TMI Blog2016 (11) TMI 1444X X X X Extracts X X X X X X X X Extracts X X X X ..... f serving suicidal contradiction of these two companies. The failure of the respondent- company even to make any alternative arrangement to argue and oppose the present case and other such petitions on behalf of the respondent-company against the petitioning creditors also shows that the Company is not interested in seriously opposing these winding up petitions against it. The objections raised in the statement of objection though not pressed again were considered but are found to be unsustainable and flimsy. There is no bona fide dispute against the admitted liability of the respondent-company and no substantial defence has been put-forth by it to show that it is not commercially insolvent. Therefore, this Court, considers it just and proper to wind up the respondent-company for failure to pay the admitted liability and accordingly, the said respondent, Company-Kingfisher Airlines Limited deserves to be wound-up. Therefore, this Court is of the considered opinion that respondent-company, KFA Ltd., deserves to be wound up under the provisions of 433 (e) and (f) read with 439 of the Companies Act, 1956. Accordingly, the respondent-company, Kingfisher Airlines Limited having it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this Court by way of intra-court appeal, namely, O.S.20/2014 (Kingfisher Airlines Limited v. Aerotron Limited) which too, came to be dismissed by the Division Bench of this Court on 15th July 2015. Admittedly, even thereafter, nothing was apparently paid to any of the creditors by the respondent-company towards its admitted debts and the respondent-company also does not appear to have made any alternative arrangements what-so-ever either for payment of any of its admitted dues of the petitioning creditors before this Court or even appearance of any other Advocate to oppose this winding up petition. Mr. Uday Holla, Senior Advocate, appearing for the holding company UBHL, to oppose winding up petitions against UBHL also refused to have any instruction to oppose the winding up petition against the respondent-company KFA Ltd. 4. The relevant extract of order of Admission passed on 6.12.2013 by the Hon'ble Mr. Justice Anand Byrareddy, is quoted below: Mr. S.S. Naganand, Senior Advocate along with Sri. A.C. Achappa, Advocate, M/s,. NDA Partners for petitioner Mr. K.G. Raghavan, Senior Advocate for Respondent. Order The petitioner is said to be a company incorporated unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Aero Engines AG ( IAE ). It is stated that there is a civil suit pending before the Court of the City civil Judge, Bangalore, against IAE and its associate companies, in case No. O.S. No. 6406/2012, where in a serious dispute has been raised regarding the defects in design and manufacture of the engines made by it. On account of which the entire fleet of Airbus A320 family aircraft of the respondent have been rendered unfit for commercial use. And that the components supplied by the respondent form part of the defective engines. It is hence sought to be contended that the respondent is justified in denying payments for defective supplies. It is contended that the respondent being a foreign company' as defined under the Companies Act, 1956, has provided support teams at all places where the customers of the petitioner are located, including India and is hence carrying on business in India, without compliance with the provisions of Section 592 to 594 of the Companies Act and is hence prohibited under Section 599 of the Act from bringing any suit or instituting any legal proceeding in India, until compliance with the above. The respondent has chosen to deny all liability to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g amounts in installments spread over several months between March and October, 2012. Appellant contested the matter by denying its liability to pay the said dues, on the ground that the same were disputed dues and it also raised an objection that since the respondent company was carrying on business in India with an established place of business in India and having failed to comply with the provisions of Section 592 to 594 of the Companies Act, it would be prohibited from bringing a suit or instituting legal proceedings in India, as provided under section 599 of the Companies Act. After hearing learned counsel for the parties, vide a reasoned order dated 06.12.2013 passed by the learned Company Judge, company petition has been admitted and posted for hearing on the question of advertisement of the petition. Challenging the said order of admission of the company petition, this appeal has been filed. 3. We have heard Sri. S.V. Rajesh, learned counsel for appellant as well as Sri. S.S. Naganand, learned Senior counsel along with Sri. A.C. Achappa, learned counsel for respondent and perused the records. 4. To support his contention that the respondent company is carrying on busi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llant company payable to the respondent company, learned company Judge has placed reliance on the agreement between the two companies dated 24.02.2012 whereby the appellant company has acknowledged an outstanding of US $ 56,16,024.12 plus accrued interest after 31st January, 2012. Admittedly said amount has not been paid within the time provided in the said agreement or even thereafter. Thus, being prima facie satisfied that the appellant company was unable to pay its debts, company petition has been admitted. In such facts, admission of the petition cannot be faulted. 7. In the end, learned counsel for appellant has also submitted that under the FOREIGN EXCHANGE MANAGEMENT (ESTABLISHMENT IN INDIA OF BRANCH OR OFFICE OR OTHER PLACE OF BUSINESS) REGULATIONS, 2000 there is a prohibition under Regulation 3 for establishing branch office in India by a Foreign company without prior approval of Reserve Bank of India. In view of the fact that we have already held above that the appellant has not been able to place any material on record to show that the respondent company has any office (be it a site office or project office or warehouse or store house) within the territory of India, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... out admitting that the present Company Petition is maintainable it is humbly submitted that the present Company Petition be stayed pending final hearing and disposal of the said Suit ( Annexure R-1 hereto ). 12. It is therefore evident that the Petitioner Company, being a foreign Company , is carrying on business in India, has an established place of business in India but has failed to comply with the provisions of Section 592 to 594 of the Companies Act- the Petitioner Company is therefore expressly prohibited under Section 599 of the Companies Act from bringing any suit, claiming any setoff, making any counterclaim or instituting any legal proceeding in India in respect of any contract, dealing or transaction -including the present Company Petition - until it has complied, inter alia, with the aforesaid provisions of the Companies Act. On this ground alone the present Company Petition is not maintainable and is liable to be dismissed in limine with costs, and the Respondent Company prays accordingly. Hereto annexed and marked Annexure R-4 is an extract from the portal of the Ministry of Corporate Affairs which clearly states No matches found against the name of the Petit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he petitioner, and therefore the question of the any alleged failure on the part of the respondent Company to pay any amounts either under the Settlement Agreement or otherwise, does not and cannot arise. The question therefore of any alleged breaches of the alleged Settlement Agreement by the Respondent Company or the Petitioner calling upon the Respondent Company to remedy any such alleged breaches or there being any failure or neglect on the part of the Respondent Company to make payment of any alleged amount due or owing to the Petitioner, under the Settlement Agreement or otherwise, as alleged or at all, does not an cannot arise. In view of what is stated hereinabove, it is denied that the petitioner was entitled to serve any notice on the Respondent company or call upon the Respondent Company to pay any amount pursuant to the Settlement Agreement or otherwise, much less an amount of US$ 5,854,825.62 or any part thereof, as alleged or otherwise. 33. With reference to paragraph 23 of the Company petition, in view of what is stated hereinabove, it is denied that it is just or equitable that the Respondent Company be wound up as alleged or for the reasons alleged or at all. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rline operations, which would be against public interest. 8. The objection raised on behalf of the respondent-company were pressed at the admission stage only and thereafter, before Division Bench in its appeal filed against admission order but were not accepted or were overruled. Nobody appeared to press the same at the stage of hearing of this petition. 9. In the facts of the Company Petition 214/2012, M/s. Aerotron Limited v. Kingfisher Airlines Limited, the learned counsel for petitioner, Mr. Naganand, Senior Advocate has urged before the Court that the Petitioner-Company originally incorporated under the Laws of England and Wales, had supplied certain rotable aircrafts components to the respondent-Company-Kingfisher Airlines, KFAL for short, and for the dues of the petitioner-Company-Aerotron Limited, a Settlement Agreement was finally arrived at between the parties on 24th February 2012, under which, the respondent-company had agreed to pay the outstanding dues of the petitioner-Company to the extent of 5,616,024.12 in US Dollars (Five Million Six Hundred Sixteen Thousand and Twenty Four United States Dollars and Twelve Cents only) and despite the said Settlement Agree ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Agreement. 5. Kingfisher further failed to pay the 3rd instalment of US$ 500,000 (Five Hundred Thousand United States Dollars) due on 30th April, 2012 to Aerotron. 6. As of as of 3rd May 2012, the total amount due and payable by Kingfisher to Aerotron is US$ 5,854,825.62 (Five Million Eight Hundred Fifty-Four Thousand Eight Hundred and Twenty- Five United States Dollars and Sixty Two cents) (US$ 5,193,107.19) (Five Million One Hundred Ninety- Three Thousand one Hundred and Seven United States Dollars and Nineteen Cents only) being the principal amount payable and USD$661,718.43 (Six Hundred Sixty One Thousand Seven Hundred and Eighteen United States Dollars and Forty three Cents) being payable by way of interest) 7. Aerotron has by its e-mails dated 2nd April 2012 (sent at 12.24 p.m.), 10th April, 2012 (sent at 11.36 a.m.) and 29th April, 2012 (sent at 10.53 a.m.) called upon Kingfisher to remedy the breaches under the Agreement. However, Kingfisher has failed and neglected to make payment of the amounts due and owing to Aerotron under the agreement. 8. In view of the aforesaid facts and circumstances, pursuant to Clause 2.3 of the Agreement, we hereby call upon Kingfis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e petitioner's Company against supply of goods and on the contrary, in its statement of objections filed before this Court, they have admitted in para-33 of their reply that the respondent-Company, was not operational and was in financial woes, but sham defences were sought to be raised against the present winding up petition in the said statement of objections, like, pendency of a Civil Suit, viz., O.S.6406 of 2012 which was filed by the holding Company of the respondent-Company M/s. United Breweries (Holdings) Limited and not by the Respondent-KFA Ltd. itself for the reasons best known to them and in the said suit filed for the alleged defective supply of Aeroengines to the respondent-KFA Ltd., which caused a huge loss to the respondent-Company and that is why, the respondent-Company was not able to pay all the dues of the petitioner-Company within the stipulated time. The said suit filed by the Holding Company UBHL of the respondent-KFAL against the manufacturers of the engines, namely, M/s. IAE International Aero Engines AG, Switzerland, M/s. Rolls Royce Plc, U.K., M/s. Pratt Whitney, USA, Japanese Aero Engines Corporation, MTU Aero Engines GmbH, and Kingfisher Airlines L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re quoted below for ready reference. (i) M/s. Madhusudan Gordhandas Co., v. Madhu Wollen Industries Pvt. Ltd. (1971 (3) SCC 632) 20. Two rules are well settled. First, if the debt is bona fide disputed and the defence is substantial one, the court will not wind up the company. The court has dismissed a petition for winding up where the creditor claimed a sum for goods sold to the sum demanded by contended that no price had been agreed upon and the sum demanded by the creditor was unreasonable. See London and Paris Banking Corporation. Again, a petition for winding up by a creditor who claimed payment of an agreed sum for work done for the company when the company contended that the work had not been properly was not allowed. See Re. Brighton Club Horfold Hotel Co. Ltd., 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. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cases indicate that if the debt is bona fide disputed, there cannot be neglect to pay within the meaning of Section 433(1)(a) of the Companies Act, 1956. If there is no neglect, the deeming provision does not come into play and the winding up on the ground that the company is unable to pay its debts is not substantiated and non-payment of the amount of such a bona fide disputed debt cannot be termed as neglect to pay so as to incur the liability under Section 433(e) read with Section 434(1)(a) of the Companies Act, 1956. COMMERCIALLY SOLVENT 24. The Appellant Company raised a contention that it is commercially solvent and, in such a situation, the question may arise that the factum of commercial solvency, as such, would be sufficient to reject the petition for winding up, unless substantial grounds for its rejection are made out. A determination of examination of the company's insolvency may be a useful aid in deciding whether the refusal to pay is a result of the bona fide dispute as to liability or whether it reflects an inability to pay, in such a situation, solvency is relevant not as a separate ground. If there is no dispute as to the company's liability, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent-company under the provisions of the Companies Act and Rules made there-under. 17. There has been no opposition as such to the present winding up petition and such of other winding up petitions against the respondent-company. The alleged defences of pendency of civil suit filed by holding company against the manufacturers but not against petitioner-Aerotron Ltd., locus standi of petitioner company to file this winding up petition, there being chance of revival of the business etc., are all, moonshine and sham defences raised without any material basis for them. The respondent-company is commercially insolvent and is unable to pay its huge debts and there appears to be no useful purpose to keep this company out of the process of winding up or to keep these winding up petitions pending unnecessarily waiting for some magic to happen for a turnaround of this company, which has been left to fend for itself even by its own holding company, even though UBHL facing similar winding up petitions against itself filed allegedly for not discharging its own guarantee obligations for discharging the debts of its own subsidiary-the Respondent company, and UBHL is hotly contesting winding up ..... 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