filed by
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further prayed for handing over the possession of the said properties on winding up of the Company and further sought for the injunction against the Official Liquidator from confirming the sale or handing over the possession to one M/s. Vicky Trading. 14. Company Application No. 19 of 2003 is filed by M/s. Vicky Trading seeking prohibition against the Official Liquidator from conducting the auction of sale of the plant and machinery, furniture and fixtures, stores, spares, scrap and other miscellaneous things of New Jahangir Vakil Mills being held on 24-1-2003 and seeking confirmation of sale of the entire property of the Company in liquidation in favour of the applicant. 15. Official Liquidator Report No. 23 of 2004 is filed praying for the direction from this Court to refer the matter to the appropriate Agency to investigate the cause of fire. The Official Liquidator has also prayed for the appointment of Government Approved Valuer to assess the damages to the properties of New Jaha
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extile Corporation (now in liquidation). The applicant-State has also prayed for the stay against the Official Liquidator from taking any further action pursuant to the order passed by this Court on 6-2-1997 in Company Petition No. 205 of 1996 in respect of disposal of properties and/or to deal with the assets and properties in any manner whatsoever. 17. Company Application No. 268 of 2004 is filed by Mill Kamdar Union seeking direction to the Official Liquidator to release the unpaid wages of the members of the applicant-Union, who are the workers of M/s. New Jahangir Vakil Mills (in liquidation) for the period commencing from 1-10-1994 to 30-9-1996 as directed by the Industrial Tribunal, Bhavnagar in Review Application Reference (IT) No. 19 of 1995 dated 27-9-1996, for which the claim has been filed by the Union before the Official Liquidator on 12-1-2000 along with the order passed by the Tribunal. The applicant-Union has also prayed for the direction to the Official Liquidator to p
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ought for the permission of this Court to give public advertisement in the Newspapers for inviting the claims from the Creditors. 19. The Court has passed several orders from time to time in different applications. During the course of hearing of all these matters, there was unanimity amongst the learned advocates appearing for the respective parties that if Company Application No. 237 of 2004 is taken up for hearing, the view taken therein will take care of all other matters. Accordingly, all submissions are made, arguments are canvassed and documents were referred to keeping in mind the reliefs sought for in the said applications. 20. As stated above, Company Application No. 237 of 2004 is moved by the State Government through the Secretary, Industries & Mines Department and the State Government has asked for the possession of the immovable properties of the Mills Company (in liquidation). 21. So far as the unit of New Jahangir Vakil Mills is concerned, there are no Secured Credi
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ilities of GSTC is only of the Government and the Government is the major creditor which has been paid approximately an amount of Rs. 826.79 lakhs until the order of winding up was passed on 6-2-1997. The State Government has moved an application earlier being Company Application No. 348 of 1997 for taking over the assets of all the 17 Units which were nationalized and vested with the GSTC. However, since the matter could not be settled at the relevant time due to non-co-operative attitude of the Secured Creditors, namely, Banks and other financial institutions, the entire idea was dropped by the Government and, therefore, the said application came to be withdrawn on 22-7-1998. 23. The State Government has thereafter moved the present application only for the purpose of taking over the immovable assets being land and building only of the New Jahangir Vakil Mills (in liquidation) where there are no secured creditors and all the liabilities including that of the labourers etc. have been
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ory basis in the vacant land of the said unit of GSTC. On fulfilment of this project and on establishment of the Diamond Park, there will be a boost to the State economy as well as national economy and at the same time will generate employment at a very large scale which would substantially solve the problem of unemployment in the district of Bhavnagar. 24. The Official Liquidator is already having sufficient fund of approxi-mately Rs. 44.89 crores in the account of GSTC which would be sufficient to discharge liabilities of the Secured Creditors as well as other unsecured creditors, if any, and if there is any deficit in repayment of dues of the aforesaid creditors, the State Government undertakes to discharge their liabilities after ascertaining the true and correct outstanding dues. So far as the liabilities towards workers and employees of the Company are concerned, the same have been fully discharged and if there is any liability either towards secured creditors or towards workers
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New Jahangir Vakil Mills while in operation. However, the liability created by the New Jahangir Vakil Mills during the first period i.e., Pre-Take over period which was prior to its having any sort of association with the GSTC may be considered as the liability of New Jahangir Vakil Mills only and GSTC need not be considered to be liable for such liabilities. However, the subsequent two stages of the life tenure of New Jahangir Vakil Mills namely, Post-Take over period i.e., subsequent to acquiring lease rights from the Official Liquidator and the Post Nationali- zation period i.e., period subsequent to Nationalization, may be considered as a period whereby the liabilities created by the New Jahangir Vakil Mills during its operation were as a result of and under the management of GSTC. Hence, the liabilities created by New Jahangir Vakil Mills during such periods may be considered to be a liability of GSTC as a whole. The Chartered Accountant has given figurative breakup of liabilities
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ed, the total liability is Rs. 2,72,04,972 as per the statement of affairs and is to be discharged out of the assets of the undertaking. However, the State Government has initiated steps to discharge the dues of Cotton Corporation of India aggregating to Rs. 146.18 lakhs for the undertaking. The State Government is intending to settle the dues of CCI separately in line with the settlement of dues of Banks and Financial Institutions, in the manner in which dues of SBS have been settled for New Jahangir Vakil Mills. Out of the remaining dues, Rs. 8,54,442 are due to GIIC, which is an institution fully owned by the State Government. The liability towards deferred dues of taxes aggregating to Rs. 1,08,19,033 is due to State Government/various departments of State Government. Thus, out of the total liability for Post Nationalization management period, Rs. 9,13,283 is due to other creditors which is to be liquidated out of the assets of the undertaking. The State Government has also paid thr
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avit that the bank balance of Rs. 80 lakhs was handed over to the Official Liquidator at the time of handing over the property of the New Jahangir Vakil Mills pursuant to the winding up order dated 6-2-1997. Thereafter, the Official Liquidator has realized Rs. 460 lakhs by way of sale of the property of the assets of the Mills company. The Official Liquidator is, therefore, having fund of about Rs. 540.53 lakhs which is in excess of the liability which aggregate to Rs. 303.47 lakhs as explained in the report of the Chartered Accountant, which is inclusive of the dues of the State Government to the tune of Rs. 136.62 lakhs. 29. It is further stated in the affidavit that there is no need for the Official Liquidator to initiate any proceedings for liquidating further assets of the Mills company. The sale effected at a low price of Rs. 12 crores is not required to be sanctioned and proceedings for sale are required to be dropped. The State Government being the sole shareholder and major cr
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Government before this Court to hand over the possession of the properties to the State Government and the Official Liquidator has no right to retain the said possession. 31. Mr. A.L. Shah, learned advocate appeared for the Official Liquidator and he has also submitted after due deliberation and discussion with the Official Liquidator that since the State Government has discharged the liabilities of the Mills Company towards Secured Creditors and labourers and there is still surplus fund available with the Official Liquidator in the account of GSTC and since the State Government has undertaken to discharge the liability, if any, which may arise in future, the Official Liquidator has no objection in handing over the possession of the properties in question to the State Government. 32. In the above view of the matter and looking to the entire facts and circumstances of the case and considering the various contentions raised from time to time and the reports submitted including the repor
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or discharging the liability or to meet with any contingency that may arise in future. However, the balance amount will have to be handed over to the State Government and the appropriate order in this regard would be passed on submission of the accounts before the Court. 34. Since the Court has taken the decision to hand over the possession of the immovable properties of NJVM a unit of GSTC, the Company in liquidation to the State Government, the question of confirmation of sale in favour of 21st Century Developers – the applicant in Company Application No. 16 of 2000, acceptance of offer for purchase of all assets including land, building etc. made by Mr. Rajabbhai K. Kangadh – the applicant in Company Application No. 26/2000, which is already stated to have been disposed of confirmation of sale of the entire property of the Mills Company in favour of M/s. Vicky Trading – the applicant in Company Application No. 19 of 2003 and setting aside the action of initiating the auction of the
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of these two applications and accordingly, these two applications stand disposed of. 37. As far as O.L.R. No. 3 of 2000 is concerned, since the sale of plant, machinery, furniture/fixtures, office equipments, spares, scrap and misc. items of the Mills Company has been confirmed by this Court in favour of M/s. I.B. Enterprise, nominee of M/s. Vicky Trading and immovable property of the Company is decided to be handed over to the State Government, O.L.R. No. 3 of 2000 does not survive and it is accordingly disposed of. 38. As far as O.L.R. No. 23 of 2004 is concerned, this Court has passed two orders earlier on 5-5-2004 and 20-7-2004. Pursuant to the order passed by this Court on 20-7-2004, the Official Liquidator has filed further report on 9-8-2004 seeking direction from this Court as to whether he should accept the claim of Rs. 1,48,307 against the total loss and/or damages of Rs. 98,57,500 assessed by the Executive Engineer, GIDC, Bhavnagar. The Official Liquidator has further sough
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concerned, in view of the decision taken by this Court in Company Application No. 237 of 2004 and in view of the fact that O.L.R. No. 23 of 2004 along with Company Application No. 19 of 2003 are being disposed of today, the directions sought for in the present report no longer survives and it is accordingly disposed of. 40. So far as Company Application No. 268 of 2004 is concerned, an affidavit-in-reply is filed by the Deputy Official Liquidator wherein it is stated that the order passed by the Industrial Tribunal, Bhavnagar in Review Application i.e., Reference (IT) No. 19 of 1995 on the basis of which the claim is made in the present Company Application, has been the subject-matter of Special Civil Application No. 826 of 1997 which is pending before this Court. It is further stated that before the winding up order was passed by this Court in the case of GSTC, GSTC introduced voluntary retirement scheme for the workers of all the Mills Company of GSTC with the financial help of the
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ompensation by 97 workers did not arise. It is further stated that at this juncture, when the Mill Company is not in existence and the Corporation who took over the management of the Mill Company is also not in existence, these 97 workers cannot claim salary for the period for which they have never worked. 41. In any case, the petition is still pending before this Court and hence, it is not necessary to pass any order in this application. It is open for the applicant-Union to move this Court after the aforesaid Special Civil Application No. 826 of 1997 is decided. Even otherwise, the State Government has undertaken the liability that if any claim on account of workers dues arises, the same will be discharged by the State Government. In view of the aforesaid position, this application does not survive at this stage and it is accordingly disposed of. 42. In the above view of the matter, all the aforesaid applications and O.L. Reports are accordingly disposed of without any order as to co
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