2015 (9) TMI 1572 - HC - Companies Law

Company Court in India territorial jurisdiction - petition for winding up of the Company having its registered office in India - Company Petition by the appellant Trustee - winding up petition - Held that - It cannot be denied that filing of a winding up petition on account of the Company being unable to pay its debts is a proper course which can be taken by the creditor. A creditor in its wisdom may chose to file a suit for payment of its debts but merely because of having such a right available would not bar the creditor from filing a winding up petition where the debts are admitted by the Company and it is unable to pay. By saying this we are not recording a finding to the effect that the Company is unable to pay its admitted debts but where the Company Petition has been filed on the ground that there are admitted debts to be paid by the Company to the appellant which it is unable to pay it would be for the Company Court to take a final decision in the matter and then decide whether in the facts of the case the Company is to wound up or not. However saying that because of clause 13.3 of the Trust Deed the option of filing of Company Petition by the appellant Trustee is taken away would not be correct. As we have already observed above questions of law can always be looked into by the Courts in India by applying either Indian law or English law as the case may be. For deciding this question all that would be required is interpreting the provisions of the Trust Deed by applying Indian law or English law. In our view the same can always be done by the Company Court if such question is raised before it during the course of the proceedings. The position of law is absolutely clear that it is for the company petitioner to prove that the debt liable to be paid is either admitted or duly proved and also that the company is unable to pay such debt. It is only in such circumstance the petition for winding up would be allowed. In the present case since such question has not been gone into by the Company Judge who has dismissed the petition only on the ground of lack of jurisdiction we would not be inclined to make any observation in this regard and would leave it to the Company Court to record its finding on this issue. Thus we are of the opinion that the dismissal of the Company Petition on the ground of jurisdiction cannot be sustained in the eye of law. Accordingly the judgment of the Company Court dismissing the Company Petition is set aside and the matter is remanded back to the Company Court for fresh decision

Summary

Issues Involved:
1. Jurisdiction of the Company Court in India to entertain a winding-up petition.
2. Nature of the contract between the parties.
3. Applicability of English law and jurisdiction of English courts.
4. Admissibility and enforcement of debt under the Companies Act, 1956.
5. Interpretation of Trust Deed and Bond clauses.
6. Admissibility of winding-up petition based on admitted debts.

Detailed Analysis:

1. Jurisdiction of the Company Court in India to entertain a winding-up petition:
The primary issue was whether the Company Court in India had the jurisdiction to entertain a winding-up petition against a company registered in India. The court noted that Section 10 of the Companies Act provides that the High Court having territorial jurisdiction over the place where the registered office of the company is situated has jurisdiction. Since the registered office of the respondent company was in Bangalore, the Karnataka High Court had jurisdiction. The court also emphasized that Section 9 of the Companies Act overrides any agreement to the contrary, meaning the Companies Act would prevail over the provisions of the Trust Deed.

2. Nature of the contract between the parties:
The contract involved a Trust Deed between the respondent company and the appellant, who was the trustee for the bondholders. The Trust Deed included clauses that governed the enforcement of the bonds and specified the jurisdiction for legal proceedings. The court examined clauses 13.3 and 20 of the Trust Deed, which detailed the enforcement mechanisms and jurisdictional provisions.

3. Applicability of English law and jurisdiction of English courts:
The Trust Deed stipulated that it and the bonds would be governed by English law and that the English courts would have exclusive jurisdiction over disputes. However, clause 20.4 allowed the trustee or bondholders to take proceedings in any other courts with jurisdiction. The court noted that Indian courts could apply English law by virtue of Section 57 of the Indian Evidence Act, which requires Indian courts to take judicial notice of public Acts passed by the UK Parliament.

4. Admissibility and enforcement of debt under the Companies Act, 1956:
The appellant argued that the respondent company had admitted its liability to pay the debt in response to the statutory notice and in its balance sheet. Section 433(e) of the Companies Act allows for winding up if a company is unable to pay its debts. The court found that the respondent's admission of liability and the inclusion of the debt in the balance sheet fulfilled the conditions under Section 433(e), making the winding-up petition admissible.

5. Interpretation of Trust Deed and Bond clauses:
The court interpreted clause 13.3 of the Trust Deed, which allowed the trustee to initiate legal proceedings to enforce repayment of the bonds. The court also examined clause 10.1 of the Bond, which provided conditions under which the trustee could act on behalf of the bondholders. The court concluded that the trustee had the right to file the winding-up petition, as the clauses did not preclude such action.

6. Admissibility of winding-up petition based on admitted debts:
The court emphasized that the winding-up petition was based on admitted debts, which the respondent company had acknowledged in its response to the statutory notice and in its balance sheet. The court rejected the argument that the petition involved disputed questions of fact, noting that the respondent had not disputed the liability to pay the interest due. The court held that the trustee could file the winding-up petition, as the debts were admitted and the company was unable to pay them.

Conclusion:
The court set aside the judgment of the Company Court, which had dismissed the winding-up petition on the ground of lack of jurisdiction. The case was remanded back to the Company Court for a fresh decision in accordance with the law. The appeal was allowed, and the court directed the Company Court to expedite the proceedings.