2010 (12) TMI 1277 - HC - Indian Laws

Summary

Issues Involved:
1. Winding up of the company due to inability to discharge liabilities.
2. Proceedings under the SARFAESI Act initiated by the assignees of secured creditors.
3. Validity and enforceability of the assignment of debts to Kotak Mahindra Bank and Alchemist Asset Reconstruction Company.
4. Applicability of RBI's One Time Settlement (OTS) guidelines to the company.
5. Bona fide nature of the company's defense against the winding-up petition.

Detailed Analysis:

1. Winding up of the Company:
The court examined whether the company should be wound up for its inability to discharge its admitted liabilities. The company had availed loans amounting to Rs. 9.26 crores from a consortium of banks and failed to repay the amount despite several opportunities and concessions. The company's defense that the debt was disputed was deemed not bona fide. The court noted that the company had not responded to pre-admission notices and failed to file a written statement in time, leading to the admission of the winding-up petition. The company's appeals against the admission and publication orders were dismissed, and it was concluded that the company's defense was unreliable and dishonest. Consequently, the company was ordered to be wound up, and the Official Liquidator was appointed to take over its assets and liabilities.

2. Proceedings under the SARFAESI Act:
The company challenged the proceedings initiated under the SARFAESI Act by the assignees of IFCI and IDBI. The court noted that once a notice under Section 13(4) of the SARFAESI Act is issued, the remedy lies with the Debt Recovery Tribunal (DRT). The company had previously filed and withdrawn a writ petition seeking directions to the secured creditors to calculate dues as per RBI's OTS guidelines. The court held that the company's challenge to the SARFAESI proceedings was not maintainable and dismissed the writ petition, directing the company to approach the DRT for any grievances.

3. Validity and Enforceability of the Assignment of Debts:
The court addressed the company's contention that the assignment of debts to Kotak Mahindra Bank and Alchemist Asset Reconstruction Company was invalid due to improper stamp duty. The court held that the registration of the assignment deeds by the competent authority was prima facie proof of proper stamp duty. The assignees were entitled to enforce the debts as per the original loan agreements, and the company's argument was rejected.

4. Applicability of RBI's One Time Settlement (OTS) Guidelines:
The company claimed that it was entitled to settle its dues under RBI's OTS guidelines. The court examined the guidelines and noted that they were applicable to small and medium enterprises (SMEs) with outstanding balances below Rs. 10 crores. The company's investment in plant and machinery exceeded Rs. 10 crores, disqualifying it from availing the OTS scheme. The court also noted that the company's assets should have been declared as Non-Performing Assets (NPA) in 1993, but the relevant circulars indicated different criteria for NPA classification. The court concluded that the company was not entitled to OTS benefits.

5. Bona Fide Nature of the Company's Defense:
The court scrutinized the company's defense that the debt was bona fide disputed. It was found that the company had paid only a fraction of the interest due and had not made any payments towards the principal amount. The company's claim that only Rs. 2.62 lakhs was payable was deemed preposterous. The court highlighted the importance of financial institutions in maintaining economic liquidity and criticized the company's attempts to evade repayment. The company's defense was found to lack credibility and bona fide intent.

Conclusion:
The court ordered the winding up of the company due to its failure to discharge admitted liabilities and dismissed the writ petition challenging the SARFAESI proceedings. The company's defenses were found to be dishonest and lacking in bona fide intent, and its claims under RBI's OTS guidelines were deemed inapplicable. The Official Liquidator was appointed to take over the company's assets and liabilities.