E. Padmanabhan, J.@mdashThis application has been taken out by the administrator of MCC Finance Ltd., praying this court to direct the board of directors of Automobile Products of India Ltd., to file a report as to steps taken by the said company before the BIFR for disposing of 31.5 acres of land located at Bhandup, Mumbai, Maharashtra State and bring the sale proceeds to the credit of Company Petition No. 496 of 2000 and to restrain the said Automobile Products of India Ltd., from selling or disposing of or alienating or encumbering in any other manner the said 31.5 acres of land belonging to Automobile Products of India Ltd., pending the winding up proceedings before this court.
2. According to the administrator appointed by this court, the total principal amount outstanding to the depositors by MCC Finance Ltd., is Rs. 165 crores, whereas the assets available with MCC Finance Ltd. and the investment companies is only to the extent of Rs. 4 crores. After the arrest of the former chairman and managing director, an appeal was preferred before the Division Bench of this court, where the appellants undertook to deposit a sum of Rs. 5 crores per month for ten months. It was represented that the M. A. Chidambaram group (MAC group) controls 95 per cent. of the share capital of the company called Automobile Products of India Ltd., (hereinafter called API) having its registered office at Bombay, factory at Bhandup, Aurangabad and Chennai, and corporate office at Chennai. The factory in Bhandup is virtually closed. The said MAC group, during the course of the proceedings before the Division Bench as well as in this company petition offered that the entire Bhandup land measuring 31.5 acres will be allotted to discharge the depositors of MCC Finance Ltd. In other words, the property will be brought to sale or otherwise disposed of and it was represented that the entire sale proceeds thereof will be given to MCC Finance Ltd. for repaying the depositors and other creditors.
3. The erstwhile management of MCC Finance Ltd. represented before the Division Bench that the said erstwhile management/promoters and their close relatives held 95-96 per cent. of shares in API and that they are willing to place the entire land or its value in this company petition for being distributed to discharge the liability and in particular to the depositors. The said representation before the Division Bench has been recorded and the Division Bench directed API to execute an affidavit of undertaking before the Division Bench as well as before the 11th Metropolitan Magistrate, Saidapet, at the time of executing the bond for the release of Mr. A.L. Vadivelu and Mr. Jawahar Vadivelu, the erstwhile chairman and managing director of MCC Finance Ltd. respectively.
4. The director of API has filed an affidavit of undertaking to dispose of the Bombay property before the Division Bench as well as the 11th Metropolitan Magistrate, Saidapet. In the affidavit filed by the director of API, it has been set out thus :
"In the matter of MCC Finance Ltd., the land measuring about 31.52 acres of vacant land at Bhandup, Mumbai, belonging to API is proposed to be given for the benefit of the depositors of MCC Finance Ltd., as per the directions of the hon''ble court passed in O. S. A. No. 302 of 2000. For and on behalf of the board of directors and based on the authority vested in me by the board of directors of API, I have to state that the board would cause the company to undertake and file necessary scheme with the BIFR for making the net worth positive and to release the same from the BIFR. The board shall also cause the company to undertake that the said landed property of the vehicles division of API situated at Bhandup, Mumbai, after necessary clearance by the BIFR shall be made available to MCC Finance Ltd., to be used exclusively for the benefit of the depositors of MCC Finance Ltd."
5. Such an affidavit has been filed by the director of API on the basis of the resolution passed by API in its board meeting held on October 4, 2001. The said API has undertaken to work out a scheme before the BIFR to make the net worth of API positive and to either transfer the land to MCC Finance or to make the said land available for refund of the amount to the depositors with the approval of the BIFR within a period of three months. Despite lapse of several months, no steps have been taken by the chairman and managing director or the directors of API to either work out the scheme before the BIFR or take steps to dispose of the land at Mumbai, and to bring the sale proceeds for being deposited to the credit of the present company petition. API had deliberately defaulted on the solemn undertaking given by it before this court. API has also filed an affidavit through its director in this company petition as well. Hence, the present application for directions.
6. The directors of API who have failed to report before this court as to the steps taken by them in ensuring that the property is disposed of for the benefit of depositors of MCC Finance Ltd. Such an undertaking has also been given before the Company Law Board by the very directors of API.
7. The applicant has also prayed for impleading API as one of the respondents and the said implead petition has already been ordered by separate orders passed by this court on November 22, 2001. The applicant has also prayed for orders of injunction forbearing API Ltd. from, disposing or alienating or encumbering in any other manner the said immovable property measuring 31.5 acres of land at Bhandup. In fact, API had impleaded itself before the Division Bench in the pending O. S. Appeal, which has since been disposed of.
8. Application No. 2596 of 2000 has been filed by the administrator of MCC Finance Ltd., praying this court to issue direction to the BIFR to dispose of the proposals filed by API Ltd.
9. In the supporting affidavit, it is stated by the administrator that MAC group offered the entire land at Bhandup for being placed or allotted to the depositors of MCC Finance and the property will be brought to sale or otherwise disposed of and the entire proceeds thereof will be given to MCC Finance Ltd., for repaying the depositors. API is a sick industrial company and proceedings are pending before the BIFR. In the affidavit filed by API before this court on November 1, 2000, API stated that a total sum of Rs. 27.80 crores was paid to the financial institution and banks towards one-time settlement and an agreement with the workers union arrived at and the dispute has been reported to have been settled and Rs. 35.49 crores was paid towards settlement of labour dues and API also submitted a modified scheme to the IDBI, the operating agency and the said operating agency is likely to complete the process of rehabilitation and place the papers before the BIFR.
10. According to the administrator, the only hope for the depositors is to receive the sale consideration as payable by the sale/disposal of the property at Bhandup belonging to API, which the said company has reserved to bring it to the credit of the above company petition and for the benefit of the depositors.
11. C. A. No. 2596 of 2000 was presented on December 1, 2000, while C. A. No. 747 of 2001 was presented on July 17, 2001.
12. In C. A. No. 747 of 2001, the second respondent, API, has filed a reply affidavit sworn to by K. Vaidyanathan, director of the said API. According to the second respondent, no such offer or undertaking or representation was made by API before the Division Bench or before this court or before the magistrate court. It is stated that the respondent had not offered 31.5 acres of land belonging to API to the depositors of MCC Finance Ltd., or to bring the sale proceeds of the same for payment to depositors. The respondent further states that it had made a specific submission that all the actions to be taken towards either making available the land to MCC Finance Ltd. or to the depositors subject to the company obtaining necessary clearance from BIFR. The filing of affidavit before the Division Bench is admitted, but it was submitted by the second respondent bringing out the various steps taken and also the impediments complied with the orders of the Division Bench dated October 4, 2000, and the second respondent has also sought for modification of the order passed by the Division Bench.
13. It is pointed out that counsel for the second respondent had made his submissions before the Division Bench and on the basis of the submissions made by the learned senior counsel appearing for the second respondent-company, the Division Bench has made certain observations, while pointing out that API had not been heard and it is open to API to seek for modification of the order dated October 4, 2000, as the transfer and disposal of landed property to API by MCC Finance and to make the same available to MCC Finance Ltd. and it could only be subject to the sanction or approval by the BIFR and the liabilities of API. While making such observation, the Division Bench adjourned the matter and called upon all concerned to come out with an agreed scheme or alternate proposal in lieu of Clauses 2(ii)(a), (b), (c) and (d) of the order dated October 4, 2000.
14. It is contended that there is no obligation on the part of API to make available the said land and that it is for the concerned authorities to work out alternate proposal as may be acceptable to them. The present application taken out by the administrator is totally uncalled for and unwarranted. It is pointed out that there is no obligation on the part of API in view of the directions of the Division Bench and the averments of the administrator that there has been a deliberate default on the part of the respondent to the solemn undertaking given before this court is unwarranted. The respondent submits that it does not have any further obligation in regard to the proceedings relating to the company petition or on such matters arising out thereof. Without prejudice to the said contention it is further stated that the respondent has taken various steps with the bona fide intention of bringing the company out of the purview of the BIFR. The BIFR had issued various directions to the company as has been detailed by it in its order dated May 24, 2001, filed as an annexure.
15. It is contended by the second respondent, API, that the application requiring direction for impleading as a party is not proper and the further prayer for directions or for the direction to bring the entire Bhandup land or the sale proceeds thereof to make it available the said land to MCC Finance Ltd. is not maintainable and there is no obligation on the part of the respondent-company to bring the land as has been stated by the applicant. The respondent has taken fresh steps in its own interest to expedite the matter for release of the company from the BIFR. It is further pleaded that the second respondent is not involved in any further proceedings before this court and an order praying for injunction is misconceived and uncalled for. The second respondent has prayed for dismissal of the applications.
16. Heard Mr. Arvind P. Datar, learned senior counsel appearing for the applicant and Mr. P. H. Aravind Pandian, learned counsel appearing for API, the second respondent.
17. Though in the applications limited prayers have been sought for, at the hearing detailed arguments were advanced by either side as to the directions that could be granted to API to bring the Bhandup land for the discharge of MCC Finance liability to the depositors and as to the steps that are to be taken in this regard. Since the very contents of the application, which the respondent API had now chosen to dispute, despite its earlier representations or undertakings or affidavits, this court, has to examine as to whether API has factually undertaken or offered or made this court to believe that it shall place the entire Bhandup land at the disposal of this court for the discharge of MCC Finance depositors and other liabilities of MCC Finance.
18. This court has to examine as to what was the stand taken by API before this court, before the Company Law Board as well as the Division Bench and what is the effect of the undertaking or representation made by API in the present proceedings, and in case the points are answered against API, what are the directions to be issued requires to be considered ; (ii) What is the effect of the representation ; (iii) Whether, it is open to API to go back or avoid to place Bhandup land or the sale proceeds of the said property before this court for the discharge of MCC Finance depositors and creditors ; (iv) Whether any action is warranted against the directors of API Ltd., for the breach of undertaking or the assurance given ; and (v) If so, which of the directors is responsible and what are the actions to be taken against the individual directors, are all the questions, which require to be examined.
19. Mr. Aravind P. Datar, learned senior counsel appearing for the administrator took the court through the earlier affidavits filed in the company petition, O. S. Appeal and before the magistrate as well as before this court and also took the court through the earlier orders passed by this court and made his submissions, while Mr. P. H. Aravind Pandian, learned counsel appearing for the second respondent, with vehemence argued that API is not responsible to discharge the debts of MCC Finance nor has it undertaken to discharge the liability of MCC or its directors nor has it assured to discharge nor has it undertaken nor made the court to believe that it shall place the Bhandup land at the disposal of this court for the discharge of the MCC liabilities nor is the company responsible in any manner nor are the directors liable to be proceeded against either for breach of undertaking or for assurances or for representations and the applications deserve to be dismissed.
20. Though the application is for a limited purpose, with the consent of counsel for either side, and as detailed arguments were advanced by either side, this court has to decide the points and also issue suitable directions in the interest of justice and it is not as if the direction should be confined to the relief prayed for alone. If the court comes to the conclusion and rejects the case of the second respondent, API, this court has to issue further directions in the interest of the depositors to render substantial justice'' and in exercise of its inherent jurisdiction. This court has to not only compel API and its directors, but also initiate appropriate action including contempt proceedings. The following points arise for consideration in these applications :
"(i) Whether API has agreed or undertaken or assured or represented or assured the courts to believe to place 31.5 acres of its Bhandup land for being disposed of and the sale proceeds being brought before this court for the discharge of MCC Finance depositors/creditors ?
(ii) Whether the directors of API have resolved to place API land for being disposed of to settle the claims of MCC depositors/creditors ?
(iii) Whether API could be compelled to bring the Bhandup land or the sale proceeds thereof or direction should be issued to dispose of the land and bring the sale proceeds to the credit of Company Petition No. 496 of 2000 ? Whether API is estopped by its conduct ?
(iv) What action, if any, this court should initiate against the directors of API for their failure to stand by the commitment or undertaking or representation and who are the directors who are liable to be proceeded in this respect for breach of undertaking or breach of assurance or representations ?
(v) Whether this court would be justified in initiating suo motu contempt action against the directors of API for various affidavits, undertakings or commitments or assurances made before the company court, the Division Bench and before the magistrate court in this respect ?
(vi) To what relief, if any ?"
21. Already the implead application has been ordered as one of the respondents in the company petition since the very API has approached the Division Bench in the O. S. A. to implead itself and such an implead application has been taken by API on its own, Taking into consideration the entire facts, though Mr. Aravind Pandian sought to resist the application for impleading, this court by separate order, ordered impleading of API as one of the respondents in the company petition. All these issues could very well be considered together since they are interconnected.
22. As regards the interim relief of injunction or direction, this court called upon API to file an affidavit as to whether the land in question is encumbered or otherwise charges have been created over the land by API. On that, an affidavit has been filed during the hearing sworn to by one of the directors of API and the said affidavit reads thus :
"(i) I state that the company has various liabilities to be settled to fulfil the directions given by the BIFR in its order dated May 24, 2001. Only after completion of the above, it will be possible to bring the company out of the BIFR by making the net worth positive.
(ii) I state that even when the company comes out of the BIFR as a going concern, there are still other liabilities of the company to be settled independently of those mentioned in the scheme before the BIFR.
(iii) I state that as far as the property situated at Bhandup, Bombay admeasuring 31.52 acres is concerned there are no existing charges/ encumbrances as on date.
(iv) I state that what is stated above is true to the best of my knowledge and belief."
23. The contents of the affidavit disclose the prevaricating stand of API and its attitude and designs are obviously clear enough to be understood by a novice.
24. The BIFR proceedings are admittedly pending as of today and admittedly further capital funds have been brought in by API and liabilities have been discharged. As seen from the affidavit filed at the hearing of this application, there is no charge or any other encumbrance over the Bhandup land. This court called upon the second respondent to file an affidavit to the effect that they will not encumber or alienate or transfer the Bhandup land pending further proceedings in this company petition, but API was not willing to file such an affidavit. Yet it may not be in a position to dispose of the land in question till the BIFR proceedings are concluded. It is suffice to add that API has been acting in such a manner, which discloses want of bona fides on the part of the said company and its directors and, therefore, suitable direction has to be issued, while passing final orders regarding disposal of the Bhandup land in the event of this court arriving at a finding that API is bound to place the Bhandup land or the sale proceeds thereof at the disposal of this court. The directions, if any, may be issued at the end of this order depending upon the findings and conclusions that may be arrived at by this court in respect of the other issues.
25. In C. P. No. 496 of 2000, K. Vaidyanathan, director in charge of API has sworn to an affidavit. The affidavit sworn to by the said director reads thus ;
"(ii) I state that the above-said matter came up for hearing on November 3, 2000. The hon''ble court had directed me to file a time schedule for the transfer of 31.52 acres of land belonging to Automobile Products of India Ltd., Mumbai. Further the court had directed me to file a list of shareholders of API, Mumbai, along with the time schedule for transfer of the above-said land. Pursuant to the above order, this affidavit is being filed. It is submitted that the promoters and associates are presently holding 77.10 per cent. of the present equity capital of API which is about Rs. 3.12 crores. As a part of the BIFR scheme to make the net worth of the company positive the monies brought in by the promoters and their associates to API have to be converted into equity. The company has to increase its share capital of these associates. On such increased capital the promoters and associates will be holding about 99 per cent. of the total equity. The details, further process and the schedule have been explained in the note enclosed along with this affidavit.
(iii) I have enclosed various details relating to API in the typed set of papers. It is submitted that contentions had been raised before this hon''ble court with regard to the further procedure to be adopted by API for making its net worth positive. It is submitted that as per the directions given by the BIFR (Board for Industrial and Financial Reconstruction) the company has already submitted a modified scheme to the monitoring agency, namely, the IDBI. It is expected that the modified scheme along with the comments of the IDBI will be submitted to the BIFR for consideration before the end of November, 2000. On receipt of the modified scheme from the IDBI, BIFR will call for a hearing to consider and approve the modified scheme. This hearing is likely to be called for in the normal course within a period of 3 to 6 months. We shall however endeavour to hasten the process by December, 2000. After such approval being granted by the BIFR the company has to apply to the BIFR along with its audited accounts proving that its net worth has become positive and obtain deregistration. After obtaining deregistration from the BIFR, API is at liberty to use the land in such manner as it may deem fit. Steps have been taken for actively following up the various procedures involved to ensure that the entire process is completed in a time bound manner."
26. This affidavit was filed in the court in the particular context, viz., the directors of MCC and group companies represented that they will be in a position to bring substantial sum to discharge the liability of depositors/creditors and to assure the same API came forward and filed the above affidavit to extricate its directors, who hold substantial shares in API. This should not be lost sight of. This stand or assurance is fortified by further affidavit filed in the O. S. A. The shareholding pattern of equity share capital of API would show that the family of M.A. Chidambaram and the group companies and associates of MAC group alone are the shareholders of API and are holding shares, which is more than 99 per cent. and only a small fraction is being held either by their friends or relatives of the said group or the directors.
27. It is also essential to refer to the affidavit sworn to by the very same director and filed in O. S. Appeal as well as pending the company petition :
"(ii) I state that in the matter of MCC Finance Ltd., the property admeasuring about 31.52 acres of vacant land at Bhandup, Mumbai, belonging to API is proposed to be given for the benefit of the depositors of MCC Finance Ltd., as per the directions of the hon''ble court passed in O.S.A. No. 302 of 2000. For and on behalf of the board of directors and based on the authority vested in me by the board of directors of API, I have to state that the board would cause the company, to undertake and file necessary scheme with the BIFR for making the net worth positive and to release the same from the BIFR. The board shall also cause the company to undertake that the said landed property of the vehicles division of API situated at Bhandup, Mumbai, after necessary clearance by the BIFR shall be made available to MCC Finance Ltd., to be used exclusively for the benefit of the depositors of MCC Finance Ltd.
(iii) I state that the board of directors of API at their board meeting held on October 4, 2000, have passed a resolution to the effect that they shall take all effective steps to work out a scheme before the BIFR to improve the net worth of the company to a positive figure and to either transfer the land to the MCC Finance Ltd., or to make the said land available for the refund of the amount of the depositors with the approval of the BIFR within a period of 3 months."
28. This affidavit in continuation of affidavit filed before the company court would establish an undertaking or a commitment to this court and there is no escape except to stand by the undertaking and discharge the unequivocal commitment and assurances made to the courts at the juncture to extricate the directors of API as well as MCC and the courts have considered and acted upon the undertaking and given relief. Hence, the API is estopped, in that but for the undertaking the courts would have insisted the directors to bring substantial amount forthwith. Before referring to the affidavits sworn to by the director of API, it is relevant to refer to the order passed by the Division Bench Since reported in M. C. C. Finance Ltd. v. Reserve Bank of India (No. 1) [2004] 119 Comp Cas 355 (Mad). consisting of V.S. Sirpurkar, and B. Akbar Kadhiri JJ. The material portion of the order reads thus :
"It was further agreed that the appellant and his close relatives who held 95 per cent. to 96 per cent. shares in one other company by name Automobile Products of India Ltd., Bombay were to execute an affidavit of undertaking before this court as well as before the said XI Metropolitan Magistrate, Saidapet, that the chairman and managing director of the said company would take steps to work out a scheme before the BIFR for transferring 35 acres of land owned by the said Automobile Products of India Ltd. and thus to secure refund of the amount to the depositors possibly from the sale of that land and a resolution to that effect would be passed by circulation by the board of directors of the said company."
29. This indicates that API had not only assured but also committed itself before the Division Bench and the Division Bench was made to believe and act upon and passed orders.
30. In the said O. S. A. No. 302 of 2000, pending the appeal, while passing the interim order, the Division Bench consisting of P.D. Dinakaran and K. Gnanaprakasam JJ., passed the following order :
"(ii) (a) The appellant/petitioner and his close relatives who claim to have 95 to 96 per cent. of shares in Automobile Products of India, Bombay, shall execute an affidavit of undertaking before this court as well as before the XI Metropolitan Magistrate, Saidapet, at the time of executing the bond for the release of A.L. Vadivelu and Jawahar Vadivelu, the erstwhile the chairman and managing director of the company respectively to the effect that they shall take all effective steps to work out a scheme before the BIFR for a possible network either to transfer 35 acres of land from the assets of the Automobile Products of India, Bombay, to the applicant/petitioner herein or to make the said 35 acres available for the refund of amount to the depositors with the approval of the BIFR within three months from today.
(b) The board of directors of Automobile Products of India, Bombay, shall pass appropriate resolution, by a circular to the above effect and file the same to this court within a week.
(c) Thereafter, within six months, the appellant/petitioner-company and the official liquidator are at liberty to dispose of the said 35 acres, in the manner known to law and to refund the depositors.
(d) If the funds so diverted by the disposal of the said 35 acres are more than sufficient to discharge the payment of the depositors, the appellant/petitioner is at liberty to approach this court to dispense with the future instalments referred to in condition No. 1.
3. In the event of default of any of the conditions, the directions in the above order shall stand cancelled automatically with a liberty to the respondents to take appropriate action against the appellant/petitioner for recovering the amount to the company to refund the same to the depositors in the manner known to law.
4. Admittedly, the petitioners are regular in paying Rs. 5 crores every month as per the order dated October 4, 2000.
5. However, pointing out that proceedings were pending before the BIFR for reviving Automobile Products of India Ltd., Bombay, who have submitted a revised scheme to the IDBI, the monitoring agency who is expected to forward its approval to the BIFR, and only after such approval, the 35 acres of land that belongs to Automobile Products India, Bombay, would either be transferred or made available to MCC Finance Ltd., to comply with the conditions imposed under Clause 2(ii)(a), (b), (c) and (d) of the order dated October 4, 2000, as otherwise there would be a delay in completing the entire process in time, as provided in the order dated October 4, 2000. In view of the multiplicity of the agencies involved in the process and due to certain procedural formalities, the appellant/petitioner seeks a modification to the common order dated October 4, 2000, passed in C M. P. No. 15014 and 15016 of 2000 in O. S. A. No. 302 of 2000, proposing to bring substantial additional funds in lieu of 35 acres at Bombay that belongs to Automobile Products of India."
31. In respect of the above portion of the order, modification was sought for to be modified at the instance of the directors of API. Thereafter, further directions were issued, which reads thus :
"No doubt, the board of directors of Automobile Products of India Ltd., Bombay, in compliance with condition 2 (ii) (b) of the order dated October 4, 2000, passed appropriate resolution by a circular to comply with the conditions mentioned in Clause 2(ii)(a), However, C.S. Vaidyanathan, learned senior counsel appearing for Automobile Products of India Ltd., Bombay, contends that the said company was not heard before imposing such condition and, therefore, they were constrained to pass the resolution by a circular, only in order to comply with the conditions imposed by this court by order dated October 4, 2000 ; and such compliance by the directors of Automobile Products of India, Bombay, will not in any way take away their right to place the correct facts before this court and to seek a modification of the order dated October 4, 2000, as the transfer and disposal of landed property of Automobile Products of India, Bombay, to MCC Finance Ltd., could only be subject to the sanction of the approval of the BIFR and the liabilities of Automobile Industries Ltd., Bombay."
32. As per its earlier representation and following the orders passed by the Division Bench on October 4, 2000, API passed the following two resolutions on October 4, 2000, at 9.00 p.m. :
"After discussing the order dated October 4, 2000, passed by the Division Bench of the High Court of Judicature at Madras in O. S. A. No. 302 of 2000 in the matter of M. C. C. Finance Ltd. v. Reserve Bank of India tabled at the meeting, it was,
''Resolved that the board of directors shall take all effective steps to work out a scheme before the BIFR to improve the net worth of the company to a positive figure and to transfer the freehold land admeasuring 31.52 acres or thereabouts of the Bhandup vehicle division of the company situated at L. B. S. Marg, Bhandup, Mumbai, either to MCC Finance Ltd. or to make the said land available to MCC Finance Ltd., with the approval of the BIFR within a period of three months.''
''Resolved further that K. Vaidyanathan or Tony Adam, directors be and are hereby severally authorised to execute any affidavit documents and/or other writings and to do all such acts, deeds and things as deemed necessary or appropriate for the purpose of giving effect to this resolution.''
Certified true copy
For Automobile Products of India Ltd.,
K. Vaidyanathan
Director in-charge."
33. Having passed the above two resolutions, it is too late in the day for API to take a different stand and its attempt to conceal, swallow its words and representations cannot be permitted, since it is a deliberate attempt to hoodwink and bypass court orders. API has already directed K. Vaidyanathan, director to execute affidavit of documents and other writing or deeds for the purpose of giving effect to the earlier resolutions to make the Bhandup land available to MCC Finance Ltd., for the refund of the amount to the depositors.
34. K. Vaidyanathan, director incharge of API, on behalf of API sworn to on October 5, 2000, filed in O. S. A. No. 302 of 2000, filed an affidavit. The material portion relevant for the application, reads thus :
"(ii) I state that in the matter of MCC Finance Ltd., the property admeasuring about 31.52 acres of vacant land at Bhandup, Mumbai, belonging to API is proposed to be given for the benefit of the depositors of MCC Finance Ltd., as per the directions of the hon''ble court passed in O. S. A. No. 302 of 2000. For and on behalf of the board of directors and based on the authority vested in me by the board of directors of API, I have to state that the board would cause the company, to undertake and file necessary scheme with the BIFR for making the net worth positive and to release the same from the BIFR. The board shall also cause the company to undertake that the said landed property of the vehicles division at API situated at Bhandup, Mumbai, after necessary clearance by the BIFR shall be made available to MCC Finance Ltd., to be used exclusively for the benefit of the depositors of MCC Finance Ltd.
(iii) I state that the board of directors of API at their board meeting held on October 4, 2000, have passed a resolution to the effect that they shall take all effective steps to work out a scheme before the BIFR to improve the net worth of the company to a positive figure and to either transfer the land to the MCC Finance Ltd., or to make the said land available for the refund of the amount to the depositors with the approval of the BIFR within a period of 3 months."
35. That apart, even much prior to the above resolution as well as the affidavit filed before the Division Bench in O. S. Appeal, in the company petition, it is the same director in charge of API, who had sworn to an affidavit and filed it before this court pending the company petition, which reads thus :
"I state that the above-said matter came up for hearing on November 3, 2000. This hon''ble court had directed me to file a time schedule for the transfer of 31.52 acres of land belonging to Automobile Products of India Ltd., Mumbai. Further the court had directed me to file a list of shareholders of API, Mumbai, alongwith the time schedule for transfer of the above-said land."
36. A.L. Vadivelu, former chairman of MCC Finance Ltd., in his affidavit filed before the Division Bench has sworn to various facts and the material portion, which is relevant for the present application, reads thus :
"I state that by an order dated October 4, 2000, under Clause II(a) I was required to take all effective steps to work out a scheme before the BIFR for a positive net worth either to transfer lands belonging to API Ltd. to MCC or to make the said land available for the refund of the amount to the depositors with the approval of the BIFR within 3 months from October 4, 2000. I state that effective steps have been taken to make the net worth of API positive and the revised scheme has been forwarded to the IDBI who is the monitoring agency. The IDBI is expected to forward its approval to the BIFR before the end of November 2000 and, thereafter, the BIFR is likely to call for a meeting and approve the scheme, probably by end of December 2000. I state that only thereafter API will be in a position to take action in the matter of transfer or make available the land to MCC."
37. Vaidyanathan, director in charge of API in support of the application filed in C. M. P. No. 19529 of 2000 has sworn to an affidavit, which reads thus :
"(2) In the above matter the hon''ble Division Bench had passed orders on October 4, 2000, inter alia, directing an affidavit to be filed by the above petitioner for taking effective steps to work out a scheme before the BIFR to make the net worth positive and to make the land available for the benefit of the depositors of MCC Finance Ltd. It is submitted in compliance with the said order of the Division Bench of the Madras High Court, an affidavit has already been filed. It is also submitted the matter had come before the learned single judge wherein the petitioner was directed to file an additional affidavit with regard to the steps of the BIFR proceedings. I submit I had filed the said affidavit on November 10, 2000.
(3) It is submitted it is just and necessary since the land belonging to the petitioner herein is proposed to be disposed for the benefit of depositors, the petitioner should be impleaded as a party to the above proceedings."
38. In the affidavit filed before the Division Bench on behalf of API, no grievance has been expressed by the company either with respect to the earlier proposals or directions or orders passed by the learned single judge or by the Division Bench and API has voluntarily not only sought to implead itself, but also was ready and came forward to place the API lands at the disposal of the court for being disposed of for the benefit of the depositors. Such representations, sworn statements were made with full knowledge and implication with the sole object of placing substantial funds available as it was anxious to save its directors. The API and its directors are not only estopped to go back and they shall not be allowed to hoodwink everyone, besides hoodwink the court. It is too late in the day for API to contend that it has neither agreed nor accepted nor was it inclined to place the Bhandup lands available for the purpose of discharging the liabilities of MCC Finance.
39. On a consideration of the above affidavit sworn to by the director in charge of API before the company court as well as the Division Bench in O. S. A. as well as the resolution passed by the said company from time to time, it is abundantly clear and there is no doubt at all that API has not only come forward to place the Bhandup land, but also undertook to place the lands before this court to discharge the liabilities of MCC Finance, but the only difficulty that was being expressed being that API, which is before the BIFR has to turn the net worth of the said company positive and, get it released to get over the sole legal impediment and place the lands at the disposal of this court.
40. Already on the earlier occasion it has been held that MCC group of companies are interconnected, have made investments and vice versa in all the group companies and the said companies are under the common umbrella of the very same chairman and board of directors. It is not as if only the majority, but 99 per cent. of the shares are held by the same group, which is interconnected and controlled by the same set of directors and only 1 per cent. is being held by others. Even those others are also connected with MAC group of companies. Therefore, on the earlier occasion, directions were issued by this court and the group of companies and its directors readily agreed. Having agreed and having made repeated representations and having undertaken to bring the Bhandup lands and having made the court to believe and secured orders on such representation, it is not only too late in the day to represent that API has not made such representations or not given assurances or any undertaking to this court. The very resolutions passed by the board of directors of API is against the very stand taken by API.
41. API has come forward not only before the company court to file an affidavit, but also approached the Division Bench and filed affidavits. This itself is a clear case where API made this court to believe that it will place the Bhandup land at the disposal of this court for being encashed by sale and apply the same for discharge of the liabilities incurred by MCC Finance towards its depositors. It is a clear case of not only breach of undertaking, but also interference with judicial administration. But for the affidavit filed by the directors and the resolution passed by API, the company court as well as the Division Bench would have passed different orders and the representation, which API made at all stages is binding on it.
42. Even before the 11th Metropolitan Magistrate also, the following affidavit has been filed by API as well as the former chairman and managing director of MCC Finance. The affidavit reads thus :
"(i) I state that I am the director in charge of Automobile Products of India (API) and I am authorised to swear this affidavit on behalf of Automobile Products of India Ltd., and by the shareholders of API holding 95 per cent. to 96 per cent. of the increased share capital of API.
(ii) I state that in the matter of MCC Finance Ltd., the entire property admeasuring 35 acres or thereabout of vacant land at Bhandup, Mumbai, belonging to API is proposed to be given for the benefit of the depositors of MCC Finance Ltd., as per the directions of the hon''ble court passed in O. S. A. No. 302 of 2000. For and on behalf of the board of directors and based on the authority vested in me by the board of directors of API, I have to state that the Board would cause the company to undertake and file necessary scheme with the BIFR for making the net worth positive and to release the same from the BIFR. The board shall also cause the company to undertake that the said landed property of the vehicles division of API situated at Bhandup, Mumbai, after necessary clearance by the BIFR shall be made available to MCC Finance Ltd., to be used exclusively for the benefit of the depositors of MCC Finance Ltd.
(iii) The above affidavit has been filed pursuant to the order dated October 4, 2000, passed by the Division Bench of this hon''ble court in O.S.A. No. 302 of 2000."
43. The proceedings before the BIFR have been pending for nearly a decade and above and only to bring the Bhandup land and place it before the court, the shareholders of API brought in further capital, settled with the labourers and settled all other claims and made the said company''s net worth positive. The company has also moved the BIFR with a revised scheme and the BIFR is seized of the matter. It is clear that API, which was hitherto on the negative side has been made positive only for the purpose of bringing the Bhandup land for being placed before this court for discharge of MCC liabilities. In fact API moved the BIFR for modification as per its earlier representation to bring the net worth positive and get the said company released from the proceedings and not for any other purpose. Having taken such a stand and proceedings and made the Division Bench and this court to act on that representations and secured orders on such representations, gained certain benefits on that basis, API is not only estopped, but also made itself liable to be proceeded for contempt.
44. In the circumstances, all the above points are answered against API and the contentions advanced on behalf of the administrator of MCC Finance deserve to be sustained and the application is allowed by issuing the following directions :
"(i) The board of directors of API are directed to file a report within two weeks from today as to the steps taken by them before the BIFR for disposing of 31.5 acres of land located in Bhandup in Mumbai, Maharashtra State ;
(ii) To place the entire lands at the disposal of the company court in C. P. No. 496 of 2000 for the said lands being sold in auction and bring the sale proceeds to the credit of the company petitions.
(iii) API and its directors are restrained from alienating or interfering or in any other manner scuttling the alienation of Bhandup land measuring 31.5 acres and place the entire documents of title with the company court with a resolution authorising the company court to sell the said lands by way of public auction and also confer by a resolution the company court or such other person nominated by the company court to sell, realise the sale proceeds and convey title to the purchaser free from all encumbrances and apply the sale proceeds for the discharge of liabilities of MCC Finance Ltd., in particular to the depositors of MCC Finance Ltd. ;
(iv) To show cause as to why suo motu contempt proceedings should not be initiated against the directors of API for their deliberate attempt to mislead the company court, in getting orders and ultimately resile by representing before this court that API had not agreed to place the Bhandup land at the disposal of this court for the discharge of the liabilities of MCC Finance and thus interfering with administration of justice by this court in a calculated manner ; and
(v) Notice is ordered to all the directors of the second respondent-company returnable by six weeks from today to show cause as to why contempt proceedings should not be initiated against the said company, API and all its directors."
