Super Bazar Liquidation: Supreme Court Ruling on Cooperative Society Revival and Winding-Up

The case of M/S Writers and Publishers Pvt. Ltd. v. Dr. AK Mishra, Official Liquidator revolves around the legal battle over the revival and subsequent liquidation of Super Bazar, a multi-state cooperative society. The Supreme Court was required to determine whether the revival plan executed by Writers and Publishers Pvt. Ltd. (WPL) was properly implemented and whether WPL was entitled to a refund of its investment after failing to revive Super Bazar.

Super Bazar, once a successful cooperative model, faced financial collapse due to mismanagement and excessive wage liabilities. After being placed under liquidation in 2002, various revival attempts were made. WPL won the bid to revive the society in 2009 but failed to inject the promised funds or effectively restore operations. The Supreme Court, after detailed scrutiny, ruled that WPL was not entitled to a full refund and upheld the findings of the Comptroller and Auditor General (CAG) report on mismanagement and financial discrepancies.

Background of the Case

Super Bazar was a multi-state cooperative society established to promote consumer welfare. However, due to years of financial mismanagement, it suffered severe losses and was placed under liquidation on July 5, 2002. The Delhi High Court upheld the liquidation order in 2003.

After several bids for revival, WPL was selected in 2009 to take over Super Bazar under a court-monitored process. WPL committed to invest Rs. 504 crore, divided into:

• Rs. 102 crore towards share capital
• Rs. 276 crore for working capital
• Rs. 126 crore for revamping operations

Despite taking control, WPL failed to invest the required funds and mismanaged assets. The Central Government and the Employees’ Provident Fund Organization (EPFO) later raised concerns about financial irregularities.

Key Legal Issues

• Whether WPL fulfilled its commitment to revive Super Bazar.
• Whether WPL was entitled to a refund of its investment, as per the Supreme Court’s previous orders.
• Whether the CAG’s findings on financial mismanagement and unfulfilled investment commitments should impact WPL’s refund claim.

Arguments by the Petitioner (Writers and Publishers Pvt. Ltd.)

WPL contended that:

• It had invested Rs. 102 crore in share capital and Rs. 9.34 crore in working capital.
• It complied with its contractual obligations to revive Super Bazar.
• It was entitled to a full refund with 6% annual interest as per the Supreme Court’s March 2016 order.
• The CAG report’s findings were incorrect and should not influence the refund calculation.

Arguments by the Respondent (Official Liquidator & Central Government)

The Official Liquidator, supported by the Central Government, argued:

• WPL did not fulfill its financial commitments as promised in the revival plan.
• WPL engaged in financial mismanagement, including unverified transactions and lease agreements with third parties.
• WPL failed to reopen most of the planned 73 stores and misused Super Bazar’s assets.
• The refund should be calculated based on the CAG’s findings, which showed a massive shortfall in WPL’s commitments.

Supreme Court’s Observations

The Supreme Court extensively reviewed the CAG report and found significant discrepancies in WPL’s financial dealings:

“WPL did not infuse the promised working capital of Rs. 276 crore and failed to invest Rs. 126 crore for revamping operations. Instead, it entered into unauthorized agreements with third parties and misused assets.”

The Court emphasized that WPL’s claim for a refund must be scrutinized based on the actual amounts invested and the losses incurred. It stated:

“Accepting WPL’s claim for a full refund would place it outside the winding-up proceedings and disrupt the statutory order of priority in liquidation.”

Final Judgment

The Supreme Court upheld the findings of the CAG report and ruled that:

• WPL was not entitled to a full refund.
• The total refund amount would be limited to Rs. 3.39 crore, as determined by the CAG.
• Priority in fund distribution would be given to EPFO dues and other statutory obligations.
• The liquidator must ensure that Super Bazar’s assets are sold and the proceeds are distributed according to legal priorities.

Conclusion

This judgment reinforces the principle that bidders who fail to meet revival commitments cannot expect preferential treatment in refund claims. The ruling clarifies:

• Revival plans must be executed as per contractual commitments.
• Financial mismanagement and third-party dealings can impact refund claims.
• Liquidation proceedings must follow statutory priorities.
• Government-monitored cooperative societies require strict compliance with revival terms.

The Supreme Court’s decision ensures fairness in cooperative society liquidation and prevents misuse of public assets.

Petitioner Name: M/S Writers and Publishers Pvt. Ltd..
Respondent Name: Dr. AK Mishra, Official Liquidator.
Judgment By: Justice Dhananjaya Y Chandrachud, Justice Ajay Rastogi.
Place Of Incident: New Delhi, India.
Judgment Date: 05-03-2020.

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