2008 (9) TMI 572 - HC - Companies Law

Winding up petition - non-payment of a sum of ₹ 2,94,60,698 with further interest at the rate of 18 per cent, per annum - Held that - There is no merit in the contention on behalf of the company that the dispute raised by the company must be treated as bona fide because the company has filed the suit before the statutory notice was issued. Such a suit does not make the dispute bona fide only because it is filed before the statutory notice. It is necessary for the court to examine whether the defence to the company proceedings based on such a suit is substantial. Also it cannot be said that merely because the bank has filed proceedings for recovery under the Recovery of Debts Due to Banks and Financial Institutions Act, 1993, before the Debts Recover Tribunal, it cannot maintain the petition for winding up. Thus the respondent-company is directed to deposit a sum of ₹ 2,94,60,698 within a period of eight weeks from today, failing which the company petition shall stand admitted and the petitioner shall advertise the petition in two local newspapers, viz., Free Press Journal, Maharashtra Times and in the Maharashtra Government Gazette. The petitioner shall deposit an amount of ₹ 10,000 with the Prothonotary and Senior Master towards the publication charges within three weeks from the date of default with an intimation to the Company Registrar, failing which the petition shall stand dismissed for non-prosecution.

Summary

Issues:
1. Alleged non-payment of a sum of Rs. 2,94,60,698 by the respondent-company under a credit arrangement letter and an internal swaps and derivative association master agreement.
2. Dispute regarding derivative transactions and agreements entered into by the company with the petitioner-bank.
3. Validity of the defence raised by the company against the winding-up petition.
4. Requirement for the respondent-company to deposit the disputed amount to avoid admission of the winding-up petition.

Analysis:
1. The petitioner filed a winding-up petition against the respondent-company for non-payment of Rs. 2,94,60,698 under a credit arrangement letter and an internal swaps and derivative association master agreement. The agreements allowed the company to enter into derivative transactions with the petitioner-bank to hedge currency risks. The company disputed the liability, citing issues with specific transactions and the borrowing limits imposed by its articles of association.

2. The company claimed that certain transactions were illegal and not binding, contending that the agreements were executed in excess of borrowing limits and without proper authority. However, the court found that the company's defence was not bona fide as it had authorized the agreements, made payments, and issued a dishonored cheque related to the transactions in question.

3. The court noted that the company's defence would be examined in the pending suit and emphasized that the observations made were prima facie and limited to the winding-up proceedings. The court rejected the argument that filing a suit before a statutory notice automatically makes a dispute bona fide, stressing the need for substantial defence against winding-up proceedings.

4. The court directed the respondent-company to deposit the disputed amount within eight weeks to avoid admission of the winding-up petition. Failure to comply would lead to the petition being admitted, and the petitioner would advertise it in local newspapers. Additionally, the petitioner was instructed to deposit publication charges, with non-compliance resulting in dismissal of the petition for non-prosecution. If the amount was deposited as directed, it would be credited to the original application.

Overall, the judgment addressed the disputed non-payment issue, evaluated the company's defence, and set a deadline for depositing the disputed amount to prevent the winding-up petition from being admitted.