TMI Blog1970 (8) TMI 47X X X X Extracts X X X X X X X X Extracts X X X X ..... to and with the benefit of the conditions endorsed thereon and in an indenture dated November 22, 1939, made between the company of the one part and Sailendra Nath Banerjee and others of the other, whereby certain properties of the company were vested in trustees for securing the payment of the principal amount and interest payable in respect of the said debentures. The relevant clauses of the said debentures as endorsed thereon are as follows: "(1)The Calcutta Safe Deposit Co. Ltd. (hereinafter called 'the company') will on the 22nd day of November, 1939, or on such earlier date as the principal monies hereby secured become payable in accordance with the conditions endorsed herein pay to the bearer of this debenture or if registered to the registered holder hereof on the presentation of this debenture Rs. 1,000. (2)The company will during the continuance of this security pay interest on the said principal sum of Rs. 1,000 at the rate of 4 % per annum by equal half-yearly payments on every 30th June and 31st December in accordance with the coupons annexed hereto. (3)This debenture is issued subject to and with the benefit of the conditions endorsed hereon, which are to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and in terms of the indenture referred to in clause 13 hereof". The said indenture dated November 22, 1939, inter alia , contained the following provisions: "(5) The trustees shall permit the company to hold and enjoy all the mortgaged premises and to carry on thereon and therewith the business or any of the businesses mentioned in the memorandum of association of the company until the security hereby constituted shall become enforceable as hereinafter provided and then the trustees may in their discretion without any such request next hereinafter mentioned and shall upon the request in writing of the holder or holders of the one-half of the debentures (but in either case without any further consent on the part of the company or its assigns) enter upon or take possession of the mortgaged premises or any of them and may in the like discretion and shall upon the like request sell, call in, collect and convert into money the same or any part thereof, etc ., etc ., etc . (6) The security hereby constituted shall subject to clause 7 hereof become enforceable within the meaning of these presents in each and every of the events following, (1) if the company shall make default in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to June 30, 1960. The said special officer also referred to a letter, dated February 28, 1970, written by one Chimanlal Ojha to him intimating that the said debentures were acquired by some members of the Ojha family and due to some disputes between the members of the Ojha family the present whereabouts of the debentures were not known. The said Chimanlal requested him not to make any payment without making proper enquiry and investigation as to the bona fides of the persons who might present such debentures for payment. Accordingly, the special officer is justified in not making payment in respect of the said debentures without ascertaining as to how, when, where and from whom the petitioner acquired the said debentures and became the holder in due course. The letter was not replied to by the petitioner. On behalf of the petitioner it is stated that the petitioner was not present in Calcutta at the date when the affidavit-in-opposition to the stay application was filed and as such the petitioner's father had to file the affidavit-in-opposition on behalf of the petitioner. The petitioner's father, Mathura Das Sampat, stated in his affidavit that in the year 1964, his son purch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such a case where there were disputes, and suits were pending. He again emphasised that he was checking up the old records and after completing the same he would place the matter before the High Court. It was recorded therein that he asked for information as to when and how Sampat acquired those debentures and the names and addresses of the persons from whom the same were acquired as also the reasons why interest had not been collected for such a long time. Thereafter, on February 6, 1970, the notice under section 434 of the Companies Act, 1956, was sent by Sampat's solicitor to the company claiming the sum of Rs. 4,282.50. In reply thereto Messrs. T. Banerjee Co., solicitors for the company, by their letter dated February 25, 1970, inter alia , stated that their client, the special officer, did not receive any records and papers relating to the debentures in question from his predecessor-in-office and that he had been instructed to deny that Sampat acquired the debentures in question in due course, bona fide or for valuable consideration and thus disputed the claim of Sampat. The right of Sampat to serve a notice under section 434 of the Companies Act, 1956, was also denied a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the purchase of the debentures by Sampat in the year 1964. Then again, the letter of Chimanlal Ojha to the effect that the said debentures belonged to some members of the Ojha family is absolutely vague and in the absence of any positive evidence from any member of the Ojha family to the effect that the said debentures belonged to him or them, the special officer should not have been so suspicious as to withhold the payment for such a long time. If the motive of the special officer had been bona fide there could not have been any difficulty on his part to seek directions from this court by making an application on the materials he had already obtained in his possession. The special officer did nothing of the kind and I have every reason to come to the conclusion that the special officer was not acting reasonably and bona fide in the matter of withholding the payment in the way he has done. Even in the stay application his attitude is such that he would not be satisfied by any explanation and it appears that he is bent upon withholding the payment under any circumstances. In paragraph 9 of the stay application the special officer stated that he made searches of the old rec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and between the trustees and the company and, accordingly, the bearer debenture bondholders could not have claimed directly against the company without making such claim through the trustees. Mr. Mitter has relied on the indenture, dated November 22, 1939, entered into by and between the trustees and the company and has drawn my attention to clauses 3, 4, 6 and 41 thereof as set out herein-above. Those clauses provide that the company's assets as mentioned therein were charged in favour of the trustees for the purpose of making payment of the debentures and how and in what manner the said security would be enforced by the trustees when the same would be enforceable. In support of his contention Mr. Mitter has cited before me an English decision in the case of In re Dundsrland Iron Ore Co. Ltd. [1909] 1 Ch. 446, 452 (Ch. D.) where it was held that the stock-holders whose interest was in arrears were not entitled to present a winding-up petition as creditors under section 82 of the Companies Act, 1852. That was the case of the registered stock-holders who, according to clause 1 of the trust deed, were the several persons for the time being entered in the register therein menti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncipal and the interest directly to the bearer debenture-holder. According to him clause 41 is for the purpose of enforcing the security. Here Sampat is not seeking to enforce the security. That question could have arisen if he had filed a suit. Here the only question is whether a claim has arisen and, if so, whether the company under clause 40 of the said indenture and by the conditions mentioned in the debenture-bond, is liable to pay to the bearer debenture-holder directly. The right of the bearer debenture-holder under clause 40 of the said indenture, in my opinion, in getting payment directly from the company has been recognised and accordingly clause 1 and condition 4 as mentioned in the debenture bond make it obligatory for the company to make the payment directly in accordance with the tenor of the said debenture bond. Mr. Panja has referred to the case of Bachharaj Factories Ltd. v. Hirjee Mills Ltd . [1955] 25 Comp. Cas. 227; AIR 1955 Bom. 355 There, the Division Bench of the Bombay High Court, in dealing with bearer debentures, distinguished the case before them from the said English decision in In re Dunderland Iron Ore Co. Ltd. [1909] 1 Ch. 446 (Ch. D.) and re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Krishnaswami [1965] 35 Comp. Cas. 456 (SC) . There the company declared dividend which according to law was to be paid within three months from the date of declaration. The declaration of the dividend was made on the basis of a resolution that the payment of the dividend was contingent on the receipt of the commission from other concerns. It transpired that the said commission was not. received within the time of three months. Before the trial court the company's solvency was proved. The Supreme Court, at page 463, observed : "Further we are satisfied that the question whether the declaration of dividend dated December 30, 1959, is valid or not raises a substantial question as to the interpretation of section 207 of the Companies Act. Further, whether the declaration dated December 30, 1959, is severable or not, is also a substantial question. We do not propose to decide whether the declaration of dividend was valid or not or whether it was severable or not, because in these proceedings we are only concerned with the question whether the debt was bona fide disputed by the company on substantial grounds. If the debt was bona fide disputed, as we hold it was, there cannot be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Mitter contends that there is no averment that the security-is insufficient. Mr. Mitter has relied on the case of Karnatak Vegetable Oils and Refineries Lid. v. Madras Industrial Investment Corporation [1954] 24 Comp. Cas. 249 ; AIR 1955 Mad. 582 , where the Division Bench of the Madras High Court held that a winding-up would not be ordered where the security was rather an ample security and there was no averment that the security was insufficient. That was a case which was decided under the provisions of the Indian Companies Act, 1913. Under the Companies Act, 1956, the definition of the word "creditor" has undergone a radical change so as to include therein a secured creditor as well and such right has been provided under sub-section (2) of section 439 of the Companies Act, 1956, by virtue of which a secured creditor shall be deemed to be a creditor within the meaning of clause ( b ) of sub-section (1) of section 439 of the Companies Act, 1956. Mr. Mitter admits the position up to that but contends that even then the deeming provision of section 434 will not come into play and the company will not be deemed to be unable to pay unless it is shown that the security is in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the company if the creditor is already secured. If Mr. Mitter's contentions are accepted as correct it would amount to this that the secured creditor has no fight to present a winding-up petition. If that was the intention of the legislature, then, how could the new sub-section (2) be enacted under the Act of 1956 so as to recognise the right of the secured creditor and also of the debenture-holders including debenture stockholders to present a winding-up petition as creditors for non-payment of the dues by the company ? In my opinion, if a secured creditor would serve a notice under section 434, then, within the period of the said three weeks, the company must take action in the matter and satisfy the creditor that his claim would either be paid or that his security is intact. It must, in such a case, come to some arrangement with such creditor so that the creditor would be satisfied that there would not be any difficulty in his obtaining payment at some point of time as would be agreed upon by and between the creditor and the company. In the case before me the bearer debentures having become payable on maturity in terms of the debenture-bonds and a notice of demand under secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... only arise if the existing security was admitted. It follows that for the purpose of the winding-up petition there is no security so far as the claim of Sampat is concerned. That being the position, there is neglect on the part of the company to secure the claim of the petitioner within the meaning of section 434 of the Companies Act, 1956, and the deeming provision would be attracted after the expiry of three weeks mentioned therein. In a winding-up petition presented by the secured creditor the company can be said to have raised a substantial and bona fide dispute in the stay application, if the company would admit the transactions with such secured creditor and would reasonably satisfy the secured creditor that his security is intact and that the company is in a position to pay either in the correspondence prior to the statutory notice or within the statutory period as provided under section 434 of the Companies Act, 1956. In such a case and under such circumstances the right of the secured creditor to present the winding-up petition would also be lost inasmuch as that would amount to an abuse of the process of the court and the remedy provided under the Companies Act, 1956 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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