2016 (11) TMI 1703 - HC - Companies Law

Cancellation of cash credit facility under which the loan was obtained - default in repayment of loan - privity of contract between the respondent Bank in carrying on business - insufficiency of stamp duty - HELD THAT - In the present case the Company raises a defence that if the creditor was to enforce the corporate guarantee on account of non-payment of dues by the main borrower in a Civil Court the creditor could not be relying upon this document which forms the basis of the debt since it is inadequately stamped. If such defence is taken up in a Civil Suit and if the document in question is insufficiently stamped probably such defence may come to the aid of the appellant. At this stage there are no steps taken by the creditor to enforce its claim against the guarantor based on the documents of corporate guarantee in the State of Maharashtra. Therefore definitely in the present Company Petition the Company Court was not required to consider such plea raised by the appellant. Therefore such defence will not hold water in aid of appellant s contention. Want of certificate by an authorized officer of the respondent Bank in accordance with the terms of corporate guarantee the certificate referred to in clause 15 is said to be a conclusive proof of the dues. It could be one of the modes of conclusive evidence against the guarantors. However there could be other evidence of such conclusive evidence of the dues. In other words it could be proved by other means of evidence. If there is convincing material on record with regard to the dues of the creditor against whom winding up is sought it is immaterial whether a certificate of the nature was produced or not. When a statutory notice before lodging Company Petition seeking winding up of the appellant s Company was filed by the respondent Bank they had made it clear that the respondent bank s debt was over 22 crores therefore cannot be said to be disputed with bonafides on the part of the appellant. There is nothing on record to show that in the Company Petition the respondent Bank has not correctly disclosed the position of the debt as on the date of the petition. Appeal dismissed.

Summary

Issues:
Challenge to winding up order based on corporate guarantee, insufficiency of stamp duty on the guarantee document, lack of certificate by authorized officer of the respondent Bank, defense of no privity of contract with the head office of the bank, and defense based on payments made by the principal borrower.

Analysis:

1. Challenge to Winding Up Order based on Corporate Guarantee:
The appellant challenged the winding up order based on the corporate guarantee issued to ICICI Bank Limited. The appellant argued that there was no privity of contract between the respondent Bank's branches and the appellant Company. The Court held that the document clearly stated the involvement of ICICI Bank's registered office at Vadodara, corporate office at Mumbai, and the Hong Kong branch, dismissing the appellant's contention regarding the jurisdiction of the branch.

2. Insufficiency of Stamp Duty on Guarantee Document:
The appellant raised the issue of insufficient stamp duty on the corporate guarantee document. The Court clarified that the adequacy of stamp duty in the State where the document was executed was sufficient. The Court emphasized that the insufficiency of stamp duty does not impact the consideration of winding up a company; the focus should be on the company's ability to pay its debts.

3. Lack of Certificate by Authorized Officer of the Respondent Bank:
The appellant argued that the absence of a certificate by an authorized officer of the respondent Bank invalidated the claim under the corporate guarantee. The Court stated that while such a certificate could serve as conclusive evidence, other forms of evidence could also establish the dues. The Court highlighted the appellant's acknowledgment of liability through various correspondences and documents.

4. Defense of No Privity of Contract with Head Office of the Bank:
The appellant contended that the contract of corporate guarantee was executed with the Hong Kong branch of the respondent Bank, creating a defense of no privity of contract with the head office. The Court rejected this defense, emphasizing the clear involvement of the Bank's various offices in the transaction.

5. Defense Based on Payments Made by Principal Borrower:
The appellant argued that several payments made by the principal borrower to the respondent Bank were not considered, impacting the outstanding dues. The Court noted the details of payments made during the proceedings, ultimately upholding the winding up order based on the substantial debt owed by the appellant.

In conclusion, the Court dismissed the appeal, affirming the Company Court's decision to wind up the appellant Company based on the outstanding dues under the corporate guarantee. The judgment emphasized the importance of honoring financial obligations and dismissed the appellant's defenses regarding jurisdiction, stamp duty, and lack of a certificate, highlighting the appellant's acknowledgment of liability through various communications and financial documents.