2012 (7) TMI 1038 - HC - Indian Laws

Winding up - Held that - In the present case, the order of the learned Single Judge admitting the Company Petition for winding up was passed on 21 October 2010. Prior thereto on 9 December 2009 the Respondent had acquired the financial assets in question being the debts and receivables of DBS Bank Ltd. under Section 5 (1) of the Securitisation Act. The reference to the BIFR was made on 26 November 2010. Clearly in view of the specific language of the first proviso to Section 15(1) of the SICA, 1985, the reference was not maintainable. For these reasons we do not find any merit in the contention of the Appellant based on the provisions of Section 22 of the SICA, 1985. The material on record clearly establishes that a debt is due and payable by the Company. The Company was granted financial assistance and has utilised it. A statutory notice of winding up was issued. No reply was filed to the Petition for winding up. Even before this Court no submission other than what is recorded hereinabove has been urged. The debt is not in dispute.

Summary

Issues:
1. Validity of Company Petition for winding up.
2. Applicability of Section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985.
3. Interpretation of provisions of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 in relation to the Sick Industrial Companies (Special Provisions) Act, 1985.

Issue 1: Validity of Company Petition for winding up
The Appeal arose from an order admitting a Company Petition for winding up, initiated by a company registered under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002. The Respondent, holding the debt of the Applicant Company, issued a notice under the Companies Act after the Company failed to pay its dues despite a demand by the bank. The learned Company Judge admitted the Petition for winding up as the Company failed to dispute the debt, leading to the direction for advertisement of the Petition.

Issue 2: Applicability of Section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985
The Appellant contended that the Company had moved a reference before the Board for Industrial and Financial Reconstruction (BIFR) under Section 15 of the Sick Industrial Companies (Special Provisions) Act, 1985. However, it was revealed that the BIFR reference was rejected, and an Appeal was filed before the Appellate Authority for Industrial and Financial Reconstruction (AAIFR). The Court analyzed the provisions of the SICA, 1985 and the Securitisation Act to determine the impact on the ongoing proceedings.

Issue 3: Interpretation of provisions of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002
The Court delved into the provisions of the Securitisation Act and its amendments to the SICA, 1985, particularly focusing on the provisos added to Section 15(1) of the SICA, 1985. The analysis emphasized the distinction between the first and second provisos, clarifying that the first proviso applies to situations involving securitisation or reconstruction companies acquiring financial assets, while the second proviso deals with pending references before the BIFR and the abatement criteria based on actions by secured creditors.

In conclusion, the Court dismissed the Appeal, upholding the validity of the Company Petition for winding up, rejecting the Appellant's arguments based on the provisions of Section 22 of the SICA, 1985. The judgment highlighted the undisputed debt due by the Company, the lack of dispute regarding the amount owed, and the partial deposit made by the Appellant. The deposited amount was directed to be credited to the Company Petition for winding up, subject to the orders of the Company Court, with no costs awarded for the Appeal.