Court dismisses winding-up petitions, emphasizes arbitration for corporate guarantees. Liberty to pursue arbitration granted.

The court dismissed the winding-up petitions, highlighting the need for arbitration to resolve the validity of corporate guarantees and the authority of Sri. Ramachandra Rao. Parties were granted liberty to pursue arbitration, with the court reserving the right to entertain petitions based on arbitration outcomes against respondent companies.

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Issues Involved:
1. Validity of Corporate Guarantees
2. Authority of Sri. Ramachandra Rao to Execute Guarantees
3. Adjudication of Debt Against Borrower
4. Pendency of Arbitration Proceedings
5. Maintainability of Winding Up Petitions

Issue-wise Detailed Analysis:

1. Validity of Corporate Guarantees:
The petitioner contends that the respondents guaranteed the repayment of loans obtained by the Borrower company. The respondents dispute the genuineness of the corporate guarantees, arguing that they were not authorized and were fabricated by Sri. Ramachandra Rao in collusion with his brother. The court acknowledges that the validity of these guarantees is a substantial issue requiring adjudication in an appropriate forum, not in the winding-up proceedings.

2. Authority of Sri. Ramachandra Rao to Execute Guarantees:
The respondents argue that Sri. Ramachandra Rao had no authority to execute the guarantees on behalf of the respondent companies. They claim that he misused his position and acted without the Board's authorization. Criminal proceedings have been initiated against him for these alleged unauthorized actions. The court notes that this contention is substantial and must be resolved through proper adjudication, not in the winding-up petition.

3. Adjudication of Debt Against Borrower:
The respondents assert that the debt against the Borrower company has not been adjudicated and that the Borrower company is not a party to the petition. The petitioner, however, contends that the Borrower company has admitted the liability and that a winding-up petition against the Borrower is pending. The court recognizes the legal position that a creditor can proceed against a guarantor but emphasizes that the debt's validity and the guarantees' authenticity must be established first.

4. Pendency of Arbitration Proceedings:
The court highlights that the parties are already involved in arbitration proceedings concerning the same transaction. The respondents have raised the issue of the guarantees' validity in the arbitration, and the court finds it appropriate to let the arbitration resolve these substantial disputes. The court emphasizes that the pendency of arbitration does not bar the winding-up petition but underscores the need for the arbitration to settle the issues first.

5. Maintainability of Winding Up Petitions:
The court examines whether the defense raised by the respondents is substantial or merely a tactic to delay the winding-up petition. It concludes that the issues raised are substantial and require proper adjudication. The court decides not to admit the winding-up petitions at this stage, granting the parties the liberty to resolve the dispute in the pending arbitration. The court dismisses the petitions, allowing the arbitration to determine the validity of the guarantees and the debt.

Conclusion:
The court dismisses the winding-up petitions, emphasizing the need for the arbitration to resolve the substantial issues concerning the validity of the corporate guarantees and the authority of Sri. Ramachandra Rao. The court grants the parties the liberty to pursue the arbitration and reserves the right to entertain the petitions if the arbitration results in findings against the respondent companies.

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