2013 (6) TMI 301 - HC - Companies Law

Winding up petition - respondent company s inability to discharge admitted liability - respondent company, is indebted to the petitioner for and on behalf of the Bondholders for a sum of USD.64,036,036.29 under the Bonds along with accrued interest and default interest - petitioner has filed this petition in its capacity as a trustee on behalf of the Bondholders - Held that - This company petition deserves to fail as admittedly, in the present case, under the trust deed authorised the petitioner can maintain the petition for recovery only if 25% of the bondholders authorised the filing of a petition. Inspite of preliminary objection, the petitioner failed to place on record authorisation by the 25% of the bondholders to maintain the present petition. The filing of memo after judgment reserved, is not permissible, as no permission was sought from the court to place additional document or record. The judgment in K.T.S.(Singapore) Plc. Ltd. vs. Associated Forest Products (Pvt.) Ltd. (1993 (1) TMI 243 - HIGH COURT OF CALCUTTA) also cannot advance the case of the petitioner, as the dispute in that case was not the one which raised in this petition. The question to be determined in this case is as to whether the petition as framed is competent or not. Thus as noticed that it is now well settled law that winding up is not legitimate means to enforce the recovery by pressurizing the company to enter into a settlement. The fact that the respondent is a running company is not controverted nor it is controverted that there is financial crunch on account of non receipt of dues form the customers. That being the case, it will be too harsh to order winding up of a running company, merely on the petition by trustee, filed without proper authorisation. Consequently, finding no merit, the company petition is ordered to be dismissed. The petitioner shall however be at liberty to enforce their rights in accordance with law to recover the amount due to bondholders, in terms of Trust deed.

Issues Involved:
1. Maintainability of the company petition.
2. Competence of the petitioner to file the winding-up petition.
3. Non-payment of admitted liability by the respondent company.
4. Respondent's financial condition and ability to pay debts.
5. Legal implications of the statutory notice and authorization from bondholders.

Issue-wise Detailed Analysis:

1. Maintainability of the Company Petition:
The petitioner, Deutsche Trustee Company Ltd., invoked the jurisdiction of the court under sections 433(E), 434(1)(A), and 439 of the Companies Act, 1956, seeking the winding-up of the respondent company due to its inability to discharge admitted liabilities. The respondent opposed the petition, arguing that it was filed merely to pressure the company into paying the debt and that the petition was not maintainable on the facts and circumstances presented.

2. Competence of the Petitioner to File the Winding-Up Petition:
The petitioner filed the petition as a trustee on behalf of the bondholders, claiming authorization from holders of at least 25% of the bonds outstanding. However, the respondent contended that no such authorization was placed on record, and the statutory notice did not mention any authorization from 25% of the bondholders. The court found that the petitioner failed to provide the necessary authorization, making the petition defective.

3. Non-Payment of Admitted Liability:
The petitioner argued that the respondent company failed to pay interest on the bonds due since June 2009, constituting an event of default under the bond conditions. Despite repeated assurances and reminders, the respondent did not make the payments. The respondent admitted to facing a financial crunch but argued that it was a temporary situation and not indicative of insolvency.

4. Respondent's Financial Condition and Ability to Pay Debts:
The respondent company claimed to be a growing concern with operations in India and abroad, suffering a temporary cash crunch due to the global financial crisis and delayed payments from clients. The company argued that it was not insolvent and was making efforts to recover from the financial situation. The court noted that winding up a running company facing temporary financial difficulties would be too harsh.

5. Legal Implications of the Statutory Notice and Authorization from Bondholders:
The petitioner served a statutory winding-up notice, but the respondent did not provide a detailed reply. The court considered the lack of authorization from bondholders and the improper stamping of the power of attorney as significant issues. The court also referenced judgments from other high courts, noting that the petitioner did not follow proper procedures for filing additional documents after the judgment was reserved.

Conclusion:
The court dismissed the company petition, finding it defective due to the lack of proper authorization and the improper use of the power of attorney. The court emphasized that winding up is not a legitimate means to enforce recovery by pressurizing a company. The petitioner was granted the liberty to enforce their rights in accordance with the law to recover the amount due to bondholders under the trust deed. No costs were awarded.

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