TMI Blog2017 (1) TMI 1167X X X X Extracts X X X X X X X X Extracts X X X X ..... been established by the company and therefore, there is really no warrant to interfere with the impugned order. There is no material on record to establish even the prima facie existence of any agreement between the company and the petitioning creditor in the matter of sale of the pledged Gitanjali sharers. The minutes of the meeting dated 14 March 2013 do not even remotely spell out any such agreement. Mr. Andhyarujina, was not at all clear as to whether it is the case of the company that there exists any such agreement between the parties. In this case, even if we were to proceed on the basis that there was some obligation upon the petitioning creditor to sell the pledged Gitanjali shares and to adjust the proceeds against the dues payable by the company, such obligation, at the highest, would arise only after the trades matured or debt was actually crystalised some time in June 2013. Admittedly, the trades matured or the debt was crystalised in the present case only in June 2013. By this date, there was already a freeze order made by EOW under section 102 of Cr.P.C. disabling the petitioning creditor from dealing with the pledged Gitanjali shares. There was no legal ob ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of omission and commission on the part of the petitioning creditor. The company contends that even before the receipt of statutory notice under section 434 of the said Act, the company had instituted Suit (L) No. 939 of 2013, claiming the said amount of ₹ 152.57 crores. This according to the company constitutes a defence which is bona fide and one of substance, both in law as well as in facts. Therefore, the company urges that the petition seeking its winding up ought not to have been admitted and the impugned order, which does so, warrants interference. 4] Mr. Zal Andhyarujina, learned counsel for the company, in support of this appeal, submits the following: (I) Whilst there may be no dispute that the company is indebted to the petitioning creditor in an amount of ₹ 90.90 crores, the company, even before the receipt of statutory notice under section 434 of the said Act, had already instituted Suit (L) No. 939 of 2013 claiming an amount of ₹ 152.57 crores from the petitioning creditor for acts of omission and commission on its part, particularly in not selling the entire bulk of 20 lacs shares of Gitanjali Gems Limited (Gitanjali) up to 27 April 2013, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble, particularly since, decision to this effect had been taken by the petitioning creditor in the meeting dated 14 March 2013. For the breach of such legal obligation, the petitioning creditor is answerable in damages. In support of such proposition, reliance was placed upon the decisions of the learned Single Judge of this Court in Kritika Nagpal vs. Geojit Financial Services Ltd. Arbitration Petition No. 47 of 2009 decided on 14 July 2016. and Bonanza Commodities Brokers Pvt. Ltd. vs. Mrs. Roshanara Bhinder (2015) 5 Bom. C.R. 393. (V) The petitioning creditor has rendered itself liable in damages for suspending sales of Gitanjali shares from 25 March 2013 and upto 27 April 2013 by relying upon EOW's letter dated 23 March 2013, when in fact, such letter had no statutory force whatsoever and consequently, was not at all binding upon the petitioning creditor. Had the petitioning creditor disregarded EOW's letter dated 23 March 2013, as it was bound to, and proceeded with the sale of 20 lacs Gitanjali shares before 27 April 2013, there would possibly arise no debt payable by the company to the petitioning creditor. 5] Mainly for all the aforesaid reasons, it was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the company in the matter of sale of the pledged Gitanjali shares. There is absolutely nothing in the minutes of the meeting dated 14 March 2013 to suggest the existence of any such 'agreement' between the parties. In fact, this position was even conceded by learned counsel for the company before the Company Judge and such concession is recorded in the impugned order. In the absence of any such 'agreement', the decision in the case Vimal Chandra Grover (supra) is distinguishable and was rightly distinguished by the Company Judge. (V) Assuming without in any manner admitting that there was any obligation to sell the Gitanjali shares, such obligation, at the highest, might have arisen in June 2013 when the trades matured. The debt of at least ₹ 90.90 crores actually crystalised only on June 2013 and therefore, before the said date, there was no question of there being any obligation upon the petitioning creditor to offload or sell the pledged Gitanjali shares. By this date, admittedly the EOW's freeze order dated 27 April 2013 was in force. (VI) Further, assuming without in any manner admitting that there was obligation to sell the pledged Gi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... will not act upon a defence that the company has ability to pay the debt but the company chooses not to pay that particular debt. Further, 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 debt is disputed, the court will nevertheless make a winding up order without requiring the creditor to quantify the debt precisely. The principles upon which the court acts are first that the defence of the company is in good faith and one of substance, secondly , the defence is likely to succeed in point of law and thirdly , the company adduces prima facie proof of the facts on which the defence depends. In fact, the learned counsel for both the parties, very rightly placed reliance upon this formulation of law by the Hon ble Supreme Court. 10] In this case, there is absolutely no dispute that the company is due and payable to the petitioning creditor an amount of at least ₹ 90.90 crores on account of various trades executed by the company on the platform of National Stock Exchange of India Limited. The company is primarily, a broker enlisted with the petitioning creditor, who has admittedly committe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onnecting their terminals and declaring them as defaulters. The Respondent Company has no assets whatsoever except trade receivables. 2. The Respondent Company shall maintain status quo as of today upto 4th September, 2014 in respect of its assets including receivables. In view thereof, no further orders are required to be passed on the above Application. 3. Place the above Petition as well as Application for hearing on 4th September, 2014. [Emphasis supplied) 13] The defence raised by the company, therefore, does not directly concern its liability to pay the amount of ₹ 90.90 crores to the petitioning creditor. However, it is the case of the company that it has already instituted Suit (L) No. 939 of 2013 against the petitioning creditor seeking damages of ₹ 152.57 crores and since the company has a very good chance of succeeding in such suit, the same ought to be regarded as an equitable set off or at least in the nature of an equitable set off as against the liability of ₹ 90.90 crores owed by the company to the petitioning creditor. Further, upon such basis the company contends that its defence is bona fide, substantial, likely t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ver, held that only where there is any genuine cross claim with substance that a petition for winding up can be rejected. He relied upon in re Welsh Brick Industries Ltd. [1946] 2 ALL E.R. 197, where it was held that in spite of fact that unconditional leave to defend had been granted in the King's Bench action, the Company Court could look into the matter and if it finds that there was no substance in the defence, could proceed to entertain the petition for winding up of the company. In the facts of the case, Lord Denning M.R. found that there was no substance in the defence raised by the company. Incidentally, even the majority approves the dictum In re Welsh Brick Industries Ltd. Therefore, Portman (supra) is not an authority for proposition that no sooner some cross claim is raised by the company against the petitioning creditor, the petition for winding up of the company has to be necessarily dismissed without even prima facie examining whether the cross claim is genuine and one of substance. 16] The legal position as to relationship between a pledgor and the pledgee arising out of section 176 of the Contract Act has been the subject matter of several decisions includ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt has emphasized upon the agreement between the parties. Therefore, unless the company pleads and establishes the existence of any similar agreement in the present case, there is no question of seeking sustenance from the decision in the case of Vimal Chandra Grover (supra). 19] There is no material on record to establish even the prima facie existence of any agreement between the company and the petitioning creditor in the matter of sale of the pledged Gitanjali sharers. The minutes of the meeting dated 14 March 2013 do not even remotely spell out any such agreement. Mr. Andhyarujina, was not at all clear as to whether it is the case of the company that there exists any such agreement between the parties. This is quite understandable, since, in paragraph 20 of the impugned order, the learned Company Judge has recorded the following : 20. ........In fact, Mr. Andhyarujina very fairly conceded that there was no agreement between the parties that the Petitioner would sell 20,00,000 shares of Gitanjali....... ...... 20] In this case, even if we were to proceed on the basis that there was some obligation upon the petitioning creditor to sell the pledged Gitanjali s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... creditor to freeze the Gitanjali shares. It is pertinent to record that the company did not even bother to challenge such freeze order, but, it was the petitioning creditor which instituted Criminal Application no. 483 of 2013 to challenge the same before this Court. By order dated 10 May 2013, this Court, directed that the freeze order dated 27 April 2013 would remain in force only till 24 May 2013 and within the said period, Sarvin and Trusha, the clients of the company, who had made the complaints of fraud and manipulation against the company may approach the competent civil court and obtain appropriate orders. 24] Sarvin, it appears, challenged this Court's order dated 10 May 2013, before the Hon'ble Apex Court, which, restrained the petitioning creditor from alienating Gitanjali shares and directions were issued to this Court for final disposal of the petition on or before 26 June 2013. This Court by its order dated 22 August 2013 dismissed the petition instituted by the petitioning creditor herein. Again, the petitioning creditor herein preferred a special leave petition to the Hon'ble Apex Court, in which, an interim order was made permitting the petitionin ..... X X X X Extracts X X X X X X X X Extracts X X X X
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