Mr. Kirit Morzaria Vs International Coach Builders

INTERNATIONAL COACH BUILDERS LIMITED (IN LIQUIDATION), REP. BY THE OFFICIAL LIQUIDATOR ATTACHED TO THE HON'BLE HIGH COURT OF KARNATAKA, 12^TH FLOOR, RAHEJA TOWERS, M.G. ROAD BENGALURU - 560 001.

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…RESPONDENT (BY SMT. KRUTIKA RAGHAVAN, ADVOCATE FOR OFFICIAL LIQUIDATOR)

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THIS COMPANY APPLICATION IS FILED UNDER SECTION 466 AND SECTIONS 391 TO 394 OF THE COMPANIES ACT, 1956 READ WITH RULES 6 AND 9 OF THE COMPANIES (COURT) RULES, 1959, PRAYING TO SANCTION THE SCHEME OF ARRANGEMENT FOR THE REVIVAL OF INTERNATIONAL COACH

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BUILDERS LIMITED (IN LIQUIDATION) VIDE ANNEXURE-J AND TO RECALL THE WINDING-UP ORDER DATED 30^TH NOVEMBER, 1990 IN THE INTEREST OF JUSTICE AND EQUITY.

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THIS APPLICATION HAVING BEEN RESERVED FOR ORDERS, COMING ON FOR PRONOUNCEMENT, THIS DAY, E.S. INDIRESH J., MADE THE FOLLOWING:

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CORAM: HON'BLE MR. JUSTICE E.S. INDIRESH

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CAV ORDER

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This application is filed under Section 466 and Sections 391 to 394 of the Companies Act, 1956 (for short, hereinafter referred to as 'Companies Act') read with Rules 6 and 9 of the Companies (Court) Rules, 1959 (for short, hereinafter referred to as 'Rules-1959) by the applicant-Mr. Kirit Morzaria, shareholder, Director and Creditor of the respondentInternational Coach Builders Ltd., a company under liquidation, seeking sanction of the scheme of arrangement for the revival of the respondent-Company (in liquidation) and to recall the order of winding-up dated 30^th November, 1990 passed by this Court.

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In the affidavit accompanying the present application, the applicant stated that the respondent-Company (in liquidation) was incorporated under the Companies Act, 1956 with the Registrar of Companies, Bengaluru and copy of

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the Memorandum of Association and the Articles of Association is produced at Annexure-A. The respondent-Company (in liquidation) is in the business of Body Building of Buses, Lorries and other Transport Vehicles. The capital structure of the respondent-Company (in liquidation) is Rs.1,21,64,000/-. The Annual Report of the respondent-Company (in liquidation) for the year 1989-90 is produced at Annexure-B.

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It is further stated by the applicant in the affidavit that the respondent-Company (in liquidation) had taken land for lease from Karnataka Industrial Areas Development Board (for short, hereinafter referred to as 'KIADB') and at the time of liquidation, it was left with the leasehold land along with the building constructed therein, including the plant and machinery at Plot No.6 formed out of Survey No.85 of Hoskote Industrial Area, Chokkahalli, Kasaba Hobli, Hoskote Taluk. This Court, by order dated 30^th November, 1990 (Annexure-C) in Company Petition No.131 of 1988 passed an order of winding-up of the respondent-Company (in liquidation).

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It is further stated in the affidavit that the Karnataka State Financial Corporation (for short, hereinafter

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referred to as 'KSFC') took over the land and building along with plant and machinery, fixed assets, stocks, raw materials, stores, work-in-progress etc., of the respondent-Company under Section 29 of the State Financial Corporation Act, 1951. Thereafter, the KSFC in terms of the order of winding-up dated 30^th November, 1990 passed by this Court, was allowed to sell the land and plant and machinery. The aforesaid order was challenged in O.S.A. No.26 of 1991, which came to be dismissed on 23^rd January, 1992 and thereafter, the said order passed in O.S.A. No.26 of 1991 was challenged before the Hon'ble Supreme Court in S.L.P.(Civil Appeal) No.4702 and 4703 of 1994. The Hon'ble Supreme Court, by its order dated 05^th March, 2003, set-aside the order in Company Application and reserved liberty to the KSFC to move this Court, for appropriate sale proceedings. Thereafter, Company Application No.934 of 2004 was filed, which came to be allowed on 14^th July, 2006, whereby, the permission was granted to the KSFC to sell the assets of the respondent-Company (in liquidation) in association with the Official Liquidator. It is also stated that, Company Application No.156 of 2011 was filed, seeking leave to publish advertisement for auction of the property. The KSFC

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had filed Company Application No.1719 of 2006, seeking permission to confirm the sale. In the meanwhile, the applicant in the present application had filed Company Application No.18 of 2007, seeking to implead him in the proceedings. This Court, allowed the application filed by the KSFC and application filed by the present applicant was partly allowed as per order 29^th January, 2007. Being aggrieved by the same, the present applicant had filed O.S.A. No.6 of 2007. This Court, by order dated 19^th December, 2008, set-aside the sale and directed the KSFC to take legal action for sale of assets of the respondentCompany (in liquidation) in accordance with law. The said order dated 19^th December, 2008 passed in O.S.A. No.6 of 2007 was challenged before the Hon'ble Supreme Court in S.L.P.(C) No.13860 of 2009, and by order dated 08^th June, 2009 (Annexure-E), Hon'ble Supreme Court, dismissed the special leave petition.

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It is the further case of the present applicant that the applicant has made efforts to revive the respondentCompany (in liquidation) by investing huge sum to repay all the creditors. It is also stated that the respondent-Company was

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under liquidation on account of loss of substratum, strike called-out by the employees and factory lock-out since from the date of 19^th September, 1987. The outstanding debts are being settled by the applicant. The applicant had also stated that the assets of the respondent-Company (in liquidation) are not sold by the KSFC. In the affidavit, the details of the amount claimed by the creditors as per the Official Liquidator is sum of Rs.85,32,918/by the Karnataka State Industrial and Infrastructure Development Corporation (for short, hereinafter referred to as 'KSIIDC'); Rs.8,25,74,742/- by the KSFC and Rs.6,42,27,600/- by the Ex-employees and as such, the total claim is Rs.15,53,35,260/-. Out of the total claim referred to above, the Official Liquidator admitted the claim of Rs.1,21,11,794/-. The claims raised by the KSIIDC and KSFC, who are the secured creditors, have been settled by the applicant on 03^rd May, 2025 and 12^th March, 2025 respectively

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by paying the entire due as per Annexure-F series. The copy of the report of the Official Liquidator is produced at Annexure-G.

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It is also stated in the affidavit that the applicant

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had filed Company Application No.7 of 2019, seeking to recall

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the order of winding-up dated 30^th November, 1990 and pursuant to the objections raised by the Official Liquidator as there is no proper scheme for the revival of the respondentCompany (in liquidation), the applicant withdrew the Company Application No.7 of 2019 on 30^th January, 2025 (Annexure-H) with a liberty to file a comprehensive scheme. Therefore, the applicant has propounded the scheme for revival as well as sought for recalling the order of winding-up dated 30^th November, 1990 in the present application.

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In order to fortify the scheme for revival, the value

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of Assets and Liabilities as per Audited Balance Sheet of the respondent-Company (in liquidation) is Rs.4,62,67,479/-. It is stated that the applicant being a Director and shareholder of the respondent-Company (in liquidation) as well as the Guarantor to the secured creditors, has cleared the entire dues with the KSIIDC and KSFC. Therefore, it is contended that the applicant is entitled to acquire the rights and remedies accrued to the secured creditors including KSIIDC and KSFC. The scheme of arrangement as per the applicant to revive the respondent-Company (in liquidation) provides for setting up of

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the industry for vehicle scrapping including dismantling and recycling of the motor parts and manufacturing of the luxury Bus and Truck bodies in collaboration with K.H.T. Agencies Pvt. Ltd. and Tata Motors. The scheme of arrangement with project report is produced at Annexure-J. The present applicant undertakes to clear all the dues with the statutory bodies and the private creditors, if the revival of the respondent-Company (in liquidation) is accorded by this Court, with a direction to implement the scheme.

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It is also stated in the affidavit that the applicant has

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the consent from other shareholders for the arrangement of the scheme as well as the interest of the shareholders would be taken care of. It is also stated by the applicant that the claim made by some of the employees has been settled and he is ready and undertake to deposit the adjudicated amount with the Official Liquidator. It is also stated in the affidavit that the applicant had social objective for providing employment opportunities to unemployed. The scheme evolved by the applicant is in line with the Voluntary Vehicle Fleet Modernization Program (V-VMP) initiated by the Ministry of

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Road Transport and Highways for eco-friendly for the purpose of reducing pollution and to increase safety. The applicant also undertakes to follow the norms and policies framed by the Government of Karnataka in this regard. Accordingly, the applicant filed the present Company Application No.70 of 2025, seeking revival of the respondent-Company (in liquidation) and to recall the order of winding-up dated 30.11.1980.

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The applicant has also filed undertaking affidavit dated 14^th August, 2025 to show his bona fides regarding the revival of the respondent-Company (in liquidation).

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The Official Liquidator has filed objections to the present application in C.A. No.70 of 2025. In the statement of objections, the Official Liquidator states that, he had invited claims on 01^st August, 2008 and as such, received 149 claims totaling Rs.15,53,35,360/-, which includes the claim made by KSIIDC, KSFC and employees of the respondent-Company (in liquidation). As per the statement of objections, the Official Liquidator admitted claim of Rs.1,21,11,794/-. According to the Official Liquidator as per the Statement of Affairs, the balance claim is to an extent of Rs.2,82,71,901/-. It is the

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specific case of the Official Liquidator that the present applicant has failed to clear the dues through One-Time-Settlement (OTS) in lump-sum payment, but was structured in installments, contingent upon revival being permitted by this Court. It is also stated in the statement of objections filed by the Official Liquidator with reference to Sections 391(1)(a) and 391(1)(b) of the Companies Act, which empowers the Company Court to order for meeting of the creditors. The Official Liquidator further states that, a notice be issued to all the creditors before taking decision in the matter and accordingly sought for rejection of the revival scheme proposed by the present applicant.

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Heard Saji P. John, learned counsel appearing for the applicant and Smt. Kruthika Raghavan, learned counsel appearing for the respondent-Official Liquidator.

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Sri. Saji P. John, learned counsel appearing for the applicant invited the attention of the Court to the satisfaction of the statutory dues with KSIIDC and KSFC and submitted that the aforementioned financial institutions have issued No Objection Certificate and therefore, no other statutory dues are

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claimed against the respondent-Company (in liquidation). It is

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also argued by the learned counsel that the claim made by the employees of the respondent-Company (in liquidation) have been sorted out and some of the employees intend to support for revival of the respondent-Company (in liquidation). It is also argued that the applicant has filed undertaking affidavit for the satisfaction of the Court, wherein it is stated that the shareholders of the respondent-Company (in liquidation) are the family members of the applicant and there is no impediment for revival of the company in liquidation. It is also argued that the dues of the secured creditors were already settled and in respect of dues of the State Bank of India, the same was assigned by M/s. Kotak Mahindra Bank Ltd. on 28^th April, 2006 and in this regard neither the State Bank of India nor Kotak Mahindra Bank Limited filed any claim with the Official Liquidator. The applicant represents 91.41% share of the respondent-Company (in liquidation) and settled the secured creditors and undertakes to deposit the amount due to the employees with the Official Liquidator and therefore, referring to paragraph 9 of the undertaking affidavit dated 14^th August, 2025, learned counsel for the applicant argued that the

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applicant undertakes to publish the notice by way of paper publication, calling for claims/objections, if any for revival of the company in liquidation in the daily newspapers having wide circulation in the locality. Accordingly, learned counsel appearing for the applicant refers to the judgment of the Hon'ble Supreme Court in the case of SUDARSAN CHITS (I) LTD. vs. O. SUKUMARAN PILLAI AND OTHERS reported in AIR 1984 SC 1579 and sought for allowing the application.

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Per contra, Smt. Krutika Raghavan, learned counsel appearing for the Official Liquidator submits that the scheme provided by the applicant for revival of the respondentCompany (in liquidation) is not satisfactory in nature and the applicant has to show his bona fides in respect of clearing the debts of the company under liquidation and that apart, the parameters laid down by the Hon'ble Supreme Court in the case of MEGHAL HOMES (P) LTD. vs. SHREE NIWAS GIRNI

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K.K. SAMITI AND OTHERS reported in (2007) 7 SCC 753, have to be satisfied by the applicant. Accordingly, she sought for dismissal of the application.

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It is also argued by learned counsel appearing for

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the Official Liquidator that the applicant being the Ex-Director and a shareholder of the company in liquidation, has admittedly failed to participate in or support the liquidation process for nearly thirty years and has now abruptly submitting the claim for settling with some of the creditors, which would not satisfy the parameters laid down by the Hon'ble Supreme Court in the case of MEGHAL HOMES (P) LTD. (supra). Accordingly, learned counsel appearing for the Official Liquidator, by referring to the averments at paragraphs 9 and 12 of the statement of objections, sought for dismissal of the present application.

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In the light of the submission made by learned counsel appearing or the parties, it is not in dispute that, this Court, by order dated 30^th November, 1990, passed an order of winding-up of the respondent-Company. The applicant had earlier, filed Company Application No.7 of 2019, seeking to recall the order of winding-up and the said application came to be dismissed as withdrawn, with liberty to the applicant to file a comprehensive scheme as per order dated 30^th January, 2025

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(Annexure-H). The respondent-Company (in liquidation) has leasehold rights in respect of the Plot No.6 formed out of Survey No.85 of Hoskote Industrial Area, Chokkahalli, Kasaba Hobli, Hoskote Taluk, allotted by the KIADB as per the Lease Agreement dated 29^th June, 1983. The value of Assets and Liability of the respondent-Company (in liquidation) up to 31^st March, 1990 as per Audited balance sheet is Rs.4,62,67,479/-. It is also forthcoming from the records that the applicant has settled the dues of KSIIDC to an extent of Rs.5,52,81,107/- on 03^rd May, 2025 and KSFC to an extent of Rs.5,15,48,012/- on 20^th May, 2025. In respect of the claim of Rs.36,58,400/-

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made by the employees of the company in liquidation, the applicant undertakes to deposit the amount due within thirty days from the date of approval of the scheme. In that view of the matter, taking into consideration the larger proportionate of the dues have been satisfied with by the applicant and that apart, 100% shareholders of the company have consented to the applicant for revival as per paragraphs 6 to 9 of the undertaking Affidavit dated 14^th August, 2025 filed by the applicant, I am of the view that the applicant has made out a case for invoking Section 466 of the Companies Act, which

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empowers the Court to stay all proceedings in relation to the winding-up all together for a limited time on such conditions as this Court deems fit. The material on record would satisfy the declaration of law made by Hon'ble Supreme Court in the case of SUDARSAN CHITS (I) LTD. (supra) and in the case of MEGHAL HOMES (P) LTD. (supra).

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This Court, in the case of GOVERNMENT OF KARNATAKA vs. NGEF LTD. (IN LIQUIDATION) reported in 2017 SCC OnLine Kar 1326 had an occasion to consider the revival of NGEF LTD. (IN LIQUIDATION) and at paragraphs 26 to 36 held as under:

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" 26. On the other hand, in paragraph 14 of the judgment of the hon'ble Supreme Court in the case of Sudarsan Chits (I.) Ltd. v. G. Sukumaran Pillai, AIR 1984 SC 1579, the hon'ble apex court held that the winding up order once made can be revoked or recalled but till it is revoked or recalled it continues to subsist and while it is subsisting, the company court can give necessary directions to the provisional liquidator to take recourse to section 446(2) of the Act. Relying upon the decision of the hon'ble Supreme Court in the case of National Textile Workers' Union v. P.R. Ramakrishnan, AIR 1983 SC 75, the learned single judge of this court in the case of G.T. Swamy v. Goodluck Agencies, ILR 1988 Karn 3147, held

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in paragraph 17 of the judgment that the power of the company court to recall the winding up order is recognised by the Supreme Court in the aforesaid judgment but the exercise of such power is dependent on the facts and circumstances of each case. Paragraph 17 of the judgment is quoted below:

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"I have no doubt in my mind that regard being had to theprovisions of rules 6 and 9 of the Rules framed by the Supreme Court in exercise of the powers under section 643 of the Act, the power of company court to recall the winding up order is recognised by the Supreme Court in the aforesaid two decisions. But the exertion of that power is dependent on the facts and circumstances of each case. Perhaps, consideration which are relevant in regard to an order of winding up under section 433(e) may not be relevant for an order of winding up under the 'just and equitable' clause."

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27. The provisions of the Companies Act, 1913, which corresponds to section 466 of the Companies Act, 1956, is section 173 and the decision of the Calcutta High Court of S.R. Das J., as he then was, in East India Cotton Mills Ltd., AIR 1949 Cal 69 has been summarised in paragraph 50 at page 84 quoting from the passage of Halsbury's Laws of England, 5^th volume article 1209 at 724 and also referring to the well known decisions in Telescriptor Syndicate Ltd., at pages 180, 181 where the trenchant observation of Fry L.J., in the earlier case of Hester, In re (1889) 22 QBD 632 at 641 has also been referred. The corresponding provisions of the English Companies Act is section 256 which is in pari materia with the Indian Companies Act, section 466. Calgary and Edmonton Land Co. Ltd., In re (1975) 1 All ER 1046 (Chandramouli D), Megarry J., enumerated the factors to

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be considered which is neatly put in the headnote of the said report which is as follows:

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"The court would, in normal circumstances, generally exercise its discretion to grant a stay only where the applicant showed (a) that each creditor had either been paid in full or that satisfactory provisions for him to be paid in full was to be made or that he consented to the stay or was otherwise bound not to object to it ;(b) that the liquidator's position was fully safeguarded either by paying him the proper amount of his expenses or sufficiently securing payment ; and (c) that each member either consented to the stay or was otherwise bound not to object to it, or there was secured to him the right to receive all that he would have received if the winding up had proceeded to its conclusion."

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28. In Palmers' Company Law, Volume 1, 22nd edition in article 81-98 at page 938 the principle is summarised as follows:

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"The court has a discretion, on the application of the liquidator or official receiver, or any creditor or contributory, to stay the proceedings under a winding up order (section 256). In exercising this discretion the court will be guided by the analogy of bankruptcy in rescinding a receiving order— that is to say, it will consider the interests of commercial morality and not merely the wishes of creditors and will refuse a stay if there is evidence of misfeasance or of irregularities demanding investigation."

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And also in article 83-60 at page 1001 which is as follows:

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"The court has discretion, on the application of the liquidator or any creditor or contributory, to sist winding up proceedings at any time (section 256(1)). A copy of any such order must be sent by the company, or otherwise as the court may prescribe, to the Registrar of Companies (section

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256(3)). In exercising its discretion under this section, the court will consider the interests of commercial morality and not merely the wishes of creditors, e.g., if there appear to be irregularities requiring investigation to continue."

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29. William on Bankruptcy says as follows:

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"The mere fact that all the creditors consent will no longer entitle the debtor to have the bankruptcy annulled ; and where the debts are not paid in full and the adjudication was properly made in the first instance, the court cannot annul except under a scheme under section 21 (vide supra), or an arrangement is proposed which amounts in substance to such a scheme, even though not complying with the formalities of that section. Even where the debts have been paid in full, the court has a discretion to refuse to annul, and may refuse an annulment on the ground of the bankrupt's misconduct, e.g., concealment of assets ; a second application to annul may, however, be made when a reasonable time has elapsed after the refusal of the first. In re : McHenry Lavita's Claim (under the 1869 Act, where the consent of creditors was relevant), the bankrupt had procured some of his creditors to sell their debts to trustees, who might consent to the annulment of the bankruptcy, which they did. With one assigning creditor the bankrupt had agreed to pay him a further sum at a future time ; it was held that there was no duty to disclose the agreement to the court on the application to annul, nor to the other creditors, there being no common basis of consent. But since, under the present Act, the court has considered all the circumstances of the case, and will not annul merely because the creditors consent, such an arrangement would presumably have to be disclosed to the court on an application to annul."

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30. Lord Scarman in a case as quoted in A. Aziz v. Managing Director, KSRTC, ILR 1986 Karn 2007, observed about inherent powers of the court as under:

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"In our society the judges have in some aspects of their work a discretionary power to do justice so wide that they may be regarded as law makers. The common law and equity, both of them in essence systems of private law, are fields where, subject to the increasing intrusion of statute law, society has been content to allow the judges to formulate and develop the law. The judges, even in this, their very own field of creative endeavour, have accepted, in the interests of certainty, the self-denying ordinance of 'stare decisis' the doctrine of binding precedent ; and no doubt this judicially imposed limitation on the judicial law making has helped to maintain confidence in the certainty and evenhandedness of the law.

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But in the field of statute law the judge must be obedient to the will of Parliament as expressed in its enactments. In this field Parliament makes, and unmakes, the law ; the judge's duty is to interpret and to apply the law, not to change it to meet the judge's idea of what justice requires. Interpretation does, of course, imply in the interpreter a power of choice where differing constructions are possible. But our law requires the judges to choose the construction which in his judgment best meets the legislative purpose of the enactment. If the result be unjust but inevitable, the judge may say so and invite Parliament to reconsider its provision. But he must not deny the statute. Unpalatable statute law may not be disregarded or rejected, merely because it is unpalatable. Only if a just result can be achieved without violating the legislative purpose of the statute may the judge select the construction which best suits his idea of what justice requires. Further in our system the rule 'stare decisis' applies as firmly to statute law as it does to the formulation of common law and equitable principles. And the keystone of 'stare decisis' is loyalty throughout the system to the decision of the Court of Appeal and this House. The Court of Appeal may not overrule a House of Lords decision : and only in the exceptional circumstances set out in the practice statement of July 1, 1966 (Practice Statement (Judicial

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Precedent) (1966) 1 WLR 1234 (HL)), will this House refer to follow its own previous decisions."

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31. In the case of Dilip B. Sheth v. Official Liquidator of Alang Industrial Gases Ltd. [2011] SCC Online Guj 7615, the Gujarat High Court has held as under:

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"In view of the provision under the said rule 6 of the Rules, the power available under section 151 of the Code would be available to the court. A conjoint reading of the provisions under rules 6 and 9 of the Rules bring out the position that the court has the power and, will have the freedom and authority to call in aid the provisions under section 151 of the 'Code' and the combined strength, i.e., the power under rule 9, rule 6 and section 151 of the Civil Procedure Code, 1908, will empower the court, to pass appropriate order including an order recalling the court's own (earlier) order, as equity may demand and as may be necessary for the ends of justice.

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As such the scheme of the Act does not contain any specific and direct provision expressly conferring power on the court to recall simplicitor (i.e., without requiring the applicant to observe and comply with any procedure or condition) the order of winding up, so as to illustrate this aspect, reference can be made to sections 391 to 394 of the Act. The said provisions do empower the court to pass an order of such nature and effect but they also lay down, in detail, the procedure which an applicant would be obliged to follow. Therefore, the question, which arises is that in exercise of inherent and special power, whether the court can pass an order in the nature of and having effect of recalling the order of winding up.

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In this context it is appropriate to take note of the observations made by the apex court in the decision in the case between Sudarsan Chits (I.) Ltd. v. G. Sukumaran Pillai, AIR 1984 SC 1579, wherein the apex court, while dealing with the issue raised with reference to theprovision under

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section 446 of the Act observed in paragraphs 13 and 14 that:

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'However, the narrow question which is required to be considered in this appeal is : whether the winding up proceedings were pending or had come to an end when the Appellate Bench froze the winding up order by keeping it in abeyance ? Let it be made at, once clear that the winding up order made by the learned company judge in respect of the appellant-company, has neither been quashed, set aside, cancelled, revoked nor recalled. On the contrary after directing that the winding up order shall be held in abeyance, the Appellate Bench directed that the official liquidator shall continue to act as provisional liquidator as provided by section 450 and that itself is a stage in the winding up proceedings. When the winding up order is kept in abeyance it is in a state of suspended animation. The fact that the Appellate Bench directed that pending implementation of the scheme as sanctioned by the High Court, the winding up order will be kept in abeyance itself without anything more shows that the order was neither cancelled nor recalled nor revoked or set aside. It continued to exist but was inoperative. Any default on the part of the company in carrying out its obligation under the scheme by itself without anything more would revive the winding up order. Therefore, the winding up order was effectively subsisting but inoperative for the time being, having all the potentiality of being rejuvenated or being brought back to life.

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Now, if the winding up order was merely held in abeyance, i.e., if it was not operative for the time being, but had not ceased to exist, the winding up proceedings are in fact pending and the court which made the winding up order would be the court which is winding up the company. It is now well-settled that

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a winding up order once made can be revoked or recalled but till it is revoked or recalled, it continues to subsist. That is the situation in this case. If the winding up order is subsisting, the court which made that order or the court which kept it in abeyance will have jurisdiction to give necessary directions to the provisional liquidator to take recourse to section 446(2)'."

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32. In Omprakash J. Mehra v. Surlex Diagnostic Ltd. [2012] SCC Online Bom 1497, the Mumbai High Court has held at paragraph 16 as under:

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"16. Now the next question is to dispose off the company petition which is revived and as observed above. In the commercial matters monetary claims can be settled at any stage. The dues of the creditors and/or workers of the respondent if paid and settled, there is no question to continue with the order of winding up. The court, in such a situation, can dispose off the petition as it is settled out of the court. There is no bar that court cannot permit the parties to settle the matter at any point of time. Therefore, in the present case, as no claims survive and/or there are no dues payable to any one, including creditor and/or workers of the respondentcompany and as there is no claim and/or objection received in spite of advertisement published by the official liquidator on July 26, 2012 I am inclined to observe that there is no point in keeping Company Petition No. 275 of 1995 pending. I am inclined to observe that in view of section 446 of the Companies Act also, the present petition can be disposed of as settled out of the court, with liberty."

¶150

33. The legal position therefore which emerges is, that there is no prohibition or restraint on the company court to recall the winding up order if the facts and circumstances requiring such a recall are established by any of the applicants, be it official liquidator or a creditor

¶151

23 -

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NC: 2025:KHC:34087 CA NO.70 OF 2025 IN

¶153

COP NO.131 of 1988

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HC-KAR

¶155

or a contributory or a shareholder. Here, the applicant is the majority shareholder, viz., the State of Karnataka itself and this court is not only satisfied but records its happiness for a Government company seeking to come out of the process of winding up by this court and for removing the impediment on the user of the assets of the company, the big chunk of land for public purposes and for that purpose seeking its revival. The revival of company does not necessarily mean revival and restoring of the usual manufacturing or the business activity. It is a broader term including therein, the best utilisation of its assets including the vacant land.

¶156

34. In other words, even by a permanent stay of winding up process under section 466 of the Act at this stage, section 466 of the Act provides for a platform to the company court to not only permanently or temporarily suspend the winding up process but to permit the company to revive either its running business to utilise its assets which are free from the charge of the creditors and workers' liability or are likely to be free from it charge soon, if the company has made adequate arrangements for the same.

¶157

35. This court is conscious of the fact that a big chunk of Government land which is presently in the custodia legis of the official liquidator if not properly safeguarded and utilised for the pressing public needs on the other hand may lead to even encroachments by unauthorised people on such public land, further engulfing the Government and the public authorities in a chain of

¶158

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NC: 2025:KHC:34087 CA NO.70 OF 2025 IN

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COP NO.131 of 1988

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HC-KAR

¶162

litigations. Therefore, it is always appropriate and suitable if the idle immovable property of the Government company like big chunk of land, as is available in the present case, is best utilised for the larger public interest and therefore this court does not see any impediment or valid objection against such revival of the company and restoring the assets of the company to its management under the provisions of the Companies Act, while staying the winding up process permanently at this stage subject to the compliance of the solemn undertaking given by the State before this court. It has already been noted above that none of the creditors, secured or unsecured or the official liquidator have put forth any objection before this court, except a minuscule number of workmen and the minority shareholder, the German company. As discussed above, the objection of the German company has no merit.

¶163

36. As far as a few of the workmen are concerned, learned counsel for the workmen also fairly submitted that such workmen whose dues have so far not been settled because of litigation by them or otherwise, they should be given an opportunity to place their claim before the concerned Nodal Agency, viz., KSIIDC or the management of the company itself when a proper board of directors is reconstituted by this company or the State of Karnataka."

¶164

Following the law declared by this Court in the case

¶165

of NGEF LTD. (IN LIQUIDATION) (supra), I have carefully

¶166

25 - NC: 2025:KHC:34087 CA NO.70 OF 2025 IN COP NO.131 of 1988

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HC-KAR

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examined the fact that the 100% of the shareholding of the company in liquidation is with the applicant and two members of his family. Even as per the claims from the creditors of the respondent-Company (in liquidation) as contended by the Official Liquidator, the applicant had cleared all the dues of KSIIDC and KSFC and further he has deposited Rs.87,22,167/towards the outstanding dues of the employees. Therefore, I am of the view that, there is no impediment for the applicant to take paper publication in 'The Hindu', English daily Newspaper and 'Vijaya Karnataka', Kannada Daily Newspaper, having wide circulation in Bengaluru City and Bengaluru Rural Districts, inviting claims/objections, if any, by the shareholders and creditors to be placed before the Official Liquidator and such advertisement to be published on or before 10^th September, 2025 and the Official Liquidator be directed to consider such claims raised by the shareholder/creditors, if any, on or before, twenty one days from the date of publication in the aforementioned daily newspapers. Ordered accordingly.

¶169

It is also made clear that, if any such claims are made therein, the applicant is directed to satisfy such claims

¶170

26 - NC: 2025:KHC:34087 CA NO.70 OF 2025 IN COP NO.131 of 1988

¶171

HC-KAR

¶172

accordingly. As the applicant herein has approached the National Company Law Tribunal, Bengaluru in C.P. No.114/2025, seeking direction to the Registrar of Companies, Karnataka to restore the name of the applicant-Company therein on the Register of Companies maintained by the Registrar of Companies, if its name has not been struck off from the roles of the Register and any observation by the National Company Law Tribunal, Bengaluru is nothing to do with recalling the order of winding-up dated 30^th November, 1990 and revival of the respondent-company (in liquidation). In that view of the matter, subject to observation made above, Company Application No.70 of 2025 is allowed . The order of winding-up dated 30^th November, 1990 passed by the Coordinate Bench of this Court is stayed and kept in suspension.

¶173

Having arrived at a conclusion to allow Company Application No.70 of 2025, it is needless to state that, if the applicant goes back on his aforesaid undertaking and assurance to settle the entire dues with due approval of this Court, only in the aforesaid manner, this Court may even recall or modify this order either suo moto or an appropriate application thereunder.

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NC: 2025:KHC:34087 CA NO.70 OF 2025 COP NO.131 of 1988

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HC-KAR

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It is also made clear that, once the aforesaid processes of revival of the company in liquidation is made as per the undertaking filed by the applicant is completed under the supervision of this Court, as indicated above, the winding-up order itself may be recalled by the Court later on.

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SD/(E.S.INDIRESH) JUDGE

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ARK List No.: 1 Sl No.: 57

Mr. Kirit Morzaria v. International Coach Builders

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