SHIV KUMAR SHARMA,J. - (1.) THIS petition under Section 391(2) of the Companies Act, 1956 (in short 'Act of 1956') has been filed seeking sanction of scheme of compromise to be binding on all the secured creditors of the petitioner -company Modern Syntex (India) Ltd.
(2.) THE petitioner -company was incorporated on 23 -5 -1989 under the provisions of Companies Act, 1956 as a part of Modern Group of Companies. The authorised share capital of the petitioner -company is Rs. 12,500 lakhs (Rupees twelve thousand five hundred lakhs) divided into 12,50,00,000 equity shares of Rs. 10 each. The issued, subscribed and paid up share capital of the petitioner -company is Rs. 15,821.66 lakhs (Rupees fifteen thousand eight hundred and twenty one lakhs) divided into 11,34,98,333 equity shares of Rs. 10 and 15,00,000 16 per cent cumulative redeemable preference shares of Rs. 100 each fully paid up). The petitioner -company is presently engaged in the manufacture and sale of polyester filament yarn, blended yarn and man -made fabrics. The company operates its business through three separate divisions viz. Modern Syntex, Modern Suitings and Modern Petrofils. Presently, Syntex and Suitings division are lying closed due to labour problem, shortage of working capital and adverse market conditions etc. The petitioner -company states that as a whole it had a good track record of generating profits, rewarding the shareholders and servicing the debts till 1997 since inception. Due to global recession coupled with stiff competition in Textile Industry the petitioner -company suffered significant losses since 1997 -99. On account of Gujarat earthquake in January, 2001 the Petrofils division of the petitioner -company also adversely affected. On account of these problems the petitioner -company submitted a reference before the Board for Industrial and Financial Reconstruction, which was registered by the Board. The petitioner -company further given out that on account of various difficulties faced by it, a necessity was left for rescheduling and restructuring of the existing debts of the company and an elaborate scheme of compromise was prepared in order to enter into a compromise with the secured creditors of the company. On 18 -7 -2005 the Board of Directors of the petitioner -company approved the proposed scheme of compromise by passing a resolution to this effect. The petitioner -company stated in the petition that the yarn and suiting divisions of the petitioner -company were declared as relief undertaking by the State Government of Rajasthan by way of Notification dated 1 -3 -2004 under sections 3 and 43 of the Rajasthan Relief Undertaking Act, 1961 for the period commencing from 15 -2 -2004 to 1 -2 -2005. The petitioner applied for extension of the period of relief undertaking status for a further period of one year by the application dated 31 -1 - 2005. The Government of Gujarat also declared the Petrofils division of the petitioner -company as a relief undertaking by the Notification dated 17 -6 -2004 for a period of one year from 17 -6 -2004 to 16 -6 -2005. The petitioner -company also applied for extension of the period of relief undertaking status and the same is under active consideration of the State of Gujarat.
(3.) VIDE order dated 12 -8 -2005 passed in Company Application No. 47 of 2005 filed by the petitioner -company meeting of secured creditors was convened on 20 -9 -2005. The notice of the meeting was published in two newspapers Rajasthan Patrika and Times of India on 26 -8 -2005 and 27 -8 -2005. The meeting was attended by 25 secured creditors. One secured creditor Bank of Baroda abstained from voting. The compromise was read and explained to the meeting and the scheme was approved by majority of 18 votes representing 77.27 per cent in value of the total value of debts as against 6 votes representing 22.73 per cent in the value of the total value of debts. It appears that the scheme of compromise has been approved by the requisite majority of the secured creditors representing more than 3/4th in value of the total debts as required under the Companies Act.;