2015 (2) TMI 1000 - HC - Companies Law

Invocation of Corporate Guarantees - Default in repayment of dues - Serious disputes involved - Guarantees not valid, void ab-initio - Winding up petition - Winding up petition in case of arbitration clause - Non compliance of provisions of sec.592 and 599 of the Companies Act - Place of business within India Held that - In the background of the assertion on the part of the petitioners, the respondent was required to prove that they have established a place of business in India as the mere fact that they are having business transaction with Indian customers would not be sufficient. Though the content downloaded purportedly from the website of the petitioner in Co.P.No.122/2012 is produced as Annexures-R8 and R9 to the objection statement, in the rejoinder of the petitioner it is denied that it pertains to them. In that light it is also explained that the screen shot of the web page of the Registrar of companies relied at Annexures-R10 and 11 is of no consequence when there is no requirement to register. Therefore, when it is not shown conclusively that the petitioners herein have established a place of business in India, the bar pleaded under Section 599 of the Act would not apply. The contention of the respondent in that regard is liable to be rejected. A cumulative perusal of the decisions referred to by the learned senior counsel on either side would disclose that the decisions of the Hon'ble Supreme Court and a learned Single Judge of this Court cited by the learned senior counsel for the respondent company are not in the context of maintaining a winding petition as against a recovery proceeding. Further, the decision of the learned Single Judge of the Bombay High Court was on its facts and not as laying down a principle of law. On the other hand the decisions of the Hon'ble Division of this Court and Delhi High Court cited by the learned counsel for the petitioner Banks has held that the winding up petition would be maintainable even in the teeth of the other recovery proceedings initiated. In that view, I am of the opinion that the winding up petition cannot be dismissed by considering it as a parallel remedy as it is a distinct statutory remedy though in appropriate cases, on facts, the Company Court may refuse to exercise its discretion to entertain a winding up petition. A collective perusal of the decisions cited by the learned counsel which has been referred in sufficient detail will disclose that irrespective of the ultimate decision taken in each of the cases cited, the decision leading to the same should be, as to whether the defence set up by the respondent-company is a substantial bonafide defence which is not a moonshine or a mirage of a defence used as a cloak to defeat the petition.n that light, if the facts herein are examined, the fact that the petitioners herein had entered into the transactions with 'Kingfisher' of which the respondent company herein was the holding company is evident. In that view, in respect of the amounts due and payable by 'Kingfisher' the respondent company has executed corporate guarantee to repay the amount. The petitioners despite having invoked the guarantee have not received the payment and in that regard alleging that the respondent company who is to honour the guarantee is unable to pay its debts are before this Court. In that background, the fact that 'Kingfisher' owes the amount to the petitioners herein cannot be in serious dispute and to that extent, the debt is ascertained. For the purpose of reference, a perusal of the decision in the case of Kingfisher Airlines Limited v. State Bank of India and others (ILR 2014 Karn 1739)indicates that the petitioner Banks have initiated winding up proceedings in addition to their security interest, which has been approved by this Court. In so far as the petitioner Banks, the Master Debt Recast Agreement dated 21.12.2010 executed by 'Kingfisher' is produced at Annexure-C to their petition. It is also observed therein that an attempt is being made by the respondent company by taking all possible technical defence only to wriggle out of the situation. In that view, all other contentions urged in the other petitions including the contention raised with regard to not being liable to pay interest as claimed in Co.P.No.99/2013 also will have to be considered as without merit and not as a bonafide defence. Though the learned senior counsel for the respondent company contended that they have deposited a sum of ₹ 1250 crores including FD receipts, the said amount will not satisfy the claim. Further, the said amount is not a voluntary deposit to establish their bona fides and raise the dispute, but the deposit made is pursuant to the orders of this Court in the fringe proceedings relating to the sale of shares. For all the aforestated reasons, the above referred petitions are liable to be admitted. - Decided in favour of appellants.

Summary

Issues Involved:
1. Validity and enforceability of corporate guarantees.
2. Applicability of Sections 592 to 599 of the Companies Act to foreign companies.
3. Parallel proceedings and maintainability of winding-up petitions.
4. Bona fide disputes regarding the debt and corporate guarantees.
5. Financial condition and ability of the respondent company to pay its debts.

Detailed Analysis:

1. Validity and Enforceability of Corporate Guarantees:
The petitioners, foreign companies, and banks, claim amounts due from the respondent based on corporate guarantees executed by the respondent for transactions involving Kingfisher Airlines. The respondent disputes the validity of these guarantees, alleging they are void, non-est, and of no legal effect due to defects in the V2500 engines and coercion in obtaining the guarantees. The court noted that the respondent had not disputed the guarantees until after the petitions were filed, and the challenges appeared to be an afterthought. The court found the respondent's defense to be a "moonshine" or a "mirage" and not a bona fide dispute.

2. Applicability of Sections 592 to 599 of the Companies Act to Foreign Companies:
The respondent argued that the foreign companies had not complied with Sections 592 to 599 of the Companies Act, which require foreign companies to register with the Registrar of Companies if they establish a place of business in India. The court concluded that the petitioners had not established a place of business in India, and therefore, the bar under Section 599 did not apply. The court rejected the contention that the guarantees were void due to non-compliance with these provisions.

3. Parallel Proceedings and Maintainability of Winding-Up Petitions:
The respondent contended that the petitioners could not pursue winding-up petitions while also engaging in parallel proceedings under the RDDB Act and SARFAESI Act. The court held that winding-up petitions are distinct statutory remedies and can be maintained even if other recovery proceedings are ongoing. The court cited decisions that established the maintainability of winding-up petitions despite the pendency of other recovery actions.

4. Bona Fide Disputes Regarding the Debt and Corporate Guarantees:
The court examined whether the disputes raised by the respondent were substantial and bona fide. The respondent's defenses included claims of defective engines and coercion in obtaining guarantees. However, the court found these defenses to be unsubstantiated and raised only after the petitions were filed. The court emphasized that a bona fide dispute must be genuine and not a mere wrangle or an afterthought.

5. Financial Condition and Ability of the Respondent Company to Pay Its Debts:
The court considered the financial condition of the respondent company, noting that it was unable to pay its debts. The respondent's financial reports indicated poor financial health, and the court observed that the respondent's defenses were attempts to avoid payment rather than genuine disputes. The court also noted that the respondent had not voluntarily deposited any amount to demonstrate its bona fides.

Conclusion:
The court admitted the winding-up petitions, finding that the respondent's defenses were not bona fide and that the respondent was unable to pay its debts. The court ordered the petitions to be advertised, indicating the date of hearing as 26.02.2015.