TMI Blog2018 (3) TMI 561X X X X Extracts X X X X X X X X Extracts X X X X ..... t can certainly be said that the appellant had waived the right if any, to terminate the contract. The submission as urged on behalf of the appellant that by their letter dated 4 March 2015 the option agreement was terminated, if is accepted, then the consequence is that Article IV (Termination Clause) of the option agreement itself would be rendered nugatory and meaningless. Whole intention of the parties to incorporate the termination clause as contained in Article IV is to bind the parties only in the stipulated and agreed mode of termination and in no other form or method. In fact what is pertinent is that the parties had categorically avoided to enter any other form of termination when they agreed to incorporate Article IV. Thus, the appellant's contention that in view of termination letter dated 4 March 2015 the “Put Option” could not have been exercised by the respondent is wholly untenable. The appellant's contention of the validity of the option agreement being considered by the learned Single Judge in the summary proceedings of a winding up petition, hence is wholly unfounded. - Ordinary Original Civil Jurisdiction Appeal (Lodg) No. 27 of 2018 in Company Petition No. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bursement 14 Security The facility shall be secured by: (a) Pledge of fully paid up, de materialised, unencumbered, freely transferable equity shares of Vandana Vidhyut Ltd (VVL), which shall provide a cover of 2.50x, subject to the minimum pledge of 26% of the entire paid up equity of VVL throughout the currency of the Facility; (b) Corporate Guarantee of Viconic Vyapar Pvt.Ltd. (c) Personal Guarantee of Mr. Vinod Agrawal, Subhash Agrawal, Mr. Ashok Agrawal, Mr. Gopal Prasad Agrawal, Mr. Prahlad Agrawal and Mr. Vijit Kumar Agrawal (d) PDCs for Principal Interest (e) Demand Promissory Note (DPN) Note: Equity valuation with respect to the pledge of VVL shares to be undertaken on DCF/other methodology acceptable to IFIN. Present indicative valuation is in the range of Rs.,8000 8,500 mn which will be mutually confirmed prior to disbursement. The valuation shall be reviewed on annual basis based on the financials of VVL progress in the implementation of the Project and top up be provided for any shortfall so as to maintain minimum stipulated cover of 2.50x subject to minimum pledge of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... * Any change of the existing Statutory Auditors of VVL/the Borrowers. .... 3. Consequent to the said offer letter, the parties entered into three agreements namely (i) 'Loan Agreement' dated 6 January 2012 entered between the borrower Vandana Udhyog Limited and the respondent; (ii) a 'Pledge Agreement' dated 6 January 2012 entered between the borrower Vandana Udyog Limited and its associate company Viconic Vyappar Private Ltd. who are stated to be pledger no.1 and pledger no.2 and the respondent and (iii) the Option Agreement dated 6 January 2012 between the respondent on the first part and the appellant Vandana Global Limited on the second part, Vandana Ispat Limited on the third part and fourthly Vandana Udhyog Limited the borrower. 4. Under the option agreement dated 6 January 2012, the borrower Vandana Udhyog Ltd., the appellant and another associate company Vandana Ispat Limited, had irrevocably undertaken to the respondent, that in the event of a default under the loan agreement the appellant had a discretion to issue Put Notice , and upon issue o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the borrower Vandana Udhyog Ltd. who admitted the loan facility as granted by the respondent, however denied its liability under the option agreement on various grounds. As the debt remained outstanding and was not being repaid, the respondent filed in this Court a winding up petition being Company Petition No.782 of 2014 against the appellant. A reply affidavit came to be filed in the said petition by the appellant whereby it was admitted by the appellant that the appellant was only a guarantor to the claim as made by the respondent against the borrower Vandana Udhyog Ltd., under the 'option agreement' dated 6 January 2012. The opposition to the petition was on the ground that the amount as mentioned in the statutory notice dated 13 September 2014 differed from the amount mentioned in the 'Put Notice' dated 21 February 2014. On 25 February 2014 the said company petition was withdrawn by the respondent with a liberty to file a fresh petition after serving fresh statutory notice. 8. The appellant thereafter by its letter dated 4 March 2015 purportedly terminated the option agreement . The termination was disputed by the respondent by its letter dated 14 Ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion agreement dated 6 January 2012 to the amounts payable to the respondent by the borrower Vandana Udhyog Ltd.. It is observed that however in paragraph 3(E) of the reply to the present Company petition, the appellant was taking a different stand that the option agreement is not a guarantee document, and the appellant is not a guarantor to the financial facility availed by the borrower Vandana Udhyog Ltd. The learned Single Judge held that considering the clear consequence which was arising under the option agreement the appellant would become liable for the debt of the borrower. The learned Single Judge accordingly has passed the impugned order admitting the company petition and directing it to be advertised. 10. Learned Counsel for the appellant in assailing the impugned order submits that the learned Single Judge is in an error in recording a finding that the Option agreement dated 6 January 2012 is in fact an agreement of guarantee, interalia executed by the appellant in favour of the respondent. It is contended that the put option is an independent separate arrangement and in no manner it can be termed as guarantee on the part of the appellant to pay the debts of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the borrower Vandana Udhyog Limited as evident from the reply affidavit filed in the earlier company petition wherein the appellant has clearly admitted that the appellant was a guarantor to the said financial facility. It is submitted that the nomenclature of the agreements may be anything, ultimately it is required to be seen as to what was the intention of the parties. It is submitted that if the option agreement when carefully seen, in its various clauses clearly reflects nothing but a guarantee on the part of the appellant alongwith Vandana Ispat Ltd. guaranteeing the loan availed by the borrower Vandana Udhyog Ltd. It is thus submitted that the option agreement is thus an unambiguous guarantee. Our attention is drawn to Article II of the option agreement dated 6 January 2012, namely the Put Option clause, under which the appellant and Vandana Ispat Limited (VIL) have irrevocably and absolutely agreed and undertook that in the event of occurrence of a default under the 'facility agreement' between the respondent and the borrower Vandana Udhyog Ltd., the respondent may at its discretion issue a Put Notice and upon receipt of Put Notice , the appellant and Vand ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion is that the option agreement was not available to be invoked against the appellant as the same was terminated by the appellant on 4 March 2015. The option agreement being terminated was not enforceable in law. As a consequence of termination of the option agreement no dues are payable under the option agreement. Further the adjudication of the validity and purport of the option agreement cannot be a subject matter of summary proceedings of a winding up petition but ought to be agitated in a civil suit. The second submission is that the learned Single Judge has erred in coming to a conclusion that there is no right available under the general law, for the appellant to terminate the option agreement and that the option agreement could not have been terminated only in two circumstances as provided by the termination clause Article IV (supra). The third submission is that even assuming that the option agreement was subsisting, the same could not have been construed as an agreement of guarantee by the learned Single Judge. The option agreement had created reciprocal obligations as also there was no amount payable by the appellant per se under the option agreement. The interpre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed and outstanding as principal, together with interest, charges, costs, expenses and all other monies payable by the borrower alongwith the penalty, if any, under the facility agreement and any other documents in relation to the facility, upon the occurrence of an event of default, under the facility agreement. Article II provides for Put Option and as the controversy revolves around the Put Option it would be relevant to extract the same, which reads thus: ARTICLE II PUT OPTION VGL and VIL hereby irrevocably, absolutely and unconditionally agree with and undertakes to IFIN that in the event of the occurrence of an Event of Default under the Facility Agreement IFIN may, at its discretion, issue the Put Notice; and upon the receipt of the Put Notice VGL and VIL shall, without demur or protest, make payment of the Exercise Price to IFIN and accept by way of assignment from IFIN the Facility alongwith all rights and liabilities thereunder. (emphasis supplied) 16. Adverting to the principle of law as laid down in Tamboli Ramanlal Motilal (Dead) by LRs. Vs. Ghanchi Chimanlal Keshavlal (Dead) by LRs. And Anr. (supra ) in regard to interpretation of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case of his default. It is well settled that a contract of guarantee involves principally three parties namely the creditor, the surety and the principal debtor, where liability may be actual or prospective. Thus necessarily the ingredients of a contract of guarantee are clearly present in the option agreement which are reflected from the unambiguous nature of Article II the Put Option whereby the appellant has irrevocably, absolutely and unconditionally without demur or protest agreed to make payment of the exercise price to the respondent. If this be the case, then considering the provisions of Section 126 of the Contract Act, it is imperative to accept the 'option agreement' as a 'contract of guarantee'. There can be no other interpretation. Thus, we are of the considered opinion, the learned Single Judge is correct in observing that the 'option agreement' is required to be considered as a guarantee. 18. Now coming to the contention as urged on behalf of the appellant that the option agreement was terminated on 4 March 2015 and the same could not have been invoked. This contention also cannot be accepted, firstly because the parties have bound themse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the impugned order the winding up petition of the respondent has been admitted and was directed to be advertised. It is not in dispute that the winding up petition has already been advertised and to that extent the impugned order is already implemented. As regards the final hearing of winding up petition, as informed to us, the learned Single Judge has placed the winding up petition for final hearing on 16 March, 2018. 20. In view of the above discussions and the only points of argument being considered and dealt by us in the foregoing paragraphs, we are of the clear opinion that no ground is made out to interfere in the impugned order. The appeal lacks merit. It is accordingly rejected with costs. 21. In view of disposal of the appeal, pending Notice of Motion (Lodg) No.37 of 2018 does not survive. It is accordingly disposed of. (G.S. KULKARNI, J.) (NARESH H. PATIL, J.) 22. After pronouncement of the judgment, learned Counsel for the appellant prayed for stay to the operation of the judgment. Learned Counsel for the respondent submits that there was no stay operating in the appeal. Hence, the prayer for stay stands rejected. - - TaxTMI - TMITax - Corporate ..... X X X X Extracts X X X X X X X X Extracts X X X X
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