18FC. Power of Central Government to call for report on the affairs and
working of managed company - Where the management or control of an
industrial undertaking has been taken over under section 18A, whether before or
after the commencement of the Industries (Development and Regulation )
Amendment Act, 1971 (72 of 1971), or under section 18AA or section 18FA, the
Central Government may, at any time during the continuance of such
management or control, call for a report from the authorised person on the affairs
and working of the industrial undertaking an in submitting the report the
authorised person shall take into account the inventory and the lists of members
and creditors prepared under section 18FG.
18FD. Decision of Central Government in relation to managed company -
(1) If, on receipt of the report submitted by the authorised person, the Central
Government is satisfied, -
(a) in relation to the company owning the industrial undertaking, which is not
being wound up by the High Court, that the financial condition and other
circumstances of the company are such that it is not in a position to meet its
current liabilities out of its current assets, that Government may, if it considers
necessary or expedient in the interests of the general public so to do, by order,
decide that the industrial undertaking should be sold as a running concern as
provided in section 18FE and proceedings should simultaneously be started for
the winding up, by the High Court, of the company;
(b) in relation to the company, owning the industrial undertaking, which is being
wound up by the High Court, that its assets and liabilities are such that in the
interests of its creditors and contributories the industrial undertaking should be
sold as a running concern as provided in section 18FE, it may, by order, decide
accordingly.
(2) Notwithstanding anything contained in sub-section (1), if, on receipt of the
report submitted by the authorised person, the Central Government is satisfied
that -
(a) in the interests of the general public, or
(b) in the interests of the shareholders, or
(c) to secure the proper management of the company owning the industrial
undertaking, it is necessary so to do, that Government may, by order, decide to
prepare a scheme for the reconstruction of the company owning the industrial
undertaking:
Provided that no such scheme shall be prepared in relation to a company which
is being wound up by or under the supervision of the High Court, except with the
previous permission of that Court.
(3) The powers exercisable by the Central Government under section 18F, in
relation to an undertaking taken over under section 18A, shall also be
exercisable in relation to an undertaking taken over under section 18AA or
section 18FA, but such powers shall not be exercised after the making of an
order under sub-section (1) or, as the case may be, under sub-section (2) of this
section.
18FE. Provisions where Government decides to follow the course of action
specified in section 18FD(1) - (1) The provisions hereinafter laid down shall
apply where the Central Government decides that the course of action specified
in sub-section (1) of section 18FD should be followed, namely :-
(a) the decision of the Central Government that the course of action specified in
clause (a) of sub-section (1) of section 18FD should be followed in relation to a
company owning an industrial undertaking shall be deemed to be a ground
specified in section 433 of the Companies Act, 1956 (1 of 1956), on which the
company may be wound up by the High Court;
(b) the authorised person shall, as soon as may be, after the decision specified in
clause (a) of sub-section (1) of section 18FD has been taken by the Central
Government, present an application to the High Court for the winding up of the
company owning the industrial undertaking;
(c) when an application is made by the authorised person, under clause (b), for
the winding up, by the High Court, of the company owning the industrial
undertaking, the High Court shall order the winding up of the company and shall,
notwithstanding anything contained in the Companies Act, 1956 (1 of 1956),
appoint the authorised person as the Official Liquidator in relation to such
undertaking;
(d) whenever the Central Government decides under clause (b) of sub-section(1)
of section 18FD that the industrial undertaking should be sold as a running
concern, it shall cause a copy of its decision to be laid before the High Court;
(e) until the industrial undertaking referred to in clause (a) or clause (b) of subsection (1) of section 18FD is sold or purchased in pursuance of this section, the
authorised person shall continue to function as the Official Liquidator in relation
to the said undertaking in the winding up proceedings of the company, and,
thereafter the Official Liquidator appointed by the Central Government under
section 448 of the Companies Act, 1956 (1 of 1956) shall take over and function
as the Official Liquidator in the said proceedings.
(2) The authorised person shall make a report to the Central Government as to
what should be the reserve price for the sale of the industrial undertaking as a
running concern.
(3) In making a report under sub-section (2), the authorised person shall have
regard to-
(a) the financial condition of the company owning the industrial undertaking on
the date on which the order under section 18FD is made-
(i) as disclosed in its books of account,
(ii) as disclosed in its balance-sheet and profit and loss account during a period
of five years immediately preceding the said date;
(b) the condition and nature of the plant, machinery, instruments and other
equipment from the point of view of their suitability for profitable use in the
running of the industrial undertaking;
(c) the total amount of liability on account of secured and unsecured debts
including overdrafts, if any, drawn on banks, liabilities on account of terminal
benefits to the employees and other borrowings and other liabilities of the
company; and
(d) other relevant factors including the factor that the industrial undertaking will
be sold free from all incumbrances.
(4) Notice of the reserve price determined by the authorised person shall be
given in such manner as may be prescribed to the members and creditors of the
company owning such industrial undertaking to make representations within a
specified time to the Central Government through the authorised person and the
Central Government shall, after considering the representations received and the
report of the authorised person, determine the reserve price.
(5) The authorised person shall thereafter, with the permission of the High Court,
invite tenders from the public in such manner as may be determined by the High
Court for the sale of the industrial undertaking as a running concern subject to
the condition that it will be sold to the person offering the highest price which
shall not be less than the reserve price determined under sub-section (4):
Provided that the High Court shall not refuse to grant such permission if it is
satisfied that the company is not in a position to meets its current liabilities out of
its current assets.
(6) The industrial undertaking shall be sold to the highest bidder, as a running
concern, only if the price offered by him therefor is not less than the reserve
price.
(7) Where no offer of price is equal to, or moe than, the reserve price, the
industrial undertaking shall be purchased by the Central Government at the
reserve price.
(8) (a) The amount realised from the sale of the industrial undertaking as a
running concern together with any other sum which may be realised from any
contributory, purchaser or any other person from whom any money is due to the
company shall be utilised in accordance with the provisions of the Companies
Act, 1956 (1 of 1956), in discharging the liabilities of the company and distributing
the balance, if any, amongst the members of the company.
(b) In other respects, the provisions of the Companies Act, 1956 (1 of 1956),
relating to the winding up of a company by High Court shall, as far as may be,
apply.
(9) When an industrial undertaking is sold to any person under sub-section (6), or
purchased by the Central Government under sub-section (7), there shall be
transferred to and vested in the purchaser, free from all incumbrances, all such
assets relating to the industrial undertaking as are referred to in sub-clause (i) of
clause (a) of section 18FG and existing at the time of the sale or purchase.
18FE. Provisions where Government decides to follow the course of action
specified in section 18FD(2) - (1) Where in any case the Central Government
decides that the course of action specified in sub-section (2) of section 18FD
should be followed, it shall, subject to the provisions of that sub-section, cause to
be prepared, by the authorised person, a scheme for the reconstruction of the
company, owning the industrial undertaking, in accordance with the provisions
hereinafter contained and the authorised person shall submit the same for the
approval of that Government.
(2) The scheme for the reconstruction of the company owning the industrial
undertaking may contain provisions for all or any of the following matters, namely
:-
(a) the constitution, name and registered office, the capital, assets, powers,
rights, interests, authorities and privileges, the liabilities, duties and obligations of
the company on its reconstruction;
(b) any change in the Board of directors, or the appointment of a new Board of
directors of the company on its reconstruction and the authority by whom, the
manner in which and the other terms, and conditions on which, such change or
appointment shall be made and in the case of appointment of a new Board of
directors or of any director, the period for which such appointment shall be made;
(c) the vesting of controlling interest, in the reconstructed company, in the Central
Government either by the appointment of additional directors or by the allotment
of additional shares;
(d) the alteration of the memorandum and articles of association of the company,
on its reconstruction, to give effect to such reconstruction;
(e) subject to the provisions of the scheme, the continuation by or against the
company, on its reconstruction, of any action or proceedings pending against the
company immediately before the date of its reconstruction;
(f) the reduction of the interest or rights which the members and creditors have in
or against the company before its reconstruction to such extent as the Central
Government may consider necessary in the interests of the general public or in
the interests of the members and creditors or for the maintenance of the
business of the company:
Provided that nothing contained in this clause shall be deemed to authorise the
reduction of the interest or rights of any creditor (including Government) in
respect of any loan or advance made by that creditor to the company after the
date on which the management of the industrial undertaking of the company has
been taken over under section 18A, section 18AA, or section 18FA;
(g) the payment in cash or otherwise to the creditors in full satisfaction of their
claim-
(i) in respect of their interest or rights in or against the company before its
reconstruction; or
(ii) where their interest or rights in or against the company has or have been
reduced under clause (f), in respect of such interest, or rights as so reduced;
(h) the allotment to the members of the company for shares held by them therein
before its reconstruction [whether their interest in such shares has been reduced
under clause (f) or not], of shares in the company on its reconstruction and where
it is not possible to allot shares to any members, the payment in case to those
members in full satisfaction of their claim-
(1) in respect of their interest in shares in the company before its reconstruction;
or
(2) where such interest has been reduced under clause (f), in respect of their
interest in shares as so reduced;
(i) the offer by the Central Government to acquire by negotiations with the
members of the company their respective shares on payment in case to those
members who may volunteer to sell their shares to the Central Government in full
satisfaction of their claim-
(1) in respect of their interest in shares in the company before its reconstruction;
or
(2) where such interest has been reduced under clause (f), in respect of their
interest in shares as so reduced;
(j) the conversion of any debentures issued by the company after the taking over
of the management of the company under section 18A or section 18AA or
section 18FA or of any loans obtained by the company after that date or of any
part of such debentures or loans, into shares in the company and the allotment of
those shares to such debenture-holders or creditors, as the case may be;
(k) the increase of the capital of the company by the issue of new shares and the
allotment of such new shares to the Central Government;
(l) the continuance of the services of such of the employees of the company as
the Central Government may specify in the scheme in the company itself, on its
reconstruction, on such terms and conditions as the Central Government thinks
fit;
(m) notwithstanding anything contained in clause (l), where any employees of the
company whose services have been continued under clause (l), have, by notice
in writing given to the company at any time before the expiry of one month next
following the date on which the scheme is sanctioned by the High Court,
intimated their intention of not becoming employees of the company, on its
reconstruction, the payment to such employees and to other employees whose
services have not been continued on the reconstruction of the company, of
compensation, if any, to which they are entitled under the Industrial Disputes Act,
1947 (14 of 1947), and such pension, gratuity, provident fund and other
retirement benefits ordinarily admissible to them under the rules or authorisations
of the company immediately before the date of its reconstruction;
(n) any other terms and conditions for the reconstruction of the company;
(o) such incidental, consequential and supplemental matters as are necessary to
secure that the reconstruction of the company shall be fully and effectively
carried out.
(3) (a) A copy of the scheme, as approved by the Central Government, shall be
sent in draft to the company, to the registered trade unions, if any, of which the
employees of the company are members and to the creditors thereof for
suggestions and objections, if any, whthin such period as the Central
Government may specify for this purpose.
(b) The Central Government may make such modifications, if any, in the draft
scheme as it may consider necessary in the light of the suggestions and
objections received from the company, from the registered trade unions of which
the employees of the company are members and from any members or creditors
of the company.
(4) The scheme shall thereafter be placed before the High Court for its sanction
and the High Court, if satisfied that the scheme is in the interests of the general
public or in the interests of the shareholders or for securing the proper
management of the company and that the scheme is designed to be fair and
reasonable to the members and creditors of the company, may, after giving a
reasonable opportunity to the company and to its members and creditors of
showing cause, sanction the scheme without any modification or with such
modifications as it may consider necessary.
(5) The scheme, as so sanctioned by the High Court, shall come into force on
such date as that Court may specify in this behalf:
Provided that different dates may be specified for different provisions of the
scheme.
(6) The sanction accorded by the High Court under sub-section (4) shall be
conclusive evidence that all the requirements of this section relating to the
reconstruction of the company have been complied with, and a copy of the
sanctioned scheme certified by the High Court to be a true copy thereof, shall, in
all legal proceedings (whether original or in appeal or otherwise), be admitted as
evidence to the same extent as the original scheme.
(7) On and from the date of the coming into operation of the scheme or any
provision thereof, the scheme or such provision shall be binding on the company
and also on all the members and other creditors and employees of the company
and on any other person having any right or liability in relation to the company.
(8) On the coming into operation of the scheme or any provision thereof, the
authorised person shall cease to function, and the management of the
reconstructed company shall be assumed by the Board of directors as provided
in the scheme.
(9) Copies of the scheme shall be laid before each House of Parliament, as soon
as may be, after the scheme has been sanctioned by the Court.
(10) The provisions of this section and of any scheme made thereunder shall
have effect notwithstanding anything contained in section 391 to 394A (both
inclusive) of the Companies Act, 1956 (1 of 1956).
18FG. Preparation of inventory of assets and liabilities and list of members
and creditors of managed company - For the purposes of this Act, the
authorised person shall, as soon as may be, after taking over the management of
the industrial undertaking of a company under section 18A or section 18AA or
section 18FA,-
(a) prepare a complete inventory of -
(i) all properties, movable and immovable, including lands, buildings, works,
workshops, stores, instruments, plant, machinery, automobiles and other
vehicles, stocks of materials in the course of production, storage or transit, raw
materials, cash balances, cash in hand, deposits in bank or with any other
person or body or on loan, reserve funds, investments and book debts and all
other rights and interests arising out of such property as were immediately before
the date of taking over of the industrial undertaking, in the ownership,
possession, power or control of the company, whether within or without India;
and all books of account, registers, maps, plans, sections, drawings, records,
documents or titles of ownership of property and all other documents of whatever
nature relating thereto; and
(ii) all borrowings, liabilities and obligations of whatever kind of the company
including liability on account of terminal benefits to its employees subsisting
immediately before the said date;
(b) prepare separately a list of members, and a list of creditors, of such company
as on the date of taking over of the management of the industrial undertaking
showing separately in the list of creditors, the secured creditors and the
unsecured creditors:
Provided that where the management of the industrial undertaking of a company
has been taken over under the said section 18A before the commencement of
the Industries (Development and Regulation) Amendment Act, 1971 (72 of 1971),
the aforesaid functions shall be performed by the authorised person within six
months from such commencement.
18FH. Stay of suits and other proceedings - In the case of a company in
respect of which an order under section 18FD has been made, no suit or other
legal proceeding shall be instituted or continued against the company except with
the previous permission of the Central Government or any officer or authority
authorised by that Government in this behalf.