TaxTMI 
TaxTMI 
2017 (2) TMI 563
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.... Respondent - Company, United Breweries (Holdings) Limited ('UBHL' for short) and in these ten winding up petitions, the secured creditors, consortium of Banks, 14 in number, led by State Bank of India (SBI) and various unsecured creditors like suppliers of Aero Engines, Lessors of Aircrafts and Service Providers who have invoked Corporate Guarantees furnished by the Respondent - Company, UBHL, to them to secure their loans, advances and supplies to King Fisher Airlines Limited (KFAL), have approached this Court, against the Respondent Company - UBHL, which was initially a Holding Company of the King Fisher Airlines Limited, but, later on diluting its shareholding in that, the said King Fisher Airlines Limited (KFAL) did not remain a Subsidiary Company, however, the existence and validity of Corporate Guarantees given by the Respondent Company - UBHL continued. 2. The King Fisher Airlines Limited (KFAL) has already been ordered to be wound up recently by this Court in its judgment and order dated 18/11/2016 in Company Petition No.214/2016 a/w. C.A.No.1183/2012 & C.A.No.1184/2012 (Aerotron Limited Vs. Kingfisher Airlines Limited) and various other winding up petitions against KFA....
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....r hearing, a serious contest was put up against these winding up petitions by Mr. Udaya Holla, Senior counsel for UBHL and other counsels appearing for the supporting creditors to oppose the winding up by Mr. Sajan Poovayya, Senior Advocate and Ms. S.R. Anuradha, learned counsels appearing for workmen of the Respondent - Company, UBHL and other allied companies. 7. The dues claimed from the Respondent - Company were relating to the KFAL and it is on the anvil of the Corporate Guarantees of UBHL and personal Guarantees given by Dr. Vijay Mallya to these petitioning creditors, which were invoked and on account of the failure to discharge the said Guarantee obligations, these winding up petitions were filed by the different secured and unsecured creditors and the learned counsel appearing for the petitioning creditors also made emphatic arguments before this Court for seeking the winding up of the Respondent - Company, as they submitted that not only the Respondent - Company, UBHL has failed to pay its admitted liability and debts arising under these Corporate Guarantees but the defences put forth by them are flimsy and unsustainable and the Respondent - Company, UBHL cannot wriggl....
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....r secured interest are concerned and that they have not relinquished their rights and interest as secured creditors and are also pursuing other remedies available to them for realization of the Securities created in their favour, without the assistance of this Court for sale/realization of the secured assets. However since according to them, the dues of the petitioners are far in excess of the security interest, which they hold with them, therefore, they are before this Court, seeking the winding up of the Respondent - Company, UBHL. 14. The petitioners have stated before the Court that the petitioners, State Bank of India (SBI), Axis Bank Limited, Bank of Baroda, Bank of India, Central Bank of India, Corporation Bank, The Federal Bank Limited, IDBI Bank Limited, Indian Overseas Bank, Jammu and Kashmir Bank Limited, Punjab & Sind Bank, Punjab National Bank, State Bank of Mysore, and UCO Bank have stated before the Court that in April 2010, at the request of KFAL, some of the petitioners - Banks, since 2005, have provided Working Capital facilities, both fund based and non fund based and Rupee Term loan facilities including Short Term loan to KFAL and subsequently in view of the ....
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....ent - UBHL, were rejected by the said Tribunal. 18. The petitioners have also stated before the Court in para.29 of the petition that the Respondent - Company, UBHL, has filed a Civil Suit, namely Suit No.263/2013 (R311/2013) before the Bombay High Court, inter alia, challenging the validity of the Corporate Guarantee given by it and sought a declaration to that effect and also another collusive Suit filed by the United Spirits Limited in Special Civil Suit No.31/2013/A, before the Civil Judge, (Sr.Dvn.) at Mapusa, Goa, whereas these Companies had no jurisdiction and the whole purpose of the said Suit was to some how create as many hurdles for recovery of outstanding dues to the petitioners as possible. 19. The petitioners have also submitted that the Respondent - Company, led by its Chairman, Dr. Vijay Mallya surreptitiously entered into a deal of sale of shares owned by Respondent - Company, UBHL to Diageo Plc and Relay B.V., Foreign Companies and the said shares held by it in its Group Company, USL was intended to be sold at Rs. 1440/- per share as against the much higher market price available and thus on account of failure of the Respondent - Company to pay its admitted ....
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....e Agreements, upon failure of KFAL to pay its dues towards petitioner - Company. The petitioner - Company, on 15/02/2012, invoked its two Guarantees and called upon the Respondent - UBHL to pay the entire outstanding amount of USD 11,877,573.01 under "V2500 Rework Agreement and USD 18,804,678 under "Repayment Agreement". The statutory notice under Sections 434 and 439 of the Companies Act, 1956 was served on 29/02/2012 which was not responded to by the Respondent - Company. However, on 21/03/2012, the Respondent - Company, UBHL only replied stating that they are trying to resolve the issue amicably. Thus, a total sum of USD 30,682,251.01 (approximately Rs. 153 crores) was due for which the petitioner -Company filed the present winding up petition in this Court on 26/03/2012. Company Petition No.121/2012 & Company Petition No.122/2012 - RRPF Engine Leasing Limited & Rolls-Royce & Partners Finance Limited Vs. UBHL. 24. The petitioner - Company (in Co.P.No.121/2012) incorporated under the Laws of England is engaged in the business of renting Air Transport Equipments including Aircraft Engines. 25. The petitioner and its Holding Company, Rolls-Royce & Partners Finance Li....
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....ms outstanding dues against KFAL to the tune of USD 20,988,224.42 under the Payment Agreement dated 22/09/2011 and the Respondent, UBHL is said to have executed an unconditional and irrevocable Corporate Guarantee to the maximum amount of USD 25,000,000, vide Guarantee dated 14/10/2011, Annexure E of this Company petition. 30. On 23/03/2012, the said Guarantee was invoked and upon failure of the Respondent to discharge its related obligations, the statutory legal notice was served by the petitioner on the Respondent vide Annexure J on 03/08/2012 claiming an amount of USD 16,899,970.60 (Rs. 101,39,98,200/-). Company Petition No.248/2012 - BNP Paribas Vs. UBHL 31. The said BNP Paribas also registered in France claims to be a Bank, having financed for the purchase of three ATR 72-212A Aircrafts or Engine bearing Number, "MSN 699", "MSN 728" and "MSN 730" under the Loan Agreements facilitated by "campagnie Franqaise d' Assurance pour le Commerce Exterieur ("Coface") the Export Credit Agency of France. According to petitioner, all three parties to Agreement dated 05/06/2006 Kingfisher Airlines Limited, KF Aero, and the petitioner, BNP Paribas. The KF Aero, lessor agreed to purc....
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....rcrafts vide terminating Notice dated 23/02/2012, the petitioner demanded a sum of USD 26,634,728 (approximately Rs. 146.11 crores), by serving a Notice dated 15/07/2012, under Sections 433 and 434 of the Companies Act, a copy of which is placed on record as Annexures NN and PP respectively, the present winding up petition was filed on 05/11/2012. Company Petition No.51/2013 - United Bank of India Vs. United Breweries (Holdings) Limited 34. The petitioner - Bank claims that initially it had sanctioned credit limits to M/s. Deccan Aviation Limited since October 2003 and further credit limits were also sanctioned to KFAL since November 2005 and M/s.Deccan Aviation Limited was taken over by KFAL vide Merger of the two, sanctioned by the Karnataka High Court on 16/06/2008 in Company petition Nos.45, 46 and 47 of 2008. 35. The Respondent - Company, UBHL had granted a Corporate Guarantee in favour of the petitioner - Bank and other Banks on 25/02/2003 which was invoked by the petitioner - Bank on 25/02/2013. The petitioner Bank is not a part of the SBI and 13 other banks in a consortium which have filed Company Petition No.162/2013 in this Court, on its own head, claiming a sum ....
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.... 46,89,15,617.87 vide its Notice dated 03/03/2016 and thereafter has filed this winding up petition on 28/06/2016. The contentions of the Petitioners 39. Since the different creditors, secured and unsecured creditors, Banks and Financial Institutions and other trading creditors like suppliers and service providers have filed various winding up petitions, it is considered appropriate to deal with the contentions of the petitioners raised by various learned counsels appearing for the different petitioners as follows:- For SBI & 13 other Banks : Mr.S.S.Naganand, Senior Advocate for Petitioner (Co.P.No.162/2013) 40. For State Bank of India and other Banks Mr.S.S.Naganand, Senior Advocate made submissions on behalf of the State Bank of India, the lead Bank representing the consortium of various banks who had made advances and extended loans to the Company - Kingfisher Air Lines Ltd., ('KFAL' for short) and the Respondent-company United Breweries (Holdings) Limited ('UBHL' for short) was earlier the Holding company qua its subsidiary KFAL and the claim of these petitioning creditors are based on the Corporate Guarantees given by the Respondent-company UBHL to secure the loans....
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....nd therefore, the Respondent company UBHL also deserves to be wound up under the provisions of Section 433(e) r/w Section 433(f) of the Companies Act, 1956. 44. Mr.S.S.Naganand submitted that the petitioner-Banks being secured creditors, standing outside the winding up proceedings, insofar as secured interest are concerned, they have initiated action against the respondent-company before the DRT, Bangalore also, but that does preclude them from pursuing the present winding up petitions against the Respondent-company UBHL. He also drew the attention of the Court towards one settlement proposal dated 29.03.2016 filed on behalf of KFAL and Respondent-company UBHL and Kingfisher Finvest(India) Ltd., through its Chairman Dr.Vijay Mallya, but he submitted that the said proposal was an eyewash and a ruse to wriggle out of the winding up proceedings initiated by the petitioners-Bank and several other creditors before this Court and such proposal was filed before the Hon'ble Supreme Court in Special Leave Petition Nos.6828-6831/2016 was not accepted even by the Hon'ble Supreme Court and the counter filed by Dr. Vijay Mallya in the aforesaid SLP before the Hon'ble Supreme Court itself was....
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.... one (1) of USD for approximate value). The said amounts were due towards the supply of Aircraft Engines and expenses incurred by the petitioner towards maintaining the Aircrafts leased by the petitioner to KFAL. He submitted that the Corporate Guarantees executed by the Respondent-company in favour of the petitioner on 01.08.2011 and 10.11.2010 were unconditionally irrevocable and same contained covenant to pay to the petitioner-company within 5 business days of a written demand and the said Undertaking was given by the Respondent - UBHL in the capacity of Principal Obligor and not merely as a Surety. 47. Mr.Shreyas Jayasimha, submitted that series of Agreements were executed between the petitioner and KFAL including the Agreement called V2500 Rework Agreement dated 27.10.2010 and FPA (Fleet Power Agreement) Termination Agreement and Agreement for mutual release and waiver of claims between the petitioner and KFAL, Deeds of lease for Aircraft Engines and for repayment of outstanding amounts which fell due between 2005-10 and all these series of Agreements were executed on 27.10.2010. The Corporate Guarantees were executed by UBHL in favour of the petitioner on 10.11.2010 and on....
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....t) Rules, 1959 and accordingly, publication was carried out on 02.02.2015 in Newspapers, "the Hindu" and "Udayavani". 51. He, therefore submitted that the Respondent company also deserves to be wound up, so that the Official Liquidator can take charge of whatever assets of the Respondent company are available and by realizing the sum by sale of assets of Respondent company UBHL and distribute the same to the petitioner company and others like, who have filed various winding up petitions before this Court in accordance with the provisions of the Companies Act. The total dues of all the petitioners in the form of a Chart are given below:- Sl. No. Case No. Petitioner Date of filing the Co.P. Date of Statutory Notice U/S.433, 434 & 439 of Co.Act,1956. Amount claimed in USD Amount in Indian Rupee converted in approximate rate of `60/USD 1. Co.P.No.57 of 2012 IAE International Aero Engines AG (IAE) 26/03/2012 a) 29/02/2012 b) 16/03/2012 * 1,18,77,573 **1,88,04,678 3,06,82,251 184,09,35,060/- 2. Co.P.No.121 of 2012 RRPF Engine Leasing Limited 12/06/2012 28/03/2012 7,32,710 4,39,62,600/- ....
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....ctors of both the companies. Mr.Ramanand also submitted that the effective date of this Loan Agreement was 04.07.2013 as defined in the Shareholders Agreement amongst Respondent-UBHL and Kingfisher Finvest India Limited dated 09.11.2012, which become effective upon completion of the purchase of USL shares by Relay B.V. and Diageo plc, Relay B.V. being indirect wholly owned subsidiary of Diageo plc, pursuant to the Agreement entered into with the Respondent-UBHL on 09.11.2012, as contemplated under the Shareholders Agreement, the USL entered into Deed of Adherence and thereby become the party to that Shareholders Agreement on 04.07.2013. 54. Mr.Ramanand Mundkur further submitted that in view of the events as developed later on, the prior affidavit of USL filed in this Court on 25.01.2016 seeking protection of the Court by appropriate orders in the present winding up petitions, the change of stand shifting from opposing winding up petition to supporting the same now by this Affidavit 10.01.2017 happened in the following circumstances:- 55. That the Company USL originally filed its Affidavit dated 25.02.2015 opposing the winding up of UBHL but slightly shifted its stand by subse....
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....ation vide its reply dated 13.08.2016, for the first time stated that since the Hon'ble Supreme Court did not stay the operation of the order of the Division Bench of this Court, the Loan Agreement had not become effective and as a consequence thereof, there was no loan outstanding or interest payable by UBHL to USL under the said Loan Agreement. This disclosure of the Respondent UBHL according to the learned counsel, Mr.Ramanand Mundkur, was clearly a moonshine and demonstrates its malafide intention to evade and avoid payment of its legitimate dues. He further submitted that in all its audited statements and Balance Sheets, after the order of the Hon'ble Supreme Court dated 11.02.2014, for the Financial Years ending on 31.03.2014, 31.03.2015 and 31.03.2016, the respondent company UBHL has clearly recognized and recorded the amount owed to USL under the Loan Agreement as a liability and therefore, its U-turn taken in the un-audited financial statements submitted to the Stock Exchanges on 10.11.2016 that there is no loan outstanding to USL is completely contrary to the admission of the liability made by the Respondent company in its audited statements and the corr....
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....aw and the winding up petitions filed by these Banks cannot be converted into money recovery suits resulting in deadly consequences of winding up against the Respondent - Company, UBHL which is a serious most consequence, against the Respondent - Company. He submitted that the recovery suits have been filed by these Banks before Debt Recovery Tribunal and they have initiated proceedings for recovery under special enactment, the Securitization and reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 ('SARFAESI' Act) and have also filed the winding up petitions. 63. The second most emphatic argument made by Mr. Udaya Holla, Senior Counsel is that the Respondent - UBHL itself has filed Civil Suit No.6406/2012 in Bangalore City Civil Court against the supplier of Aero Engines to KFAL not only claiming declaratory relief of declaring Corporate Guarantees given by UBHL to IAE International Aero Engines and others as void and non-est but have also claimed compensation to a large extent against these suppliers for supplying defective Aero Engines to KFAL which have not only resulted in huge losses to the said erstwhile subsidiary Company of the Respondent - ....
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.... they cannot seek the winding up from this Court of the Respondent- UBHL. 66. Mr. Udaya Holla also submitted that Section 599 of the Companies Act, 1956 bars the Foreign Companies to take any legal proceedings including the winding up proceedings before this Court without complying with the mandatory provisions of Section 592 of the Companies Act, 1956, which requires a Foreign Company which has an establishment in India, to seek requisite approval and Registration from the Registrar of Companies and RBI and since the petitioner - M/s. IAE International Aero Engines, while it was actively engaged in the business of supply of Aero Engines to KFAL, had a business establishment in India and was admittedly neither registered with the Registrar of Companies in India nor had obtained any approval from RBI and other competent Authorities, the winding up petitions filed by such Foreign Company before this Court was not maintainable and deserved to be dismissed. 67. Mr. Udaya Holla, Senior Advocate also submitted that the Debt Recovery Tribunal where the secured creditors like SBI and other consortium of Banks had filed recovery proceedings was seized of the said case in O.A.No.766/20....
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....her members of the Consortium of Banks ("Consortium") that had advanced facilities to Kingfisher Airlines Ltd. ("KFA") filed a winding up petition against UBHL, being Company Petition No. 162 of 2013. The Consortium's claim arises out of a purported Corporate Guarantee dated 21st December, 2010 issued by UBHL in favour of the Consortium. Suit pending before the Bombay High Court challenging the very validity of the guarantees 75. UBHL, along with Kingfisher Finvest India Limited ("KFIL") and Dr. Vijay Mallya have filed a Suit in the Hon'ble Bombay High Court, being Suit No. 311 of 2013 on 26th March, 2013 ("Bombay High Court Suit"), inter alia, seeking a declaration that the Corporate Guarantee dated 21st December, 2010 given by UBHL ("Corporate Guarantee") and the Personal Guarantee dated 21st December, 2010 given by Dr. Vijay Mallya ("Personal Guarantee") are void ab initio and non est, inter alia, on the ground of coercion and duress. It is pertinent to note that the Bombay High Court Suit was filed even prior to recall of the Kingfisher Airlines facilities and/or invocation of either the Corporate Guarantee or the Personal Guarantee. 76. Each of the members compris....
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....ous breaches of the Consortium's obligations under the "Lender's Liability" principles and especially the obligations of strict confidentiality with regard to which all the members of the Consortium have signed an undertaking binding themselves to maintain confidentiality of the information with regard to KFA, UBHL and Dr. Vijay Mallya, by the barrage of disparaging statements made in the media by or on behalf of the Consortium have hindered investment into KFA by external investors, resulting in UBHL and KFIL, by themselves, and through their subsidiaries and associates, being compelled to fund KFA in an aggregate amount of Rs. 3199.68 crores just from 1st April, 2011 till the end of March, 2013. UBHL has claimed the said amount from the Petitioner Banks in Suit No. 311 of 2013 filed in the Hon'ble Bombay High Court. 82. The aforesaid constitute unlawful acts by the Consortium and are clearly in breach of the principles of good faith and fair dealings between the parties and the Consortium has now even gone to the length of attempting to initiate draconian measures in an attempt to leave KFA, UBHL and Dr. Vijay Mallya, without an avenue to pursue their legal remedies according ....
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....ave invoked and are pursuing two parallel remedies i.e. before the DRT and winding up against UBHL, both the claims cannot be invoked on same subject matter, simultaneously. Hence same is bad in law. 87. The Supreme Court in 1977 (1) SCC 1 and the Karnataka High Court in AIR 2000 Kar. 393 have held that two parallel remedies cannot be pursued by a party in respect of the same matter at the same time. The Bombay High Court in Dalmia Cement v. Indian Seamless Steels and Alloys, reported in 2002 (112) Comp. Case. 314 and QSS Investors v. Allied Fibres, reported in 2001 (107) Comp. Case 587 and the Himachal Pradesh High Court in Azeet International v. HPH Produce Marketing, reported in 2001 (107) Comp. Case. 587 have held that even in respect of winding up petitions, parallel remedies cannot be pursued. The petitioners have admitted that Respondent is solvent 88. The State Bank of India (which is the lead bank in the consortium) has on the one hand declared UBHL as a Willful Defaulter stating that although UBHL has the means to pay, it has not paid the dues of the petitioners and therefore UBHL has been declared as a Willful Defaulter. A copy of the order has been produced by ....
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....y from distribution of cash deposits and from the disposal of liquid assets with a transparent price determination on the Stock Exchange and therefore not subject to any conditionalities. CO.P.No. 57/2012 - International Aero Engines v. United Breweries (Holdings) Limited Pending Proceedings against IAE before the City Civil Court 91. The alleged debt that the Petitioner Company claims is allegedly due and payable by the Respondent Company, is the subject matter of a serious dispute arising out of and in view of the inherently defective, both in design and manufacture, IAE V 2500 - A5 Engines fitted on the entire fleet of Airbus A320 family aircraft of KFA, rendering them incapable of commercial use. The investment of the Respondent Company and its subsidiaries (including by way of equity share capital and shareholder loans) in KFA has been seriously damaged primarily on account of the operational and financial woes of KFAL, which in turn has been primarily or in any event decisively been caused by the defective engines supplied, and further on account of the false assurances/representations given made by IAE (the Petitioner Company) and/or its constituent joint-venture pa....
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.... inevitable when aircraft remain grounded for want of and/or poor performance of engines, which was the result of the defective engines supplied by IAE to KFA. 96. In or around mid 2010, Kingfisher Airlines, which was already overburdened on account of the aforesaid huge accumulated losses totaling Rs. 4,321 crores, occasioned principally on account of the substandard, inherently defective and commercially unviable IAE V 2500 - A5 engines, was faced with no real choice. If it had to survive as an airline, it had to come to terms with IAE and get its fleet back in the air. It is in this background that KFA commenced negotiations with IAE sometime in mid 2010 to try and reach an amicable resolution of this issue. Oral representations were made, in the course of negotiations, by senior officials and officers of IAE to the representatives of KFA and the Respondent to the effect that steps taken by IAE by way of replacing the drums with fully silver coated nuts with new drums without fully silver coated nuts, and the proposed installation of Single Crystal Panels in the combustion chamber, were allegedly a "complete fix" for the HPC Stage 3 to 8 Drum defect and the Hot Section Distre....
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....te guarantees even to the consortium of banks. Guarantees are governed by Foreign Law and the same needs to be pleaded and proved 100. The alleged guarantees are governed by English Law, which is a foreign law. The petitioner herein has in the petition neither pleaded the foreign law in respect of the invocation of the guarantees nor proved the same. 101. The Supreme Court in Hari Shankar Jain v. Sonia Gandhi, reported in 2001 (8) SCC 233 has held that a Court shall take judicial notice of all laws within the territory of India. Foreign law is not included. As the court does not take judicial notice of foreign law, it should be pleaded as any other fact, if a party wants to rely on the same. 102. The Bombay High Court in Iridium India Telecom v. Motorola Inc., reported in MANU/ MH/1125/2003 (BOM) has held that the legal position is well settled that foreign law is a question of fact and must be pleaded by the parties who relies upon it. 103. The petitioner in the present winding up petition has neither pleaded nor proved English law which is the foreign law. This being the case, the guarantees being governed by English law, the same cannot be regarded by this Hon'ble....
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....mplied with the provisions of Section 592 is in terms of Section 599 of the Companies Act, 1956 barred from prosecuting any legal proceedings in India. 110. The Chancery Division in Re: Tovarishstvo Manufacur Liudvig Rabenek, reported in 1944 (2) All E R 556, if the representatives of foreign company were often coming and staying in hotel in England for purchase of machinery etc, the foreign company is deemed to have a place of business in England. The judgement of the Chancery Division has been affirmed in the judgement of the Delhi High Court in Dabur (Nepal) P. Ltd. v. Woodworth Trade Links P. Ltd., reported in 2012 (175) Comp. Cas. 338. COP 248 / 2012 - BNP Paribas v. United Breweries (Holdings) Limited 111. The Respondent had agreed to guarantee the amounts due to M/s KF Aero. In this regard an application was submitted to the Reserve Bank of India (RBI) seeking permission to provide such a guarantee, guaranteeing the dues of KF Aero. However, the RBI gave permission only to issue the corporate guarantee in favour of KF Aero and not to its successors and assigns. KF Aero in turn appears to have assigned its rights in favour of BNP Paribas which is the petitioner in th....
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.... guarantees, Kingfisher Airlines had by its letter dated 7th June, 2006 applied for prior RBI approval through UTI Bank Ltd. to permit issuance of the three corporate guarantees by UBHL in favour of "KF Aero, its successors and assigns"( Annexure R-2 to the Objections of UBHL (pg. 20-23)). However, by its letter dated 12th June 2006 RBI conveyed that it had "no objection from FEMA angle to issuance of corporate guarantee by M/s.United Breweries (Holdings) Ltd., Bangalore, in favour of lessor M/s. KF Aero".(Annexure R-3 to the Objections of UBHL. (pg. 24)). Thus, there was no permission of the RBI allowing assignment of the three corporate guarantees to KF Aero's assignees, and although such permission had been expressly sought, it had not been granted. 115. It is submitted that unless prior permission was duly obtained from the RBI, the purported assignment of the three corporate guarantees in favour of BNP Paribas would be void and/or unenforceable in law for such permission would have to precede and not follow the assignment. That BNP Paribas was aware of this position in law is evident from the legal opinion(s) given by M/s Rajinder Narain & Co. (Annexures R-2 (Pg 34), R-3 (P....
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....o locus standi to file the present Company Petition, and the same ought to be dismissed in limine with costs. 119. It is pertinent to note that before the Division Bench of this HonRs. ble Court, BNP Paribas cited the decision of the Calcutta High Court in Eurometal Ltd. v. Aluminium Cables and Conductors in support of its proposition that absence of a permission under the provisions of erstwhile FERA would not render a contract void. However, it is submitted that Eurometal as well as all the decisions following Eurometal (including Eurometal) do not refer to the decision of the Supreme Court in Mannalal Khetan and therefore are per incuriam and not good law. 120. The contention that the corporate guarantees are void and/or unenforceable in law is further buttressed by a perusal of Article VIII 2(b) of the Articles of Agreement of the International Monetary Fund. The said article states: "Article VIII: General Obligations of Members Section 2. Avoidance of restrictions on current payments (b) Exchange contracts which involve the currency of any member and which are contrary to the exchange control regulations of that member maintained or imposed consistently with thi....
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....e Letter Agreement between ATR and erstwhile Kingfisher Airlines which provided for Asset Value Guarantees from ATR in respect of the three Aircraft in question) between ATR and erstwhile Kingfisher Airlines. KF Aero and its assignee - BNP Paribas were duty bound to invoke the Asset Value Guarantees against ATR. If KF Aero and/or BNP Paribas have or had so invoked the Asset Value Guarantees, ATR is contractually bound to pay to KF Aero and/or BNP Paribas the Guaranteed Amount, i.e. the entire alleged debt or at least the entire alleged outstanding principal amount claimed in the present Petition. 123. BNP Paribas was therefore, obliged to invoke the Asset Value Guarantees before approaching this HonRs. ble Court by way of the present Company Petition. The Guarantees are governed by Foreign Law, which has to be pleaded and proved 124. The guarantees are governed by English Law. The petitioner in the petition has neither pleaded nor proved English Law. Under the circumstances, the very petition is not maintainable and no order of winding up can be passed against this Respondent. CO.P.No.121/2012 - RRPF Engine Leasing Limited v. United Breweries (Holdings) Limited CO.P.....
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....ice or any other place of business in India by any entity resident outside India other than a banking company. Petitioners are admittedly not banking companies and have established a place of business in India as is evident from what is stated in the aforesaid objections. Petitioners have not obtain the requisite prior permission from the Reserve Bank of India prior to establishing such places of business in India and hence, are illegally carrying on business in India. On this ground also the petition is liable to be dismissed. CO.P.No.185/2012 - ATR v. United Breweries (Holdings) Limited Petitioner being a Foreign Company has failed to comply with Section 592 129. The Respondent Company submits that erstwhile Kingfisher Airlines Limited ("erstwhile Kingfisher"), which inter alia, operated Scheduled Air Transport Services within India and was a part of the UB Group of Companies, had entered into Agreements with the Petitioner for purchase of ATR 72-500 aircraft as well as General Maintenance Agreements ("GMA") for maintenance of these aircraft. Erstwhile Kingfisher had entered into a Purchase Agreement dated 13th December, 2005 ("the erstwhile Kingfisher PA"), and GMA d....
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....e and other facilities to the Petitioner's representatives which included use of telephone, telefax, copying machine, Internet access etc. to assist the field service representation and/or the CSR and/or the LMR and/or the engine specialist to fulfill their task properly. 134. These representatives referred to hereinabove carried out the various functions required to be carried out by them under the relevant Agreements including providing dedicated technical support to the products and services supplied by the Petitioner, assistance as well as customer service support to the airline on a day to day basis in respect of the operating fleet of ATR aircraft and also acted as a communication channel between the airline and the Petitioner. 135. Thus, the petitioner had a place of business in India and accordingly had to comply with the requirements of Section 592 of the Companies Act, 1956, which the petitioner has not complied with. As a result of such non-compliance, Section 599 of the Companies Act bars the petitioner from instituting any legal proceedings. Thus, there is a bar to the present proceedings and the present proceedings are not maintainable. CO.P.No.99/2013 - HPCL....
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....nt set of winding up petitions to support the Respondent - UBHL and made the following submissions:- 143. Mr. Sajjan Poovaiah urged that Respondent - UBHL is a profit making Company and is a Going concern and employs about 70 to 100 employees in its On-Going business of Leather Products manufacturing and Beer business and therefore, need not be wound up. 144. He submitted that as against the petitioning Trade creditors who have filed these winding up petitions, the objector, unsecured creditor, M/s. Prestige Estate Projects Limited, which has constructed the prestigious King Fisher building in Bengaluru for the Respondent - UBHL itself, has dues to the extent of Rs. 94.33 crores against the Respondent - Company. But, it is hopeful and quite positive that the Respondent - UBHL will repay its dues and winding up of UBHL therefore will not be the solution of the financial crisis, which the Respondent - UBHL may be temporarily facing. 145. He submitted that even the secured creditors like HDFC Bank who have their financial exposure in the Respondent - UBHL, want to oppose these winding up petitions. He urged that of course, with the sale of some of the share holding of the UBH....
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....very basis for these creditors to seek winding up against the Respondent - UBHL on the basis of such Corporate Guarantee Agreements, is subject matter of adjudication before the Bombay High Court and therefore, winding up petitions cannot be proceeded and prosecuted by them. 149. He also drew the attention of the Court towards another Suit, in O.S.No.6406/2012 filed by the Respondent -UBHL in Bangalore City Civil Court, similarly raising a question on the validity of the Corporate Guarantee Agreements of the Respondent - UBHL with the Banks and other unsecured creditors on the ground that the Engines supplied by the creditor, IAE International were defective and various other grounds and even that suit is pending trial at Bengaluru and the application filed by the defendants under Order 7 Rule 11 of the Civil Procedure Code, 1908 seeking dismissal of the suit at the threshold has already been rejected by the learned Trial Court on 30/04/2016 and even though the Revision Petitions have been filed by the defendants before this Court, however, there is no stay order granted by this Court in such Revision Petitions and they are pending consideration before this Court. 150. Finall....
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....support of their contentions and also to meet the objections raised by the Respondent company UBHL, they are also briefly discussed and quoted below for ready reference. (i) In Hegde & Golay Ltd., vs. State Bank of India (ILR 1987 KAR 2673), the Division Bench of this Court held that the secured creditor like Bank does not have to give up its security in order to pursue the winding up petition against the Respondent company and filing of the suit by the Creditor-Bank for recovery of the dues against the respondent company does not bar the filing up of the winding up petition as well. The relevant portions of the judgment are quoted below for ready reference:- "These observations, in our opinion, do not advance the contention of Sri.Shetty any further. Section 529(1) of the 'Act' attracts the rules of insolvency to winding up in relation to "the respective rights of secured and unsecured creditors" and confines these Rules so attracted to matters that arise between these two classes of creditors. Sections 528 and 529 of the 'Act' are in the chapter "Proof and Ranking of Claims" and deal with the question of proof of debts and the rights of secured and unsecured creditors. Sect....
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....LR (2004) II Delhi 583], held that the Companies Act 1956 and Recovery of Debts due to the Banks and Financial Institutions Act of 1993 (RDB Act) operate in two different and distinct fields and mutually exclusive jurisdiction and while the purpose of initiating proceedings under RDB Act is to recover the amount due and payable to the Bank/Financial Institutions, the purpose of invoking the winding up jurisdiction is to wind up the company on the ground that it has become commercially insolvent. Paragraph-30 is quoted below for ready reference. "30. Therefore, it cannot be said that RDB Act covers the field for winding up an insolvent company and, therefore, the contentions of Mr.Tripathi are misconceived and are accordingly rejected. The contention that the petitioner could chose one of the remedies available in case where two or more than two remedies are available is applicable when the remedy provided for is one and the same but when two different remedies are provided for two different reliefs, in that event the plea of election of remedies is not applicable. We, therefore, hold that the winding up court is concerned with the issue as to whether or not a company could be de....
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....t for sale/realization of secured assets. In the petition, they have also made a categoric statement that even if all secured assets are sold and their value realized, they would still not realize substantial/large portion of the outstanding dues. Learned Counsel for the parties are ad idem that the worth of Kingfisher House in nay case may not be more than Rs. 300 Crores as against total outstanding of Rs. 6200 Crores. The proceedings under the Act are not recovery proceedings and need to be filed for winding up of the company which is unable to pay its debts. The proceedings initiated by the respondent-Banks under SARFAESI are not alternate to the winding up petition". (iv) In the case of Official Liquidator, Uttar Pradesh vs. Allahabad Bank & Others (2013) 14 SCC 381, the Hon'ble Supreme Court has held that RDB Act is a complete code in itself and DRT has exclusive jurisdiction for sale of properties for realization of dues of Banks and Financial Institutions. However, being protector of interests of workmen and creditors of the company in winding up petition, the Official liquidator shall mandatorily be associated at the time of auction and sale by Recovery....
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.... debts. While passing the impugned order dismissing the company petition for lack of jurisdiction, the learned company judge has relied on the decision of Swastik Gases P. Ltd. Vs. Indian Oil Corporation Ltd.,[2013] 9 SCC 32, wherein the issue was with regard to invoking of jurisdiction in Jaipur court, where a part of the contract had been performed by the parties in Jaipur and also in Kolkata, but the agreement provided that the Kolkata court would have jurisdiction to entertain all cases arising out of the dispute with regard to the agreement. In such facts, it was held that Kolkata court would have the jurisdiction and not Jaipur court. Relying on the said decision, the learned company judge has considered and interpreted clause 20 of the agreement and held that the English courts alone would have jurisdiction to try any case regarding a dispute with regard to the trust deed. There cannot be any quarrel with regard to the law laid down by the apex court in the case of Swastik Gases P. Ltd. Vs. Indian Oil Corporation Ltd.,[2013] 9 SCC 32. However, the facts in the present case are quite different. The trust deed (clause 20) does not impose a blanket ban on the jurisdiction....
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....foreign creditor with decree of foreign Court is barred from presenting a petition for winding up on the original course of action and till the decree by Indian Court is passed in it's favour, it will make a distinction between two classes of creditors. This will lead to the Indian companies adopting unhealthy practices of borrowing capital abroad and then refuse to repay admitted debts and resist winding up. This will have negative effect on the cross border flow of capital and international commerce. Thus there is no warrant to read such an exclusion of the statutory right by way of interpretation. 47. Therefore, there is no impediment in the way of the Petitioner to proceed on the basis of the Patronage Letter as a creditor of the Company for presenting this petition for winding - up. There is no question of merger of the Patronage Letter into the decree. The admissions as regards the liability given in the correspondence is sufficient to form basis of the petition for winding-up. Even assuming that there is a suit filed for enforcement of a foreign decree it cannot be said that the Petitioner has ceased to become a creditor of the Company. 48. It was further contended by ....
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....t carries on business in India. A foreign corporation carrying on business in India is amenable to the jurisdiction of the local courts and is for all practical purposes present in India. This test is satisfied only if its business is carried on at a fixed and definite place which is, to a reasonable extent a permanent place within India. The mere presence of a representative of the foreign corporation is not sufficient if his only authority is to elicit orders from customers, but not to make contracts on behalf of the corporation. The question really is, as stated by Lord Loraborn, does the corporation really keep house and does business in India? Its real business is carried on where the "central management and control actually abides". De Beers Consolidated Mines Ltd. V. Howe, (1906) AC 455, 458 (see above). While a company is domiciled where it is incorporated, it is resident where its controlling power and authority is vested. Although dual residence is conceivable where there is division of management and control, it is nevertheless imperative that in some degree, in some measure, to some extent it can be said that the foreign corporation is centrally managed and controlled i....
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.... by way of penalty or in a formal manner, the judgment may not be one based on the merits of the case". (ix) The leading case on the maintainability of the winding up petition when there is a bonafide dispute about the debt was rendered by the Hon'ble Supreme Court in the case of Madhusudan Gordhandas & Co., vs. Madhu Woollen Industries Pvt. Ltd., [1972]2 S.C.R. 201, the Hon'ble Supreme Court has laid down the principles in the following terms:- "Two rules are well settled. First if the debt is bona fide disputed and the defence is a substantial one, the court will not wind up the company. The court has dismissed a petition for winding up where the creditor claimed a sum for goods sold to the company and the company contended that no price had been agreed upon and the sum demanded by the creditor was unreasonable (See London and Paris Banking Corporation). Again, a petition for winding up by a creditor who claimed payment of an agreed sum for work done for the company when the company contended that the work had not been done properly was not allowed.(See Re. Brighton Club and Norfold Hotel Co. Ltd.) Where the debt is undisputed the court will not act upo....
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....553], decided on 23/09/2010, the Hon'ble Supreme Court held that where the Company has a bona fide dispute, the petitioner cannot be regarded as a creditor of the Company for the purpose of winding up. In fact, the dispute implies the existence of a substantial ground for the dispute raised. The Court should dismiss the winding up petition and leave the creditor first to establish his claim in an action, lest, there is danger of abuse of winding up procedure. A dispute would be substantial and genuine if it is bona fide and not spurious, speculative, illusory or misconceived. The Company Court in a winding up proceedings is not expected to hold a full trial of the matter. If the debt is bona fide disputed, there cannot be "neglect to pay" within the meaning of Section 433(1)(a) of the Companies Act, 1956. The relevant portion of the judgment is quoted below for ready reference. " A party to the dispute should not be allowed to use the threat of winding-up petition as a means of enforcing the company to pay a bona fide disputed debt. A Company Court cannot be reduced to a debt collecting agency or as a means of bringing improper pressure on the company to pay a bona fide disputed....
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.... jurisdiction under Section 433 of the Act, cannot convert itself into a Court of Original Jurisdiction settling civil dispute including drawing up of a decree in favour of one or the other parties in proceedings under Section 433 of the Act and then convert itself into a kind of Executing Court by passing a winding up order and such an exercise of jurisdiction should be avoided. In paragraph 4 of the judgment, the Court has held as under: "4. The Company Court under the provisions of the Act cannot convert itself into a Court of original jurisdiction setting civil disputes including drawing up of a decree in favour of one or the other of the parties in proceedings under Sec.433 of the Act. It is true, the Company Court does have original jurisdiction to settle claims of all kinds when it exercises its power under Sec.446 of the Act. But the nature of jurisdiction and the nature of power exercised under the two sections are widely different. Under the latter section jurisdiction is acquired only if an order is made under Sec.433 of the Act and not otherwise. If there is no order under Sec.433 of the Act, including the appointment of a provisional liquidator then there is no juri....
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....tioner - M/s. Globe Detective Agency had provided security guards to the Respondent - Company and some of the security guards employed by the petitioner - Company took away the key bunch of the Factory premises resulting in loss of machine hours in one shift on 24/02/1982 and the Respondent - Company refused to pay the security charges to that extent of Rs. 4,450-60. The Court held that where there were certain allegations and counter allegations and claims and counter claims involving disputed question of facts, the substance of the defence of the Respondent - Company was that it was under no obligation to pay the amounts claimed by the petitioner- Company on account of the loss suffered by it due to the negligence of the Guards furnished by the petitioner- Company and in such circumstances, leaving the parties to settle the disputes in an appropriate Civil Court, the learned single Judge dismissed the winding up petition against the Respondent - Company. 161. The argument of Mr. Holla based on this case was, that when the Respondent - UBHL also has raised claims against the petitioning creditors in Civil Suits filed by it and has disowned its Corporate Guarantees and there are....
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....nd merger merging Capital Controls (Delaware) Inc. (Delaware Corporation) into Severn Trent Water Purification Inc. were filed before the same authority. In the absence of pleading of the relevant laws of merger prevalent in the State of Delaware or under the law of the commonwealth of Pennsylvania under which merger is said to have taken place, it is very difficult to examine the aspect as to whether by virtue of the said merger, there is a blending of the two entities and the status of the two companies thereafter." 166. In support of his contention that where the Civil Suit had been filed by the petitioning creditor for recovery of the money in question, the same creditor cannot pursue the winding up proceedings against the Respondent - Company like the petitioning Banks, SBI and others are pleading before this Court, Mr. Udaya Holla relied upon the judgment of the Bombay High Court in the case of Dalmia Cement (Bharat)Ltd. Vs. Indian Seamless Steels and Alloys Limited, decided on 31st August, 2001 [2002(112) Comp.Case 314(Bom)] in which the learned Single Judge of the Bombay High Court held that the winding up petition is not a legitimate means to seek to enforce payment of ....
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....ners had resorted to the civil remedy and therefore the petition could not be entertained. 169. In Divya Export Enterprises Vs. Producin Private Ltd. (I.L.R.1990 Kar.1610), the learned Single Judge of this Court held, that a mere assertion of debt payable was not sufficient to attract the discretion of winding up under Section 433 (e) of the Companies Act, 1956. 170. On the issue of compliance of Sections 592 and 599 of the Companies Act, 1956, Mr. Udaya Holla also relied upon a Foreign judgment, in the case of Re TOVARISHESTVO MANUFACTUR LIUDVIG RABENEK, decided on 12/06/1944,[1944(2) All E. Reporter 556], in which the Court there found that where it was the practice of the Director on such visits to stay at a Manchester Hotel which was used as regular place of business for the Company and to which, the correspondence was addressed and the Company kept Banking Accounts in London, but it was contended by the Respondent - Company that the Company could not be wound up under Section 338 of the Indian Companies Act, 1929, since it never had an established place of business under the jurisdiction of the Courts within the meaning of the Companies Act, 1929. Section 343, which refe....
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....BHL exists in law and there is also no dispute that the principal borrower, KFAL has failed to pay off and discharge its financial obligations towards the creditors and was accordingly ordered to be wound up by this Court on 18/11/2016 and those winding up petitions by the secured and unsecured creditors against it were not even defended and contested by the Respondent KFAL itself nor by the extended arm of the Guarantor and its Holding Company, Respondent, UBHL. 174. The findings recorded in the judgment and order dated 18/11/2016 winding up Respondent KFAL therein are also extracted below for ready reference. 17. There has been no opposition as such to the present winding up petition and such of other winding up petitions against the respondent-company. The alleged defences of pendency of civil suit filed by holding company against the manufacturers but not against petitioner- Aerotron Ltd., locus standi of petitioner company to file this winding up petition, there being chance of revival of the business etc., are all, moonshine and sham defences raised without any material basis for them. The respondent-company is commercially insolvent and is unable to pay its huge debts ....
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....ences to really succeed either before this Court or at appropriate Forums where they have been raised against and instituted as legal proceedings against the petitioning creditors. 177. Taking up the arguments of Mr. Udaya Holla, learned senior counsel for Respondent - Company, UBHL, that UBHL has instituted Civil Suits in Bombay High Court and Bengaluru City Civil Court, challenging the validity of the Corporate Guarantees itself as having been given under duress or coercion or that on account of defective supply of Aero Engines, the said company, KFAL suffered huge losses and went out of business operations and therefore the Respondent Company has claimed huge damages against the suppliers and also to declare the Corporate Guarantees itself as non-est and void, this Court does not find any substantial ground in law upon which the Respondent - UBHL hopes to succeed in such proceedings. 178. The assertion of duress or coercion on a corporate body like Respondent - Company, UBHL, at the point of time when these Guarantees were extended to the creditors for securing the financial obligations of KFAL towards them, firstly, is a question of fact to be established by the plaintiff....
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....there was none. Not only the applicant banks are dealing with the public money, but it was also the defendants 1 to 3, who knowingly availed public money as loans from the Banks with a promise to repay the same. It is the bounden legal duty of the banks and the borrowers to ensure that such loans are properly secured by mortgage over immovable properties, hypothecation over movables and guarantees of directors and all other types of guarantees including even that of third parties wherever offered or possible. The second and third defendants cannot expect the banks to give away public money as loans to them without even guarantee from them for the repayment in addition to other securities and loan documents. In fact, the second and third defendants would have done well to have volunteered execution of such guarantees, being the holding company and the Chairman and as Rajya Sabha member. It is unfortunate that the defendants are challenging these guarantees without any basis or material to support their contention of coercion. If insistence on guarantees by the banks for realizing the loans are to be considered as coercion, then no loan can be properly secured by any bank. In fact, t....
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....mption of undue influence which it requires very little evidence to substantiate". Their Lordships think that decision to be wrong. There is no such presumption until the question has first been settled as to the lender being in a position to dominate the borrower's will" In the present case no pleadings or documents are produced to prove that the banks have dominated the will of defendants 2 and 3. In fact as stated above vice-versa may be true in this case with worries for the banks to recover such a huge outstanding. Therefore, it is clear from the above that the question of coercion on the basis of banks being in an advantageous/dominant position to take guarantee, charge interest etc. raised by the defendants 2 to 3 are baseless. In fact, in my view, it was the defendants 1 to 3 herein who were in dominant position of demanding restructuring of the loan by not repaying the huge loans already availed by them from the banks. In my opinion, therefore, it was the bank which, just for the sake of arguments, can be heard to say that they were coerced into entering into MDRA so as to recover its huge outstandings and not the other way around. However, in view of the above, I am....
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....ice of the Court, the letter written by the Chairman of the Respondent - Company, Dr. Vijay Mallya himself to one Mr. Ian of petitioner - IAE International Aero Engines, AG, the supplier of the Aero Engines on 30th December 2011 in which the said Chairman, Dr. Vijay Mallya not only acknowledged all the debts towards the said Company and expressed his difficulties faced by the Company in meeting its obligations towards the company KFAL but sought for the co-operation of the said creditor supplier, IAE International Aero Engines AG, in the following manner and to complete this contextual background, the entire letter is quoted in- extenso below: "From: Vijay Mallya To: Aitken, Ian (IAE) Cc: [email protected] Sent: Fri Dec 30 17:08:11 2011 Subject: Kingfisher Dear Ian December has been an unusually hard month for me to get anything meaningful done. We have had one of the most stormy sessions of Parliament in recent history that has occupied the minds and time of the Government and my own. The Indian economy has slowed considerably with growth forecasts now pegged at 7.5% of GDP. Certainly better than most developed economies but disappointing....
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....y financial reporting as of tomorrow is important. I write to first acknowledge that you have put your faith in me and trusted me for which I am truly grateful. I also know that our ongoing out standings which you wanted to be paid this week is a major cause of concern. You have the ability both legally and morally to ground and repossess your planes and you are entitled to take such action. Keeping all your rights in mind, I am writing to appeal to you to continue your trust in me. I have put USD 800 million into Kingfisher which should demonstrate my absolute commitment to making the Airlines a success. I was confident that all our negotiations with the Government, Ministry of Finance, Banks and all those involved would be concluded before mid December and that you would be paid your overdues. Sadly, this did not happen due to the pre-occupation of Government Ministers that I have explained. However, I write with confidence that everything will get sorted out and put in place during the month of January 2012. Specifically, we will secure: 1. USD 130 mio of new funding 2. Cashflow relief from Government owned fuel suppliers/direct importation of fuel the....
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....nual Report 2015-16, with no separate title given, the Flying Horse of UB Group is on the Front Cover of the Annual Report. 186. While these photographs and description of Annual Reports do not indicate or establish anything in particular, but the selection of the photos and Logos by the Company, UBHL, carries some hidden message.... Be that as it may. 187. These winding up petitions have to be dealt with on harder facts and figures and financial results as reflected in these Balance Sheets and commented upon by the Auditors including independent Auditors. Therefore, a glance through their comments and financial figures follows herein: 188. In the Audit Report dated 24/08/2012, for the year 2011-12, the Auditor, Mr. S. Vishnu Murthy, Chartered Accountant of M/s. Vishnu Ram and Company, vide Note No.4 in his Audit Report drew the attention of the stake holders including Government, Creditors and public at large towards the said Guarantee obligations of the Respondent - Company in the following manner. 189. What stands out in the aforesaid comment, is that the Respondent Company chose to make no provision for the said Guarantee obligations even though it noted that KFAL, ....
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...., the still restrictive regulatory environment and prohibitory cost of operations resulted in the entire sector incurring huge losses. As one of the largest players in the industry, Kingfisher Airlines incurred very significant losses. The global financial environment, during this period, triggered by the collapse of Lehman Brothers in 2008 meant that the Company could not raise equity in a timely fashion, thus increasing its dependence on borrowings, some of which necessitated underlying support from the Company. Kingfisher Airlines ceased operations in October 2012 primarily on account of suspension of license by the Civil Aviation Regulator in response to constant disruption by crew and staff. Your Company has continued its efforts to find a suitable investor who could capitalize on the still strong reputation and license. With this intent, your Company continues to fund Kingfisher Airlines. Certain lenders and other creditors have approached the Hon. High Court of Karnataka seeking winding up of Kingfisher Airlines and consequently also of the Company, relying upon purported guarantees issued in their favour by your Company. The validity of the guarantees had been challen....
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....rable High Court of Karnataka and are being heard (Ref. note no.45); the Honourable High Court of Karnataka has restrained the Company from disposing of any of its assets [Ref. note no.52(e)]; the Company is a defendant in recovery suits instituted by certain creditors/lenders for recovery of their dues of Rs. 62,033 million [Ref. note no.45]; some of the lenders have recovered their dues by disposing of the securities pledged by the company [Ref. note no.37]. Yet, the company has prepared its financial statements on going concern basis for the reasons stated in note no.52. The appropriateness of preparation of financial statements on going concern basis in subject to the Company being able to successfully defend itself in the petitions/suits filed against it and obtaining substantial reliefs in the suits filed by it as mentioned in note no.45. The Company has not recognized in its financial statements, disputed liabilities amounting to Rs. 77,309 million arising out of invocation of its corporate guarantees [Ref. note no.31] and claims of Rs. 1,463 million made against it under agreements entered into with a banker [Ref. note no.31]. Had the company recognized the above, curren....
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....g Concern." 196. For the latest year, the Balance Sheet for the year 2015-16, for the Financial Year ending 31st March 2016, the loss shown in the Profit and Loss Account as on 31/3/2016, soared upto Rs. 451.304 crores and the seriousness of the qualifications by the Auditor of the Company also increased and while noting that the lenders of KFAL have taken the possession of the Company's property in Goa to recover its dues, the Auditor reported the following qualifications in his Report dated 31/08/2016. "The company had extended corporate guarantees of Rs. 87,072 million in favour of lenders/lessors/creditors of Kingfisher Airlines Limited (KFA) an erstwhile subsidiary of the company (Refer note no.31 to financial statements). The beneficiaries of such guarantees have invoked the guarantees and are pursuing recovery actions against the company. This may result in loss to the company (Refer note no.31 to financial statements). No provision has been made in the accounts for such possible loss. Xx xx xx xx xx xx xx The company has shown Rs. 358 million as due from a banker who has unilaterally encashed company's deposits lying with it and appropriated the amount tow....
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....which it was alleged that the aggregate outstanding principal amount (both fund based and non-fund based outstanding) was Rs. 5,440 crores plus unapplied interest of Rs. 1,131 crores. In addition thereto, 4 Banks (PNB, OBC, UBI and Corporation Bank) have filed Original Application No.158 of 2014 before the Debt Recovery Tribunal, Bangalore ("DRT"), inter alia, against the Offerors in respect of Pre-Delivery Payment Loans raising an aggregate claim of Rs. 192 crores plus interest thereon. PNB has also filed O.A.No.1844 of 2014 in the DRT, inter alia, against the Offerors in respect of Pre-Delivery Payment Loans raising an aggregate claim of Rs. 18 crores plus interest thereon. In the Original Application No.766 of 2013 filed by the Consortium of Banks before DRT, it is alleged that the alleged dues of the Consortium of Banks are guaranteed by a Personal Guarantee of Dr. Vijay Mallya and a Corporate Guarantee of UBHL (collectively "Alleged Guarantees"). It is further stated in the Original Application No.766 of 2013 filed by the Consortium of Banks, that between 28- 03-2013 and 25-04-2013 the Consortium of Banks recovered an aggregate sum of Rs. 544 crores from the sale of s....
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.... the Hon'ble City Court, Bangalore pursuant to the order dated 20th June, 2014 passed in Writ Petition No.28577 of 2014. The Offerors will cause KFA, UBHL and KFIL to consent to the aforesaid sum of RS.700 crores being paid over to the Consortium of Banks in full and final settlement of their claims in O.S.No.25877 of 2013; (b) The residual value of 4,116,306 equity shares of United Spirits Ltd held by UBHL shall be pledged in favour of the Consortium of Banks (Petitioners), the current residual value of which (net of MAT and dues payable to pledgees) being approximately Rs. 660 crores. These shares shall be liquidated so as to maximize the total amount recovered, subject to the Offerors receiving a minimum credit of Rs. 660 crores (net of MAT and dues payable to pledgees); and (c) The residual value of 1,208,180 equity shares of United Spirits Ltd held by KFIL shall be caused to be pledged in favour of the Consortium of Banks, the current residual value of which (net of MAT and dues payable to pledgees) being approximately Rs. 243 crores. These shares shall be liquidated so as to maximize the total amount recovered, subject to the Offerors receiving a minimum cre....
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....the Reserve Bank of India and CIBIL accordingly. Upon the Offerors making payment of the balance amount of Rs. 1,853 crores and causing assignment of all and any amount that UBHL may recover under that claim made against the Defendants in O.S.No.6406 of 2012 as aforesaid, inter alia. (i) all legal proceedings filed by the Consortium of Banks against the Offerors shall stand dismissed as withdrawn, and all ad-interim and interim orders passed therein shall stand vacated. (ii) all security/security interests other than those created hereinabove, shall stand released in favour of the party which created the security/security interest in favour of the Consortium of Banks. (iii) all orders passed by any of the Banks against any of the Offerors declaring them willful defaulters shall stand quashed, and the Reserve Bank of India and CIBIL informed accordingly. Upon acceptance in writing of this Offer by the Consortium of Banks, the Parties shall mutually agree to and execute suitable documentation to record the settlement. It is clarified that non of the ad-interim or interim orders passed by any court(s) against the Offerors will prevent the Offerors f....
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....ounsel appearing for Respondent Nos.1 to 4 have submitted that they may be given short time to file their response to the main petition. Accordingly, they are granted time upto 21.04.2016 to file their response. In the response filed by the third respondent, he shall disclose the details of all his properties - movable, immovable, tangible, intangible, share holdings and any right, title or interest including beneficial interest and those held in fiduciary capacity, in private trusts, public trusts, companies, partnerships, limited liability partnerships, and/or any other entity/ies both in India and abroad etc. in any form whatsoever and also the rights, indicated above, in the name also of his wife and children, as on 31.03.2016. It shall also be indicated in the response as to what is the amount he is prepared to deposit before this Court so as to show his bonafide for a meaningful negotiation. Mr. C.S. Vaidyanathan and Mr. Parag P. Tripathi, learned senior counsel, have submitted that on the next date of hearing, specific instruction shall be obtained from the third respondent as to his probable date of appearance in person before this Court. The petitioners and the in....
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....Companies (ROC) or Reserve Bank of India (RBI) in terms of Sections 592 and 599 of the companies Act, 1956, also is equally devoid of merit. If the Respondent - Company wanted to challenge the locus standi of the petitioners, it was for them to establish before the Court that such Companies had a 'permanent establishment' of business in India so as to fall within the definition of a Foreign Company, requiring registration and permissions in terms of Sections 592 and 599 of the Act. No such material has been placed by them before this Court to question the locus standi of the petitioning creditors. Mere presence of some sales representatives while undertaking business of supply of Aero Engines and Allied Equipments does not establish in any manner that such Companies had their permanent establishment in India so as to attract rigor of Sections 592 and 599 of the Companies Act. The said contention also is therefore liable to be rejected and is accordingly hereby rejected. 204. The contentions raised against locus standi of petitioner, BNP Paribas are also equally devoid of any merit. The assignment of debt by KF Aero in favour of BNP Paribas has never been questioned by KF Aero it....
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....oning creditors, a viable, reasonable and bona fide arrangement or Scheme could always be produced before the Court, after consultation and concurrence of the creditors even during the course of these winding up petitions. But no such effort was made by the Respondent - Company before this Court. On the contrary, it was brought to the notice of the Court that one such proposal submitted before the Hon'ble Supreme Court in Special Leave Petition Nos.6828-6831/2016 (SBI & Others Vs. KFAL & Others) and the relevant extract of which proposal is also given above, was not approved and not accepted by the Banks before the Hon'ble Supreme Court itself. Even if such a proposal was to come before this Court also, ex-facie, it reflects lack of bona fides on the part of the Respondent Company, because such a proposal is hedged with the conditions, practically impossible of compliance and therefore, this Court finds no serious and sincere efforts made by the Respondent - Company to save itself from the winding up of the Company in accordance with law. 208. This Court also finds that if one of the Group Companies itself, viz. the United Spirits Limited (USL), on account of its financial help ....