Financial Daily from THE HINDU group of publications
Thursday, May 02, 2002
Money & Banking
HC to the rescue of MCC Fin depositors -- API told to hand over Bhandup land for sale
Our Legal Correspondent
CHENNAI, May 1
THE Madras High Court has directed the Mumbai-based Automobile Products of India Ltd (of the M.A. Chidambaram group) and the directors of API to hand over the land measuring 31.5 acres in Bhandup in Mumbai to the company court for sale through auction and apply the sale proceeds for the discharge of the liabilities of MCC Finance Ltd of Chennai, in particular to repay the amounts due to the depositors.
Allowing an application by the administrator of MCC Finance praying for a direction to the board of directors of API to file a report to restrain API from selling or disposing of or alienating or encumbering in any other manner the said 31.5 acres of land, Mr Justice E. Padmanabhan, in his order dated April 23, directed the board of API to place the entire land at the disposal of the company court.
API and its directors were restrained from alienating or interfering or in any other manner scuttling the alienation of Bhandup land and place the entire documents of title with the company court with a resolution authorising the company court to sell the said land by public auction and apply the sale proceeds for the discharge of liabilities of MCC Finance, in particular to the depositors of MCC Finance.
The judge also ordered 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 that API had not agreed to place the Bhandup land at the disposal of this court.
The court also directed the board of directors of API to file a report within two weeks as to the steps taken by them before the BIFR for disposing of the Bhandup land.
According to the administrator appointed by this court, the total principal amount outstanding to the depositors of MCC Finance was Rs 165 crore, whereas the assets available with the company and the investment companies was only to the extent of Rs 4 crore.
The company undertook before the court to deposit a sum of Rs 5 crore per month for 10 months. It was represented that the M.A. Chidambaram group controlled 95 per cent of the share capital of API, and the land was offered for sale to discharge the liabilities of the MCC Finance.
The directors of API filed an affidavit of undertaking before the Division Bench of this court as well as the 11th Metropolitan Magistrate, Saidapet, to dispose of the Mumbai property for the benefit of the depositors of MCC Finance.
The administrator submitted that API was a sick industrial company and proceedings were pending before the BIFR. The administrator contended that in company application No 747 of 2001, the 2nd respondent (API) filed an affidavit stating that no such offer or undertaking or representation was made by API before the Division Bench or before this court or before the Magistrate Court. The respondent had not offered 31.5 acres of land belonging to API to the depositors of MCC Finance or to bring the sale proceeds of the same for payment to depositors.
The judge while referring to the affidavit of the director of API filed before the company court said that the affidavit would establish an undertaking or a commitment to this court and there was no escape except to stand by the undertaking and discharge unequivocal commitment and assurances made to the courts.
Hence, API was stopped in that but for the undertaking the courts would have insisted on the directors bringing in substantial amount forthwith.
Having passed resolutions on October 4, 2000, to the effect that the Bhandup lands would be made available, with the approval of the BIFR, to MCC Finance Ltd to discharge its liabilities, it was too late in the day for API to take a different stand and its attempt to conceal, swallow its words and representations could not be permitted since it was a deliberate attempt to hoodwink and bypass court orders, the judge held.
No grievance had been expressed by the company, either with respect to the earlier proposals or directions or orders passed by the court, and API had 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 of MCC Finance.
The judge said that this was a clear case where API made this court to believe that it would place the Bhandup land at the disposal of this court.
It was a clear case of not only breach of undertaking, but also interference with judicial administration.
While allowing the application, the judge ordered notice to all the directors of API returnable by six weeks to show-cause as to why contempt proceedings should not be initiated against the said company, API and all its directors.
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