In a unique verdict, the Karnataka High Court on Thursday recalled its 13-year-old order of winding up of NGEF Ltd., a State-owned company, and allowed the State government to make use of the company’s properties only for public infrastructure projects of Bengaluru city.
The High Court directed the official liquidator to hand over all records and assets of NGEF Ltd., which is free of all debts now, to the board of management as soon as it is constituted by the State government.
Justice Vineet Kothari delivered the verdict while allowing the State government’s plea, filed in 2015, to revive the company, but not the NGEF factory, and utilise around 119 acres of lands for public infrastructure projects.
If the winding up process was continued despite clearing of NGEF’s debts, the 119 acres of land, the present value of which is more than ₹2,000 crore, would have faced public auction and landed into the hands of real estate firms.
Leading builders had attempted to purchase NGEF land through auction during initial stages of the winding up process.
The court on August 3, 2004 had ordered winding up of the NGEF after the Board for Industrial & Financial Reconstruction (BIFR) recommended liquidation as attempts to revive the company had failed.
During the winding up process, the State paid around ₹80 crore that was due to secured creditors — the banks. The official liquidator had paid unsecured creditors by selling the company’s immoveable and moveable properties situated outside Bengaluru. At present, the official liquidator has around ₹100 crore in the account after clearing all dues of the company.
In his verdict, Justice Kothari termed as “misconceived” the objections raised by EHG Elektroholding, Germany, which is a minority shareholder with 10% share in NGEF.
It had claimed that there was no provision in law for recalling winding up order and there was no scheme placed by the State for revival.
However, the court said that though there is no specific provision in the Companies Act for recalling of winding up order, the law also has not imposed any restriction on the court from recalling winding up order depending upon facts of each case.
Stating that the court is conscious of the fact that NGEF lands may be encroached upon resulting in further litigation if not properly utilised for pressing public needs, Justice Kothari said the plea for using assets for public infrastructure projects in the larger public interest can be accepted as a reason for recalling winding up order as no adverse material is placed before the court to establish that the State will not adhere to its undertaking. “...it is appropriate that the idle immoveable properties of the government-owned company is best utilised for larger public interest,” the court observed.
Referring to the the plea of around 400 former employees of the NGEF, who opposed revival of the company for the reason that they should have been provided with better voluntary retirement packages and sought more monetary benefits, the court said they can approach the company’s management or the State government with their grievances as the government has also agreed to look into their demands.
