Opening the auction house for the defunct Swadeshi Mills, spread over 48 acres in Mumbai’s Sion area, the Bombay High Court on Wednesday quashed or stayed the decision to terminate the proceedings of the Swadeshi Mills Company Limited.
The HC resumed the trial, which had been stalled due to previous court orders. The court ordered the legal representative to regain control of the company’s affairs, assets and properties. Swadeshi Mills ceased operations in 2000.
Liquidation of a company involves selling its assets, paying creditors and distributing the remaining assets to shareholders.
A bench of Justices Mahesh S Sonak and Jitendra S Jain passed the verdict on the appeal of Bipin J Bagadia and Ashish Jagmohan Mooni, two shareholders of the Swadeshi Mills company, against advocate Mohit Khanna.
The petitioners challenged the orders of October 9, 2023 and December 21, 2022 of the HC which dismissed the petition filed by Grand View Estates Private Limited (a company of the Shapoorji Pallonji Group of Companies) under section 466 of the Companies Act and stayed the proceedings
The real estate group holds 52 percent stake in Swadeshi Mills through its two subsidiaries Forbes and Co Ltd (22.72 percent) and Grand View Estates (29.29 percent).
During the proceedings under the September 2002 HC order, two real estate group companies had sought to occupy the same land, which was rejected by a single-judge bench of the HC in October 2011. In August 2013, a two-judge bench of the HC dismissed the appeal against the order. of a single judge bench. The Supreme Court in February 2016 dismissed the special leave petition against the HC orders, noting that it did not find any legal and valid grounds to interfere with the same.
After four years, in 2020 and later in 2021, Grand View Estates and Rashtriya Mill Mazdoor Sangh entered into an agreement related to the payment of dues of former employees of the company.
Grand View Estates then filed another interim petition at the HC in 2022, seeking a stay on the completion of the case. The HC agreed to stay this and also issued directions to distribute funds to the creditors of Swadeshi Mills after handing it over to Grand View Estates.
Aggrieved by the said order dated October 9, 2023, the present petitioners approached the HC.
Appearing for the petitioners, advocate Khanna said that the intention of Shapoorji Pallonji’s subsidiaries was to acquire the properties of the company for the purpose of selling real estate without going through any public auction, by which the best price could be obtained for the benefit of the shareholders of Swadeshi Mills. .
Senior advocate Adv Virag Tulzapurkar, representing Grand View, submitted that it has already deposited Rs 240 crore in the court and the same amount has been released to the employees.
The bench observed that the impugned orders of 2022 and 2023 should have been set aside for “failure to consider important factors” including the earlier HC orders of 2011, 2013 and the SC order of 2016.
It said that the amount to be paid to the workers is subject to the final decision in the present appeal, and therefore no dividends can be claimed in that regard.
The HC rejected the plea for further stay on the conclusion of the case. It also ordered the two subsidiaries that currently manage the company’s affairs, to stop selling, or transferring its properties that cannot be removed without the court’s permission.
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