- (1.) BPL Limited, the respondent herein, was incorporated under the Companies Act, 1956 (for brevity 'the Act") and on 16.4.1963, certificate of incorporation in the name of the company as British Physical Laboratories India Pvt. Ltd. was issued. The company became deemed public company and the word "Private" stood deleted with effect from 24.3.1981. Subsequently, the name of the company was changed to BPL Limited and fresh certificate of incorporation was issued by the Registrar of Companies on 16.3.1992. In the year 1982 the company had diversified its activities into Consumer Electronics, Colour Television Receivers, Black and White TV Receivers and Video Cassettes Recorders. The company embarked on various diversifications, expansion programmes and had facilities for manufacture of television, Alkaline batteries, colour monitors, etc. It also entered into the arena of manufacturing of refrigerators and electronic components through associate companies and had grown into a diversified group with multiple products and services. Due to manifold reasons, the company faced cash flow constraints which adversely affected its operations. It suffered a loss of Rs.287.8 crores in the last 18 months for the period ending on 30.09.2003 as there was decline of sales of goods. Due to the said loss, the debt of the company increased to 1494.57 crores as on 31.03.2003. As many a international brand had entered into the Indian market, the respondent company in order to keep pace with the technological advancement in the field of business initiated a comprehensive restructuring of its operations which primarily involved rejuvenating its main business through a joint venture with "Sanyo Electric Co. Ltd.", Japan and accordingly entered into a shareholder agreement. In terms of the agreement the BPL had to transfer its existing CTV business undertaking to the joint venture constituting BPL brand for CTV business manufacturing services, marketing and distribution. Both the companies BPL and Sanyo had equal partnership in the ratio 50:50 in the joint venture. The CTV business was valued at Rs.368 crores and BPL was required to invest approximately Rs.46 crores in the joint venture company and to receive a net cash inflow of Rs.322 crores. Initially, BPL proposed a scheme of arrangement which was finally modified and in the said scheme various business institutions and banks were involved. There were 36 creditors whose names featured in the scheme.
(2.) After approval of the scheme the respondent filed an application under Section 391 (1) of the Act read with Rule 9 the Companies (Court) Rules, 1959 seeking permission for holding a meeting for consideration for approval of compromise or arrangement proposed to be made between companies and the creditors. The second prayer had been made for orders governing the procedures to be complied with. There were 15 respondents. After the application was filed forming the subject matter of MCA No. 84 of 2004 notices were issued and many financial institutions filed their counter affidavits/objections. The present appellant, Infrastructure Leasing & Fin. Services Ltd., which was the 8th respondent, filed its counter- affidavit and in it, had raised objections to the prayer for stay of various proceedings before number of forums including Debt Recovery Tribunal, etc. on the foundation that the Memorandum of Association of the company does not authorise it to enter into any arrangement as proposed; that the scheme concealed more than it revealed, for when such a drastic transformation was taking place it was imperative that there had to be exhaustive disclosure; that the application filed under Section 391 of the Act was totally silent as to how and on what basis the valuation of Rs.368 crores had been arrived at, which agency had done the valuation and at whose instance the valuation was done; that the scheme did not mention whether the BPL had any other option to raise the capital when retaining CTV business; that no detailed information had been furnished in the application or in the proposed scheme of arrangement as to on what basis the various percentage payments which were proposed to be made to the unsecured creditors were arrived at by the company; and that the company court had no jurisdiction to stay the criminal prosecution under exercise of its power under Section 391 (6) of the Act.
(3.) BPL filed a reply stating, inter alia, that very purpose of Section 391(6) of the Act is that till effective consideration of the scheme and finalization of the scheme under Section 391 of the Act there has to be a stage of abeyance from all aspects so that the Company Court can examine the workability of the same and grant requisite relief. As regards the non- disclosure by BPL, it was asserted that the disclosure had been adequately made, for what was proposed to be transferred to the joint venture company was the colour television business of the BPL and brand associated with it and the residual company would retain the other business of the group such as medical electronics, batteries, components, etc. It was also put forth that Price Water House Coopers (PWC) was appointed by the ICICI at the instance of all lenders and PWC had assessed that the residual company could sustain a debt to the extent of Rs.480 to 520 crores and the report submitted by PWC was already in possession of the lenders including 8th respondent therein. It was alleged as the operation had been stagnated for a period of two years the valuation made by the PWC was absolutely fair.;