TaxTMI 
TaxTMI 
2015 (2) TMI 867
X X X X Extracts X X X X
X X X X Extracts X X X X
....ur (Punjab). 3. Briefly, the pleaded facts are that on 31.3.2006, the respondentcompany issued US$ 30 millions 2.5% convertible bonds due on 8.4.2011. Interest @ 2.5% per annum was payable semi-annually on 7th of April and October each year. As per the terms of allotment, unless converted, redeemed, re-purchased or cancelled before the due date, the respondentcompany was to redeem each bond at US$ 120.075% of the principal amount. The maturity date was 8.4.2011. On 7.4.2006, the respondentcompany executed a Trust Deed with the petitioner as a trustee for holders of the bonds. As on 24.9.2012, the respondent-company was indebted to the bond holders to the tune of US$ 33,283,286.42 and despite notice for winding up, the amount was not cleared, the present winding up petition was filed. 4. Before dealing with the preliminary objection raised by the respondent and also the issue on merits, it would be appropriate to deal with two applications filed by Consortium of Banks and the workers employed with respondent-company for being impleaded as party to the petition. Applications Under Order 1 Rule 10 CPC by Consortium of Banks and Workers' Union 5. In the application filed by All....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rs v. P. R. Ramakrishnan and others, (1983) 1 SCC 228; In Re: Umang Boards Pvt. Ltd. (M/s), 2011 (3) ILR (Raj.) 245 and Bharat Petroleum Corporation Ltd. v. National Organic Chemical Industries Ltd. and State Bank of India, (2004) 120 Company Cases 333 (Bom). It was further submitted that judgment of this Court in Chemical Enterprises and another v. Kalpanalok Ltd. and others, (1984) 55 Company Cases 552 should be ignored in view of later judgment of Division Bench of Rajasthan High Court in Re: Umang Boards Pvt. Ltd. (M/s) (supra) and the same should not be considered a good law. 7. On the issue of prejudice being caused to the applicant, though learned counsel for the applicant submitted that the applicant being a secured creditor can take action against the company under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (for short, 'the 2002 Act'), but still considering the fact that the company is serving the debt properly and as a banker, the applicant has the right to object to the winding up of such a company. On account of recession in the market and finding that net worth of the company and the value of assets....
X X X X Extracts X X X X
X X X X Extracts X X X X
....learned counsel for the applicant, learned counsel for the non-applicant/petitioner submitted that it is totally misconceived to contend that a Single Bench judgment of this court in Chemical Enterprises and another's case (supra) is not a good law in view of the Division Bench judgment of Rajasthan High Court in Re: Umang Boards Pvt. Ltd. (M/s)'s case (supra). In terms of law of precedence, a court is bound by its own judgment and the judgment of Hon'ble the Supreme Court. The judgment of other High Courts, even of larger benches, may have persuasive value. The judgment of the same High Court deserves to be followed by the co-ordinate Bench. In case of disagreement, the matter is required to be referred to a larger Bench. Unless that is reversed or over-ruled, merely because there is a contrary view of other High Court, the same cannot be ignored. The judgment of Delhi High Court in Bipla Chemical Industries v. Shree Keshariya Investment Ltd., (1977) 47 Company Cases 211 was followed by this court in Chemical Enterprises and another's case (supra). 12. Further contention raised by learned counssel for the nonapplicant- petitioner is that in view of the judgments o....
X X X X Extracts X X X X
X X X X Extracts X X X X
....idavit in support of a petition or objecting to the winding up. This process is after the petition has been admitted. 15. In fact, the applicant wants to participate in the process without joining in the petition. In case, it wishes to do so, it is welcome and then it has to forego the securities and join the petition as an unsecured creditor, otherwise the interest of the applicant is safe as the entire loan advanced is secured against the assets. It can very well take action under the 2002 Act. Unless interest of the applicant is affected, he cannot even file affidavit objecting to or supporting the petition after it is admitted, much less at the stage even before admission of the petition. In fact, the applicant is trying to play smart. It is advancing more loan and seeking to create further charge on the assets of the company, as a result of which chances of payment of unsecured amount to the bondholders will be further reduced. Judgment of Hon'ble the Supreme Court in Allahabad Bank v. Canara Bank and another, (2000) 4 SCC 406 was referred to. 16. While referring to the aforesaid judgment, learned counsel further submitted that there are two options available with ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....and it is only thereafter a list of creditors is to be prepared and a meeting is called. Prior to that, meeting of the creditors is not possible. After the aforesaid meeting, as envisaged under the 1956 Act and the Rules, Sections 559 and 560 of the 1956 Act which follow Section 557 of the 1956 Act, provide for complete burial of the company. Though the applicant is seeking to claim that it is exposing the claim of the creditors, but is only one set of them. 19. It was further submitted that the interim order passed by this court on 19.9.2013 regarding valuation of assets of the company cannot be termed to be an order for deemed impleadment of the applicant as before passing of the aforesaid order, the non-applicant had already filed reply to the application and objected to the impleadment of the applicant. The order was passed with reference to settlement of claims with the petitioner. It has specifically been noticed therein and the same is without prejudice, hence, no effect on the rights of the parties. 20. In response to the contentions raised by learned counsel for the applicants, learned counsel for the non-applicant/petitioner submitted that such a plea has already been r....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he Company Court admitting the petition or winding up of the company would adversely affect the workers, they will have a right to be heard before passing of such an order as the same would be violative of the basic principles of fair procedure unless there is express provision in the Act, which forbids the workers from hearing at the time of winding up of the petition. It was opined that a company is not property of the share holders only. Today, it is treated as a living, vital and dynamic, social organism with firm and deep rooted affiliations with the rest of the community in which it functions. Capital introduced by the share holders is one of the factors that contributes to production of national wealth. Another equal factor is labour. Then there are financial institutions and investors who provide funds required for production. The important role of the consumer and other members of the community is also not less important. Relevant paragraphs thereof are extracted below: "It would be contrary to every recognised principle of fair judicial procedure and violative of the rule of audi alteram partem which constitutes one of the basic principles of natural justice, to deny to ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rying on trade or business as proprietors. A company is now considered as a species of social organisation with a life and dynamics of its own and having a firm and deep-rooted affiliation with and duties and responsibility towards the contemporary society. Therefore, maximisation of social welfare should be the legitimate goal of a company. The socioeconomic objectives, set out in the Preamble, Articles 23, 24 and Part IV- especially Articles 43-A of the Constitution, clearly mandate that the management of the enterprise should not be left entirely in the hands of the suppliers of capital but the workers, who supply labour, being equally, if not more, interested in the enterprise, should also be entitled to participate in it. The workers should have voice or a right to be heard in the determination of the question whether the enterprise should continue to run or be shut down under an order of the court." In Bharat Petroleum Corporation Ltd.'s case (supra), application filed by consortium of bank for being heard before the petition is admitted was allowed while referring to Section 557 of the 1956 Act and opining that it had wide application considering the plain language whic....
X X X X Extracts X X X X
X X X X Extracts X X X X
....in it was opined that creditors do not have any right of hearing before admission of a winding up petition. 27. The primary ground on which the Consortium of Banks has sought hearing before admission of the petition is, while placing reliance upon Section 557 of the 1956 Act, a judgment of Hon'ble the Supreme Court in National Textile Workers Union's case (supra) and Rajasthan High Court in Re: Umang Boards Pvt. Ltd. (M/s)'s case (supra). The issue under consideration before Hon'ble the Supreme Court in National Textile Workers Union's case (supra) was regarding right of hearing to the workmen before and after admission of the petition. Considering the special status of the workmen in an industrial unit, Hon'ble the Supreme Court while taking into consideration the principles of audi alteram partem, opined that the workers should be offered opportunity even before admission of the petition as they may have some proposal for revival of the company or otherwise. In that case, Hon'ble the Supreme Court opined that the object of winding up is to realise assets of the company and pay the amount so realised in terms of the priority as fixed in the 1956 Act. T....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... creditors. Even if the company is ultimately wound up, they have priority for payment of their debt and as such will not be prejudiced at this stage before admission of the petition. After it is admitted, all the affected persons will have a right to either support or object to the winding up. 29. Further considering the earlier judgment of this Court in Chemical Enterprises and another's case (supra), which is still holding the field, it would not be appropriate for this court to take a view different than that merely because Bombay High Court has taken a different view. 30. For the reasons mentioned above, in my opinion, the application filed by Consortium of Banks for being impleaded as respondent in the petition deserves to be rejected as it does not have any right of hearing before admission of the petition. Ordered accordingly. 31. As far as the application filed by the applicants-workers' union of the company is concerned, in view of the judgment of Hon'ble the Supreme Court in National Textile Workers' Union's case (supra), they have a right to be heard before winding up petition is admitted and an order for its advertisement is passed. They have bee....
X X X X Extracts X X X X
X X X X Extracts X X X X
....within 3 months of execution, the stamp duty can be collected without impounding and without penalty. If a document is sought to be used in evidence beyond three months, the document can be impounded under Section 33 of the Stamp Act and the stamp duty and penalty can be levied even after expiry of three months. The relevant parts thereof are extracted below: "2. An order was passed on the last occasion on 3.11.2000, impounding the power of attorney dated 15.12.1997 and levying maximum penalty along with stamp duty and directing deposit of a sum of Rs. 110 in the treasury. Directions were also issued to the treasury to give the receipted challan on the same day. That order reads as follows: "This application has been filed by the petitioner under Section 11 of the Indian Arbitration and Conciliation Act, 1996. At the time of hearing of this application learned counsel for the respondent has raised an objection that the general power of attorney dated 15.12.1997 issued by the petitioner Company of Malaysia in favour of Mr. Noor Amiruddin Bin Mohd. Nordin, Senior Vice-President/ General Manager, South-Asian Region executed at Kuala Lumpur has not been properly stamped according to ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... chambers at 1.30 p.m. If the stamp duty is paid aforesaid, then this court will be able to make an endorsement as per Section 42(1) of the Stamp Act admitting the instrument in evidence." 3. The penalty and stamp duty have since been paid and the original document dated 15.12.1997 is produced in this court and also contains the endorsement of the Registrar of this Court to the following effect: "The document was impounded by this Hon'ble Court under Section 33 of the Indian Stamp Act, 1899. As per the order of this Hon'ble Court dated 3.11.2000 the petitioner has paid stamp duty of Rs. 10 and penalty of Rs. 100, total sum of Rs. 110 with the treasury vide Challan No. 46 dated 10.11.2000." 4. In the meantime, IA No. 4 of 2000 was filed by the respondent to recall the order dated 3.11.2000, contending that the power of attorney dated 15.12.1997 was produced beyond 3 months from the date of execution outside India and that therefore under Section 18 of the Indian Stamp Act, read with clause (b) of Section 32 of the Indian Stamp Act, it is not permissible to follow the course adopted by this court in its earlier order abovementioned, inasmuch as more than 3 months have elap....
X X X X Extracts X X X X
X X X X Extracts X X X X
....vidence on record and taking into consideration all the circumstances of the case during conduct of the trial. It would be travesty of justice if a party is non-suited only for a technical reason which does not go to the root of the case. The suit in that case did not suffer from any jurisdictional infirmity and the only defect alleged was curable. The issue also came up for consideration before Delhi High Court in Mahesh Nathani's case (supra), where the objection pertaining to inadmissibility of power of attorney on the ground that it was not validly stamped in India was rejected. In the aforesaid case, though the petition was filed on the basis of an un-stamped power of attorney dated 16.7.1997, however, after the objection was raised, a fresh power of attorney dated 18.10.2004 was filed in court which was executed on proper stamp paper and was also attested by Counsulate General of India, New York. The fresh power of attorney clearly mentioned execution of earlier power of attorney. The action of the attorney holder, who instituted the company petition initially, was specifically approved and ratified in the fresh power of attorney. It was further opined therein that in ca....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nd Wahi's (supra) and Gujarat High Court in Welding Rods (P.) Ltd.'s case (supra) are not relevant for the reason that these deal with only defect in the affidavit filed in support of the petition. In the case in hand, the issue regarding defect is sought to be raised on the plea that power of attorney executed in favour of the person executing the affidavit is un-stamped. When that defect itself is curable and cured, the affidavit filed in support of the petition becomes valid. In the case in hand, the power of attorney initially produced along with the petition was a photo copy not duly stamped. It was executed outside India. Objection to the admissibility of the same was raised by learned counsel for the respondent when final arguments in the petition were being heard. In reply to the petition, there is no specific objection regarding the power of attorney being not stamped, hence, inadmissible. It is not only at the stage of filing of the reply to the petition but even in appeal against the interim order dated 9.1.2013, against which Company Appeal No. 2 of 2013 was filed, no such issue was raised, when according to learned counsel for the respondent, this sole ground ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....easury Officer is directed to give the receipted challan on the date of presentation without raising any further objection. List the matter on 27.1.2015 for further orders." 33. As the stamp duty and the penalty have been paid as directed by this court and endorsement has been made by the Registrar Judicial of this court on 23.1.2015, I certify that the said endorsement falls within subsection (1) of Section 42 of the Indian Stamp Act. The power of attorney is taken on record, hence, the issue regarding maintainability of the petition on the ground of power of attorney being not stamped is taken care of by the petitioner. Preliminary Objection raised by the respondent in the main petition 34. Mr. U. K. Chaudhary, learned senior counsel appearing for the respondent-company raised a preliminary objection regarding maintainability of the present petition. For the purpose, he relied upon a judgment of the Karnataka High Court in Company Petition No. 203 of 2010- The Bank of New York Mellon v. Cranes Software International Limited, decided on 4.3.2014. He submitted that in the aforesaid judgment, the petitioner herein was the petitioner. An identically worded Trust Deed was under co....
X X X X Extracts X X X X
X X X X Extracts X X X X
....iance was further placed upon judgment of Hon'ble the Supreme Court in British India Steam Navigation Co. Ltd. v. Shanmughavilas Cashew Industries and others, JT 1990(1) SC 528 and Bombay High Court in Rhodia Ltd. and others v. Neon Laboratories Ltd., AIR 2002 Bom. 502. 36. Another objection raised to the maintainability of the petition is that the petitioner was not authorised to issue notice and file petition even as a trustee as there was no authorisation in its favour. The notice shows that it has been issued on behalf of the petitioner and the bond holders, however, no authorisation as such from the bond holders was annexed. With the rejoinder, authorisation on behalf of two of the bond holders conveyed by them to the petitioner in London was annexed, which was of the same date as that of the statutory notice. Arguments of the petitioner 37. In response to the contentions raised by learned senior counsel for the respondent regarding maintainability of the present petition, Mr. Arun Kathpalia, learned counsel for the petitioner submitted that the issue of jurisdiction being raised by the respondent is beyond pleadings. The question of jurisdiction is a mixed question of l....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tted default in payment of the amount due on maturity of the bonds, no action can be taken against the borrowing company, the same will shatter the confidence of the foreign investors. The entire issue is required to be examined in that light. Our country is a growing economy where need is to build that confidence. 39. Elaborating his arguments further, learned counsel for the petitioner, while referring to various clauses of offering circular dated 31.3.2006 and the Trust Deed, submitted that event of default has been clearly defined, the same is, inter-alia, non-payment of either the interest or the principal amount. Constitution of the Trust Deed was clearly provided for in offering document. The trustee represents all the bond holders. In fact, the bond holders cannot approach this court individually unless the trustee fails in discharge of its duties, namely, does not take action within 60 days of the resolution. The powers of the trustee are unlimited and its decision is final between the trustee and the bond holders. As per the Trust Deed, the amount due had to be paid to the trustee or to any one in terms of its order. The petitioner-trustee is the creditor in that scheme ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... on the basis of a decree of foreign court, whereas it was not. Appeals against the aforesaid judgments are stated to be pending. In the present case, no dispute is to be adjudicated upon as the liability for refund of the amount on account of FCCBs is clearly admitted. 42. Learned counsel further submitted that in reply filed by the respondent, specific plea with reference to clause 25 of the Trust Deed regarding exclusion of jurisdiction was not raised. In any case, it was submitted that once the respondent has submitted to the jurisdiction of this court, it cannot be permitted to raise the issue as the Company Court has exclusive jurisdiction to deal with a petition for winding up. 43. It was further contended that a petition under Section 433 of the 1956 Act for winding up of a company is an action in rem. When the economy of the country was opened up, corporates are borrowing money from foreign institutional and individual investors at a very low rate of interest. If the amount is not returned on due dates and their action is not sustained on hyper-technical pleas, this will put a dent on creditworthiness of not only the corporates of the country but even the country as such....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ply that interest of petitioner has been taken care of on account of Corporate Debt Restructuring is totally misconceived, as the petitioner was never a party to that. It was merely with the secured creditors who advanced additional loan by taking further security. The only remedy available with the petitioner is to file a winding up petition, as with the advancement of more loans and furnishing of security by the company the chance of repayment to the petitioner, which is trustee of the unsecured bond holders, will be further depleted. 45. Learned counsel, while referring to stay order dated 3.10.2012 and order dated 17.10.2012, whereby this court directed that no charge on the assets of the respondent-company shall be created, submitted that CA No. 762 of 2012 was filed by the respondent-company seeking permission to create further charge on the properties of the company for the purpose of Corporate Debt Restructuring. Vide order dated 9.1.2013, this court dismissed the application and made the orders dated 3.10.2012 and 17.10.2012 absolute. The order dated 9.1.2013 was stayed by a Division bench of this court vide order dated 17.1.2013 in Company Appeal No. 2 of 2013. In Specia....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ocus to file the same in terms of various clauses of the Trust Deed, has not been answered. The issue as to whether the petitioner is a creditor in terms of various provisions of the Trust Deed has to be determined in view of English law as per Clause 25.1 of the Trust Deed, as it involves interpretation thereof. Clause 24 of the Trust Deed provides that the petitioner is merely a collecting agent. It is not a person, who had advanced loan to the respondent-company and as such was a creditor. It has different status, as defined in the Trust Deed, such as trustee, Transfer Agent, Paying Agent, Conversion Agent and the Registrar appointed under the Agency Agreement. The petitioner has not been shown to be a creditor in the books of accounts of the respondent-company. It was further submitted that even if for argument's sake it is admitted that the petitioner can be said to be a creditor, still whether it has a right to file a winding up petition is to be decided in terms of various clauses in the Trust Deed, which would require interpretation thereof, as the intention of the parties has to be deciphered therefrom. The issue regarding proper law was not raised in any of the judgme....
X X X X Extracts X X X X
X X X X Extracts X X X X
....S$ 14 millions. 51% of the bond holders had got their FCCBs converted into shares. It means that majority of the bond holders have faith in financial health of the respondent-company and are not in favour of its winding up, as the same will harm their interest. It is the minority bond holders, who are seeking that relief. It also shows that the petitioner has no authority or control over them. Some of them had got the bonds converted even after issuance of winding up notice by the petitioner. When the bond holders can deal with the respondent-company directly, the petitioner does not come in picture claiming it to be a creditor, as is sought to be in the case put up. The creditor cannot be for and on behalf of some other persons. Even notice for winding up can be issued by a creditor or the assignee, but the petitioner is none of them. Though it is sought to be pleaded that in case the winding up petition is not allowed, the petitioner will suffer irreparable loss, but it is none as it is neither a bond holder nor a creditor. 53. As per Section 439(2) of the 1956 Act, a trustee of bond holders is a person in whose favour security is created. Such a trustee is required to be regist....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... petition and ultimately order for its winding up. In the aforesaid judgment, even the creditor was secured. A winding up petition filed by an unsecured creditor, in fact, is against his own interest as in case of winding up, he comes in last for payment of dues in priorities as is envisaged under the 1956 Act. The power to admit a petition for winding up is discretionary and it is to be exercised with circumspection, especially in the cases of a going concern. 56. It was further submitted that it is wrong to suggest that for the purpose of admission of a winding up petition, only the amount and the default are to be seen. Even if both these facts are admitted, still it is the discretion of the court as to whether winding up petition is to be admitted or not. There are many other factors to be considered like the interest of other creditors, number of employees working, contribution to the State, whether it is commercially insolvent and to let it continue is not in public interest where even other creditors have lost faith. The assets of the company are more than its liability. The valuation thereof was got done in terms of the order passed by this court on 19.9.2013, wherein it w....
X X X X Extracts X X X X
X X X X Extracts X X X X
....td. v. Mascon Global Ltd., (2013) 181 Company Cases 223 (Mad.); New India Corporation v. Nandanvan Manufacturers and Traders (P.) Ltd., (1983) 54 Company Cases 32 (Kar.) and Shantilal Khushalds and Bros. Pvt. Ltd. v. Smt. Jayabala Suresh Shah and another, (1997) 90 Company Cases 399, submitted that even after admitting a petition, still no winding up order was passed in various cases by the courts. Reply by the petitioner 59. As far as merits of the controversy is concerned, in response to the contentions raised by learned counsel for the respondent, learned counsel for the petitioner submitted that Section 439(2) of the 1956 Act was already existing in the Act when Sections 117A to 117C of the 1956 Act were added. A subsequently added section will not control the meaning of the section already existing. It can be harmoniously read to mean that Section 117B of the 1956 Act deals only with one kind of debentures, which could be secured and unsecured. The argument that for the purpose of maintainability of a winding up petition in this court, English law is to be seen, the same would mean that Indian courts are sought to be made subject to English law. The contention is totally misc....
X X X X Extracts X X X X
X X X X Extracts X X X X
....se in hand being external commercial borrowings from outside India, the same are governed by various guidelines issued by the Government, as the amount has also to be repatriated in foreign currency. Even a foreign company or a creditor, who may not be a bond holder can also file a petition for winding up in case of failure of a company to discharge its debt. Reference was made to Commissioner of Income Tax v. Cochin Refineries Ltd., (1983) 142 ITR 441 (Ker.) and Narendera Kumar Maheshwari v. Union of India and others, 1990 (Supp) SCC 440, where term "debenture" has been dealt with extensively. The issuance of FCCBs cannot be said to be de hors the 1956 Act as it contained a clause for its optional conversion into equity, which is governed by the 1956 Act. 63. Once the liability in the present case is admitted, as the bonds had become due for redemption in April, 2011, no payment having been made thereafter to the bondholders who did not opt for its conversion into equity, the inescapable conclusion in case the locus of the petitioner to file the petition is accepted, is that the company is unable to pay its debt, hence, the petition deserves to be admitted. Discussions regarding....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... reason of an Event of Default or a potential Event of Default; or (2) any such indebtedness for borrowed money is not paid when due, as the case may be, within any applicable grace period originally provided for; or (3) the Issuer or any of its Subsidiaries fails to pay when due for within any applicable grace period originally provided or any amount in excess of US$1,000,000 in aggregate payable by it under any present or future guarantee or indemnity in respect of indebtedness for borrowed money (or its equivalent at the relevant time in any other currency); or (D) Enforcement Proceedings: A distress, execution or other legal process is levied, enforced or sued upon or against any material part of the property, assets or revenues of the Issuer or any of its Subsidiaries by any person or entity and is not discharged or stayed within 60 days of having been so levied, enforced or sued out; or (E) Security Enforced: An encumbrancer takes possession or a receiver, manager or other similar person is appointed over, or an attachment order is issued in respect of the whole of any material part of the undertaking, property, assets or revenues of the Issuer or any of its Subsidiaries ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....) Analogous Events: Any event occurs which under the laws of India has an analogous effect to any of the events referred to in paragraphs (D) through (H) above. For the purposes of (C) above, any indebtedness which is in a currency other than US dollars shall be translated into US dollars at the spot rate for the sale of US dollars against the purchase of the relevant currency quoted by any leading bank selected by the Trustee on any day when the Trustee requests a quotation for such purposes. In this Condition, "indebtedness for borrowed money" means any present or future indebtedness (whether being principal, premium, interest or other amounts) for or in respect of (i) money borrowed, (ii) liabilities under or in respect of any acceptance or acceptance credit or (iii) any notes, bonds, debentures, debenture stock, loan stock or other securities, issued or distributed whether by way of public offer, private placing, acquisition consideration or otherwise and whether issued for cash or in whole or in part for a consideration other than cash. Upon such notice being given to the Issuer, the Bonds will immediately become due and payable at their Early Redemption Amount. Under curr....
X X X X Extracts X X X X
X X X X Extracts X X X X
....unt of the Bonds becoming due for redemption or repayment on that date (to be received by 10.00 a.m., London time) together with any applicable premium and will (subject to the Conditions) until such payment (both before and after any judgment or other order of a court of competent jurisdiction) unconditionally so pay or procure to pay to or to the order of the Trustee interest in U.S. Dollars on the principal amount of the Bonds outstanding as set out in the Conditions provided that (a) every payment of any sum due in respect of the Bonds made to or to the account of the Principal Agent as provided in the Agency Agreement shall, to that extent, satisfy such obligation except to the extent that there is failure in its subsequent payment to the relevant Bondholders under the Conditions and (b) a payment made after the due date or pursuant to Condition 11 will be deemed to have been made on the third Business Day after the full amount due (including interest accrued to that third Business Day) has been received by the Principal Agent or the Trustee and notice to that effect has been given to the Bondholders if required under Clause 9.10 (Notice of late payment) except (if payment is ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....pany, be held by the Trustee on trust to apply them (subject to Clause 8.2 (Accumulation)): (A) first, in payment or satisfaction of all costs, charges, expenses and liabilities incurred by the Trustee and the Agents (including remuneration payable to the Trustee and the Agents) in carrying out their functions under this Trust Deed and the Agency Agreement pari passu and rateably; (B) secondly, in payment of any other amounts (including principal, premium and interest) owing in respect of the Bonds pari passu and rateably; and (C) thirdly, in payment of any balance (if any) to the Company for itself. If the Trustee holds any monies in respect of Bonds in respect of which claims have become prescribed under Condition 12, such funds shall be returned to the Company. xx xx xx 9.15 Trust Deed comply with and perform and observe all the provisions of this Trust Deed which are expressed to be binding on it. The Conditions shall be binding on the Company and the Bondholders. The Trustee shall be entitled to enforce the obligations of the Company under the Bonds and the Conditions as if the same were set out and contained in this Trust Deed which shall be read and construed as one ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rests of Bondholders In connection with the exercise of its powers, trusts, authorities or discretions (including, but not limited to, those in relation to any proposed modifications, waiver or authorisation of any breach or proposed breach of any of the Conditions or any of the provisions of this Trust Deed), the Trustee shall have regard to the general interests of the Bondholders as a class and shall not have regard to any interest arising from circumstances particular to individual Bondholders (whatever their number) and, in particular but without limitation, shall not have regard to the consequences of such exercise for individual Bondholders (whatever their number) resulting from their being for any purpose domiciled or resident in, or otherwise connected with, or subject to the jurisdiction of, any particular territory or otherwise to the tax consequences thereof and the Trustee shall not be entitled to require from the Company, nor shall any Bondholder be entitled to claim from the Company or the Trustee, any indemnification or payment in respect of any tax consequence of any such exercise upon individual Bondholders except to the extent provided for in Condition 10 and/o....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nue or on the ground that the Proceedings have been brought in an inconvenient forum. This submission is for the benefit of the Trustee and each of the Bondholders and shall not limit the right of any of them to take Proceedings in any other court of competent jurisdiction nor shall the taking of Proceedings in any one of more jurisdictions preclude the taking of Proceedings in any other jurisdiction (whether concurrently or not)." 66. As far as the judgment of Karnataka High Court in The Bank of New York Mellon's case (supra) is concerned, firstly the aforesaid judgment is subject-matter of appeal. Further, in the aforesaid case, the Trust Deed was dated 17.3.2006. The due date for redemption of FCCBs was 18.3.2011. The company petition was filed alleging default in payment of interest due on 18.9.2009. The interest upto March, 2009 was paid. On account of that, the trustee therein called upon the company to pay the total amount of FCCBs. The contention sought to be raised by the company therein was that the petitioner therein was not a creditor and not entitled to file the petition as in terms of the provisions of the Trust Deed, only recovery proceedings could be initiated.....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ria Continental was to pay a lump sum of US $ 3,20,000. On account of failure of Aturia Continental to adhere to the terms of the technical knowhow agreement and closure of the factory, the collaboration/ technical knowhow agreement was terminated. As Aturia Pompe had supplied the technical knowhow, US $ 3,20,000 became payable, out of which first instalment of US $ 74,666.67 was paid and two instalments of US$ 2,13,334 were still payable. On account of failure to pay the aforesaid amount, winding up petition was filed, where the plea raised was that as per the collaboration agreement, resolution of disputes was by way of arbitration and that too in accordance with laws of Switzerland, hence, the Company Court should not exercise jurisdiction. While negating the plea raised by Aturia Continental, it was held by Delhi High Court that the said plea was not with reference to any dispute in terms of the agreement between the parties, which was required to be resolved as per the agreement. The closure of the factory was pleaded on account of change in economic policy of the government. The inability was pleaded on account of bad financial position. Under these circumstances, the Court o....
X X X X Extracts X X X X
X X X X Extracts X X X X
....o go to English Court, as dispute between the parties was also governed by English law. Present case is not one for recovery but for winding up of the respondent company. It is trite law that company proceedings are not in the nature of recovery suits. Present petition is one which is for winding up of the respondent company. As respondent company is having its registered office in Delhi, winding up petition can be filed only with this Court, which is the mandate of Section 10 of the Companies Act." 68. In Videocon Industries Ltd.'s case (supra), the Company Court admitted Company Petition No. 528 of 2012 vide judgment dated 5.12.2013, which was upheld in Appeal (L) No. 29 of 2014 vide judgment dated 18/19.7.2014. In the aforesaid case, respondent-Intesa Sanpaolo S.P.A. was a bank incorporated under the laws of Italy. The petitioner-Videocon approached the aforesaid bank for financial assistance. As a condition to secure financial assistance, Videocon offered and issued a guarantee letter styled as 'Patronage Letter' in favour of the bank. In terms of the loan agreement as guaranteed, Intesa advanced financial assistance. On default, Intesa instituted proceedings in th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....er Baer that the company should not be wound up as there is a CDR Scheme being implemented was declined as such a plea could be considered after admission when all concerned with the company are to be heard. The earlier judgment of Delhi High Court in Company Petition No. 960 of 2009- Sublime Agro Ltd. v. Indage Vintners Limited, decided on 19.3.2010 was relied upon. 70. In Shin Satellite Public Co. Ltd.'s case (supra), winding up petition was filed by Shin Satellite as in terms of an agreement signed by STV Enterprises Ltd. with Shin Satelite to partly utilise and avail the services of non-Preempitible unprotected extended C-Band Regional Beam Transponder of Thaicom-3 satellite of Shin Satellite for the purpose of digital broadcast applications etc. for a period of 5 years commencing from 15.11.2001. As per the said agreement, the service fees of US $ 49,219 per quarter was payable in advance. STV Enterprises failed to adhere to the terms. Shin Satellite issued a notice dated 16.9.2002 to STV Enterprises claiming that there was an outstanding amount of US $ 99,683. The same was admitted by STV Enterprises. In subsequent communication, STV Enterprises admitted outstanding bala....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ding to English law. Certain disputed facts were required to be gone into. Whereas in the case in hand, Clause 25.2 of the Trust Deed clearly provides that in addition to the courts in England, proceedings can be initiated in any other court of competent jurisdiction. It cannot be disputed that a petition for winding up can be filed in a court in whose territorial jurisdiction registered office of the company is situated. 73. To similar effect is the judgment of Bombay High Court in Rhodia Ltd. and others' case (supra). 74. As a preliminary objection, the respondent-company while referring to clauses 25.1 and 25.2 of the Trust Deed, sought to argue that jurisdiction with reference to the Trust Deed was exclusively with the courts in England and Wales and the Trust Deed is to be governed and construed in accordance with English law. Unless the petitioner first gets it determined under the English law that it is a creditor, it does not have any right to file the present winding up petition, as in terms of Section 439(2) of the 1956 Act, such a petition can be filed only by a creditor. 75. Clause 25.1 of the Trust Deed provides that the Trust Deed shall be governed and construe....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ests of the bondholders as a class. Clause 19 of the Trust Deed provides that in addition to the rights and remedies conferred in the Trust Deed, every other right and remedy permissible shall be cumulative and in addition to right and remedy as provided for in the Trust Deed. 78. Clause 24 of the Trust Deed provides for enforcement. The bonds became due for redemption on 8.4.2011. This clause provides that at any time after the bonds become due and repayable, the trustee may, at its discretion and without any further notice take such proceedings against the company as it may think fit to enforce repayment of the bonds together with the premium (if any). It can further enforce the provisions of the Trust Deed. However, such proceedings could not be initiated unless there is a request of not less than 25% of the bondholders in writing. This clause specifically provides that no bondholder will be entitled to proceed against the company directly unless the trustee fails to take appropriate action and such failure continues for a period of 60 days and during this period. The case in hand is not such. Meaning thereby, the right to proceed against the company, in case of an event of def....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ny was got issued by the trustee specifying the event of default and admitted inability of the respondent-company to pay the debt. In reply, the event of default was admitted, though it is sought to be claimed qua the bond holders and not the petitioner. The contention of learned counsel for the petitioner that the petitioner does not have any right to initiate winding up proceedings is totally misconceived. Even section 439(2) of the 1956 Act provides that a secured creditor, holder of any debenture, whether or not any trustee or trustees have been appointed, and trustee for holders of debentures shall be deemed to be a creditor within the meaning of clause (b) of sub-section (1), which provides that winding up petition can be filed by any creditor or creditors of the company. The petitioner in the present case is a trustee of the bond holders, hence, entitled to maintain the petition. 82. The contention that the aforesaid deeming provision, as provided for under Section 439 of the 1956 Act, is limited only to the entitlement to file a petition and not for issuance of a notice under Section 434 of the 1956 Act is totally misconceived and deserves to be rejected. Once a trustee ha....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... is unable to pay its debt and deserves to be wound up, the first step in the process being admission of the petition. The event of default having been admitted in the present case, the petition deserves to be admitted, whereas the respondent-company has raised the issue that even if there is admission of debt, it is still the discretion of the court, which is to be exercised considering many factors, namely, whether the company is functional, number of employees working, contribution to the State etc. 87. As per the information available in the annual report of the company for the year 2012-13, the date of commencement of commercial production of the company was 19.12.1946. It is engaged in manufacturing of cotton textiles, synthetics fabrics and nylon filament yarn. As per the balance sheet of the company for the period ending in September, 2013 (18 months), the company suffered operating loss of ` 6399.27 lacs. For six months period from October, 2013 till March, 2014, the company earned operating profit of 302.05 lacs. For the quarter ending 30.6.2014, the same was ` 821 lacs (un-audited) and for the quarter ending 30.9.2014, the same was ` 816 lacs (un-audited). 88. The valu....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t be put at stake once the bonafide of the respondent-company to revive the same and pay of the debts cannot be doubted. All what was claimed by the petitioner was that by arranging more loans and furnishing securities, interest of the petitioner will be further affected, but the fact remains that even as on today, the total assets of the company are more than its liabilities. It suffered losses on account of recession and also apparently on account of non-availability of liquid funds as was claimed that in terms of the exercise being done for Corporate Debt Restructuring Scheme, some of the non-core assets were to be sold to pay of the creditors. Such an opportunity deserves to be afforded to the respondentcompany. It will not be in the fitness of things to give unceremonial burial to the respondent-company, once it is in business for the last more than 68 years. It is further relevant to add here that 50% of even the bond holders have got their bonds converted into equity. It shows that even they have faith in the management and financials of the company. 90. Hon'ble the Supreme Court in M/s IBA Health (India) Private Limited v. M/s Info-Drive Systems SDN. BHD., (2010) 10 SC....