JUDGMENT
Vikramajit Sen, J.
1. Mr. Nain, learned counsel for the respondent company prays for an adjournment of one month to place on record some documents to illustrate that tangible results have been achieved in respect of the proposed scheme of arrangement. Keeping in view the fact that the previous undertakings given to this court have been violated with impunity, and that repeated adjournments have been taken by the respondent company in the hearing post, the revival of the petition, this prayer is rejected.
2. The brief history of the litigation in this court needs to be recounted. Various winding up petitions have been filed and while they were pending consideration, an application under Order XXIII Rule 3 of the CPC was considered and allowed by orders dated 19 November 1999. The terms of the application need not to be reiterated, for the reason that the compromise was stillborn inasmuch as payments were not received by any of the petitioning creditors in conformity with the compromise. Undertakings have also been given on behalf of the respondent company which have been violated. In respect of the claims/debts owed to financial institutions such as IDBI, IFCI, IIBI, LIC and UTI, etc., the amount outstanding is stated to be Rs. 275 crores. However, a copy of the proposed scheme of arrangement filed in the petitions on 15 May 2002, has been handed over to Mr. Sumant Batra, learned counsel appearing for these institutions in the court today. This is only to underscore that the mala fide intentions of the respondent company are writ large and that their intention is only to pro-tract the proceedings.
3. In the order dated 30 April 2002-it had been noted that if no viable scheme was forthcoming by 15 May 2002, the official liquidator attached to this court would be appointed as the provisional liquidator the take over the charge of the assets including the books of accounts of the respondent company. In view of these orders, the present proposed scheme of arrangement, which is CA 569/2002 in CP 280/1999 has been filed by the respondent company. All the petitioning creditors have stated in unison that they have carefully perused the scheme and found it totally unacceptable. This scheme under Section 391(1) of the Companies Act, 1956, has been read out in its entirety. In the first place, the scheme only envisages an arrangement with the unsecured creditors, whose total worth is stated to be for the sum of Rs. 64 crores. In contrast thereto the secured creditors, as per the showing of the respondent company itself are of Rs. 275 crores. Since the scheme does not take the secured creditors into account, it must be rejected forthwith.
4. Secondly, it has been pointed out that some of the secured creditors feature in the list of unsecured in their favor. For example, in CP 371/2000 entitled Kirloskar Oil Engines Ltd. (KOEL) v. Mideast Integrated Steel Ltd., the petitioner is a secured creditor in respect of whom the outstandings are Rs. 6,73,23,756. Redeemable secured debentures of the total value of Rs. 5.21 crores have been issued to the petitioner by the respondent company. However, the amount shown against this petitioner is Rs. 159.90 lakhs. In CP 133/2002, namely, Siemens Ltd. v. Mideast Integrated Steels Ltd. secured redeemable non-convertible debentures for an aggregate sum of Rs. 7.40 crores, of the maturity value of Rs. 11.56 crores, have been issued. This creditor has been taken into consideration in the scheme, but for an amount of Rs. 383.09 lakhs only. In CP 146/2001, Indian Hume Pipe Co. Ltd. v. Mideast Integrated Steels Ltd.–the amount claimed is approximately Rs. 78 lakhs. Reliance has been placed on Annexure B & C in that petition to an acknowledgment made by the respondent company for a sum of Rs. 23,16,847.74 and Rs. 55,02,730, respectively, as on 31.3.2000. This petitioning creditor does not feature in the list of unsecured creditors or elsewhere. The petitioner in CP 370/2001 is Bharat Earth Mover Ltd. The sum claimed in the petition is Rs. 36,42,991 along with interest thereon. My attention has been drawn to a demand for Rs. 16,91,000 raised by this petitioner by its facsimile letter dated 5.2.1996. In reply thereto, the President of the respondent company had stated that it was suffering from a liquidity crunch, and that the money would be released shortly. Counsel for the petitioner has drawn attention to two subsequent communications in which the liability has also not been disputed. Despite this background, in the list of unsecured creditors, the amount shown against the petitioner is only Rs. 12.55 lakhs, despite the passage of over six years. Learned counsel further clarifies that in its reply, consent to the scheme has been inadvertently recorded and that it is unequivocally opposed. Similarly, in CP No. 167/2001 viz, Onida Finance Ltd. v. Mideast Integrated Steels Ltd., Mr. Jayant Nath, learned counsel appearing for the petitioner, stated that whilst postdated cheques for a sum of Rs. 1.07 crores have been issued to the petitioner by the respondent company, only a sum of Rs. 12.60 lakhs has been shown due in the scheme. Mr. Kanwal Nain, learned counsel for the respondent company, stated that only two Installments had fallen due as on 15.5.2002 and, therefore, only this figure had been stated there. Mr. Jayant Nath, in reply has contended that the entire amount was to be cleared in quarterly Installments, the last of which was due on 23.8.2000 and that, therefore, the statement made by Mr. Kanwal Nain is totally incorrect. First Leasing Company of India Ltd. has filed CA 814/2002 seeking intervention in CP No. 248/19997. It is stated that a charge for the sum of Rs. 3.89 crores stands duly registered. However, First Leasing Company of India Ltd. is not mentioned in the list of unsecured creditors or in the list of secured creditors. Mr. Neeraj Kaul, learned senior counsel appearing in CP No. 230/1999 submits that in the compromise arrived at on 19 November 1999-the respondent company had admitted the liability for Rs. 37,27,510 after duly accounting for subsequent payments, the amount due in that petitioners favor was Rs. 33,53,670. However in the list of unsecured creditors, the amount shown is Rs. 31,68,000. Mr. Nain, learned counsel appearing for the respondent company stated that the error has been admitted. Mr. Kaul further points out that the repayment schedule is only for Rs. 26,78,000 to which Mr. Nain again admits the error. Counsel for the petitioner submits that such errors are present in almost every case. In CP No. 269/2001 filed by BSBK (P) Ltd. v. Mideast Integrated Steels Ltd. the claimed amount is Rs. 68,54,096.39 as is evident on a perusal of letter dated 23.11.1999, but in the scheme, only the sum of Rs. 26 lakhs has been shown. This is being mentioned for the reason that if there is widespread error, the appointment of the provisional liquidator is imperative in all the cases. The counsel for the petitioner jointly state that the figures mentioned by them pertain to only the principal amount, and that interest thereon is not reflected at all.
5. The respondents in the scheme have mentioned, in passing, that negotiations have been entered into with Tata Metalic Ltd. and some Chinese Government owned company. Whether these negotiations have reached fruition or not has not been slated. Mr. Nain stated that the negotiations as on date are in crucial stages with three or four companies.
6. While considering a scheme of arrangement under Section 391(1) of the Companies Act, the court is duty bound to consider whether the pre-pondering has diligently accounted for all the creditors. This feature is almost totally missing in the present case. Thereafter, the court must take into view the arrangement that have been made for repayment. Even though the scheme was filed in the court over four months ago, there is no tangible progress in this regard.
7. Furthermore, the court would not sanction the scheme which does not have the approval of two-thirds of the creditors. As has been mentioned hereinabove-all the petitioning creditors have objected in unison. Mr. Nain points out that in the case of Monnet Finance Ltd. in CP 172/1998 the petitioner consented to the scheme of arrangement. He has also drawn attention to the fact that the petitioner in CP 370/2001 has also recorded consent but as has been mentioned above, this consent has been emphatically withdrawn.
8. The scheme further prays for holding of a meeting of only the unsecured creditors, which in the circumstances of the case, especially keeping in view that the secured creditors are of a much greater value than that of unsecured creditors, is wholly inexplicable. The credibility of the respondent company is slender because it has already breached the undertakings given by it to the court. In the absence of any positive and credible indication of the manner in which resources are to be garnered to pay to the creditors, the proposed scheme appears to me to be only moonshine, calculated only to delay the proceedings. The scheme is rejected. The applications are dismissed. The petition is admitted.
9. As stated in the order dated 30.4.2002, since no viable scheme is forthcoming, the Official Liquidator attached to this court is appointed as the provisional liquidator with the direction to take over the assets of the respondent company including books of accounts, etc.
10. Each of the petitioners shall deposit a sum of Rs. 10,000 with the official liquidator within four weeks from today.
11. It has been pointed out that pursuant to the affidavit dated 20.10.1999 and the subsequent compromise recorded on 19.11.1999, the promoter directors of the respondent company had filed affidavits creating a charge or a second charge in respect of their personal assets. The provisional liquidator is directed to attach the personal assets so pledged.
12. In the circumstances of the case, I am also satisfied that citation be published in one issue of Indian Express (English) and Nav Bharat Times (Hindi) as well as Delhi Gazette in CP 337/1996 for 2.12.2002.
13. A copy of this order be placed in each of other petitions.
14. CP 337/1996 shall be treated as the winding up petitions, and the other petitions are likely to be disposed of on the next date.