Report No. 143

Annexure 'M'

By Regd. A.D.
In Duplicate
Gram: Tufex V.V. Nagar
Fax No.: (02692) 30560
Shri Vallabh Glass Works Ltd.
P.B. NO. 12, P.O. Vithal Udyog Nagar-388 121
(Dist. Kheda), Gujarat.

26th February, 1991

Ref.: SVG: AHD: SHA: 1241

Mr. G.V.G. Krishnamurthy,
Member-Secretary
Law Commission of India,
Ministry of Law and Justice,
Government of India,
Shastri Bhavan, 7th floor,
New Delhi-110001.

Sub.: 1. Public deposits remaining unrefunded beyond the date of maturity.

2. Furnishing of information and data relating to public deposits.

Ref.: 1. Your letter No. 6(2)(ii)/87/LC(LS)(RD)(15), dated 14-2-1991.

2. Your letter No. 6(2)(ii)/87/LC(LS)(IF)(15), dated 14-2-1991.

Dear Sir,

We acknowledge receipt of your above quoted letters. We very much regret that your earlier letters to the company have not been appropriately replied by our concerned officers. We have taken a very serious note of the same and please rest assured that we hold the law Commission in the greatest esteem and we have initiated corrective action against the erring officers and have strictly warned them to be very particular in future for prompt replies. We are however with due respect forwarding the information required by you:-

(a) We are enclosing herewith a copy of the latest return of deposits filed in the office of registrar of Companies Gujarat under rule 10 of the Companies (Acceptance of Deposits) Rules, 1975 as on 31-3-1990. The same is annexed herewith and marked Annexure A.

(b) During last five years the company has not accepted any fresh deposits from public. All these deposits relate to period 1982-83 which have matured during the period 1984-85.

(c) Reasons for non-payment of deposits are as under:-

That as a consequence of losses incurred the liquidity position of the company has substantially eroded. The company was declared as a Relief Undertaking under the provisions of Bombay Relief Undertakings (Special Provisions) Act by Government of Gujarat on 31st March, 1984 to serve as a measure of employment relief by different further declarations dated 18th December, 1984. 12th January, 1986, 12th August, 1986, 12 November, 1986, 12th February, 1987 and 9th June, 1987 the company was declared as Relief Undertaking, upto 8th December, 1987.

On 27th August, 1987 the company was declared a Sick Industrial Company within the meaning of section 3(1)(o) of Sick Industrial Companies (Special Provisions) Act, 1985. The set of orders passed by Board for Industrial & Financial Reconstruction (BIFR) on 27-8-1987 are enclosed herewith and marked Annexure B.

M/s. Wallace Flour Mills Ltd. have filed a winding up to petition No. 178 of 1983 on 9th December, 1983. As per provisions of Companies Act, 1956 winding up was deemed to have commenced from 9th December, 1983 if the winding up order was ultimately passed by Honourable Gujarat High Court. Any disposition of property after commencement of winding up is void under section 536(2) of the Companies Act against the liquidator unless the transactions are validated by Honourable Court.

As per the judgement of Gujarat High Court the transactions can be validated by Court even before the passing up on winding up order. In view of this legal position the company filed Company Application No. 66 of 1987 before Gujarat High Court requesting the repayment to small depositors upto Rs. 5000 who voluntarily waive the interest on humanitarian grounds. The petitioner creditor in the winding up petition No. 178 of 1983 has opposed the application as it offends the rule of pari-passu distribution of property Bank of Baroda as a debenture trustee has also opposed the application.

As all the winding up petitions were subsequently dismissed by Honourable Gujarat High Court, a scheme was circulated to all depositors that all depositors with deposits upto Rs. 5000 who need their deposits back for urgent need on medical grounds and who are ready to waive the interest voluntarily shall be paid back the deposits. Many of the depositors have positively responded to the scheme and during the year. April, 1989 to March, 1990, 1641 depositors were paid back Rs. 69.50 lakhs.

This is continued in the current year also and it is expected that during current year also about 1600 depositors will be paid back approx. 70.00 lacs. There about 40% depositors would be covered by that time and balance depositors, it is expected to complete payment in a phased manner in the next three years time.

It is only in the view of the fact that the company is in extreme financial difficulties and has been declared a sick unit that company has been unable to repay the deposits to the deposit holders. The company although a sick unit realises the plight of small depositors and has therefore against all odds already started paying back to small depositors their principal amounts of deposits.

It is respectfully submitted that Board for Industrial and Financial Reconstruction is fully seized of the matter and as per provisions of the Act viz. Sick Industrial Companies (Special Provisions) Act, 1985, it is a specialised legislation dealing with Sick Industrial Companies like ours.

The Board for Industrial and Financial Reconstruction takes care of all sections of members, financial institutions, secured creditors, debenture holders, unsecured creditors, workmen, statutory dues of the Government. The matter is under active consideration of Board. I.C.I.C.I. has been appointed as operating agency.

It has already submitted its report to BIFR and recommended revival of the unit with sacrifies from all sections viz. Central Government, State Government, Promoters, Company depositors, workmen, financial institutions, banks, etc. The Bench has now prepared a draft rehabilitation scheme for circulation to all concerned for giving then consent under section 19(2) of Sick Industrial Companies (Special Provisions) Act, 1985. This scheme is circulated on 17th of February, 1993 on page 3 of the draft rehabilitation scheme following provisions has been made for depositors:-