Swadeshi Mills Case Study

o Company application is taken out by workmen of M/s. Swadeshi Mills Co. Ltd. These workmen are five out of the 735 workmen who were employed in the Mill. o They had filed proof of debt before the Official Liquidator. They inter alia claimed that they should be paid up to the date of the order of winding up. The Official Liquidator has paid them till the date of the appointment of Provisional Liquidator, taking that as the relevant date. Since this view taken by the Official Liquidator affects large number of workmen of the Mill under liquidation. o M/s. Swadeshi Mills Co. Ltd. was one of the leading Mills in Mumbai. The Company, when it was in operation, had approximately 2970 employees. The Company had substantial immovable assets. o The
On 24 April 1998, the BIFR declared the Company as a sick undertaking, under the provisions of Sick Industrial Companies (Special Provisions) Act. o The BIFR on 5 February 2001, recorded a prima facie opinion that the Company was not likely to make it's net worth match its cumulative losses within a reasonable time and that the Company was not likely to be viable. o The BIFR recommended that it was just and equitable and in public interest to wind up the Company. o Rashtriya Mill Mazdoor Sangh (RMMS) being the workers Union filed an appeal before the Appellate Authority of Industrial and Financial Reconstruction (AAIFR) challenging the order of BIFR. The Appeal was dismissed by the
2 and 3, and RMMS entered into a Memorandum of Understanding. In the recitals, it was mentioned that the Forbes Company is the major share holder and secured creditor of Swadeshi Mills Company Ltd. and Grand View Estates Private Limited was an unsecured creditor of the Company. These two Companies referred themselves as the Promoter group and as part of the Shapoorji Pallonji Group. It was mentioned in the Memorandum that the RMMS was representing majority of the workers/employees of the Company. Facts leading to the winding of the Company were