2014 (9) TMI 1222 - HC - Companies Law

Winding up of Company - Petition filed by the appellant was dismissed on the ground that the power deed executed by the trustee is insufficiently stamped and the trustee has not produced the authorisation as required under Clause 10 of the Trust deed - HELD THAT - Clause 10 of the Trust deed dated 27.12.2002 speaks about the action, proceedings and indemnification by the trustee representing the appellant as against the respondent. Clause 10.1 deals with the rights of the Bond holders vis-a-vis the duties of the trustee. As per clause 10.1, the trustee is not bound to take any action unless he is directed or requested to do so by an extraordinary resolution or in writing of the holders of atleast one quarter in principal amount of the Bonds then outstanding. Therefore, it merely speaks about the action that is required on the part of the trustee when it was sought to be initiated at the instance of the Bondholders. Under clause 9 of the Trust deed, the trustee may, at any time, at its absolute discretion and without any notice, take such proceedings and/or other steps as it may think fit against or in relation to the Company to enforce its obligations under these presents. Therefore, a combined reading of the above said provisions would make it clear that it is a trustee, who can represent either on its own or at the instance of the required Bondholders. The appellant has raised a specific plea in the Company Petition that it has been filed both on behalf of the Bondholders as well as in its capacity as a trustee, as there was a breach of covenants and obligations under the Trust deed on the part of the respondents. Furthermore, the authorisation has also been produced. The respondent has not questioned the validity or genuineness of the said authorisation. Therefore, the learned single Judge was not right in rejecting the application on the ground that there was no valid authorisation. The execution of the power of attorney is also not in dispute. As rightly submitted by the learned Senior Counsel, the Company Court ought to have impounded the document and send it to the Collector for re-validation. Even otherwise, a fresh document has been filed by the appellant. The genuineness and authenticity of the said document has not been questioned by the respondent - the order passed by the learned single Judge dismissing the petition on the ground of insufficiently stamped power deed is also liable to be set aside and accordingly the same is set aside. Matter remanded back to the learned single Judge to decide the matter on merit after hearing the parties as to whether the Company Petition requires to be admitted and to be followed by appropriate consequential directions - petition allowed by way of remand.

Summary

Issues:
- Dismissal of Company Petition on grounds of insufficient stamp duty and lack of authorization
- Validity of power deed and authorization from Bondholders
- Interpretation of Clause 10 of Trust deed
- Admissibility of Company Petition and remittal for further consideration

Issue 1: Dismissal of Company Petition on grounds of insufficient stamp duty and lack of authorization

The appellant, a corporate trustee, filed a Company Petition seeking to wind up the respondent company due to non-payment. The petition was dismissed by the learned single Judge citing insufficient stamp duty on the power deed and lack of authorization from Bondholders as required by the Trust deed. The appellant challenged this dismissal, arguing that the 25% authorization from Bondholders was in place, and the power deed could be rectified by paying the deficit stamp duty. The appellant also highlighted the respondent's lack of response to the notice issued. The High Court found that the rejection based on lack of valid authorization was incorrect, as the memo with the required documents had been filed and served on the respondent. The Court referred to similar judgments to support the appellant's position and set aside the dismissal order.

Issue 2: Validity of power deed and authorization from Bondholders

The Trust deed's Clause 10.1 required direction or request from at least one-quarter of the Bondholders for the trustee to take action. The appellant contended that the petition was filed on behalf of Bondholders and as a trustee due to the respondent's breach of obligations. The Court noted that the authorization had been produced, and its genuineness was not disputed by the respondent. The Division Bench judgment from the Bombay High Court was cited to support the appellant's right to file a winding-up petition as a trustee for the Bondholders. The Court found no dispute regarding the execution of the power deed and allowed the appeal, emphasizing the need for the Company Court to impound the document for re-validation if necessary.

Issue 3: Interpretation of Clause 10 of Trust deed

The Court analyzed Clause 10 of the Trust deed, emphasizing the trustee's discretion to take action on behalf of the Bondholders as per the deed's provisions. It clarified that the trustee could act independently or at the direction of the required Bondholders. The Court found that the appellant had fulfilled the necessary requirements under the Trust deed and that the respondent had not challenged the authorization's validity. The judgment from the Bombay High Court was referenced to support the appellant's position on the trustee's role and rights under the Trust deed.

Issue 4: Admissibility of Company Petition and remittal for further consideration

While setting aside the learned single Judge's findings, the High Court decided not to admit the Company Petition immediately. Instead, it remitted the matter back to the single Judge for a fresh consideration on merits. The Court acknowledged the need for a detailed examination of the case and left all issues on merit open for further review. The Court upheld the reasons presented in the appellant's petition for additional documents and ordered the matter to be reconsidered by the single Judge.

In conclusion, the High Court set aside the dismissal order of the Company Petition, emphasizing the fulfillment of authorization requirements and the trustee's rights under the Trust deed. The matter was remitted back to the single Judge for a comprehensive review on merits, leaving all issues open for further consideration.