Provisions: Section 466 of the Companies Act, 1956 – Power of Court to stay winding
up and allow revival of a company.
Facts: Svadeshi Mills Company Ltd. was ordered to be wound up in 2005. Its main
asset was around 48 acres of land at Sion. Grand View Estates and Forbes together
held about 53.25% of the shareholding and proposed revival of the company through
redevelopment without selling or alienating the land. Grand View deposited ₹240 crore
with the Official Liquidator, out of which about ₹169 crore had already been paid to ex-
workers. The revival proposal provided for payment of creditors and substantial benefits
to around 2,834 workmen and their families. However, two minority shareholders
holding only about 0.07321% opposed the revival and sought public auction of the
company's assets. The Single Judge rejected the revival proposal, after which Grand
View appealed.
Conclusion / Held: The Division Bench allowed the appeal and permitted the revival
proposal. The Court considered the interests of the workmen, creditors, public interest,
bona fides of the proposal and the fact that the land was not proposed to be alienated.
The Court also observed that redevelopment of the company's property did not by itself
amount to transfer or divestment of the company's land. Accordingly, the earlier order
refusing revival was set aside.
Key Learning: Under Section 466, a Court can consider revival of a company instead of
continuing liquidation where the proposal is bona fide and serves public interest and
commercial morality. The interests of workmen and creditors are important
considerations, and a changed revival proposal may be considered even where earlier
revival attempts had failed.