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TMI Blog2015 (3) TMI 944X X X X Extracts X X X X X X X X Extracts X X X X ..... ;Loan I') under Micro Credit Scheme of the petitioner bank. The said application was considered by the petitioner bank and by a letter of intent dated 02.03.2007, it granted the same to the respondent company. Thereafter on 06.03.2007, a loan agreement was executed for the same. The respondent company again applied to the petitioner bank for financial assistance in form of a term loan of Rs. 600 lacs and capacity building grant of Rs. 15.75 lacs (hereinafter referred to as 'Loan II') under Micro Credit Scheme of the petitioner bank. The said application was considered by the petitioner bank and by a letter of intent dated 13.02.2008, it granted the same to the respondent company. Thereafter on 20.02.2008, a loan agreement was executed for the same. Loan II was secured by an exclusive charge by way of hypothecation of book debts and underlying assets. 3. The interest with respect to Loan I was due 01.04.2007 and the first installment for the same was due on 01.12.2007. The interest with respect to Loan II was due 01.03.2008 and the first installment for the same was due on 01.09.2008. 4. The petitioner bank claims that the respondent company made regular payments of in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pany submits that by an email dated 24.11.2009, it had informed the petitioner bank that it had 'less than sixty days (60 days) of cash for carrying on future operations', and the petitioner bank was pre-warned of the resource crunch faced by the respondent company. The respondent company states that it had on various occasions called upon the petitioner bank to work out proper fund infusion programmes to revitalize the respondent company but the petitioner bank instead issued a demand advice dated 21.04.2010. It is further contended that in a meeting between all the lenders of the respondent company, held on 13.05.2010, it was decided that an unconditional consent letter will be provided by the MD of the respondent company for the purpose of identifying and thereafter negotiating a sale of the respondent company's portfolio to the suitable buyer MFI. However, the petitioner bank without waiting for the consent letter issued a recall notice dated 18.05.2010. 11. The respondent company submits that, by a letter dated 23.09.2010, it proposed two compromise offers for a final settlement of its dues; One being, repayment of the amount due and payable in three installments ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ondent company, the petitioner bank had failed to do so. 15. It is further contended on behalf of the respondent company, that it is a settled proposition that mere inability to pay debts is not a ground for winding up and the Micro finance expert report and special audit report establishes that respondent company can be revitalised and rehabilitated. It is also contended that the present petition needs to be dismissed as, not only the petitioner bank is a secured creditor holding security in the form of hypothecated book debts and underlying assets, but it also has the option to recover the debt as per the provisions of Section 38 of the Small Industries Development Bank of India Act, 1989. 16. Considering the facts and the contentions urged, it is apparent that there is no dispute that the respondent company owes substantial debt to the petitioner bank and has been unable to pay the same. The respondent company has also not contested its current inability to repay the debt. Essentially, the defence raised by the respondent company is that the petitioner bank is liable to support the respondent company in its rehabilitation by providing further assistance, both in terms of provi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be rehabilitated. The respondent company has further explained that its financial position had deteriorated as its borrowers, who were workers from the marginal section of the society, had themselves suffered on account of unprecedented floods and lack of demand for Ari- zardosi work. Further, a loan waiver scheme announced by the Chief Minister of Uttar Pradesh in 2008 and a rumor that the MD of the respondent company had expired, also adversely impacted the recoveries by the respondent company from is borrowers. The respondent company has also alleged that the petitioner bank has singled the respondent company for not extending a rehabilitation package. 21. The reasons for the financial condition of the respondent company are not material at the present stage. Whether the financial condition of the company had deteriorated for reasons beyond the control of the respondent company is also not germane to the question whether the respondent company is unable to pay its debts. The question whether, the petitoner bank has acted arbitrarily or has adopted a policy of pick and choose is also not a controversy which can be considered in the present case. The respondent company had app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Company Court to hold a full trial in cases where there is a substantial dispute as to the liability owed by the company. The relevant extract from the said decision is quoted below: "it is settled law that if the creditor's debt is bona fide disputed on substantial grounds, the court should dismiss the petition and leave the creditor first to establish his claim in an action, lest there is a danger of abuse of winding up procedure. The Company Court always retains the discretion, but a party to a dispute should not be allowed to use the threat of winding up petition as a means of forcing the company to pay a bona fide disputed debt." 25. Accordingly, the petition is admitted and the petitioner bank is directed to advertise the petition in "Statesman" (English) and "Jansatta" (Hindi). The petition be also advertised in "Amar Ujala" having circulation in Uttar Pradesh. In addition, the petition shall also be advertised in the official gazette for a hearing to be held on 14.11.2014 CM 363/2011 26. In the given circumstances, where the respondent company is stated to be making efforts for its revival, I am not inclined to appoint a provisional liquidator, as that may impede t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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