N.L. Tibrewal, J. - (1.) The petitioner Company, namely; Rajasthan State Agro Industries Corporation Ltd., (hereinafter referred to as the company) is a Government Company within the meaning of Section 617 of the Companies Act. This petition for winding up is by the Company itself on the ground set out in clauses (a), (e) and (f) of S. 433 of the Companies Act, i.e. on the footing that: (i) The Company has by its special resolution, resolved that Company may be wound up by the Court; (ii) The Company is unable to pay its debt; (iii) That it is just and equitable that the Company should he wound up.
(2.) For deciding whether the Company may be ordered to be wound up and also to resolve the controversies raised in the petition, it is necessary to set out the factual background relating to the Company and the circumstances leading to this petition, which are thus: (i) The Company was incorporated under the provisions of the Companies Act, 1956 on 1st August, 1969. The objects main or incidental and ancillary are described in para 3 of the petition, which are as under: "(1) To aid, assist, promote or establish, develop or execute agro-industries, projects or enterprises or programmes for manufacture or production of plant, machinery, implements, accessories, tools, materials, substances, goods or things of any description which in the opinion of the Company is likely to promote or advance the agro-industrial development of Rajasthan. (2) To organise, conduct or manage engineering or repair shops or workshops of all description and to manufacture, import, export, buy, sell or otherwise deal in workshops, machinery, agricultural machinery, implements, machine tools, accessories and metals of all kinds." (ii) The Company came to be established under Central Government scheme to promote establishment of State Agro Industries Corporations with the object of making available in-puts and services required by a rapidly modernising agriculture and for promoting agro based industries. The National Commission on Agriculture in its report had also recognised dispersal of agro processing activities to inaccessible areas as the responsibility of the State Agro Industries Corporations and recommended that they should make arrangements for the disposal of industrial products manufactured in small and medium sectors under their patronage. The authorised share capital of the Company as on the date of incorporation was Rs. 5 Crores which was increased to 10 Crores divided into 5 Lacs equity shares of Rs. 100/- each. The increase in the authorised share capital was done vide amendment adopted in the adjourned 22nd Annual General Meeting of the share-holders held on 6.4.1992. The issued and subscribed capital of the Company as on 31.3.1992 was as under: JUDGEMENT_71_LAWS(RAJ)9_19971.html (iii) As per the petition, since its establishment from 1.8.1969, the Company had been incurring losses year after year except marginal profits during four years, i.e. 1971- 72, 1974-75, 1975-76 and 1979-80. The huge losses suffered by the Company year after year were met out by obtaining short and long term loans from the State Government as the Central Government expressed its unwillingness either to increase its share capital or allow any future financial assistance to the Agro Industries Corporations. The Ministry of Agriculture, Government of India, vide its letter dated March 31,1994 proposed to dis-invest Central Government share holdings in the State Agro Industries Corporations as per decision of the National Development Council. The Government of India, therefore, agreed in principle for dis-investment in favour of the respective State Governments and in the case of the petitioner company, whose net worth had become negative, the Government of India expressed its willingness to pass on its share holding for a token consideration of Rs. 1,000/- for the value of shares. The above proposal was examined by the State Government and it was agreed that the Central Government may transfer certain number of shares to the Secretary, Agriculture of State and remaining shares Governor of Rajasthan and a letter to that effect was sent by the Government of Rajasthan on 12.9.1995 seeking approval of the Government of India. The Ministry of Agriculture vide its letter dated 12th December, 1995 conveyed its consent and it was agreed to transfer (i) 1,86,776 shares of Rs. 100/- each with a total face value of Rs. 1,86,77,600/- (Rupees one crore eighty six lacs seventy seven thousand and six hundred only) to the Governor of Rajasthan; (ii) One thousand shares of face value of Rs. 1.0 lacs (Rupees one Lacs only) in favour of Secretary, Department of Agriculture, Government of Rajasthan.) The transfer was in token consideration of Rs. 1,000/- in view of the fact that as per annual report of the Company for the year 1992-93 its net worth was negative to the extent of Rs. 8.5 Crores. Accordingly, a meeting of the Board of Directors was convened to be held on 6.3.1996 to give effect the above proposals. In the meeting necessary resolutions were passed and it was also resolved that the amount of Rs. 32 Lacs lying as application money of the State Government for allotment of 32,000 preference shares be accepted and shares to that effect be issued to the State Government. After passing of the aforesaid resolution by the Board of Directors on 6.3.1996 position of share holding as on 31.3.1996 was as under: JUDGEMENT_71_LAWS(RAJ)9_19972.html (v) It was stated in the petition that the Company was una ble to pay its debt as it was running in losses continuously for years together. There were repeated reminders on behalf of the State Government for making repayment of the outstanding amounts. Some of them have been placed on record which pertain to the period from 21.2.1992 to 29.5.1995. In response, the Company informed to the Chief Accounts Officer of the Directorate of Agriculture Department vide its letters dated 22/23.7.1992 and 10.7.1995 that it was not in a position to repay the loan and interest accrued thereon due to its adverse financial position. It was also intimated that the State Government had taken a decision for winding up the Company and the resources which may be generated during the winding up proceedings alongwith any assistance received from the State Renewal Fund were to he utilised to meet the winding up labilities .s in accordance with law. (vi) In paragraph 16 of the petition, details of the assistance/relief/ concession extended by the State Government to the Company from time to time, in order to improve financial condition of the Company have been described. Inspite of all these, the Company could not improve its position and quantum of losses went on increasing and in the year 1994-95 the accumulated losses reached to the tune of Rs. 1616.83 Lacs. (vii) On 23rd July, 1992, meeting of a high power committee was convened under Chairmanship of the State Chief Minister to discuss steps and measures and the alternatives available. In the meeting, besides the Chief Minister, State Ministers for Medical and Health; for Agriculture; Development Commissioner Rajasthan; Principal Secretary Finance, Principal-cum-Managing Director of the Company; Chief Engineer, EW.D. Rajasthan, Chief Engineer, P.H.E.D. and the Deputy Secretary of the Government Agriculture Department participated. After due deliberations and taking into consideration all relevant information's relating to the Company, including its profit and loss position over years, nature of operation, capital structure, employees strength and future prospects and finding no way to run it in profit, it was decided that the Company needed to be wound up. The Chairman-cum-Managing Director of the Company was directed to work out legal modalities for closing the Company. It was also decided to form a committee under Chairmanship of Shri Rajendra Jain, Development Commissioner to work out for absorption/re-employment of surplus employees in public enterprises. The minutes of the committee have been placed on record as Annexure 29. (viii) Subsequently, a meeting was again convened on 4.1.0.1993 under Chairmanship of Principal Secretary, Agriculture, which was attended by Chairman-cum-Managing Director of the Company; Special Secretary Industries; Director of Agriculture; Deputy Secretary Finance Department; Secretary-cum-Financial Advisor, Rajasthan State Agro Industries Corporation Ltd., Deputy Secretary Agriculture (Gr. I). In the meeting option for revival of the Company was also considered but it was not found feasible. Hence, decision to winding up the Company was reiterated and firm line of action regarding retrenchment or absorption of the employees was felt necessary at the earliest. Thereafter, the Council of Ministers in its meeting held on 21.2.1995, after considering the exercise made so far in the matter, took a decision vide Cabinet Memo 13/95 No. D-5/5/MM/95 to wind up the Company. For employees of the Company it was decided that option of availing voluntary retirement under the Voluntary Retirement Scheme (VR.S.) be extended to all eligible employees and retrenchment provisions under Industrial Disputes Act, 1947 (for short 'I.D. Act') or the relevant service rules be invoked in cases of those employees who did not upto for voluntary retirement. The Managing Director of the Company was authorised to initiate all legal steps for winding up of the Company and implementation -of decisions taken in the meeting of the Council of Ministers. The approval of the Governor of Rajasthan to wind up the Company, in accordance with Article 77(2) of the Memorandum and Articles of Association of the Company, was also obtained vide letter No. F. 3(5) Agri/Inputs/92 dated 10.5.1995. That, an extraordinary general meeting of share-holders in accordance with provisions of the Companies Act was convened after special notice of the 5 meeting and resolution proposed to be taken in the meeting. The extraordinary general meeting was held on 30th May, 1.996 wherein it was resolved to wind up the Company and to file an application for winding up before the High Court of Rajasthan at Jaipur. The Managing Director of the Corporation was authorised to take all necessary steps and action and to file pleadings and papers required for this purpose. A copy of this resolution has been placed on record as Annexure 2. (ix) With regard to the employees of the Company it has been averred in the petition that 169 employees had opted and sought retirement under V.R.S. They voluntarily retired and were paid in the tune of Rs. 4,98.23.731.35 as per the statement in Schedule 'A filed alongwith the petition. In addition to them, 55 employees were absorbed on suitable posts in various other public undertakings and autonomous bodies as per Schedule 'B'. 28 other employees as per Schedule 'C' submitted applications seeking voluntary retirement till the date of filing the petition. Thus, according to the petition, out of 495 total employees of the p Company, 252 employees either accepted/opted voluntary retirement under V.R.S. or were absorbed in other public undertakings and autonomous bodies of the State. After filing of the petition, as stated by Shri U.N. Bhandari, 4 more employees hive opted voluntary retirement under the V.R.S. and 42 employees have been absorbed in other public undertakings. Thus, 197 employees have s remained, out of them two have attained the age of superannuation. For the remaining 195 employees, Mr. Bhandari made a statement on behalf of the State Government to be agreeable to give benefit under V.R.S. it they so desire even now though cut off date had already expired. (x) The latest audited-Balance Sheet of the Company for the year 1994-95 - (Annexure 43) and an un-audited provisional Balance-Sheet as on 31.3.1996 (Annexure 44) have been filed alongwith the petition to give latest financial position of the Company. The provisional Balance-Sheet shows that total paid-up share capital of the Company was about 6 Crores rupees, its accumulated losses had gone to the extent of Rs. 18,74,80,990/- and liability towards out standing loans as on 31.3.1996 was to the tune of Rs. 20,20,91,929/-. On the basis of these facts the petition for winding up was filed on 19.8.1996.
(3.) On 20.8.1996 this Court ordered winding up petition to be advertised in newspapers 'Rajasthan Patrika' (Jaipur Edition), and Indian Express (English) Delhi Edition fixing the date of hearing. Pursuant to that Krishi Udyog Nigam Karamchari Union Rajasthan, Rajasthan Agro Employees Union and some employees of the Company have intervened and filed application for being impleaded as parties. They also filed objections in opposition to the winding up. They disputed that the Company was running in losses. According to them. the Profit and Loss Accounts and the Balance-Sheets of the Company did not disclose a true and correct picture of financial position of the Company. In any case, according to them, the losses incurred by the Company were due to mis-management and huge establishment expenses incurred by the Company, Shri Paras Kuhad and Shri Suresh Kashyap, learned counsel appearing for the unions and employees, contended in this connection that the Company has a large piece of land which can fetch good amount if sold to improve financial condition of the Company. They submitted that the State Government is owner of the Company having 99.8% share holdings and also the principal creditor. The Company being of vital importance as it manufactures agricultural implements and goods of alike nature, as such, even the Company is running in loss, the State Government professing to be a welfare State, should not be allowed to wind up the Company. The winding up of the Company shall not be in national interest or in the interest of the farmers, workmen and employees of the Company. Other objections relate to non- maintainability of the winding up petition under the Companies Act on account of over-riding effect of the provisions of I.D. Act in general and Section 25-(o) in particular and also for the provisions of the Sick Industrial Companies (Special Provisions) Act, 1985 (shortly called ' the Act of 1985') in relation to a sick industrial Company, According to learned counsel the I.D. Act and the Act of 1985 are special and beneficial piece of legislation and they should be given full effect rather to allow their breach.;