AI Drafter 
TaxTMI 
TaxTMI 
2016 (9) TMI 1677
X X X X Extracts X X X X
X X X X Extracts X X X X
.... & Financial Reconstruction (BIFR); is opposed by the petitioner, who is an unsecured creditor of the respondent company. 2. The petitioner is seeking winding up of the company, inter alia, on the ground of non-payment of a debt of Rs. 1,35,89,016/- (Rupees One Crore Thirty Five Lakhs Eighty Nine Thousand Sixteen Only) payable by the respondent company. The petition also mentions the fact that the company has suffered massive losses between 01.04.2013 and 30.09.2013; and that, while the share capital and reserves of the company for the half year ending 30.09.2013 is Rs. 563 crores, its liabilities are Rs. 4,641 crores, which, according to the petitioner, indicates that the company is, "overleveraged". At the same time, it is also mentioned that in the relevant financial statements, the company has also indicated an amount of Rs. 1,273 crores as, "other current assets". The petitioner has also asserted the fact that the company, "is unable to pay its admitted debts...."; meaning thereby, that the company is insolvent or in any case, is not in a position to pay its admitted debts and therefore should be wound up for that reason also. 3. The applicant is stated to have moved a r....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ebt payable by it; and thereafter it has even placed on record its written consent, to clear the debt due to the petitioner. Some other grounds are also urged. 6. In order to better appreciate the nature and style of counsel's submissions, it has become necessary to reproduce some of her submissions in extenso here. In this context, I might also add that although some time has elapsed since the orders were reserved on 15.12.2015, a reasonably accurate record of the proceedings was kept by the Court Stenographer who was noting the arguments verbatim, as is often done in my Court. This has proved most helpful. They are as follows; (i) That there is an agreement in writing and the respondent company has agreed on 27.08.2014, that "there is an admitted amount". She further submits that, "once they have admitted to the position that there is a debt payable by them, thereafter they have placed on record in January 2015, the consent. In that case, provisions of Section 22(1) of SICA cannot apply." (ii) After lunch, when the matter was taken up again, counsel for the petitioner submitted that her client had filed the petition in 2014, while the reference was filed by t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....be permitted to resile, that is my submission." She further submits that, "what has to be seen in this case is that once there is consensus ad idem, there is consent between two parties. In this particular case, there was a consent, they said we will make payment on these modalities. Once they have accepted to that, they cannot resile from that." 7. The relevant facts available on the record are as follows; (a) The petitioner has filed the main petition seeking winding up of the respondent also containing a prayer, "seeking appointment of the Official Liquidator to take possession of all assets of the respondent company". Along with this, interim applications seeking directions and for appointment of the Provisional Liquidator were also filed. (b) Notice to show cause was issued by the Court to the respondent on 20.01.2014. Interim orders were passed on that date restraining the respondent from selling, alienating or parting with possession of any of its immoveable properties. The respondent was also restrained from dealing with its moveable properties, except in the normal course of business. Although on 16.04.2014, this Court directed that a reply shall be fi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....this Court directed the company to file an affidavit setting down therein, inter alia, the "proposed schedule of payment to the petitioner in terms of CDR scheme.", and the matter was adjourned to 24.03.2015. (f) Consequently, pursuant to the aforesaid orders of 28.11.2014, the respondent filed an affidavit of compliance dated 23.01.2015 where a copy of a letter of approval of the Corporate Debt Restructuring Scheme (CDR Scheme) dated 30.09.2014 along with the annexures to that letter (29 pages) was enclosed as Annexure A/1. In addition, and as directed by the Court on 28.11.2014, the respondent company also annexed the proposed schedule of payment in terms of the said CDR scheme, bearing the title, "PROPOSED PAYMENT PLAN", as Annexure A/2. Below the said payment schedule, and as part of that proposal, the company has also stated that, "the above payment schedule is subject to successful completion of CDR and release of payments accordingly." (g) Thereafter, when the matter was taken up on 24.03.2015, it was brought to the notice of the Court that despite efforts having been made in that direction, the aforesaid CDR scheme had not come into effect. And, in fact, t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....uld be taken further, the respondent company moved the instant application, being CA No.3298/2015, informing this Court that looking to its financial condition as on 31.03.2015, it had moved the BIFR under Section 15(1) of the SICA; and that on 14.07.2015, the Registrar, BIFR, had informed the company that the said reference had been duly registered by the Board and further directions were also given to the company. (i) It may also be noted that there were as many as 29 more petitions instituted by separate petitioners seeking winding up of the respondent on the ground of non-payment of their dues; and for convenience, matters were being listed before this Court on the same date to enable this Court to have a better overall picture of the company's affairs. In para 3 of its aforesaid affidavit of 07.05.2015, the company has also said that out of all these, "....there are certain petitions.....where the amounts claimed by the respective petitioners have not been disputed by the respondent..... ". In all those matters, orders similar to those sought here have already been passed in the light of Section 22(1) SICA. (j) On 15.12.2015, arguments were heard and the orde....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ce counsel for the petitioner kept insisting to the contrary, she was invited to cite any precedent to support her case. She relies on a judgment of the Bombay High Court in TATA Capital Financial Services Limited v. Ramasarup Industries Limited, 2013 (6) Bom CR 230, paragraph 34 at page 18, which states as follows; "34. ....In my view consent terms filed in court by parties was an agreement and steps taken under such agreement cannot be stayed. It is clear that that there is apparent distinguishment between the expression 'proceedings' and 'suit' used in section 22(1) of SICA. In my view, steps taken to enforce the consent order passed under section 9 of the Arbitration and Conciliation Act, 1996 would not be barred by section 22(1) of the SICA." 11. To my mind, that decision of the Single Judge of the Bombay High Court in TATA Capital Financial Services Limited (supra) being relied upon by counsel for the petitioner has no application here. There, the issue related to the stay of execution of an order of the Bombay High Court with regard to the sale of properties of Sureties and Guarantors of a company, in proceedings under Section 9 of the Arbitration and Conciliatio....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nter alia, to these terms with the consortium of banks, that must be presumed to be some sort of consensus ad idem, i.e., a bilateral consent between the petitioner and the respondent also. In any case, to my mind, any such agreement by the company to pay its creditors on terms concluded between that company and some of its creditors generally, does not automatically become executable as a decree or order of the court. Not only that, even if it were executable in some fashion, the fact remains that the proceedings before this Court are not execution proceedings. Furthermore, a perusal of the CDR scheme shows that the commitment of the company to pay its creditors is in terms of the letter of approval dated 30.09.2014 issued by the State Bank of India, titled, "Letter of Approval - Techpro Systems Ltd. (TSL) Restructuring Proposal Approved Under CDR System." This communication runs into 23 pages. Copies of this approval have only been sent to the Bank of India; ICICI Bank; IDBI Bank; Axis Bank; Vijaya Bank and IndusInd Bank. The restructuring package, which was approved by what was known as the, "CDR empowered group", has been annexed to this communication, and it envisaged the fina....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ing agreement to pay is factually incorrect, and cannot be countenanced. In any case, the circumstances make it obvious that even if the aforesaid proposed payment schedule annexed with its affidavit of 23.01.2015 by the respondent had been accepted by the petitioner; and the payment permitted by this Court, on the terms proposed; although there is nothing on the record to bear this out; it would have made no difference because the condition precedent, i.e., the, "successful completion of CDR and release of payment accordingly.", does not appear to have come about. 17. It bears repetition that although the respondent company has admitted the debt; and at one stage had also offered to repay the same on terms, subject to receiving necessary funding after the acceptance of a Corporate Debt Restructuring Scheme by the consortium of secured creditors and banks; this offer has not been specifically accepted either by the petitioner, or more importantly by this Court, at any time. A perusal of the record shows that in fact, the stage for this exercise never came about, and all that has come on the record so far is merely the company's acceptance of the debt and its conditional offer....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... for the respondent has referred to a decision of the Supreme Court in Managing Director, Bhoruka Textiles Limited v. Kashmiri Rice Industries, (2009) 7 SCC 521, to the effect that, "the receipt of a reference must be held to be the starting period for proceeding with the enquiry." In the same context, it is also noteworthy that even by the communication dated 14.07.2015, informing the company that the reference has been duly registered, further directions have also been communicated to the respondent to the effect that the company is restrained from disposing off or alienating any fixed assets of the company; whilst also directing the company to furnish additional information sought by the Board in connection with the said reference. Merely because the Board is not sitting for any reason is, therefore, no ground for concluding that the enquiry has not commenced. In that view of the matter, it is also obvious that if this Court were to proceed further with the winding up proceedings whilst exercising company jurisdiction, any orders or judgment passed thereafter would be coram non judice. 21. A Full Bench of the Supreme Court in Madura Coats Limited v. Modi Rubber Limited and....
X X X X Extracts X X X X
X X X X Extracts X X X X
....y. By this argument, counsel for the petitioner presumably means that if there was no proceeding pending for winding up of the company on the date when the reference was registered by the BIFR under SICA, there would have been no need for this Court to entertain the instant application moved by the company praying that the matter be not proceeded with further in the light of Section 22(1) SICA. While the latter may be true in itself, it requires a prodigious leap of faith from there to conclude that since proceedings for winding are, in fact, pending, therefore the mandate of Section 22(1) SICA should be ignored by this Court and it should continue with the winding up proceedings. As far as I have been able to make out, this conclusion is also invited by counsel for the petitioner on the ground that these proceedings have not been concluded earlier and remain pending because the company is at fault in not having paid the outstanding amount even though, according to her, it had given its, "consent", before this Court. This line of reasoning is deeply flawed and illogical. It is being noted only to be rejected as completely unsustainable for a number of reasons, including the fact th....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... by the company whose winding up is being sought, and is under consideration by the court; the matter has suddenly been converted into a civil suit for recovery. Even if were, that too would come under the bar of Section 22(1) of the SICA, so I do not really know what learned counsel intended by taking this approach in the matter. 25. In this context, I might add that any offer made before the Company Court in winding up proceedings by the company to pay an unsecured creditor; such as the petitioner; in preference to the debts owed to workers and secured creditors, requires serious application of mind by the Court to all the relevant circumstances, and the affairs of the company. This is necessary for the Court to satisfy itself about the genuine viability of the company as a going concern, so that the Court may not commit the error of allowing preferential payment to be made out to an unsecured creditor in preference to other priority creditors including, inter alia, secured creditors of a company that deserved to be wound up in the first place. To my mind, this obligation assumes greater significance in the light of Sections 531; 531(A); 441; 536 and 537 of the Companies Act, ....