Contact us   Feedback   Subscription   New User   Login      
Tax Management India .com
TMI - Tax Management India. Com
Extracts
Home List
← Previous Next →

2016 (8) TMI 1 - BOMBAY HIGH COURT

2016 (8) TMI 1 - BOMBAY HIGH COURT - TMI - Winding up petition - Held that:- The defense raised by the Respondent Company is neither in good faith nor bonafide. As stated earlier, as far as the debt of the Respondent Company in relation to the Term Loan of ₹ 35 Crores is concerned, there is absolute no dispute and in fact none has been canvassed before me by Mr. Cama. In this view of the fact, on this count alone, and considering the fact that substantial amounts are due and payable by the .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

mpany to the Petitioner. In this view of the matter, find no substance in the contention of Mr. Cama that there is a serious dispute with reference to the claim made in the Petition. - For all the aforesaid reasons, find that the substantial sum is undisputedly due and payable by the Respondent Company to the Petitioner which would warrant admission of the Company Petition. In this view of the matter, the following order is passed:- - (i) The Company Petition is admitted and made returna .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

acy of notice shall not invalidate such advertisement or notice and shall not constitute non-compliance with this direction or with the Companies (Court) Rules, 1959. - (iv) The Petitioner shall, on or before 8st July, 2016 deposit a sum of ₹ 10,000/- towards publication charges with the Prothonotary and Senior Master, under intimation to the Company Registrar, failing which the Company Petition shall stand dismissed for non-prosecution without further reference to the Court. After the .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ariya i/b AZB and Partners For The Respondent : Mr. Rohan Cama a/w Mr. Mihir Mody, Mr. Ashraj Patel i/b M/s K. Ashar and Co, ORAL JUDGMENT:- 1 This Company Petition has been filed seeking to wind up the Respondent Company-Entertainment World Developers Pvt Ltd on the ground that it is unable to pay its debts. It is the case of the Petitioner that the Respondent Company is indebted to it in the sum of ₹ 52.80 Crores and ₹ 23.33 Crores (aggregating to ₹ 76.13 Crores) as on 12th D .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ner. It is the case of the Petitioner that these amounts have not been paid and/or secured to the satisfaction of the Petitioner and therefore the present Company Petition. 2 The brief facts giving rise to the present controversy are that, the Petitioner had sanctioned financial assistance to one Nanded Treasure Bazaar Private Limited (hereinafter referred to as Borrower No.1 ) and Treasure World Developers Private Limited (hereinafter referred to as Borrower No.2 ) from time to time and as per .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

rm Loan was availed of by Borrower No.1 for partly repaying the outstandings under another Term Loan that they had availed of from the Housing and Urban Development Corporation (HUDCO) and part to finance the capital expenditure for Borrower No.1's property at Nanded, Maharashtra. This Term Loan of ₹ 35 Crores was inter alia secured by an Indenture of Mortgage dated 27th August, 2009 (Exhibit-D to the Petition) as well as two separate Deeds of Guarantee executed by one Mr. Manish Kalan .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

demand at Mumbai the said loan together with interest thereon and all other moneys which shall then become due to SICOM as aforesaid and all costs, charges and expenses whatsoever which SICOM may incur by reason of any default on the part of the Company its successor or successors and assigns and will indemnify and keep indemnified, saved harmless and defended SICOM at all times hereinafter against any loss or damage which SICOM may suffer by reason of any default by the Company in repayment to .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

enforceable against the Guarantor notwithstanding that the securities or any of them specified under the said Mortgage shall at the time when the proceedings are taken against the Guarantor or any of them hereunder be outstanding or unrealised. 6. The Guarantor hereby agrees and declares that its liability under these presents shall be irrevocable joint and several with the liability of the Company for repayment of the said loan together with interest, costs, charges and expenses. 9. The Guaran .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

said Mortgage as also for all interest, costs, charges and expenses and all other moneys which may from time to time become due and payable and remain unpaid for the time being to SICOM under the said Mortgage and shall remain in force until the said loan shall be paid off in full with interest and all costs, charges and expenses and all other moneys as aforesaid. 16. The Guarantor further declares that as between SICOM and the Guarantor, the Guarantor will be treated as principal debtor jointl .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

of ₹ 12 Crores was also secured inter alia by a Deed of Mortgage dated 4th May, 2010 as well as a personal Guarantee of one Mr. Manish Kalani. It is not in dispute before me that as far as this loan of ₹ 12 Crores is concerned, the Respondent Company has not executed any corporate Guarantee to secure the same. 5 Be that as it may, in relation to the Term Loan of ₹ 35 Crores, Borrower No.1 continued to pay the EMI's on a regular basis for the first few installments (from Jan .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

oan of ₹ 35 Crores as well as the Term Loan of ₹ 12 Crores. As far as the Term Loan of ₹ 35 Crores is concerned, the recall notice itself states that the principle amount outstanding is ₹ 33.28 Crores and interest over due is ₹ 2.03 Crores totaling to ₹ 35.31 Crores. The reason why I have mentioned this over here is because the Respondent Company was not a Guarantor in relation to the Term Loan granted of ₹ 12 Crores to Borrower No.1. 6 In view of the fa .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

has fairly stated that as far as the Respondent Company is concerned, they are liable as Guarantors only for the dues that are payable under the Term Loan of ₹ 35 Crores, which on the date of the notices came to approximately ₹ 36.35 Crores. 7 In view of the fact that the Respondent Company as well as Borrower No.1 failed to pay the outstanding amounts, the Petitioner initiated recovery proceedings against Borrower No.1 as well as the Respondent Company in the Mumbai Debts Recovery .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ts outstanding dues. The Respondent Company replied to the same by their letter dated 2nd February, 2013 and refuted the claim of the Petitioner on the grounds more particularly set out therein. As mentioned earlier, according to the Petitioner, as on 31st July, 2015, an amount of ₹ 58.24 Crores is outstanding as due and payable by the Respondent Company against the Term Loan of ₹ 35 Crores. TERM LOAN OF ₹ 25 CRORES SANCTIONED TO BORROWER NO.2. 9 On 21st June, 2010, the Petitio .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ion to the loan sanctioned by the Petitioner to Borrower No.1 (for the Term Loan of ₹ 35 Crores). 10 On 25th August, 2010, the terms and conditions of the ₹ 25 Crore loan were further modified, first on 24th June, 2010 and thereafter again on 25th August, 2010 inter alia to change the nature of the facility from an inter-corporate deposit to a Medium Term Loan for a period of three years. Further, this loan was made repayable in a single installment at the end of 180 days from the da .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

77; 25 Crore loan shall continue to be valid and in force. This modification letter dated 16th November, 2011 has been duly executed and signed by Borrower No.1 as well as the Respondent Company in its capacity as a Guarantor. Pursuant to this letter dated 16th November, 2011, the Petitioner eventually disbursed ₹ 20 Crores (as against the sanctioned limit of ₹ 25 Crores) in two tranches of ₹ 10 Crores each (on December 27, 2011 and December 29, 2011 respectively). 12 Since Bor .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

pay the outstanding dues, the Petitioner by its notice dated 16th July, 2012, invoked the Guarantee given by the Respondent Company (dated 26th June, 2010) and called upon the Respondent to pay the outstanding amount to the Petitioner. 13 It is the case of the Petitioner that since the Respondent Company failed to make payment under the Guarantee that was executed by them, the Petitioner on 24th January, 2013, issued a statutory notice under Sections 433 and 434 of the Companies Act, 1956 to the .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

itioner and as claimed in their further affidavit dated 2nd February, 2016, are really undisputed. He submitted that there is no dispute with reference to the fact that both these loans (Term Loan of ₹ 35 Crores and Term Loan of ₹ 25 Crores), have been availed off by Borrower Nos.1 and 2. It is not in dispute that to secure these loans, the Respondent Company executed two Deeds of Guarantee dated 27th August, 2009 and 26th June, 2010 respectively. He submitted that the terms of these .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

the Guarantor notwithstanding that no action of any kind can be taken by the Petitioner against the borrower and intimation in writing is sent to the Borrower and/or the Respondent Company that a default has occurred which shall be treated as final and conclusive proof as to the facts stated therein. He further stated that these Guarantees clearly stipulate that the Respondent Company waives all the rights conferred on the Guarantor by Sections 133, 134, 135, 139 and 141 of the Indian Contract .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

d despite several defenses being raised in the Affidavit in reply, Mr. Rohan Cama, the learned counsel appearing on behalf of the Respondent Company, canvassed only the following defenses:- (a) The entire claim of the Petitioner is fully secured by a mortgage of an immoveable property, the value of which is far more than the claim of the Petitioner; (b) The Petitioner is guilty of suppression, and therefore, is not entitled to any equitable orders from this Court in company jurisdiction. To elab .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

to Borrower No.2 was for ₹ 25 Crores whereas in fact only a sum of ₹ 20 Crores was disbursed to Borrower No.2; (iii) a sum of ₹ 9 Crores was paid by Borrower No.2 on/about March, 2013 which fact is suppressed in the Petition and no credit for the same is given to the Respondent Company; (iv) even though the Petitioner has filed proceedings in the DRT for recovery of their dues in respect of both these loans, the same is suppressed in the Company Petition. (c) Since a substantia .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

fit making company and is a running concern, and therefore, it ought not be wound up. 16 I must mention here that Mr. Cama fairly stated that the issue of stamping has not been pleaded in the Affidavit in reply filed on behalf of the Respondent Company and hence he is not pressing this point. He, on instructions, states that this point shall be raised by his clients in the proceedings pending in the DRT. Be that as it may, for all the aforesaid reasons Mr. Cama submitted that the debt of the Pet .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

y of a piece and parcel of land admeasuring about 10,947 square meters and thereabouts situated on Nanded Latur Road within the limits of Village Vasarni Taluka, and District Nanded, together with buildings, structures and superstructures thereon (hereinafter referred to as the mortgaged property ). He submitted that the possession of this mortgaged property has been taken over by the Petitioner by exercising rights under Section 29 of the State Financial Corporation Act, 1951 and they have an u .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

et out in the said Section was not attracted. 18 I am unable to agree with this submission for more than one reason. Firstly, this property wasn t mortgaged by the Respondent Company. It was mortgaged by Borrower No.1. Section 434 stipulates that the Company shall be deemed to be unable to pay its debts if inter alia, a creditor to whom the company is indebted in a sum exceeding one lakh rupees then due, has served on the company, by causing it to be delivered at its registered office, by regist .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

is called upon to pay pursuant to the notice issued thereunder has to either pay or secure the dues to the satisfaction of the person giving the notice. Therefore, at least, prima facie, I am unable to accept the submission of Mr. Cama that the Petitioner is fully secured as contemplated under Section 434 (1) (a) of the companies Act, 1956. Secondly, even otherwise, it is not in dispute before me that after valuation of the mortgaged property (valued at approx ₹ 74 Crores) was done by thi .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

. Thereafter another attempt was made on 15th October, 2015, when the reserve price fixed was ₹ 25 Crores even though the distress value of the mortgaged property was ₹ 31 Crores. The Petitioner received a bid only for ₹ 25.25 Crores and therefore decided not to sell the mortgaged property. As rightly submitted by Mr. Rajadhyaksha, the maximum bid that has been received for the sale of the mortgaged property, despite three attempts, is approximately ₹ 25 Crores. This, at .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

he question whether the security is adequate or otherwise is something that would be investigated by this Court at the hearing and final disposal of the Petition. At this stage and when I am hearing the Company Petition for admission, prima facie, on the facts narrated above, I am not satisfied that the security is sufficient to cover the claim of the Petitioner. This view that I have taken, is also supported by a decision of a Division Bench of this Court in the case of Bharat Overseas Bank Lim .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

hat stage that the court could go into the question as to whether the security is sufficient or not and exercise its discretion to accept the petitioning creditor's claims and request for winding up or to reject the same on judicial consideration. 19 This being the position, I am unable to accept the submission of Mr. Cama that the claim of the Petitioner is adequately secured, and therefore, the Company Petition ought to be dismissed. 20 The next argument canvassed by Mr. Cama was that the .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

, the Petitioner has filed a further affidavit dated 2nd February, 2016 making clean breast of affairs and have revised their claim as mentioned in their further affidavit. It has been clearly disclosed in the said affidavit that the Respondent Company was not a Guarantor in relation to the Term Loan of ₹ 12 Crores granted by Borrower No.1 and therefore the claim to that extent stands reduced against the Respondent Company. In the further affidavit it has also been stated that even though .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

has been filed after the affidavit-in-reply was filed by the Respondent Company. In my view, it would be an extremely hyper-technical approach to reject this Petition on the ground that these facts were not initially disclosed in the Company Petition and have been brought to the notice of this Court only after the affidavit-in-reply of the Respondent Company was filed. Mr. Rajadhyaksha and in my view correctly so, submitted that these omissions in the Company Petition were not to gain a march or .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

is the reason why even the claim against the Respondent Company in relation to the Term Loan of ₹ 12 Crores was included in the Company Petition despite the fact that the Respondent Company is not liable as a Guarantor to the said loan. What is important to note is that the notice invoking the Guarantee (in relation to the loans given to Borrower No.1) specifically sets out the dues that are payable with reference to the Term Loan of ₹ 35 Crores as well as the Term Loan of ₹ 12 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

de in the said further affidavit. I therefore do not find that the Petitioner is guilty of suppression on this count. 21 As far as the issue of not giving credit of ₹ 9 Crores is concerned (even though the same was paid before filing of the Company Petition), Mr. Rajadhyaksha submitted that this mistake occurred because the claim made in the Petition was as on 12th December, 2012 (as mentioned in the particulars of claim) whereas the payment of ₹ 9 Crores was made only sometime in Ma .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ed in the further affidavit dated 2nd February, 2016 filed on behalf of the Respondent Company. He submitted that even if one were to reduce the claim of the Petitioner by ₹ 9 Crores, there is still a huge amount due and payable by the Respondent Company to the Petitioner which would entitle the Petitioner to a winding up order. I find considerable force in this submission. In company jurisdiction, I am not adjudicating the claim of the Petitioner and neither am I passing any decree. As la .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

the debt precisely. This proposition has been laid down at paragraph 21 thereof which reads thus:- 21. Where the debt is undisputed the court will not act upon a defence that the company has the ability to pay the debt but the company chooses not to pay that particular debt, see Re. A Company. [94 SJ 369] Where however there is no doubt that the company owes the creditor a debt entitling him to a winding up order but the exact amount of the debt is disputed the court will make a winding up order .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

act that no credit of the same was given in the Company Petition, I find that a substantial sum is due and payable by the Respondent Company to the Petitioner. This would entitle the Petitioner to seek a winding up order from this Court. In this view of the matter, the argument of Mr. Cama that payment of ₹ 9 Crores is suppressed in the Petition pales into insignificance. 23 In view of what I have held, I find that the reliance placed by Mr. Cama on the decision of the Supreme Court in the .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

agannath had obtained a preliminary decree by playing a fraud on the Court. It is in these circumstances that the Supreme Court held that non-production and even non-mentioning of the release deed at the trial tantamounted to playing a fraud on the Court. When a party withholds a vital document in order to gain an advantage on the other side then he would be guilty of playing a fraud on the court as well as on the opposite party, is what was held by the Supreme Court in the said decision. I do n .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

diction. On the same parity of reasoning, I find the reliance placed by Mr. Cama on the judgment of the Supreme Court in the case of Ram Chandra Singh v/s Savitri Devi and Others, (2003) 8 SCC 319 also wholly misplaced. I therefore have no hesitation in rejecting the argument of Mr. Cama that the Petitioner is guilty of any suppression, and therefore, this Company Petition ought be dismissed. 24 The next contention raised by Mr. Cama was that there was a serious dispute with reference to the deb .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

oo before filing of the Company Petition. He would therefore submit that there is serious dispute with reference to the amounts payable by the Respondent Company to the Petitioner and this being the case, this Company Petition ought not to be entertained. In this regard, Mr. Cama relied upon the decision of the Supreme Court in the case of Mediquip Systems (P) Ltd v/s Proxima Medical System GMBH. (2005) 7 SCC 42 Mr. Cama relying upon the aforesaid decision, contended that if there is a dispute a .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

y was not a Guarantor. However, as far as the Term Loan of ₹ 35 Crorers is concerned, Mr. Cama has not raised any defense in relation to the same. The fact that the Guarantee was executed by the Respondent Company in relation to the Term Loan of ₹ 35 Crores has been very fairly admitted by Mr. Cama before me. In the further affidavit, a specific statement has been made on behalf of the Petitioner that the Respondent Company is not a Guarantor in relation to the Term Loan of ₹ 1 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ny as a Guarantor, has absolutely no defense. 26 As held by the Supreme Court in the case of M/s Madhusudan Gordhandas and Co (1971) 3 SCC 632 it is now settled law that where there is no doubt that the Company owes the creditor a debt entitling him to a winding up order but the exact amount of the debt is disputed, the Court will make a winding up order without requiring the creditor quantifying a debt precisely. The principle on which the Court acts are that the defense of the company is in go .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

recisely. This proposition has been consistently followed by this Court. In the case of Pfizer Limited v/s Usan Laboratories Pvt Ltd. (1985) Mh. L. J. 554 a Division Bench of this Court held as under:- 6. The short question we are considering is the position of the notice or of the subsequent petition when a part of the claim made by the creditor is seriouly in dispute, but the remaining portion which prima facie would appear to be in order exceeds the limit of ₹ 500/- indicated in section .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

.] The relevant observations are to be found at pages 413 and 414 of the report. An opinion has been expressed in the said judgment that it would be quite unjust to refuse a winding-up order to a petitioner who is admittedly owed moneys which have not been paid merely because there is a dispute as to the precise amount owing. 8. Almost to the same effect are the observations in Cardiff Preserved Coal and Coke Company v. Norton, [(1866-1867) 2 Law Reports Chancery Appeals 405.] . A contention had .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

consequential winding up order bad or invalid, provided that there was a debt in exeess of £50 due to the creditor. 9. Both the above decisions have been cited and followed by a Single Judge of the Calcutta High Court in Ofu Lynx Ltd. v. Simon Carves India Ltd. [AIR 1970 Cal. 418.] The learned Single Judge was considering the validity of a notice under section 434 of the companies Act, 1956, and the contention raised was that the notice must be deemed to be bad because a portion of the cla .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

decisions set out the correct principle and once we have reached the conclusion, it will have to be held that the dismissal of the winding-up petition on the basis indicated in the impugned order would be clearly bad and order required to be set aside. Merely because there could be a serious dispute as to the liability to pay interest at all or at the rate of 18% would not render the statutory notice invalid or result in a dismissal of the winding-up petition. The Company Judge was required to .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

n erroneous basis which we have earlier indicated. If that be so, the impugned order will be required to be set aside and the petition will now go back to the Company Judge for reconsideration of the position and to decide whether it is required to be admitted and whether further directions after admission are required to be given. (emphasis supplied) 27 The second decision is in the case of Tata Finance Ltd v/s Kanoria Sugar and General Manufacturing Company Ltd., Mumbai. (2002) 1 Mh. L. J. 617 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

that the company has liability to pay but chooses not to pay and the creditors will, in such case, be entitled to a winding-up order. This is clear from the following observations of the Supreme Court in Madhusudan Gordhandas and Co. v. Madhu Woollen Industries, (1972) 42 Comp Cases 125: Two rules are well settled. First, if the debt is bona fide disputed and the defence is a substantial one, the Court will not wind up the company. The Court has dismissed a petition for winding-up where the cre .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

t will not act upon a defence that the company has the ability to pay the debt but the company chooses not to pay that particular debt. (See A Company, Re. 6) Where, however, there is no doubt that the company owes the creditor a debt entitling him to a winding-up order but the exact amount of the debt is disputed the Court will make a winding-up order without requiring the creditor to quantify the debt precisely. (See Tweeds Garages Ltd., Re. 7). The principles on which the Courts acts are firs .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

mpany's real inability to pay the debts. The inability is indicated by its neglect to pay the debt within three weeks, after proper demand was made. He added that neglect is to be assessed on the facts of each case. 10. In Goel Bros, and Co. Pvt. Ltd.'s case, 1979 Mh. L.J. 607 : (1980) 50 Comp Cases 356 (Bom.), another Single Judge of this Court, Agarwal, J. held that after the creditor establishes that the debt is clear, valid in law, unimpeachable and indisputable, the creditor is enti .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

pany's case is that the total amount of more than Rupees Two crores is payable by the company. It is true that there is some dispute about the claim of enhanced lease rentals on account of disallowance of claim of depreciation by the Income Tax department. There is, however, absolutely no dispute for the outstanding lease rentals which are in the range of nearly Rupees Thirty Lakhs. The terms of agreement are also very clear and in case of default, the company is liable to pay the service ch .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ecause there is a dispute as to the precise amount owning. Almost to the same effect are the observations in Cardiff Preserved Coal and Coke Co. v. Norton, (1867) 2 Ch. App. 405. 12. The learned single judge of Calcutta High Court in Ofu Lynx Ltd. v. Simon Carves India Ltd., (1971) 41 Comp Cas 174 has observed: I, therefore, hold that a notice under section 434 of the Companies Act, 1956, will not be rendered invalid only because of the fact that the amount of debt mentioned in the notice may no .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

lied) 28 In view of this clear enunciation of the law, I find that the defense raised by the Respondent Company is neither in good faith nor bonafide. As stated earlier, as far as the debt of the Respondent Company in relation to the Term Loan of ₹ 35 Crores is concerned, there is absolute no dispute and in fact none has been canvassed before me by Mr. Cama. In this view of the fact, on this count alone, and considering the fact that substantial amounts are due and payable by the Responden .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

e Petitioner. In this view of the matter, I find no substance in the contention of Mr. Cama that there is a serious dispute with reference to the claim made in the Petition. 30 Ancillary to this argument, Mr.Cama sought to contend that the Petitioner is a financial institution as contemplated under the provisions of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 ( RDDB Act ) which alone has exclusive jurisdiction to adjudicate upon the claims made by the Petitioner, and .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

w of the dispute raised in relation to the claim made by the Petitioner, this Company Petition ought to be dismissed. 31 I find this argument to be wholly misconceived. It is now well settled that the Company Court does not adjudicate the claim of the Petitioner nor does it pass any decree ordering the Respondent Company to pay the sum claimed in the Company Petition. It only has to come to the conclusion that the Respondent Company is indebted to the Petitioner in a sum exceeding to ₹ 1 l .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

vely mean that no bank or the financial institution would be able to file a Company Petition and seek orders of winding up. This is not how I understand the law to be. In fact, a Division Bench of this Court in the case of Viral Filaments Ltd. Vs Indusind Bank Ltd. 2001(3) Mh.L.J. 552 has categorically held that the exclusion of jurisdiction as set out in Sections 17 and 18 of the RDDB Act of all other Courts and authorities is only to the extent of the jurisdiction specifically vested in the De .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

al institution, which is entitled to move the Tribunal constituted under the RDB Act for recovery of debt, has moved the DRT, then a winding up petition is totally barred. We shall shortly examine whether this contention or has merit. 5. Section 18 of the RDB Act provides that, on and from the appointed day, jurisdiction of Courts and other authorities in relation to matters specified in section 17 is barred. Section 17 provides that on and from the appointed day, a Tribunal constituted under th .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

l institutions for recovery of debts due to them. On first principles, we are unable to agree with the learned Counsel that a Petition presented under section 433(e) of the Companies Act, 1956 for winding up of a Company is or equivalent to an application seeking recovery of debt due to the petitioning creditor. In the first place, section 433 of the Companies Act, 1956 is not intended to supplant the jurisdiction of a Civil Court to adjudicate a money suit . Section 433(e) vests in the Company .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

the Company Court to entertain the petition under section 433(e) of the Companies Act, 1956. 6. The argument of Mr. Shah that what could be done by the Company Court can equally be done by the DRT under the RDB Act is erroneous. There is no provision in the RDB Act empowering the Tribunal to wind up a Company which owes the debt to the applicant financial institution. The jurisdiction of the Tribunal under the RDB Act is only to adjudicate the liability of the respondent before it, ascertain th .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

, I find no merit in this contention and it is accordingly rejected. 33 The last argument canvassed by Mr. Cama is that this Company is a profit making Company and is a running concern and therefore should not be wound up. In this regard, Mr. Cama relied upon two decisions of a Single Judge of this Court (Kochar J. as he then was) in the case of QSS Investors Pvt Ltd v/s Allied Fibers Ltd. (2001) 107 Company Cases 587 and in the case of Dalmia Cement (Bharat) Ltd v/s Indian Seamless Steels and A .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

event of the matter, once I have come to the conclusion that substantial amounts are undisputedly due and payable by the Respondent Company to the Petitioner, there is no question of dismissing this Petition merely on the ground that the Respondent Company is a profit making company. If I was to do so, I would be acting contrary to the law laid down by the Supreme Court in the case of M/s Madhusudan Gordhandas and Co. (1971) 3 SCC 632 as well as two Division Bench decisions of this Court in the .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

o carry the case of the Respondent Company any further. 34 This only leaves me to deal with decision of the Supreme Court in the case of Mediquip Systems (P) Ltd . (2005) 7 SCC 42 The facts of this case would reveal that the Respondent therein (Proxima Medical System GMBH) issued a legal notice to the appellant company under Section 434 of the Companies Act, 1956, mentioning that the Appellant Company (Mediquip Systems Pvt. Ltd. ) was liable to pay to the Respondent a sum of US$ 5000 and US$ 110 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ny Court. This order of the Company Judge was challenged before a Division Bench of Calcutta High Court without any success. Being aggrieved thereby, the Appellant Company approached the Supreme Court. The Supreme Court after considering the facts of the case held that, even with reference to US$ 11,000 there was a bonafide dispute raised by the Appellant Company. This is evident from paragraph 15 and 16 of the said decision. On going through the aforesaid decision, I do not find that the Suprem .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

refore, do not think that this decision of the Supreme Court, in any way furthers the submissions made by Mr Cama. As the facts reveal, before the Supreme Court, the entire debt claimed by the Respondent therein was bonafide disputed by the Appellant Company. The observations made by the Supreme Court, therefore, have to be read and understood in the facts, that were before it. 35 It is now too well settled a proposition that the ratio of any decision must be understood in the background of the .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

said in Quinn v. Leathem[1901 AC 495 : (1900-1903) All ER Rep 1 (HL)] : (All ER p. 7 G-I) Before discussing Allen v. Flood [1898 AC 1 : (1895- 1899) All ER Rep 52 (HL)] and what was decided therein, there are two observations of a general character which I wish to make; and one is to repeat what I have very often said before-that every judgment must be read as applicable to the particular facts proved or assumed to be proved, since the generality of the expressions which may be found there are n .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

supplied) We entirely agree with the above observations. 15. In Ambica Quarry Works v. State of Gujarat [(1987) 1 SCC 213] (vide SCC p. 221, para 18) this Court observed: 18. The ratio of any decision must be understood in the background of the facts of that case. It has been said long time ago that a case is only an authority for what it actually decides, and not what logically follows from it. 16. In Bhavnagar University v. Palitana Sugar Mill (P) Ltd. [(2003) 2 SCC 111] (vide SCC p. 130, par .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

sing as to how the factual situation fits in with the fact situation of the decision on which reliance is placed. Observations of courts are neither to be read as Euclid's theorems nor as provisions of a statute and that too taken out of their context. These observations must be read in the context in which they appear to have been stated. Judgments of courts are not to be construed as statutes. To interpret words, phrases and provisions of a statute, it may become necessary for judges to em .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

Act of Parliament and applying the rules of interpretation appropriate thereto. This is not to detract from the great weight to be given to the language actually used by that most distinguished Judge, … 10. In Home Office v. Dorset Yacht Co. Ltd. [1970 AC 1004 : (1970) 2 WLR 1140 : (1970) 2 All ER 294 (HL)] Lord Reid said, Lord Atkin's speech … is not to be treated as if it were a statutory definition. It will require qualification in new circumstances. (All ER p. 297g) Megarry .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

and it is to be remembered that judicial utterances are made in the setting of the facts of a particular case. 11. Circumstantial flexibility, one additional or different fact may make a world of difference between conclusions in two cases. Disposal of cases by blindly placing reliance on a decision is not proper. 12. The following words of Hidayatullah, J. in the matter of applying precedents have become locus classicus: (Abdul Kayoom v. CIT [AIR 1962 SC 680] , AIR p. 688, para 19) 19. &hellip .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

as it marks the path of justice, but you must cut the dead wood and trim off the side branches else you will find yourself lost in thickets and branches. My plea is to keep the path to justice clear of obstructions which could impede it. (emphasis supplied) 18. We have referred to the aforesaid decisions and the principles laid down therein, because often decisions are cited for a proposition without reading the entire decision and the reasoning contained therein. In our opinion, the decision of .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

 

 

 

 

 



|| Home || Acts and Rules || Notifications || Circulars || Schedules || Tariff || Forms || Case Laws || Manuals ||

|| About us || Contact us || Disclaimer || Terms of Use || Privacy Policy || TMI Database || Members || Site Map ||

© Taxmanagementindia.com [A unit of MS Knowledge Processing Pvt. Ltd.] All rights reserved.

Go to Mobile Version