2012 (3) TMI 111 - HC - Companies Law

Winding up petition - appellant-company had suggested the proposal for settlement by way of one time resettlement of loan - On the basis of the above recovery certificate and calculating the interest on the principal amount, the petitioning creditor issued notice to the appellant-company calling upon the company to pay the bank an amount of Rs. 14.26 crores together with further interest from 1 March 2010 and other charges - It is also submitted that the appellant is a going concern with 470 employees who are being paid monthly wages of Rs. 21 lakhs - Held that having regard to the fact that the first winding up petition being Company Petition No.5 of 2006 by this very petitioning creditor against the same company was dismissed by this Court in terms of order dated 8 June 2006 - Appeal is alloowed

Summary

Issues Involved:
1. Maintainability of the winding-up petition based on the recovery certificate issued by the Debt Recovery Tribunal (DRT).
2. The impact of previous settlement agreements and payments made by the appellant.
3. The appellant's financial viability and its implications on the winding-up petition.
4. The appellant's willingness to make further payments to settle the debt.

Issue-wise Detailed Analysis:

1. Maintainability of the winding-up petition based on the recovery certificate issued by the Debt Recovery Tribunal (DRT):
The appellant contended that the winding-up petition was not maintainable because the petitioning creditor had not resorted to executing the recovery certificate issued by the DRT. According to the appellant, under Section 433(e) read with Section 434(1)(b) of the Companies Act, the petitioning creditor could only resort to winding-up proceedings if the execution process on the recovery certificate was returned unsatisfied. The court, however, did not express an opinion on this issue, as the appeal was allowed on other grounds.

2. The impact of previous settlement agreements and payments made by the appellant:
The appellant argued that it had entered into a one-time settlement (OTS) with ICICI for Rs. 3.50 crores, which superseded all previous agreements. The appellant had complied with the terms of the OTS by paying Rs. 3.16 crores by 31 December 2007, as directed by the court in the previous winding-up petition (Company Petition No. 5 of 2006). The court noted that the first winding-up petition by the same petitioning creditor was dismissed after the appellant complied with the order. The appellant's defense regarding the OTS with ICICI and the petitioning creditor being a mere assignee from ICICI was pending examination before the Debt Recovery Appellate Tribunal (DRAT), indicating a bona fide dispute.

3. The appellant's financial viability and its implications on the winding-up petition:
The appellant highlighted that it was a going concern with 470 employees and had shown financial improvement with a turnover of Rs. 44.95 crores and a profit before depreciation of Rs. 1.45 crores for the year ending 31 March 2011. Admitting the winding-up petition would trigger a series of cross defaults, leading to acute insolvency and cessation of manufacturing operations. The court considered the appellant's financial viability and the potential adverse impact of admitting the winding-up petition on its operations and employees.

4. The appellant's willingness to make further payments to settle the debt:
The appellant expressed readiness to deposit Rs. 1.5 crores as directed by the court on 14 November 2011 and proposed an additional payment schedule totaling Rs. 3.25 crores. The court noted the appellant's willingness to make further payments and allowed the appeal on the condition that the appellant deposits Rs. 3.25 crores with the DRAT as per the specified schedule. Failure to comply with the payment schedule would result in the dismissal of the appeal and revival of the learned Company Judge's order.

Conclusion:
The court allowed the appeal, setting aside the impugned order of the learned Company Judge, on the condition that the appellant deposits Rs. 3.25 crores with the DRAT according to the specified schedule. The court emphasized that the appellant had raised a bona fide dispute pending before another forum and highlighted the appellant's financial viability and willingness to settle the debt. The injunction restraining the appellant from transferring or encumbering its immovable properties would continue until the deposit was made. The court clarified that it had not expressed any opinion on the merits of the appeal pending before the DRAT.