TaxTMI 
TaxTMI 
2013 (4) TMI 650
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.... demand loan agreement dated October 5, 2009 Tata altogether sanctioned a sum of Rs.5 crores as Working Capital. The directors being Ajit Kumar Mundra and Bhagwani Devi Mundra guaranteed the said loan. The loan was partly secured through pledge of a fixed deposit receipt for Rs.75 lacs with HDFC bank. Maheshwari permitted Tata Capital to encash the said fixed deposit that would clear the dues to the extent of Rs.92.54 lacs towards part satisfaction. Maheshwari confirmed the balance from time to time and assured TDS certificates to be issued in due course. After taking into account, the sums paid from time to time a sum of Rs.2,27,57,975 became due and payable as would appear from the confirmation of the accounts signed by Maheshwari dated July 14, 2011. The parties agreed to have contractual interest at the rate of 15.5% per annum. Adding interest as on the said date to the principal, a sum of Rs.4,12,98,703.81 became due and payable when Tata filed the petition for winding up as against Maheshwari. Tata also initiated parallel proceeding before the Bombay High Court under the provisions of Section 9 of the Arbitration and Conciliation Act 1996 and obtained order restraining dispos....
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.... held, the balance sheet was unimpressive, in any event, before making an order of admission of the winding up proceeding, the Court would have to assess whether the company was solvent and its net worth was positive. His Lordship considered the provisions of the Sick Industrial Companies (Special Provisions) Act 1985 and observed, the sickness of an Industrial Company was a much worse financial position than its commercial insolvency. His Lordship discussed the precedents and the law on the subject particularly, Section 434(1)(a) of the said Act 1956 and held, "If a debt is discharged by causing a third party to liquidate the claim, there is no claim to be carried forward for the Court to assess the possible commercial insolvency of the company. But if security were caused to be furnished by another, it would not be unreasonable for the petitioner to insist that such fact is not to be taken into account to assess the commercial insolvency of the company." The learned Judge ultimately held, there was no dispute to the claim of the petitioning creditor that was based on dishonoured cheques. The company did not reply to the statutory notice. Hence, the claim was an ascertained sum a....
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....up particularly, at the pre-admission stage, the company Court would only venture to find out whether the dispute raised by the company was bona fide. The bona fide dispute would not only relate to the claim but also its payability and the surrounding circumstances. Offer to pay off the dues through reasonable installments would successfully resist admission of a winding up proceeding. He referred to the decision in the case of SRC Steel (P) Ltd. Vs. Bharat Industrial Corporation Ltd. reported in 2005 volume-IV Calcutta High Court Notes page- 343. The petitioning creditor was satisfied with the worth of the company and on being satisfied about the worth, they extended financial support. There was no major change in the financial status and the structure of the company hence, Tata should remain satisfied about the intention of the company to pay off the dues and should not be permitted to raise the issue of commercial insolvency or inability to pay. He contended, security given by persons other than the borrower was not unknown in commercial world. It got the legal sanctity too. OUR VIEW: In the case of State Trading Corporation (supra) the Punjab and Haryana High Court followed t....
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....benefit of the petitioner but of all shareholders, creditors or contributories of the company. Therefore, winding up proceedings could not be stayed merely because the creditor has filed a suit against the company." In Kotak Mahindra we discussed the role of the company Court in a case of the like nature. We discussed the law on the subject as cited at the bar. We held as follows: "........Neglect to pay is a fiction that would depend upon the notice to be served under section 434 (1) (a) that would permit the creditor to claim deemed insolvency as a fiction. However, that would not take away the creditor's right to claim, the company is also commercially insolvent or otherwise unable to pay its debt. If we give a close look to section 433 (e) and (f) we would find, the company may be wound up if it is unable to pay its debt and the court is of the opinion, it is just and equitable that it should be wound up. These two provisions could be invoked by the creditor as we find from section 439. Section 439 (1) (b) would permit any creditor to maintain the winding up petition. Sub section (2) would also include a secured creditor as a creditor within the meaning of sub section (1)(b).....
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.... admission is an obvious consequence. Even if we accept the view of His Lordship on the interpretation of section 434 (1) (a) we would not be in a position to agree with the ultimate finding as we find enough material to hold, the petition was maintainable in terms of sections 433 (e) and (f) read with sections 439 (1) (b) and 439 (2)." In the case of Kotak Mahindra, we specifically asked the learned counsel as to whether the would be in a position to pay off the dues in a phased manner. In short, we invited proposal for repayment. The learned counsel could not apprise us on the issue, possibly in absence of appropriate instruction that would very much affect a positive decision of the Court in favour of the company. In the present case in course of hearing we asked Mr. Chowdhury as to whether he would be in a position to make any commitment as to the repayment of the dues. He sought accommodation. On the next date of hearing, he gave a proposal of restructuring of the debt that would take 5-6 years time to pay off the dues of the petitioner. We did not accept the same. Mr. Chowdhury again came back to Court and ultimately agreed to pay off the dues at a monthly installment of Rs....