2001 (3) TMI 920 - HC - Companies Law

Summary

Issues Involved:
1. Validity of the Inter Corporate Deposit (ICD) agreement.
2. Alleged purpose of the ICD.
3. Bona fide dispute regarding the repayment of the ICD.
4. Limitation period for filing the petition.
5. Verification of the company petition.
6. Entitlement to interest on the ICD.

Detailed Analysis:

1. Validity of the Inter Corporate Deposit (ICD) Agreement:
The petitioner placed an ICD with the respondent-company for a period of 90 days, as evidenced by a cheque dated 7-3-1995 and a letter dated 8-3-1995. The terms included interest payable on a quarterly basis and the principal amount of Rs. 25 lakhs to be remitted with 20% interest per annum on 7-6-1995. Clause 3 stated that the ICD and interest were not subject to lien or adjustment with other debts. Clause 5 stipulated a 24% per annum interest in case of default. The respondent-company accepted these terms by affixing its stamp on the letter. Despite the due date, the respondent failed to repay the amount, leading to a statutory notice on 17-6-1997, which was not replied to on merits.

2. Alleged Purpose of the ICD:
The respondent-company argued that the ICD was a finance arrangement to enable it to subscribe to the issue of Partly Convertible Debentures of J.K. Udaipur Udyog Ltd. The respondent claimed that the ICD was placed to support an under-subscribed public issue, with an understanding that the amount would be repaid after selling the converted equity shares. However, this defense was not mentioned in the initial replies to the statutory notices and was only introduced in the affidavit in reply.

3. Bona Fide Dispute Regarding the Repayment of the ICD:
The Court found that the respondent's defense lacked bona fide. The respondent did not deny receiving Rs. 25 lakhs as an ICD under the stipulated terms. The defense was inconsistent, as evidenced by the repayment of Rs. 21 lakhs to Pranav Investments Ltd., another group company that also placed an ICD. The respondent's claim that the public issue was heavily undersubscribed was contradicted by the petitioner, who stated that the issue was fully subscribed and the ICD was placed after the issue closed.

4. Limitation Period for Filing the Petition:
The ICD became due on 7-6-1995, and the respondent acknowledged the outstanding dues on 16-1-1998, within three years. The company petition was filed on 1-7-1999, making the plea of limitation baseless.

5. Verification of the Company Petition:
The respondent contended that the petition was not verified by a duly authorized representative. However, the Court found this contention meritless, as the General Power of Attorney and the resolution of the Committee of Directors provided sufficient authorization for filing the petition.

6. Entitlement to Interest on the ICD:
Under clause 5 of the letter dated 8-3-1995, the petitioner was entitled to 24% per annum interest on the defaulted amount. The Court acknowledged the contractual claim for interest, noting that the petitioner had been deprived of the use of the money for nearly five years. Consequently, the Court directed the respondent to deposit Rs. 40 lakhs in the Court within four weeks, failing which the petition would be admitted and advertised.

Conclusion:
The Court ordered the respondent to deposit Rs. 40 lakhs within four weeks, allowing the petitioner to file a suit for recovery, with the deposited amount lying to the credit of the suit. All defenses, including limitation, were left open for the respondent to argue in the suit. If the amount was not deposited, the company petition would be admitted and advertised.