2017 (1) TMI 1058 - HC - Companies Law

Court dismisses Company Petition, citing bona fide defense. Liability not proven under Trade Finance Agreement.

The court dismissed the Company Petition, ruling in favor of the respondent. The court found the respondent's defense to be bona fide and substantial, ... Winding up petition - Held that:- A perusal of Clause 9.1 along with Clause 9.1.1 would show that the petitioner would have recourse qua all receivables emanating from the Approved Debtor, except those which were created by Debtor's Insolvency. Admittedly, the Approved Debtor i.e., BCPMS had become insolvent and the knowledge with respect to the same was available with the petitioner. This fact is laid bare on perusal of letter dated 30.01.2009, issued by KPMG, the Administrators of BCPMS. Furthermore, if there was any doubt with regard to aforesaid it is set to rest upon a perusal of the petitioner's own letter dated 25.08.2009, wherein, it makes a reference to the Administrators of BCPMS. The said letter is a clear pointer to the fact that the petitioner was in touch with the Administrators of BCPMS and, it had, dispatched the said communication, when, the Administrators informed the petitioner that no outstandings were owed by BCPMS to the petitioner. It is, in this context, that the petitioner, by very same letter, indicated to the respondent that, since, it had not protected its title qua the receivables, it was seeking from the respondent the payment of the amounts involved. In support of its stand, the petitioner alluded to Clauses 7 and 9 of GARMA in the said communication. Importantly to lend clarity to the submissions advanced as indicated to the counsel for the petitioner during the course of hearing to advert to the specific sub-clause (8) in Clauses 7 and 9, based on which, it was sought to be asserted that even in a situation where the Approved Debtor had turned insolvent, the petitioner could take recourse to the respondent. We must record that the counsel for the petitioner was not able to point to any provision, which would run counter to the provisions of Clause 9.1.1 of GARMA. As a matter of fact, as indicated in my narration, the 12th Metropolitan Magistrate, Mumbai, in coming to the conclusion that the respondent along with its Directors/guarantors was not guilty of the offence with which they were charged, had based his reasoning on Clause 9.1.1 of GARMA. My view, in the matter, is no different. This apart, the issue raised, in defence, to the present Company Petition by the respondent is alive and pending adjudication in the suit filed by the Directors/Guarantors of the respondent. The defence raised by the respondent is not only bona fide, but is also one of substance, and therefore, it would not be appropriate to allow the petitioner to press ahead, with the instant Company Petition. In this behalf, the argument advanced that the Suit is not filed by the respondent but by its Directors/Guarantor is without merit, as not only is the respondent party to the suit, albeit, as a pro-forma defendant but its liability in law is coextensive with that of its Directors/Guarantors. The issue, if decided, one way, or other would attain finality as amongst the parties to the Suit. Issues Involved:1. Maintainability of the Company Petition under Sections 433(e) and 434(1)(a) read with Section 439(1)(b) of the Companies Act, 1956.2. Liability of the respondent under the Trade Finance Facility Agreement.3. Applicability of Clause 9.1.1 of the Global Accounts Receivables Management Agreement (GARMA) regarding the Approved Debtor's insolvency.4. The bona fide nature of the respondent's defense and its impact on the winding-up petition.Issue-wise Detailed Analysis:1. Maintainability of the Company Petition:The petitioner argued that the respondent was liable to pay the amount crystallized in the demand notice and the Company Petition under the sanction letter, which empowered the petitioner to take 'recourse' to the respondent for moneys payable by the Approved Debtor, BCPMS. The respondent, however, contended that the petition under Section 433 of the 1956 Act was not maintainable, as this was not a case of an admitted liability. The court concluded that the defense raised by the respondent was bona fide and of substance, rendering the petition inappropriate for a winding-up order.2. Liability of the Respondent under the Trade Finance Facility Agreement:The petitioner, a subsidiary of the State Bank of India, entered into a Trade Finance Facility Agreement with the respondent in 2006, which was secured by various documents, including letters of undertaking and guarantees. The facility limit was amended multiple times, with the last amendment in 2008. The respondent's account became 'sticky' in early 2009, leading to the petitioner issuing notices demanding payment. The petitioner argued that the respondent failed to perfect its title to the receivables, thus entitling the petitioner to take recourse to the respondent.3. Applicability of Clause 9.1.1 of GARMA Regarding the Approved Debtor's Insolvency:Clause 9.1.1 of GARMA exempts the petitioner from having recourse to the respondent in cases where the Approved Debtor becomes insolvent. The court noted that BCPMS, the Approved Debtor, had become insolvent, as evidenced by communications with KPMG, the Administrators of BCPMS. The petitioner's own letter dated 25.08.2009 indicated that it was aware of BCPMS's insolvency. The court found that Clause 9.1.1 clearly applied, preventing the petitioner from taking recourse to the respondent for the amounts involved.4. The Bona Fide Nature of the Respondent's Defense:The respondent's defense was deemed bona fide and substantial, particularly given the pending adjudication in a related suit filed by the respondent's Directors/Guarantors. The court emphasized that the defense raised issues of substance that should be resolved in the pending suit. Consequently, it was inappropriate to allow the petitioner to proceed with the winding-up petition.Conclusion:The court dismissed the petition, finding no merit in the petitioner's claims. The petition was dismissed, and the parties were directed to bear their own costs. The court highlighted that the issues raised in the defense were substantial and bona fide, warranting resolution in the pending suit rather than through a winding-up petition.