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of <h1>Court upholds maintainability of winding-up petitions, clarifies creditor rights under Companies Act.</h1> <h3>VIKASH METAL AND POWER LIMITED & OTHERS Versus. CORPORATION BANK</h3> VIKASH METAL AND POWER LIMITED & OTHERS Versus. CORPORATION BANK - TMI Issues Involved:1. Immediate payment obligation under the agreement.2. Interest rate and payment timeline.3. Availability of collateral security.4. Quantified realizable debt requirement for winding up petition.5. Applicability of SARFAESI Act over Companies Act.Issue-wise Detailed Analysis:1. Immediate Payment Obligation Under the Agreement:The appellants argued that the agreement did not specify that the outstanding sum had to be cleared immediately upon the Bank's demand. The court found that the financial arrangement allowed the appellants to enjoy credit facilities against deposited cheques, which were dishonored. Consequently, the Bank issued a demand notice under Section 434 of the Companies Act, 1956, leading to the winding-up proceedings. The court upheld that the agreement implied an obligation to clear dishonored cheques immediately, supporting the Bank's claim.2. Interest Rate and Payment Timeline:The appellants contended that the sanction letter provided for interest at the base rate plus 4.25% per annum, implying the money would not be immediately payable. The court dismissed this argument, clarifying that the interest rate applied to delayed payments and did not defer the principal debt's immediate payability. The court interpreted the interest provision as a penalty for delayed payment rather than a deferment of the debt.3. Availability of Collateral Security:The appellants argued that the Bank should rely on the collateral security offered instead of pursuing winding-up proceedings. The court noted that the offered LIC policies covered only Rs.20-22 lacs against the principal claim of Rs.18.8 crores and that the intended mortgage on immovable property was never executed. The court concluded that the Bank was not a secured creditor under the SARFAESI Act and was justified in seeking winding-up.4. Quantified Realizable Debt Requirement for Winding Up Petition:The appellants claimed that the creditor must have a quantified realizable debt for a winding-up petition to be admissible, which was absent in this case. The court found that the appellants had admitted their liability through various correspondences, thus foreclosing any bona fide dispute regarding the debt. The court emphasized that a creditor could maintain a winding-up petition if the debt was undisputed and the company failed to pay.5. Applicability of SARFAESI Act Over Companies Act:The appellants argued that the SARFAESI Act, being a special statute, should prevail over the Companies Act, 1956. The court rejected this argument, stating that Section 37 of the SARFAESI Act explicitly provides that its provisions are in addition to and not in derogation of the Companies Act. The court held that the SARFAESI Act did not preclude the Bank from filing a winding-up petition under the Companies Act.Conclusion:The court dismissed the appeals, upholding the maintainability of the winding-up petitions. The court found that the appellants had admitted their liability and failed to provide sufficient collateral security. The court also clarified that the SARFAESI Act did not bar the Bank from seeking winding up under the Companies Act. The judgment emphasized that a creditor could pursue winding-up if the debt was undisputed and the company failed to pay. The court directed that the winding-up process would continue unless the company made a satisfactory payment proposal to the learned Company Judge.
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