CA No.714/2017 in Co.Pet. No.357/2015

1. This application is filed by Ex-Management of the respondent company Assotech Ltd. under Section 391 of the Companies Act, 1956 (hereinafter referred to as the Act) seeking approval of a Scheme of Compromise and Arrangement between the applicant and a class of its creditors.

2. On 08.02.2016, this court had admitted the main petition, and the OL attached to this court was appointed as the provisional liquidator. Directions were issued to publish citations and for the OL to seal the premises of the respondent and take into custody the assets and books of accounts of the company etc.

3. This court while admitting the petition on 08.02.2016 noted that an FIR being No.121/2015, under Sections 406, 420 and 120B IPC was registered against the Managing Director of the respondent company with the Economic Offences Wing (in short EOW), Delhi. The order also notes that the proceedings under Section 482 Cr.P.C. were filed, which were disposed of on 04.11.2015 wherein it was noted that a settlement agreement had been reached whereby the Managing Directors and other Directors had agreed to pay a sum of Rs.17.60 crores to the complainants within a period of one year. The schedule of payments was not adhered to and the directors defaulted.

4. Against the above order of this court dated 8.2.2010 admitting the petition, the respondent company went up in appeal before the Division Bench. On 09.02.2017 the Division Bench dismissed the appeal. However, it was left open to the Ex-Directors of the respondent company to file a comprehensive scheme of arrangement disclosing therein all the admitted creditors of the respondent company and such particulars of debt which the appellant admitted. The proposal would indicate the manner in which the dues of the creditors are proposed to be liquidated.

5. In pursuance to the said observations of the Division Bench of this court, now the present scheme of compromise/arrangement has been filed.

6. The present application came up for hearing for the first time on 10.04.2017 when this court issued notice to the petitioner in ten different company petitions filed against the respondent seeking winding up of the respondent, which had been earlier disposed of on 20.07.2016.

7. On 20.12.2017, I heard Mr.Vikas Singh, Sr.Adv. for the Ex- Management of the respondent company; Ms.Ranjana Roy Gawai, Advs. for the applicant IDBI in CA No.1734/2017; Mr.Manish Shukla, Adv. for Assotech the Nest Apartment Owners in C.A. No.2045/2017; Mr.Saakar Sardana, Adv. for Ms.Divya Vedi, Creditors; Ms.Sangeeta Chandra, Adv. for the OL and Mr. Punit K Bhalla, Advocate for ICICI Bank.

8. The learned senior counsel appearing for the Ex.Management of the respondent company has explained the mechanism of the scheme proposed by the respondent company. It is urged by the learned senior counsel that as per the scheme, a sum of Rs.5 crores will be infused from personal resources by the applicant/Ex-Management. Once construction starts, the flat buyers will pay their dues and this will help to revive the functioning of the company. It was pleaded that as far as the secured creditors are concerned, they will be taken care of by future cash flow. The respondent company will put the secured creditors Essel Finance, Religare and ICICI Bank under an arrangement whereby 60% of the amount received from future cash flow basis from the Nest Phase-3 (existing project) will be kept towards the cost of construction and the balance amount shall be paid to the three secured creditors in the proportion of Rs.17.5 % each for Religare and Essel Finance and 5% for ICIC Bank. It is also pointed out that as far as ICICI Bank is concerned, they have already a property bearing No.A-12 in Sector 24, Noida, admeasuring 1200 sq.mtrs. which is a fully developed five floors, commercial property having estimated realisable value of approximately Rs.20 crores. The dues of ICICI Bank are Rs.6 crores approx. After adjusting said dues from the sale of the said property, the balance funds would be available with the respondent company. It was also clarified that list of creditors shown in the scheme are only those creditors who are before the court and have filed litigations. It was submitted that the company is willing to abide by any restrictions that may be imposed for success of the scheme by this court.

9. When the arguments of the above counsel were nearing completion, an application was filed being CA 238/2018 pursuant to certain directions passed by the Supreme Court.

10. This application CA. 238/2018 has been filed by two of the home buyers seeking to be impleaded as a party to the present petition. Other connected reliefs are also being sought. It has been pointed out that the applicants had filed a petition before the Supreme Court under Article 32 of the Constitution of India being Writ Petition No. 26/2018. The Supreme Court by its order dated 25.01.2018 disposed of the matter in terms of its earlier order in a petition being Writ Pet. No. 1164/2017 dated 08.12.2017. In the earlier petition which was disposed of on 08.12.2017, the Supreme Court had permitted the petitioner to move the High Court whereby the High Court can on taking note of the Supreme Court orders, pass an appropriate orders to protect the interest of the home buyers.

11. I have also heard Mr.Ajit Kumar Sinha, learned senior advocate who is appearing for the applicants in CA No. 238/2018. Mr.Sinha, learned senior counsel has opposed the present application filed by the ex-directors. He has pointed out that there is a six year gap in completion of the project and the ex-directors cannot be trusted with the present Scheme of Revival. He has relied heavily on Sections 464 and 465 of the Companies Act to submit that this court may appoint a Committee of Inspection to act with the Liquidator which should also comprise of home buyers or representatives of creditors and contributories.

12. The present application has also been opposed by the learned counsel appearing for the secured creditors Essel Finance. She submits that the proposed scheme is contrary to Section 391 of the Act. It also does not follow the process/procedure stated in the Company (Court) Rules, 1959 especially Rules 67 and 69. She also relies upon the judgment of the Supreme Court in the case of Miheer H. Mafatlal v. Mafatlal Industries Ltd., 1997 1 SCC 579 [LQ/SC/1996/1478] to contend that the scheme is contrary to law.

It was also urged that the scheme is being pushed through without any order of meeting of the creditors or a class of creditors to be called and conducted in the manner as prescribed in the Company (Court) Rules, 1959. It is further urged that the secured creditors have also filed an application being CA No.1734/2017 whereby it has been pointed out that they have been opposing the proposed scheme made under Section 391 of the Act. It is claimed that outstanding dues of the secured creditors is Rs.34 crores in terms of the documents executed between the parties. The land of the respondent at Sector 78, Noida being Windsor land is pledged as security to the applicant and no scheme can be enforced which includes the said land. However, she withdrew her opposition when it was clarified by the respondent/ Ex.Management that the scheme deals only with unsecured creditors.

13. The learned counsel appearing for Mr.Manoj Srivastava, who claims to be a minority shareholder of the respondent company states that the entire scheme is misplaced as there are large statutory dues payable by the respondent company to various Government Organisations which are not reflected in the scheme.

14. The OL has also filed a reply opposing the scheme. It has been pointed out that the appellant cannot be permitted to satisfy the claims of a few creditors on preferential basis, for if the assets fall short, it would mean that a large number of unsecured creditors being left high and dry. It has also been pointed that the ex-directors have filed their statement of affairs which are defective. Despite issue of a letter on 15.06.2016 to rectify the defects, the ex-directors have not yet rectified the defects. Further, it has been pointed out that when a team of the OL went to take possession of the three projects/schemes, difficulties were encountered as number of occupants claimed that they are in physical possession of various flats without proper explanation.

15. I may now have a look at the proposed Scheme filed by the ex-directors. As per the Scheme, the net worth of the Company as per the audited balance sheet dated 31.03.2014 is more than Rs.100 crores. It is further stated that if order appointing the OL as the Provisional Liquidator is withdrawn all the pending projects are likely to be completed by 31.03.2020. The Scheme provides that the creditors shall be paid all their dues by (i) generation of funds from the existing projects and revenue to be realised from the debtors; (ii) corpus of Rs.5 cores as one time induction of money towards the clearance of the liability from personal source of the ex-management; (iii) collateral security of the property being A-12, Sector 24, Noida which is said to have a realisable value of Rs.20 crores and is encumbered to ICICI Bank for dues of Rs.6 crores. It is stated that the said property can be put to sale on permission from ICICI Bank and funds can be realised thereafter. The said amount will be used to pay on pro-rata basis the claims of the creditors as listed in Schedule A.

Schedule A to the scheme has three lists. List (i) comprises of a list of creditors whose cases have been settled by the Ex.Management after 8.2.2016. List (ii) of Schedule A comprises of 24 creditors with whom the Ex.Management is said to have settled but could not fully comply with the terms of the settlement, List (iii) of Schedule A comprises of list of creditors whose claim is filed/pending. There are stated to be 31 such creditors having total claims of Rs.37.45 crores. Schedule B to the scheme states the source of generation of funds for the debtors/allottees. The three pending projects of the respondent company, namely, Assotech. The Nest Ghaziabad; Celeste, Sector-44, Noida and Windsor Court, Noida; are proposed to be completed by 31.3.2020. In all on completion of the project a sum of approximately 124 crores is expected to be generated.

16. Schedule C shows that a total payment of about Rs.50 crores is to be made to those persons who are listed in Schedule A by either making payment or handing over properties. The Scheme does not deal with the secured creditors.

17. It has also been stated that on 14.05.2017 and 15.05.2017, the ex-management of the Company issued notices for convening a meeting of the admitted creditors of the Company on 17.05.2017. The meeting was held and 37 creditors were present and 34 gave their consent meaning thereby that 90%of the creditors in terms of the value of the meeting have given their consent.

18. In the course of hearing, a note was submitted by the ex-management which requests for the following reliefs:-

1. Discharge of Provisional Liquidator;

2. SFIO order dated 08.11.2016 be set aside;

3. Stay of all the proceedings against Assotech Limited till further directions;

4. An independent Observer to be appointed to oversee the affairs of Assotech Limited- for 9 months from the date of discharge of Provisional Liquidator, on honorarium of Rs.2.50 Lakhs per month.

5. All the three group housing projects of Assotech are nearing completion, and are likely to be completed as per following time line:

a. Celeste Tower, Sector 44, Noida(269 units constructed, out of which 127 units+ 7 shops shall be handed over within 12 months and the balance 37 units shall be handed over within 6 months, 98 units possession has already been handed over);

b. Windsor Court, Sector-78(141 units possession handed over balance within 6 to 9 months);

c. The Nest, Crossing Republik, Ghaziabad(694 unit possession handed over balance within 12 to 24 months).





6. Assotech Limited is committed to hand over the possession of units/flats to all its allottees/buyers in a timely manner provided the home buyers make the payment as per the schedule mentioned in the demand letter. All the three projects are registered under UP RERA Act.

7. All the receivable amount from the aforesaid projects shall go into the escrow account registered under the UP RERA Act and shall be used only for the purpose of construction and development of the project including statutory payments i.e. payments to Authorities.

8. Assotech will settle/satisfy the grievance of each and every creditor in a time bound manner.

9. Properties of Assotech be de-sealed, it will pay all the expenses of OL, including watch and ward services etc.

10. Rs.5 Cr. To be infused within 45 days of the lifting/discharge of the PL.

11. On 06.12.2017 this court had directed the Ex-Directors to place on record a full list of secured and unsecured creditors with the amounts payable to them. In pursuance to the said direction, the Ex-Directors have now filed a list which contains the name of 92 unsecured creditors all of them seem to have been in some litigations against the respondent company. The total dues payable under the new list to the 92 unsecured creditors is not stated. However, it appears that some of the creditors are sought to be paid by allotting properties in Noida and Gurgaon.

12. A perusal of the Schedule A list (i) (ii) and (iii) of the scheme shows that this contains a list of only those creditors who have initiated some legal cases against the respondent company. In fact list (iii) makes the picture quite clear. The list contains 31 names. 17 of the persons are those who have initiated proceedings under section 138 of the N.I. Act against the respondent company. Balance are those persons who have initiated proceedings before this court but details are not given. As already noted above, pursuant to orders of this court dated 6.12.2017 the Ex.Management had filed a list titled as Summary and Particulars of admitted unsecured creditors. This list contained 92 persons. Other than one or two persons all the other persons are stated to have commenced some litigation against the respondent company.

It follows from the above that though not specifically said so, the Scheme that has been filed in court essentially pertains to unsecured creditors who have filed litigations in court. All other creditors do not find any mention in the lists. The question that would arise is as to whether such a classification can be termed to be a class of creditors within the meaning of Section 391 and 392 of the companies Act, 1956.

13. Section 391 (1) and (2) of the Companies Act, 1956 read as follows:-

391. 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 Court 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 Court 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 under section 643], by proxy, at the meeting, agree to any compromise or arrangement, the compromise or arrangement shall, if sanctioned by the Court, 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 Court unless the Court is satisfied that the company or any other person by whom an application has been made under sub- section (1) has disclosed to the Court, 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.]

14. Hence, a scheme has to be between the company and its creditors or any class of the creditors. The Court also has to be satisfied that the company has disclosed to the court, by affidavit or otherwise, all material facts relating to the company, such as the latest financial position, latest auditors report on the accounts of the company, pendency of any investigation proceedings in relation to the company and the like.

15. What would constitute a Class of creditors has already been dealt with by a Division Bench of this Court. Reference may be had to the judgment of this court in Spice Jet Ltd. & Ors. vs. Malanpur Steel Ltd. & Anr., 2013 (134) DRJ 467 [LQ/DelHC/2012/5410] where the Division Bench held as follows:-

11. A class consists of creditors or members who form a homogenous group with commonality of interest. A class must be confined to members or creditors whose rights are similar. Their rights should not be dissimilar so as to make it impossible for them to consult together keeping in view their common interest. As defined by Bowen, L.J. "it seems plain that we must give such a meaning to "Class" as will prevent the section being so worked as to result in confiscation and injustice, and that it must be confined to those persons whose rights are not so dissimilar as to make it impossible for them to consult together with a view to their common interest." (Sovereign Life Assurance Co. Ltd. v. Dodd 1892 (2) Q.B. 573 CA).

12. Creditors can normally be divided into three categories (which may themselves overlap), of preferential creditors, secured creditors and unsecured creditors. Unsecured creditors normally form a single class, unless there are circumstances that they must be treated differently, i.e. when they have different interests which may come into conflict. A background for the same must be established. In Miheer H. Mafatlal v. Mafat Lal Industries, (1996) 87 Company Cases 792, [LQ/SC/1996/1478] it has been observed as under:

It is, therefore, obvious that unless a separate and different type of Scheme of Compromise is offered to a sub-class of a class of creditors or shareholders otherwise equally circumscribed by the class no separate meeting of such subclass of the main class of members or creditors is required to be convened. On the facts of the present case the appellant has not been able to make out a case for holding a separate meeting of dissenting minority equity shareholders represented by him.

13. The object and purpose of classification of creditors is to ensure that the meetings of different classes of creditors are held in a manner that there should not be any injustice or confiscation, and persons dissimilar are not clubbed together with a view to take advantage of their conflicting interest.

14. According to Halsburys Laws of India, 2007, Vol. 27, "Unsecured creditors who may have filed suits or obtained decrees must be deemed to be of the same class as other unsecured creditors, as per Section 390(c) of the Companies Act." Further, an unsecured creditor who has a decree does not become a secured creditor, and does not constitute a separate class (see Haricharan Karanjai Vs. Ulipur Bank Ltd. (1942) 12 Company Cases 110). After reference to the provisions and relying upon Section 511 of the C. Act, the Gujarat High Court, in Ananta Mills Ltd. (In Liquidation) Vs. City Deputy Collector, Ahmedabad and Ors [(1972) GLR 63] has held:-

The object of the winding up provisions of Companies Act, is to put all unsecured creditors upon an equality and to pay them pari passu. All the unsecured creditors form one class. The winding-up order made on the petition of a creditor or a contributory enures for the benefit of all creditors and contributories and that is why it is always styled as a representative action. When a company is in insolvent circumstances or in financial doldrums, it is quite likely that different creditors might try to secure a march over those similarly situated. Provision for the winding-up of companies are meant for just and equitable distribution of the assets of the company amongst various persons interested in it. Consequently, once a company is ordered to be wound up, a scramble for taking away its assets must be avoided. All the assets of the company must be available for just and equitable distribution amongst the various interests having claims against the company. If by some action of creditor this basic concept of just and equitable distribution amongst the various interests having claims against the company is sought to be defeated, the liquidator has to step in and resist such benefit going to some to the exclusion of rest similarly situated. To repeat the words of Lindley J., In re Oak Pits Colliery Co., the object of the winding-up provisions of the Companies Act is to pay all unsecured creditors upon equality and pay them pari passu. This principle has secured statutory recognition in section 511 of the Companies Act, which provides as under:

Subject to the provisions of this Act as to preferential payments, the assets of a company shall, on its winding-up, be applied in satisfaction of its liabilities pari passu and, subject to such application, shall, unless the articles otherwise provide be distributed among the members according to their right and interests in the company.

What effect can then be given to an attachment levied by a creditor who, but for the attachment would stand in company with all other creditors similarly situated. In my opinion, the short answer to the question would be to ignore the attachment or, as a winding up court, raise the attachment with a view to remove an impediment in collection or realisation of the assets of the company which is being wound up, for its just and equitable distribution. If attachment is held subsisting giving some right to the attaching creditor, it would strike at the root of the principle whereby all unsecured creditors are to be paid in pari passu.

15. In view of the aforesaid position we are in complete agreement with the Company Judge that Malanpur cannot be treated as a distinct class of creditor on the ground that it was a decree holder. It was certainly not a secured creditor. We also reject the contention of Malanpur that the principal amount due and payable to them was not Rs. 5 crores but Rs. 5,83,96,465/-. Admittedly, the principal amount advanced was Rs. 5 crores. The fallacious argument of Malanpur on the said issue proceeds on the foundation that as they have a court decree, the amount mentioned in the court decree should be treated as the principal amount. If we accept the aforesaid contention, it will lead to an unwarranted distinction between a decree holder and other claimants, and gravely affect and upset the pari passu principle. Unsecured creditors form a separate class and have to be treated alike regardless of whether they have a court decree or have filed the court proceedings or proceedings for winding up proceedings. This is the underlining principle behind several provisions of the C. Act (see sections 441, 442, 446, 447, 448, 456, 511 and 537 of the C. Act). Observations in Maneckchowk and Ahmedabad Manufacturing Co. Ltd. (supra) are apposite. The aforesaid sections relate to winding up proceedings but underlying salutary principle of pari passu can be equally applied when it comes to the question of value of voting rights. Unsecured creditors cannot steal a march and claim a better right viz. another unsecured creditor in the same class on the ground that it has a court decree in its favour.

Clearly, in view of the above aforesaid judgment unsecured creditors would be considered as a class of creditors. However, unsecured creditors who have filed suits or obtained favourable orders cannot be deemed to be a different class from the other unsecured creditors.

16. In the present case as noted above, the Scheme is sought to be enforced against primarily a sub-class of creditors, namely, unsecured creditors who have filed cases against the respondent company in this court or under section 138 of the N.I. Act. Such a classification cannot be termed to be a class in terms of section 391 of the Act. The term class would normally mean all those persons who are in the same category and level of rights. The proposed sub-class created by the Ex.Management i.e. unsecured creditors who have filed litigation against the respondent in this court or under Section 138 of the NI Act if allowed would cause grave injustice to other unsecured creditors who may not have initiated legal cases against the respondent company.

17. It is manifest from a reading of the above legal position that the scheme as proposed by the Ex.Management does not fulfil the basic criteria of Section 391 of the Companies Act, namely, it fails to propose any compromise or arrangement between the company and any class of creditors.

18. That apart, in my opinion, the scheme lacks bona fide and good faith. If one were to remove the sheen of the proposed scheme, it would become apparent that the scheme is only proposing infusion of a sum of Rs.5 crores by the Ex. Management and nothing else.

19. There are only three sources for generation of funds. First is of course infusion of Rs.5 crores by the Ex.Directors from the personal accounts. Second is realisation of funds from debtors/allottees of flats of the said pending three projects. It is proposed to realise about Rs.124 crores in phases by completion of said three projects and realisation of the dues from debtors/allottees. Third mechanism is the sale of the property at Flat No.A-12, Sector 24, Noida, which is mortgaged to the ICICI Bank Ltd. It is claimed that dues of the ICICI Bank Ltd. is about Rs.6 crores whereas the property is valued at Rs.20 crores. Hence, a surplus of Rs.14 crores will become available from this scheme.

20. As noted above, as per the note submitted by the Ex.Management, there are about 1100 units in the said three incomplete projects. The projects have been languishing since long. It is on account of the improper manner of handling of the projects that the progress in the projects came to halt and the Ex.Management was unable to make any further progress. This creates serious doubts as to how the Ex.Management proposes to move forward to complete the projects and to recover the dues from the creditors/allottees. Further there is no clarity as to the outstanding dues payable to the unsecured creditors. As per Schedule A to the scheme, approximately Rs.47 crores is due.

It may also be noted that there are three secured creditors whose outstanding dues are said to be approximately Rs.53 crores. The dues of the three creditors have also to be taken care of from the same source of funding.

21. I may also note regarding the mortgaged property. This court on 06.12.2017 had permitted the OL to hand over the possession of the property A-12, Sector-24, Noida to ICICI Bank Ltd. to be dealt with as per law as the property was mortgaged to the said bank. The Ex.Directors claim that from sale of the said property a surplus of Rs.14 crores would be available to the respondent company as the property is worth Rs.20 crores.

I may note there is nothing on record to show that the property is worth Rs.20 crores. In any case, there is nothing available on record to show the steps taken by ICICI Bank Ltd. with the regard to the said property.

22. I cannot help concluding that the scheme is only an attempt to persuade this court to revoke the order appointing the OL as the provisional liquidator by infusing Rs.5 crores in the company. The whole scheme clearly lacks bona fide.

23. In the course of arguments, some of the investors who were present in court had repeatedly pointed out that the Scheme has been filed by the ex-management only to mislead the courts which are hearing the criminal proceedings against the ex-directors of the respondent. The ex-directors had been pressing for bail or anticipatory bail and one of the defences raised by them is that they are proposing a scheme of revival before this court. I cannot help but come to the conclusion that the said submissions appear to be correct.

24. In my opinion, the scheme completely lacks bona fide and is not in good faith. Even otherwise, the scheme is unworkable. Hence, I cannot accept the said scheme.

25. There is another aspect which persuades me not to accept the present scheme, namely, the past conduct of the directors regarding the manner in which they have dealt with the finances and the assets of the respondent Company. These aspects have already been noted by earlier orders of this court.

26. I may first also look at the observations made by the Division Bench on 09.02.2017 while disposing of Co. Appeal No. 17/2016 filed by the ex-management to impugn the orders of this court. One of the reliefs sought was to keep the order appointing the OL in abeyance. The Court had held as follows:-

10. The conduct of the appellant before the learned Company Judge is clearly indicative of the appellant acquiescing in the order admitting the winding up petition and proceeding to settle the disputes with a number of creditors. This itself establishes that the appellant company is heavily in debt.

11. Learned Senior Counsel for the appellant urge that merely because the appellant is in debt would be no ground to wind up the appellant if it otherwise is a viable company. We have serious doubts on that. From the statement of affairs filed, the manner of giving the information is prima facie suggestive of diversion of funds.

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15. Reports filed by the learned Official Liquidator before the learned Company Judge would evince that the learned Liquidator was unable to take possession of many flats on April 28, 2016 because he found the same to be occupied but no occupant could show a document evidencing the flat occupied, to be formally transferred by the appellant to the person in possession. This reinforces the prima-facie view taken by the learned Company Judge on February 08, 2016 that there was a grave and credible apprehension that the assets of the appellant may be imperiled.

16. Since proceedings are pending before the learned Company Judge we do not intend to return any determinative finding but suffice to state that from the aforesaid facts noted it appears those who were in charge of the affairs of the appellant have much to explain. There are traces of the funds being siphoned off.

17. That apart, the appellant cannot be permitted to satisfy the claims of a few creditors on preferential basis, for if the assets fall short it would mean a large number of unsecured creditors being left high and dry.

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19. The facts which we have noted, which emanate from the statement of affairs filed by the directors of the appellant do not warrant any of the impugned order to be set aside in appeal. The debts owned by the appellant are much. The rosy picture painted in the balance sheet, is not so rosy. The situs of the assets of the appellant is not known. The persons who have to pay money to the appellant are unknown as of today. The persons with whom deposits have been made are unknown today. [emphasis added]

27. Similarly, this court on 08.11.2016 in a report filed by the OL being OLR 286/2016 had made the following observations while appointing SFIO to enquire into the accounts of the respondent company:-

5. Mr. Mayank Goel, learned counsel appearing on behalf of the Official Liquidator would strenuously urge that, in gross violation of the order dated 08.02.2016 passed by this Court, inter alia, large sums of money have been transferred by the Ex-Management to M/s Lindex Impex Private Limited. In addition to cash transactions, Ex-Directors of the company have sold immovable property belonging to the company in liquidation and received the proceeds qua the same in their accounts.

6. Further, it has been brought to the notice of this Court, that despite directions of this Court in this behalf, the Ex-Directors have steadfastly neglected, failed and avoided to furnish the Statement of Affairs and the details of the assets in the Balance Sheets; have furthermore failed to hand over peaceful physical possession of all the flats/properties, vehicles, plant and machinery, and cash-in-hand belonging to the company in liquidation to the Provisional Liquidator.

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10. A perusal of the communication dated 14.10.2016, received from Mr. Manoj Srivastava, Ex-Director of the company in liquidation, in reply to the notice dated 16.09.2016 under Rule 130 of the Companies (Court) Rules, 1959 clearly manifest that, inter alia, the following acts were committed by the Ex-Management of the company in liquidation, which are prima facie in violation of the said order dated 08.02.2016:

(i) The company in liquidation holds 100% shareholdings of M/s Lindex Impex Private Limited and vide agreement dated 2l.03.2016 the shareholdings of M/s Lindex Impex Private Limited have been sold to Mr. Joydeep Nayar, Mr. Paramjit Gandhi and M/s Khyati Buildtech Private Limited with 33 .33% shareholding each.

(ii) Payments have been made to the company in liquidation in different bank accounts, details of which are as under:-

1) Rs.50,00,000/- in HDFC Bank- Account No-00880350000674 on 20/04/16.

2) Rs.50,00,000/- in HDFC Bank- Account No-00880350000674 on 20/04/16.

3) Rs .5,00,000/- in HDFC Bank- Account No-00880350000674 on 02/05/16.

4 ) Rs. 25,00.000/- in Canara Bank -Account No-1 177201004113 on 05/05/16.

5) Rs.30,00,000/- in Punjab National BANK (Noida) Account No.-3702002100038992 on 18/05/16.

6) DD of Rs.1,50,00.000/- was also handed over to Assotech Limited.

(iii) Various immovable properties, belonging to the company in liquidation have been disposed of and the sale proceeds received thereof have been misappropriated by Mr. Sanjeev Srivastava and Mr. Rajeev Srivastava.

11. A statement depicting the bank transactions pertaining to the company in liquidation have been placed on record. A perusal thereof shows the extent or fraudulent defalcation of the funds of the company in liquidation by the Ex-Management. Furthermore, from the material on record, the Official Liquidator has been able to demonstrate the sale of immovable assets belonging to the company in liquidation, in violation of the order passed by this Court on 08.02.2016 and mis-appropriation of the proceeds from the sale thereof.

28. A perusal of the aforesaid orders of the Division Bench and of this court dated 08.11.2016 shows that there are serious doubts about the manner in which the ex-directors have conducted their business. There are grave allegations about the ex-directors having sold immovable properties and received proceeds in their own accounts. They have also failed to hand over possession of all the flats/properties, vehicles, plant & machinery and cash in hand belonging to the company in liquidation to the OL.

29. In this context, reference may be had to the judgment of the Supreme Court in Miheer H.Mafatlal vs. Mafatlal Industries Ltd., (supra) wherein the Supreme Court held as follows:-

In view of the aforesaid settled legal position, therefore, the scope and ambit of the jurisdiction of the Company Court has clearly got earmarked. The following broad contours of such jurisdiction have emerged:

1. The sanctioning court has to see to it that all the requisite statutory procedure for supporting such a scheme has been complied with and that the requisite meetings as contemplated by Section 391(1)(a) have been held.

2. That the scheme put up for sanction of the Court is backed up by the requisite majority vote as required by Section 391 sub-section (2).

3. That the meetings concerned of the creditors or members or any class of them had the relevant material to enable the voters to arrive at an informed decision for approving the scheme in question. That the majority decision of the concerned class of voters is just and fair to the class as a whole so as to legitimately bind even the dissenting members of that class.

4. That all necessary material indicated by Section 393(1)(a) is placed before the voters at the meetings concerned as contemplated by Section 391 sub-section (1).

5. That all the requisite material contemplated by the proviso of sub-section (2) of Section 391 of the Act is placed before the Court by the applicant concerned seeking sanction for such a scheme and the Court gets satisfied about the same.

6. That the proposed scheme of compromise and arrangement is not found to be violative of any provision of law and is not contrary to public policy. For ascertaining the real purpose underlying the scheme with a view to be satisfied on this aspect, the Court, if necessary, can pierce the veil of apparent corporate purpose underlying the scheme and can judiciously X-ray the same.

7. That the Company Court has also to satisfy itself that members or class of members or creditors or class of creditors, as the case may be, were acting bona fide and in good faith and were not coercing the minority in order to promote any interest adverse to that of the latter comprising the same class whom they purported to represent.

8. That the scheme as a whole is also found to be just, fair and reasonable from the point of view of prudent men of business taking a commercial decision beneficial to the class represented by them for whom the scheme is meant.

9. Once the aforesaid broad parameters about the requirements of a scheme for getting sanction of the Court are found to have been met, the Court will have no further jurisdiction to sit in appeal over the commercial wisdom of the majority of the class of persons who with their open eyes have given their approval to the scheme even if in the view of the Court there would be a better scheme for the company and its members or creditors for whom the scheme is framed. The Court cannot refuse to sanction such a scheme on that ground as it would otherwise amount to the Court exercising appellate jurisdiction over the scheme rather than its supervisory jurisdiction.

The aforesaid parameters of the scope and ambit of the jurisdiction of the Company Court which is called upon to sanction a scheme of compromise and arrangement are not exhaustive but only broadly illustrative of the contours of the Courts jurisdiction.

30. Clearly, the scheme lacks bona fide. It cannot be termed to be just, fair and reasonable. There is no cogent mechanism on record to show how the dues of the unsecured creditors is to be paid off. In fact the scheme cannot be even said to be a scheme as it fails to define a proper class of creditors.

I accordingly dismiss the present application.

CA 696/2017

31. This application is also dismissed. The enquiry by SFIO as directed on 8.11.2016 shall be carried out expeditiously by SFIO.

CA 238/2018

32. List this application for arguments on 26.07.2018.