- (1.) CP No. 233 of 2008 is the lead matter. Such petition and CP No. 159 of 2011 have both been advertised. The petitioners in the other winding-up petitions are represented. In addition, there are a number of supporting creditors who seek the winding-up of the company and are represented pursuant to advertisements being published. There appear to be several classes of creditors; informally classified, there are the secured creditors, trade creditors, statutory creditors, unpaid employees and workmen, suppliers, trade depositors, financiers and sundry other creditors. Some of the creditors have obtained decrees or awards and there are several creditors who have instituted proceedings against the company whether by way of suits or by way of proceedings under the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 or under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002. Two orders of some substance were passed in course of the present round of proceedings. On December 9, 2011 the company was directed to file a comprehensive affidavit indicating, inter alia, the following: 1.The number of creditors with details of the dues according to the company's books; 2.The source of funds of the company, based on the company's annual accounts for the recent financial years; 3.The fullest particulars of all sums expended by the company by way of payment to creditors after the institution of CP No. 233 of 2008; 4.The extent of the statutory dues of the company based on the claims of the appropriate authorities. When these matters were next taken up on January 6, 2012, some of the creditors represented in Court referred to a news article published in the Times of India, Mumbai edition on December 16, 2011 entitled "Dunlop put Worli property on the block" whereupon the Court required further particulars to be furnished by the company. In any event, all the particulars sought by the order dated December 9, 2011 had not been furnished in the affidavit filed on behalf of the company when the matter was taken up on January 6, 2012.
(2.) PURSUANT to the direction contained in the order dated January 6, 2012 a further affidavit has been filed today on behalf of the company. It appears from the two affidavits filed on behalf of the company thus far at the post-admission stage, that the value of the company's indebtedness to its secured creditors is to the extent of Rs.127 crore; to its unsecured creditors to the extent of Rs.33 crore; and, to its statutory creditors including 5 workmen to the extent of Rs.25 crore. Thus according to the company, its exposure to its creditors seems to be about Rs.185 crore in all. On the company's admission, some of the claims of the creditors may be indicated in the company's books without providing for any interest; but even if any reasonable provision for interest were to be made and some other dues of the company are recognised which may not find mention in the company's books, the extent of the company's indebtedness will appear to be somewhat below Rs.500 crore. Of course, such a tentative assessment is made on the basis of the material now produced by the company and cannot be treated as any final or accurate assessment of the extent of the company's indebtedness. At one point of time the company had substantial assets by way of land and immovable property. It appears that the two most prominent immovable properties now available to the company are the freehold land at its Ambattur factory in Tamil Nadu and the Sahaganj factory near Calcutta. The company was the owner of several prominent properties, including in up-market areas in Mumbai, which the company appears to have alienated in the last few years and the circumstances in which such alienation has taken place raises serious doubts as to the bona fides of those now in the management of the company. One of the trade creditors of the company, Madura Coats Limited, has carried CA No. 34 of 2012 under, inter alia, Section 450 of the Companies Act seeking the appointment of the Official Liquidator as the provisional liquidator over and in respect of company's assets and properties. Madura Coats has an independent winding-up petition (CP No. 13 of 2009) and says that in addition to the claim evident from its winding-up petition, it has a claim in excess of Rs.7 crore in a suit pending in this Court where the company has been required to furnish security to the extent of Rs.1 crore pursuant to an order passed by the Supreme Court. There are some interesting revelations in the application for the appointment of a provisional liquidator that has been moved for the first time by Madura Coats today. It appears that a reference relating to the company was made before the Board for Industrial and Financial Reconstruction (BIFR) under the provisions of the Sick Industrial Companies (Special Provisions) Act, 1985. Madura Coats contends that the reference relating to the company was not closed because Dunlop India Limited had picked up its manufacturing activities or had become commercially viable, but because of some accounting jugglery resorted to by a new management installed in the company. The relevant petitioning-creditor has relied on orders passed by the BIFR, particularly in July, 2007, and by the Appellate Authority for Industrial and Financial Reconstruction (AAIFR) on December 4, 2007 that contain some startling facts. It appears that in course of reference before the BIFR a director was nominated on the board of the company by the BIFR. Such nominee director reported to the BIFR that notwithstanding a reference relating to the company pending before the BIFR, valuable properties of the company had been sold off without either the permission obtained therefor from the BIFR or the transactions being routed through the assets sales committee comprising members of the secured creditors of the company under the aegis of the operating agency appointed by the BIFR. The minutes of the proceedings held before the BIFR on July 23, 2007 show that the company was unable to apprise the BIFR as to how any of its properties could be sold during the pendency of the reference and the BIFR listed several questions for the company to answer. In course of the meeting before the BIFR on such date, it was submitted by the company to the BIFR that the net worth of the company had become positive and, as such, a reference relating to the company could no longer be continued before the BIFR. The BIFR refused to immediately accept such submission. The order passed by the BIFR was carried in appeal. The appellate authority was not impressed and made rather caustic remarks in respect of the functioning of the company and its dealing with its assets during the pendency of the reference. It appears that in some proceedings filed before the Madras High Court, a submission was made on behalf of the company that its net worth had become positive and neither the BIFR nor the AAIFR could exercise any authority in respect of the company. It is unclear at this stage as to the circumstances in which such statement came to be accepted by the Madras High Court. However, the net effect of the acceptance of such position by that Court was that upon the relevant order being placed before the AAIFR in the beginning of 2008, such authority observed that it did not have any jurisdiction over the company any further. The reference before the BIFR, therefore, fizzled out without the company having to explain how it sold its assets during the pendency of the reference. It is of some importance even at this interim stage to notice that it was not the company's case that the company had resumed functioning at its manufacturing facilities at the relevant point of time or the company's commercial fortune had turned a corner. It appears that the company's basis to its assertion that its net worth had become positive was upon the apparent revaluation of its non-core properties. As a result of the BIFR and AAIFR ceasing to have any further authority over the company, it implied that the questions which were raised by the BIFR on July 23, 2007 were no longer required to be answered by the company. It does not appear that any authority or forum has subsequently required the company to respond to the query as to how any of its assets or properties could have been sold off by the company during the pendency of its reference before the BIFR. There is a clear mandate in the Act of 1985 that there can be no sale or transfer of any properties of a company during the pendency of a reference under that Act, without the sanction of the BIFR.
(3.) THE company has volunteered, at paragraph 9 of the affidavit filed on its behalf today, that though no immovable or other property of the company has been sold since the time CP No. 233 of 2008 was filed in this Court, some of the company's properties were sold prior thereto. One of the company's properties sold prior to the middle of 2008 (that is when CP No. 233 of 2008 was filed) was the Worli property which uninformed newspapermen still regard as a property of this company without being aware of the transaction recorded in the company's books relating thereto. THE additional information that the company has volunteered corroborates the case made out by Madura Coats in its application for appointment of a provisional liquidator. THE company has confirmed that during the year 2006-07 the company sold off some of its immovable properties to four of its fully owned subsidiaries at a price of about Rs.350 crore. Such payment of Rs.350 crore was apparently adjusted against issuance of shares of such amount by the subsidiaries in the name of the company. In effect, therefore, it may be regarded that there was no benefit to the company upon the sale of its valuable properties. THE company makes no attempt to show how these properties were valued at Rs.350 crore and not at a tenth of the value or at hundred times the amount. THE company did not receive any money but it notionally received the consideration in its shareholding in the subsidiary companies swelling by the corresponding amount. What is more important is that the company is unable to apprise the Court today as to whether these once fully-owned subsidiaries of the company continue to be fully-owned subsidiaries of the company today or whether these once fully- owned subsidiaries of the company continue to hold the properties of the company that had been parked there by the company in the year 2006-07. This is a matter of great concern, considering that the statutory and other creditors of the company had been kept at bay during the period that the reference relating to the company remained pending before the BIFR and, particularly considering the plight of the workmen of the company at its Sahaganj unit who have remained without work and pay for a substantial period in the last decade or so. Prima facie, the sale by the company of any of its properties during the pendency of the reference before the BIFR, appears to be void - being in derogation of the mandatory provisions of the 1985 Act. Subject to further consideration, it appears today that any subsequent dealing with any of those properties may be of no effect since the company, without the permission of the BIFR, may not have had any authority to confer any title relating to the properties or any of them in favour of any other - whether or not the transferees were the company's fully-owned subsidiaries.;