KALYAN DUTTA, J. - (1.) An application under s. 391 of the Companies Act, 1956, for sanction of a proposed scheme arrangements was filed in this Court by Shri Mehtab Chand Golcha and Shri S.P. Sharma, holding power of attorney for Smt. Jatan Kanwar Golcha, Ex-Directors of Golcha Properties (P) Ltd. in liquidation, hereinafter refereed to as the Company. By way of the proposed scheme, the aforesaid Ex-Directors of the said Company in liquidation wanted to settle the dispute with the creditors of the Company without going into any arbitration for the purpose. The salient terms of the scheme are reproduced below:- "(a) costs, charges and expenses of Official Liquidator up to the date of commencement of the scheme as provided under the law; (b) full payment to the creditors of the Company as per claims already accepted by the Official Liquidator after deducting the payments already made to them by the Official Liquidator, in full and final satisfaction of their dues against the Company; (c) a sum of Rs. 50 lacs (rupees fifty lacs ) to the Income-Tax Department against the Income-tax due for asst. yr. 1961-62 to 1974-75. which have already become due or which may become due and payable in future; (d) over and above the amount of Rs. 50 lacs mentioned in cl. (c), above an amount of Rs. 2,000/- (rupees two thousand only per month w.e.f. 1st Jan, 1975 till the date of deliquaidation to IT Department against dues as mentioned in cl. (c); (e) the assets of the Company and its management shall not be handed over by the Official Liquidator to the Ex-Directors of the Company, unless the amounts fall short of required to make the payments as mentioned in cls. (a) to (d) are supplemented and paid by the Ex-Directors of the Company".
(2.) No controversy was raised to this proposed scheme on arrangements by L.R. Mehta, counsel for the Company Law board, S.C. Bhandari, counsel for IT Department and Shri K.C. Samdaria, counsel for M/s. Kanhaiyalal Bhawani Shanker creditors. Notice of the proposed scheme was given to the Central Government but no objection has been made to the scheme by it. The Official Liquidator, to whom also a notice of this proposed scheme was given, has filed a written reply that he has no objection in principle to the provisions of the new scheme, subject to the following three conditions:- (i) the fixation of the time target for the Ex-Directors to bring into this Hon'ble Court the amounts for discharging the dues of the General body of the creditors and the dues of the IT Department; (ii) the completion of assessments for the years during which the Company has been in liquidation before the said target date; (iii) the inclusion of the provisions in the scheme to the effect that the Ex-Directors shall not call in question the income-tax assessments that may be accepted by the Official Liquidator in terms of the scheme. This Court after perusing the proposed scheme of arrangements and hearing the learned counsel for the parties was of the view that it is just and proper that the prayer of the Ex-Directors for ordering a meeting of the creditors for consideration of the proposed scheme may be accepted. It was, therefore, ordered that: (1) a meeting of the creditors of Golcha Properties (P) Ltd. (now in liquidation) shall be convened and held at Golcha Gardens at Jaipur on 16th March, 1975, at 11 a.m. for the purpose of considering and it, thought fit, approving with or without modification the compromise or arrangement proposed to be made between the said Company and the creditors thereof; (2) that at least 21 clear days before the said date appointed for the meeting an advertisement convening the same and stating that copies of the said compromise of arrangement and of the statement required to be furnished pursuant to s. 393 and forms of proxy can be obtained free of charge at the office of C.K. Garg, Advocate, Ujwal Niwas, Paota B. Road, Jodhpur. This should be published in the Rajasthan Gazette, Times of India, the Hindustan (Hindi Edition) and the Rajasthan Patrika; (3) That in addition, at least 21 clear days before the meeting to be held as aforesaid, a notice convening the said meeting at the place and time aforesaid together with a copy of the said compromise or arrangement, a copy of the statement required to be sent under s. 393 and the prescribed form of proxy shall be sent by pre-paid letter-post under certificate of posting addressed to each of the creditors at their respective registered or last known addresses; (4) that Shri C.K. Garg, Advocate for Shri Mehtab Chand Golcha do within 7 days from this date file in Court the form of advertisement, notice and the statement to accompany the notice and the same shall be settled by the Registrar of this Court; (5) that Shri M.M. Singhvi, Advocate, and failing him, Rajeshwar Singh Parihar, Advocate, shall be Chairman of the meeting to be held on 16th March, 1975; (6) that Shri C.K. Garg, counsel for Shri Mehtab Chand Golcha shall issue the advertisement and send out the notice referred to above under the supervision of the Chairman. If any assistance is needed for this purpose, the Official Liquidator shall render such assistance; (7) that the quorum for the said meeting shall be 100 creditors in person representing not less than 15 lacs of the total amount of debts. The voting shall be in person or by proxy, provided that proxy in the prescribed from duly signed by the person entitled to the vote is filed with the Chairman Shri M.M. Singhvi at this office at Hathi Ram Ka Oda, Fateh Sagar Road, Jodhpur, not later than 48 hours before the metting; (8) that the value of each creditor shall be in accordance with the books of the Company and, where the entries in the books are disputed, the Chairman shall determine the value for the purpose of the meeting; In pursuance of the directions contained in the order dated 3rd Jan., 1975, a meeting of the creditors was held at 11 a.m. on 16th March, 1975 at Golcha Gardens, Jaipur, under the chairmanship of M.M. Singhvi, Advocate. The meeting was attended by the following :- (a) the Official Liquidator K. Mukhopadhyay; (b) C.K. Garg, Advocate, with his clients; (c) 109 creditors as per list L/C. filed by the Chairman along with his report. In accordance with the direction No. 7 given in the order of this Court dated 3rd Jan., 1975 proxy forms were sent per post or filed in person by the creditors or their proxy were received by the Chairman at his office Hathi Ram Ka Oda, Fateh Sagar Road, Jodhpur, the details of which are set out below :- (a) in all 1111 proxy forms were received up to 11 a.m. on 15th March, 1975. (b) out of the above proxy forms, on scrutiny 1087 forms were found to be valid as per list V/P/L/1. The said list along with the valid proxy forms marked V/P/L/1 (i) to V/P/L/1 (1087) are submitted herewith; (c) the list of proxy forms which were found to be invalid is 1/P/L/2. The invalid proxy forms marked 1/P/L/2(i) to 1/P/L/2 (24) along with the list are submitted here with. The reasons for rejecting proxy forms are recorded on each of such from itself; (d) the proxy forms received after 15th March, 1975 as per list 1/P/L/3 along with such proxy forms marked 1/P/L/3(1) to 1/P/L/3(3) are submitted herewith." There were 109 creditors present in the meeting representing not less than 15 lacs in person of the total amount of the debs. During the course of meeting amendments were proposed orally as well as in writing which were discussed (vide item No. 17(a) Marked M/P/1). The amendments which were orally proposed were taken down word by word. Each proposed amendment was read out twice and thereafter the same was discussed in the meeting. The result of the discussion was that out of the various amendments proposed some were not pressed and the remaining were accepted after some modifications as proposed by C.K. Garg, and adopted by the creditors. A unanimous resolution was adopted which is contained in Annexure A and the amendments are mentioned in Annexure B, annexed to the report submitted by the Chairman. The modified scheme unanimously adopted in the creditor's meeting is as follows :- Clause I. The Scheme shall be given effect to only when the Ex-Directors of the Company namely M. C. Golcha and Jatan Kanwar Golcha pay to the Official Liquidator an adequate amount to supplement the funds already lying with him so that the following payments can be made by the Official Liquidator :- (a) Costs, charges and expense of Official Liquidator upto the date of commencement of the Scheme as provided under the law; (b) Full payment to the creditors of the company as per the claims already accepted and to be accepted up to the date of the Company going out of liquidation by the Official Liquidator, in full and final satisfaction of their dues against the Company; (c) A sum of Rs. 50 lacs (rupees fifty lacs) to the IT Department against the Income-tax dues for asst. yr. 1961-62 to 1974-75, which have already become due or which may become due and payable in future; (d) Over and above the amount Rs. 50 lacs mentioned in cl. (c), above, an amount of Rs. 2,000 (rupees two thousand) only per day, w.e.f. 1st Jan., 1975 till the date of de-liquidation, to IT Department against dues as mentioned in cl. (c); (e) The assists of the Company and its management shall not be handed over by the Official Liquidator to the Ex-Directors of the Company, unless the amounts fall short required to make the payments as mentioned in cl. (a) to (d) are supplemented and paid by the Ex-Directors of the Company; Clause II. The Official Liquidator shall not make any payment either to the creditors or to the IT Department, as referred to in cl. I above, unless and until the supplementary funds promised by the Ex-Directors of the Company, as indicated above, have been received by the Official Liquidator. Payment to the IT Department shall be made by the Official Liquidator simultaneously with the commencement of the payment to the creditors. Clause III. After the necessary funds which are adequate to make payment to the creditors and the IT Department, as indicated in clause I above, have been received by the Official Liquidator, he shall hand over the charge of the Company including its movable and immovable assets except such funds which are required for the purposes of disbursement under sub-clause (a) to (b) of cl. I as specified above to the Ex-Directors immediately and he will make payment to the IT Department and commence making payments to the creditors forthwith by cheques drawn on the Nationalised Bank at Delhi if permissible under law. Clause IV. No sooner the amount mentioned in clause I above have come into the hands of the Official Liquidator, the Official Liquidator shall immediately hand over the complete chart of the Company including its movable an immovable assets to the Ex-Directors as provided herein above. The Official Liquidator by virtue of and in pursuance of this scheme shall, however, retain the amount that may be required to be paid to the creditors and the IT Department as provided in cl. I for the purpose of disbursement of the same to the creditors and to the IT Department. Clause V. Towards the Income-tax dues against the company in respect of the asst. yr. 1961-62 and onwards till the date of de-liquidation of the company, the company shall from the date of handing over of its assets and management by the Official Liquidator to its Ex-Directors pay to the IT Department from out of the daily box office collection of Golcha Cinema, Delhi and, or Maratha Mandir, Bombay a sum of Rs. 2,000, per day. Such payment is to be continued until payment in full of the amount of tax that may be finally determined as payable by the Company for the asst. yr. 1961-62 and onwards till the date of de-liquidation of the Company either in assessment and/or reassessment and/or appeal or appeals that may or may have been preferred therefor, Provided that in the event of the present admission rates of cinema being raised by the company, the daily payment of Rs. 2,000, may be reviewed for revision. Further, in order to enable the IT Department to enforce their first and over-riding charge the IT Department shall be entitled to recover the net receipts directly from the box office collection of the company in the even of the company failing to deposit the same in the bank account opened by the Department for this purpose, on the date next following the day to which the box office collections relate. The endorsement of the bank on slip or paying-in-slip shall be sufficient proof of such deposits having been made by the Company. Until such deposit is made the next day unless that day happens to be a bank holiday, the company shall hold such amount in the trust for exclusive payment to the IT Department. Clause VI. (a) As security for the payment of the daily instalment mentioned in clause No. V above, the IT Department shall have the first and over-riding charge to the extent of Rs. 2,000, per day or as revised on the daily box office collection of Golcha cinema, Delhi and/or Maratha Mandir, Bombay. (b) As a further security for the amount payable to the IT Department for the asst. yrs. 1961-62 to 1974-75 as referred to in clause. 1(c) the Company shall mortgage the building known as 'Golcha Cinema', Daryaganj, Delhi along with all movable and immovable assets attached to it as also the lease hold rights of Maratha Mandir Cinema, Bombay by deposit of title deeds. M.C. Golcha, as Karta, of his HUF, in which he in the sole-coparcener will also mortgage the property known as Golcha Gardens, Agra Road, Jaipur by depositing of titled deeds. The title deeds of these properties will be deposited with the Union of India through the CIT, Rajasthan I, Jaipur and will do all acts necessary and ancillary to create equitable mortgage of the above mentioned properties. Clause VII. The Company shall after de-liquidation any and discharge regularly the advance and other current tax liabilities as may become due from the day of deliquidation of the company. Clause VIII. The Company shall co-operate with the IT Department for the expeditious disposal of assessment and/or appeal/appeals. Clause IX. Until the payment in full of all the dues of the IT Department, the Company shall not pay any remuneration or emoluments to its Directors exempting that a maximum of two of its Directors may be paid by way of remuneration and/or emoluments a sum of not exceeding Rs. 2,500/-, per month including perquisites. Also the Company shall not declare any dividend during this period except as required under the law. Clause X. Until the payment in full of all the dues of the IT Department as herein provided, the Company shall not divert its funds for purposes other than the business of the Company and/or under or for or in pursuance of the provisions of the scheme. Clause XI. In the event of its becoming impossible for the Company to exhibit pictures at any of the above mentioned theatres namely Golcha Cinema and or Maratha Mandir by reason of the circumstances beyond the control of the Company, such a any act of God, riots, strikes, enemy action or Government Legislation then in that event the period during which the Company is so unable to exhibit the pictures the Company will be absolved from its liability to pay the amount referred to in clause 1 (b) above. The intent being that during such period the implementation of the present scheme with regard to the liability of the Company for making the said payment shall remain suspended, and the same shall not constitute a default on the part of the Company. Clause XII. Upon the scheme becoming operative the winding up order of the High Court of Rajasthan shall be vacated and the authority of Official Liquidator shall also cases to function, except for the purposes of disbursement as contemplated in clause 1 above and further upon discharge of the Official liquidator as stated in cl. IV above, the management of the business including the entire assets movable and immovable of the Company shall be handed over to the former Directors immediately. Clause XIII. (a) This scheme is subject to the sanction of the Hon'ble High Court of Judicature for Rajasthan, and shall become operative as soon as it is sanctioned by the Court and the period prescribed for filing an appeal therefrom shall have expired and no appeal has been filed. In case any appeal is filed, it will become operative as soon as appeal is dismissed. A certified copy of the sanctioned scheme shall be registered with Register of Companies, Rajasthan as required by Companies Act. (b) That after the scheme becomes operative as contemplated herein above, Ex-Directors (The sponsors of the scheme) shall pay the adumbrated amounts in the said scheme within a reasonable period to be determined and ordered by the Company's Judge, High Court of Rajasthan. Clause XIV. The Liquidator and IT authorities shall take all possible steps to have the assessment and other proceedings in respect of post liquidation period finalised as expeditiously as possible. Any Income-tax settlement assessment arrived at by the Liquidator with the IT authorities shall not be called in question by the Company except to the extent that the Company may avail of any legal remedies under IT Act, and in such proceedings the Company shall in no case question the bona fides of the liquidator or involve him personally. Clause XV. The Company shall pass all resolutions which may required to be passed for the purpose of effectuating the present scheme or any matter incidental thereto.
(3.) M.M. Singhvi, Chairman of the meeting of the creditors, submitted his report under r. 78 of the companies (Court) Rules, 1959, on 22nd March, 1975. C.K. Garg, appearing on behalf of the aforesaid Ex-Directors filed an application under s. 151, C.P.C. for introducing a change in the modified scheme. It was stated in the application subsequent to the passing of the scheme by the creditors in the meeting held on 16th March, 1975, the Official Liquidator has made a payment of Rs. 29 lacs to the IT Department towards post liquidated payments. It was, therefore, prayed that in the said modified scheme the figures of Rs. 21 lacs may be substituted for the figures of Rs. 50 lacs in sub-cl. (c) of cl. 1 thereof. Notice of this application was given to the opposite parties. The Official Liquidator also filed a petition under the r. 79 of the companies (Court) Rules, 1959, for confirmation of the modified scheme unanimously adopted in the meeting. It was prayed by the Official Liquidator in his application under r. 79 that the scheme of arrangements may be sanctioned by the Court after fixing a time limit for the Ex-Directors to bring sufficient funds for discharging the dues mentioned in the scheme or to pass such other order as the Court may deem fit. Hence, a date i.e. 5th May, 1975 was fixed for the hearing of the petition. Notice of the aforesaid date of hearing was advertised in the Rajasthan Raj Patra dated 24th April, 1975, Times of India dated 12th April, 1975 and Rajasthan Patrika dated 15th April, 1975. On 5th May, 1975, the hearing of the petition was adjourned to 14th July, 1975. On 14th July, 1975 the Official Liquidator put in his affidavit in support of the application that the notices have been duly advertised in the aforesaid newspapers. S.C. Bhandari, appearing on behalf of the IT Department filed a written reply to the application filed by C.K. Garg for making alteration in the scheme. The other non-petitioners did not file any reply. The cases was fixed for hearing on 4th Aug., 75. Thereafter arguments were heard on the amendment application and the scheme on 21st Sept., 1975.;