TaxTMI 
TaxTMI 
2009 (9) TMI 579
X X X X Extracts X X X X
X X X X Extracts X X X X
....as the manufacture of industrial chemicals like detergent powders, cleaning powder, acid slurry, liquid soap, and allied industrial chemicals. 3. The petitioner-bank has averred that it executed an International Swaps and Derivatives Association ('ISDA') master agreement along with Schedule thereto with the respondent-company on 17-7-2005, for the purpose of transacting in forward contracts and other derivative transactions from time-to-time. The respondent-company entered into a full currency swap deal for an underlying amount of Rs. 6.40 crores and the currency pairs involved were USD/INR and USD/CHF. The transaction was to expire on 7-8-2006. It is further averred that a letter of confirmation with regard to the aforementioned deal issued by the petitioner on 2-8-2005, was duly accepted and signed by the respondent-company (annexure P4) making a declaration in terms whereof that all the risks of the transaction have been explained by the petitioner-bank and that the respondent had understood all the risks of the transaction. It is stated that during the term of the agreement, the petitioner-bank remained in constant touch with the respondent-company through e-mails and teleph....
X X X X Extracts X X X X
X X X X Extracts X X X X
....etition are disputed questions of fact for which a winding up petition is not maintainable; (iii) the ISDA agreement contemplates certain obligations and duties of the petitioner-bank including specified information to be given to the customers and in the event of any misrepresentation or non-supply of the specified information, the parties had a right to terminate the contract but the bank failed to disclose the true risk factors; (iv ) the ISDA agreement was procured through misrepresentation and by concealing the material facts and the bank failed to keep its promise that they will provide the report with regard to LIBOR curve/USD/CHF trend, USD/INR trend and forward premium trend from start of deal as well as all the calculations. These deficiencies were communicated to the bank vide letters dated 2-8-2006 and 23-9-2006; (v) on 7-12-2005, the respondent-company informed the petitioner-bank in writing that the deal dated 2-8-2005, be cancelled as the calculations of the deal had never been confirmed from the side of the petitioner-bank and no action was taken by the bank on that communication at its own risk; (vi) that the delay in communication of the details of the profit/loss....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t where there is a bona fide dispute over liability between the claimant/creditors and the company which involves serious contest on questions of facts, the winding up petition cannot be entertained as a tool of arm twisting, especially when the financial condition of the company sought to be wound up does not warrant such a punitive action in public interest. 8. In order to opine as to whether there exists any bona fide dispute between the parties to take out the respondent-company from the rigours of winding up, a brief reference to the ISDA master agreement may be made. Clause 3(v) declares all the obligations under the agreement to be liable, valid and binding obligations. Clause 4 (agreements) obligates that each party, so long as either party has or may have any obligation under this agreement or under any credit support documents to which it is a party, shall : "(a) 'Furnish specified information'.-It will deliver to the other party any forms, documents or certificates specified in the Schedule or any confirmation by the date specified in the Schedule or such confirmation, if none is specified, as soon as reasonably practicable ; (b)Maintain authorisations ; (c)C....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tes or amalgamates with, or merges with or into, or transfer all or substantially all its assets to, another entity and such action does not constitute an event described in section 5(a)( viii) but the credit-worthiness of the resulting, surviving or transferee entity is materially weaker than that of X, such credit support provider or such specified entity, as the case may be, immediately prior to such action (and, in such event, X or its successor or transferee, as appropriate, will be the affected party) ; or (iii) Additional termination event.-If any 'additional termination event' is specified in the Schedule or any confirmation as applying, the occurrence of such event (and, in such event, the affected party or affected parties shall be as specified for such additional termination event in the Schedule or such confirmation). (c) Event of default and illegality.-If an event or circumstance, which would otherwise constitute or give rise to an event of default also, constitutes an illegality, it will be treated as an illegality and will not constitute an event of default. Schedule Part 1. Termination provisions (b)'Specified transaction' shall have the meaning spec....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... required by you we will be pleased to provide you the same." [Emphasis supplied] 12. The company had, thus, accused the petitioner-bank of not performing its part of the contractual obligation and self-responsible for suffering the financial loss, if any. The letter demanded cancellation of the deal "on priority basis". Could the respondent-company wriggle out of the contract and cancel it or whether there existed valid grounds like the alleged breach of terms and conditions of the agreement by the petitioner-bank, is yet another set of contentious issues which cannot be resolved without recording evidence. The winding up petition, thus, has many interrogatories in its flock which can essentially be resolved by a civil court only. 13. The respondent-company has placed on record its balance-sheet for the year 2006-07 (annexure R5) which is a clear indicative of its sound financial position. It is a profit yielding company and this Court, therefore, would in larger public interest, be reluctant to proceed with the winding up proceedings which will result into adverse publicity against the respondent-company as an insolvent. Contrary to it, the petitioner-bank can proceed with ....