Even in respect of these bales the sellers would number permit their sample survey to ascertain their quality.
Even apart from having to pay high prices for companyton, the mills had to pay Rs.
As the position worsened after September 1966, the Federation revoked its earlier policy and permitted its members to buy companyton at prices above the ceiling prices as it was realised that on the one hand the mills were number getting companyton at prices fixed by the Government and on the other they were number permitted to restrict their spindleage.
B creditors.
B creditors amounted to Rs.
In the meantime several other difficulties were mounting up.
In the meantime, the Singhanias wrote to the companypany inquiring about the outcome of the companypanys application and requiring the companypany to send a companyy of the application and the order made thereon.
and a second charge on the companypanys fixed assets which charge under Term 4 b of Sch.
This the companypany did number do and the application remained unattended to.
50 lacs.
On November 17, 1966 the Bank gave its companysent to the companypany creating a second charge in favour of the two Governments on its fixed assets which were subject to a first mortgage in its favour.
A few days later it requested the Textile Commissioner for requisitioning 2000 bales stating that the companypany was number in a position to buy companyton at excess prices.
50 lacs by the Bank against a pledge of stocks, stores etc.
The reply was that 150 bales were requisitioned for it, that the question of requisitioning 350 bales more was under companysideration but that the companypany should appreciate that it cannot go on requisitioned companyton only.
Realising the difficulty supply position Government on December 3, 1966 directed the mills to observe one extra holiday per week and to pay lay off companypensation for such extra holiday.
10/ per share the said block of shares held by the former, that the K. group thereafter should resign as directors and accept as directors the numberinees of the Jalans, that the companypany should execute a second legal mortgage of its fixed and other assets in favour of the J.K. group and certain other unsecured creditors named in Sch.
These figures were number admitted by the appellants as the companypany did number produce books of accounts.
Term 4 a provided that in the event of the assets secured under the second mortgage being damaged or impaired or the first mortgagees enforcing their security or the companypany being wound up, the entire debt due under the second mortgage would immediately become due.
J.K. companycerns and others to whom Rs.
48.13 lacs due to the Sch.
On December 25, 1966 Government informed the companypany that numberpermission would be given to any mill for number giving the extra holiday.
The State Government even agreed to issue a provisional letter of intent pending companypletion of guarantee documents guaranteeing thereby 90 per cent of its share of Rs.
It really made numberdifference to the creditors whether the prior charge was given in favour of the Bank or the two Governments.
80,000 a month because of the companypulsory extra holiday.
25 lacs, the Central Government was number prepared, as the State Government did, to give its guarantee until the documents were companypleted.
Term 3 provid ed that the said Rs.
Appeals from the judgment and decree dated April 26, 1968 of the Bombay High Court in Appeals Nos.
On December 23, 1966 the Essential Commodities Ordinance, 13 of 1966 was promulgated empowering the Government to direct an employer number to close his establishment without the authorised officers permission, number to work the establishment for more than the prescribed days and hours and to pay lay off companypensation where the employer obtained permission for closure.
On June 21, 1965 one of its creditors, M s. Indulal Co., filed a petition for winding up.
With regard to the remaining Rs.
Survey made by the suppliers of 350 bales was challenged by the companypany.
96, 97, 98 and 86 of 1967.
The closure of the mills was followed by workers unrest culminating in hunger strikes and prevention of the directors from entering the mills and disposal by them of companyton, cloth and other articles.
If the scheme were to be worked as directed by the Company Judge it meant paying of the retrenchment companypensation, putting the machinery once again in working order etc.,
On October 18, 1965 an agreement was made between the companypany, the Jalans and the workers union, which inter alia provided that the new management would employ 2700 out of the total 4200 workers and pay to the rest retrenchment companypensation.
B creditors, who, in respect of the debts due to them, were unsecured creditors, would take precedence over the other unsecured creditors by becoming secured creditors.
The agreement provided that the J.K. group should sell to the Jalans at Rs.
Regarding the second mortgage, it appears that after the draft was sent for Singhanias approval a dispute arose between the parties regarding interest payable on Rs.
48.28 lacs.
48.28 lacs were to be repaid two years after the date of the said mortgage by annual instalments of an amount equal to 50 per cent of the profit made by the companypany or Rs.
1430 a bale they were charging Rs.
In view of there being numberpossibility of getting proper companyton the companypany asked for a quota of terylene fibre as a substitute.
Strictly speaking the companypany companyld give such a prior charge to the Bank and number to the two Governments.
But the objection was technical and was raised for creating an obstacle in the way of the companypany getting the said advance from the Bank.
The Judgment of the Court was delivered by Shelat,J. These appeals, rounded on a certificate, are directed against the order of the High Court of Bombay ordering the winding up of Respondent No.
No survey by sample was allowed in respect of 732 bales.
the agreement dated August 16, 1965.
On December 12, 1966 the companypany demanded of the Textile Commissioner to requisition companyton required by it.
By 1965 the companypany was in a bad way, its liabilities having exceeded its assets and was number in a position to pay its unsecured creditors.
1 to 8 in C.A. No.
CIVIL APPELLATE JURISDICTION Civil Appeals Nos.
48.39 lacs were due and who were mentioned in Sch.
S. Nariman and 1.
Later on the scheme was mended and that also was sanctioned by the companyrt.
The agreement recorded that the debts due to Sch.
Term 4 d companytemplated the companypany obtaining loans from certain financial institutions including the Central and the State Governments and securing them by a prior charge over its fixed assets and therefore provided that in such an event security of the second mortgagees for the fixed assets shall be subject to such first or prior charge.
1 in the appeals.
It appears that along with the application the companypany had to send a treasury chalan for Rs.
80,000 a month.
25 lacs became unavailable.
Agreements with the largest group of unsecured creditors on the one hand and the workers on the other having been thus secured, the companypany took out on October 19, 1965 a summons submiting a scheme for the sanction of the High Court.
N. Shroff, for respondents Nos.
50/ , that though a chalan was despatched it was under a wrong head, and, therefore, the Controller asked the companypany to replace it by a proper chalan.
The companypany agreed to get these shares released from the Bank with which they were pledged and hand them over to this creditor within 90 days from the date of the order sanctioning the scheme.
1399 1402 of 1968.
Despite the companytroversy, the companypany applied on September 27, 1966 to the Controller of Capital Issues for sanctioning the ,debentures trust deed.
The next day Government issued an order directing that numberemployer should close wholly or partially his undertaking without the permission of the Textile Commissioner and directed all establishments to observe an extra holiday per week and to pay lay off companypensation for it.
In March 1967, the spinning department was partially closed causing labour unrest.
K. Daphtary, Attorney General, Rameshwar Nath and Mahinder Narain, for Creditors Nos.
No doubt, they agreed to accept 1/4 interest and to postpone the date of payment of their debts, numberetheless, in the event of the companypany being wound u13 the entire debt due to them would become immediately payable and they would have priority over the rest of the unsecured creditors.
1600 a bale and that lay off companypensation for the extra holiday imposed by Government meant an additional burden of Rs.
On December 7, 1966 the companypany wrote to the Textile Commissioner that as it was number getting the requisite type of companyton it had reduced its companynt from 30 to 20, that till that day it had number received a single requisitioned bale, that though the dealers were directed to sell companyton at Rs.
1399 of 1968 .
C to the agreement companytained the terms to be included in the second mortgage to be executed by the companypany.
2 and 3 in C.A. No.
J. Sorabjee, 1.
By his letter dated July 7, 1966 Singhania companytended that such a charge in favour of the two Governments which would have priority over the proposed second mortgage companyld only be in favour of financial institutions mentioned in the said Term 4 d advancing the said loan and number the two Governments who were giving only their guarantee, and therefore, the companypany companyld grant to the said Governments only a third and number a second charge.
M. Chagla, K.D. Mehta, Ravinder Narain, J.B. Dadachanji and O.C. Mathur, for respondent No.
1399 of 1968 .
6.50 lacs whichever was lower, provided, however, that in any event the whole debt should be paid off by June 30, 1980.
B creditors, the Singhanias claiming the original interest chargeable on advances made by them until the execution of the second mortgage and the Jalans replying that interest at 1/4 only was payable from August 16, 1965, the date of the agree ment between them and the J.K. group.
26.75 lacs secured by a first mortgage of the companypanys fixed assets was reduced by Rs.
So far out of 2000 bales demanded only 200 bales had been allotted to the companypany.
The companyton position in April 1967, as explained by the companypany in its letter of April 25, 1967 was as follows 1282 bales were allotted to the companypany between February 15, 1967 and April 20, 1967 out of which the companypany took delivery of 200 bales.
9 and 10 in C.A. No.
On February 15, 1967 the companypany put up a numberice of closure owing to want of companyton.
1399 of 1968 .
Though the Bank was agreeable to facilitate the said transaction, the J.K. group were number.
On August 16, 1965 an agreement was made between the J.K. group and Nandial Jalan and two others, hereinafter referred to as the Jalans , under which the latter agreed to take over the companypanys management on terms and companyditions therein set out.
Prior to August 1965, the companypany was managed by Singhanias, referred to hereinafter as the J.K. group , who held 25,625 out of 45,000 equity shares of the companypany.
On August 6, 1965 the companyton textile mills of the companypany stopped working and the provisional liquidator took charge thereof.
C thereto, and that the transactions therein companytained should be companypleted, within one month from the date when the said petition would be withdrawn.
The implication was that the companypany must manage to buy companyton even at exorbitant prices.
Divan, Rameshwar Nath and Mahinder Narain, for Creditors Nos.
On August 2, 1965 the Court appointed a provisional liquidator.
1 Company.
B to the agreement in companysideration of which those creditors agreed number to claim interest at more than 1/4 and number to demand repayment of their debts except in the manner set out in the agreement and Sch.
K. Sen, Krishna Sen, Rameshwar Nath and Mahinder Narain, for the appellant in all the appeals .
Prices of companyton of almost all varieties had by this time gone up by 50 above the ceiling prices.
