HC vacates stay on winding up of Swadeshi Mills Company

The Bombay high court has lifted the stay on Swadeshi Mills' winding up, allowing the Official Liquidator to take control of its assets.

MUMBAI: The Bombay high court has lifted the stay on the winding up of 120-year-old defunct Swadeshi Mills Company Limited, a 48 acres Sion prime property, and directed the Official Liquidator to immediately take control of the company’s assets, which were reportedly under the management of two Shapoorji Pallonji Group firms, a real estate company.

HC vacates stay on winding up of Swadeshi Mills Company

An Official Liquidator is an officer appointed by the Central Government to oversee the winding up of a company. They are attached to High Courts and are responsible for carrying out the duties outlined in the Companies Act.

A division bench comprising justices MS Sonak and Jitendra Jain overturned a single judge’s order from 9 October 2023, which had temporarily halted the winding-up process. This earlier order was based on a conditional directive from 21 December 2022, requiring Grand View Estates Private Limited, a Shapoorji Pallonji Group company, to deposit ₹240 crore in court. Grand View Estates and Forbes and Co Ltd—both part of the Shapoorji Pallonji Group—together hold a 52% stake in Swadeshi Mills.

Shareholders Bipin Bagadia and Ashish Mooni challenged the single judge’s decision, arguing that the stay application, filed under section 466 of the Companies Act, failed to consider the statutory provisions and established principles for such cases. The division bench accepted their argument, noting that the single judge had overlooked key factors, including prior rulings rejecting similar stay requests, which had even reached the Supreme Court.

“The impugned order dated 9 October 2023 does not reference the principles governing the discretion to stay winding-up proceedings under section 466 of the Companies Act,” the bench stated. It highlighted that the court failed to consider decisions by the Company Court, the Appeal Court, and the Supreme Court, instead relying solely on compliance with directions issued in the 21 December 2022 order.

The division bench also pointed out findings from earlier proceedings, which stated that Grand View Estates and Forbes and Co Ltd were not genuinely interested in reviving the business but sought to acquire the company’s properties for real estate purposes. These findings were not brought to the single judge’s attention during the October 2023 hearing.

The court rejected a plea from the Shapoorji Pallonji Group firms to extend the stay and ordered the Official Liquidator to take immediate possession of the company’s assets. Additionally, it restrained those managing the company from selling, encumbering, or otherwise dealing with its immovable properties without permission from the company court.