9911796707
TMI Blog2008 (1) TMI 621X X X X Extracts X X X X X X X X Extracts X X X X ..... llege that they lent a sum of Rs. 2,07,96,031 and Rs. 66,70,000 respectively to respondent company. This was admittedly given as an unsecured loan. They had, however, option to convert unsecured loan into shares of respondent company. It is also alleged that respondent promised to allot 31 per cent shares to first petitioner and 10 per cent shares to second petitioner. They were also, as alleged, appointed as Executive Director and Director of respondent company respectively. In addition to unsecured loan, petitioners allegedly gave guarantee on behalf of respondent company to Syndicate Bank, Sanga Reddy Branch for loan facilities availed by respondent company. However, Sri R. Palani Swamy (RPS), Managing Director, with mala fide intention did not honour the commitment necessitating petitioners' sending communication, dated 5-7-2006 to Syndicate Bank complaining about his avoiding conduct and informing that their personal guarantee offered will not be available to respondent. They sought for return of collateral security. Yet another similar communication, dated 26-8-2006 to Syndicate Bank, in spite of which Syndicate Bank issued demand drafts to RPS. In the meanwhile RPS sent comm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s including the letter addressed by them to Syndicate Bank, Sanga Reddy. As per the report of the statutory auditors, dated 31-3-2005, respondent company did not take or grant any secured/unsecured loans from companies or individuals during financial year 2004-05. As per the record and certificate issued by Syndicate Bank (secured creditor), first petitioner brought an amount of Rs. 88,00,000 on three different dates and diverted these payments to M/s. Special Tech Equipment Private Limited (STEP) though RPS did not purchase anything from them. The operation was carried out meticulously and those amounts diverted to said company were included in the account, so that on paper it would show the same as 'share application money', not even a single rupee remains with respondent company. The diversion of funds by first petitioner amounts to criminal breach of trust and respondent reserves its right to take appropriate action. The Managing Director, Palani Swamy has no mala fide intention. As per original understanding amongst the investors who contributed by way of share application money, shares were allotted on 30-3-2007 in the Board Meeting held on that day duly filing necessary retu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ether he is a Director or an outsider cannot be treated as debt. Share application money cannot be equated to debenture amount, and therefore company petition would not lie when the applicant for shares seeks winding up. He secondly submits that whether petitioners paid amount towards share application money is itself in dispute. Petitioners diverted funds for unauthorized payments and therefore, unless the account is settled, they cannot claim refund of the amount. According to learned counsel, petitioners have taken inconsistent stand with regard to nature of the contribution allegedly made by them and in any event as the Board of Directors passed resolution to refund the amount if any to petitioners after settlement of the account, company petition would not lie. He also submits that the books of account are kept by first petitioner and unless and until they are given to respondent company, he cannot claim that the company owes any money to them. 7. The submissions of learned counsel for petitioners and learned counsel for respondent broadly can be considered under two different heads. First is the question whether a company petition under section 433 of Companies Act for windi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct of such and other like debentures, and the trustee for the holders of debentures, shall be deemed to be creditors within the meaning of clause (b) of sub-section (1). (3) A contributory shall be entitled to present a petition for winding up a company, notwithstanding that he may be the holder of fully paid-up shares, or that the company may have no assets at all, or may have no surplus assets left for distribution among the shareholders after the satisfaction of its liabilities. (4) A contributory shall not be entitled to present a petition for winding up a company unless - (a)either the number of members is reduced, in the case of a public company, below seven, and, in the case of a private company, below two; or (b)the shares in respect of which he is a contributory, or some of them, either were originally allotted to him or have been held by him, and registered in his name, for at least six months during the eighteen months immediately before the commencement of the winding up, or have devolved on him through the death of a former holder. (8) Before a petition for winding up a company presented by a contingent or prospective creditor is admitted, the leave of the Court s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r of bearer debenture have been held by the Courts to be creditors. A person who has become bound by a Scheme sanctioned under sections 391 to 395 of Companies Act has been held as incompetent to file a petition for winding up. Similarly unless shares in respect of which a person is contributory holds shares at least six months during eighteen months before commencement of winding up, a petition cannot be presented. Sub-section (8) of section 439 of Companies Act provides important guidelines to the Court. It is to the effect that unless in the opinion of Court there is a prima facie case for winding up of company, leave cannot be granted. Section 440(1)(a) of Companies Act confers absolute power on the Court to authorize any person to present a company petition where a company is being wound up voluntarily, if it comes to conclusion that voluntary winding up cannot be continued without prejudice to the creditors or contributories. 11. In Words and Phrases1 the terms "Credit" and "Creditor" are defined as below. "'Credit' is a debt due in consequence of a contract of hire or borrowing of money, and, according to business usage, connotes no more than a chose in action. Generally t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s payment of debentures and that debentures were issued to Jalan and therefore, the company petition would not lie. Calcutta High Court came to the conclusion that there is a dispute as to whether the company issued debentures or not, but found that even if the debentures were issued, the company did not pay interest on debentures and therefore, they are unable to pay the debt and accordingly refused stay and confirmed advertisement of petition for winding up. The relevant observations made therein are below: "Assuming the alternative case which the company has made out that the said amount was paid for the issue of 176 debentures of Rs. 1,000 each in the company to the petitioning creditor, which case, the petitioner could have made, had he known about the fact of the alleged conversion of the said loan and the application and the blank letters form in which the application for debenture and that the debentures were in fact issued to the petitioning creditor. The company has not paid the interest payable on the debentures under the terms of the said debenture bond and an amount of Rs. 44,000 odd has admittedly become payable to the petitioning creditor. The company took time to p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , cannot be said to have proved prima facie case for admitting the winding up petition. 17. According to learned Counsel for respondent, an ascertained and undisputed debt is only criterion for exercising jurisdiction under section 433(e) of Companies Act. The law is well-settled that a winding up petition is not a ground to enforce payment of a disputed debt when the respondent bona fide demurs the debt. [See Bombay Glass Blowing Industries v. Bio Vaccines (P.) Ltd. 1998 (1) ALD 390, Kesar Enterprises Ltd. v. IDI Ltd. [2003] 42 SCL 99 (Bom.), NATL Technologies Ltd. v. Vijay Industries 2005 (4) ALD 315 (DB) and Mediqup Systems (P.) Ltd. v. Proxima Medical System GMBH [2005] 59 SCL 255 (SC)]. 18. In Mediqup Systems (P.) Ltd.'s case (supra), after referring to Tube Investments of India Ltd. v. Rim & Accessories (P.) Ltd. [1990] 3 Comp. LJ 322. Supreme Court laid down the Rule for disposal of winding up petitions and opposed on the ground of disputed claim. The same is as follows : "The rules as regards the disposal of winding-up petition based on disputed claims are thus stated by this Court in Madhusudan Gordhandas & Co. v. Madhu Woollen Industries (P.) Ltd. [1971] 3 SCC 632. Thi ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
