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2016 (7) TMI 1191 - HC - Companies LawWinding up petition - Respondent Company is unable to pay debts - Held that - As carefully gone through the deal confirmation annexed at Exh. K to the Petition as well as Exh. F to the affidavit in rejoinder dated 24 March, 2014. Both the aforesaid documents are one and the same deal confirmation and are identical in its terms. The only difference between the two is that the duplicate of this deal confirmation has been signed by the Respondent Company (through its authorised signatories) whereas the stamped deal confirmation is unsigned by the Respondent Company. Reading these two documents together, find absolutely no merit in the submission of Mr Cama that there is any variance between the two documents. In any event, this defence is taken for the first time in this Company Petition and was never raised by the Respondent Company at the time when it disputed its liability on the expiry of the relevant options under the Deal Confirmation dated 26 June, 2008. Therefore find that this defence is neither in good faith nor bonafide which would persuade me to dismiss this Company Petition on this ground. If in fact, it was the case of the Respondent Company that it was not a signatory to the Deal Confirmation which in turn did not give rise to any liability, such a fundamental defence would have been taken up by the Respondent Company at the very first instance and would not find place for the first time only in the affidavit in reply filed to contest the contentions raised by the petitioner Bank. This being the position, unhesitatingly reject this argument. For all the aforesaid reasons, find that there is no bonafide defence that has been raised by the Respondent Company. The liability incurred by the Respondent Company to the Petitioner Bank is on the basis of a written contract (the Deal Confirmation) entered into between them which the Respondent Company has, without sufficient cause, failed to honour. The liabilities are far in excess of an amount of ₹ 500/- as contemplated under section 434(1)(a) of the Companies Act, 1956. This, to my mind, would entitle the Petitioner to seek an order of admission of this Company Petition. In these circumstances, the following order is passed - (i) The Company Petition is admitted and made returnable on 3rd October, 2016. (ii) The admission of this Company Petition shall be advertised in two local newspapers viz. (i) Free Press Journal (in English) and (ii) Navshaktti (in Marathi) as also in (iii) Maharashttra Governmentt Gazetttte. Any delay in publication of the advertisement in the Maharashtra Government Gazette and any resultant inadequacy of notice shall not invalidate such advertisement or notice and shall not constitute non-compliance with this direction or with the Companies (Court) Rules, 1959. (iii) The Petitioner shall, on or before 27th August, 2016 deposit a sum of ₹ 10,000/- towards publication charges with the Prothonotary and Sr. Master of this Court, under intimation to the Company Registrar, failing which the Petition shall stand dismissed for non-prosecution without further reference to the Court. After the advertisements are issued, the balance, if any, shall be refunded to the Petitioner.
Issues Involved:
1. Whether the Respondent Company is unable to pay its debts. 2. Validity and enforceability of the Deal Confirmation dated 26 June 2008. 3. Whether the Deal Confirmation constitutes a wagering contract. 4. Whether the claim made by the Petitioner is in the nature of damages. 5. Dispute regarding the amounts owed based on the US Dollar rate. 6. Variance in the Deal Confirmation documents. 7. Whether the Respondent Company has a bona fide defense. Issue-wise Detailed Analysis: 1. Whether the Respondent Company is unable to pay its debts: The Petitioner, HDFC Bank Ltd., filed the Company Petition seeking winding up of the Respondent Company, Rohan Dyes and Intermediates Ltd., on the ground that the Respondent Company is unable to pay its debts amounting to approximately ?8.74 Crores. The claim arises from derivative transactions between the parties, with the Petitioner asserting that the Respondent has failed to honor its commitments under these transactions. 2. Validity and enforceability of the Deal Confirmation dated 26 June 2008: The Deal Confirmation was entered into to modify and hedge certain derivative transactions. The Respondent Company argued that the Deal Confirmation was merely a paper transaction to square off old contracts with CBOP and not enforceable. However, the court found that the Respondent had affirmed the Deal Confirmation through letters dated 20 May 2009 and 22 July 2009, expressing their intention to continue with the transactions and clear all dues. The court rejected the Respondent's contention that these letters were unauthorized and found no merit in the argument that the Deal Confirmation was not a real transaction. 3. Whether the Deal Confirmation constitutes a wagering contract: The Respondent claimed that the Deal Confirmation was a wagering contract and thus void under Section 30 of the Indian Contract Act, 1872. The court referred to the Madras High Court's decision in Rajshree Sugars & Chemicals Ltd. v. Axis Bank Ltd., which clarified that derivative transactions are not wagering contracts if they involve actual delivery or settlement. The Deal Confirmation allowed for either delivery of US Dollars or net cash settlement, thus not constituting a wagering contract. The court found no intention of wagering between the parties. 4. Whether the claim made by the Petitioner is in the nature of damages: The Respondent argued that the claim was for damages and not a debt due in presenti. The court held that the amounts claimed arose directly under the Deal Confirmation, which provided for either delivery of US Dollars or net cash settlement. The claim was not for damages but for amounts payable under the contract. The court rejected the argument that the claim was in damages, citing the Madras High Court's decision that derivative transaction claims are debts. 5. Dispute regarding the amounts owed based on the US Dollar rate: The Respondent contended that there was no indication of the US Dollar rate on the expiry dates of the options. The court noted that the Petitioner Bank, as the calculation agent, had provided specific US Dollar rates in emails to the Respondent. The rates provided by the Respondent's counsel also indicated that the US Dollar traded significantly higher than the strike price of ?43.15, confirming the amounts owed to the Petitioner. 6. Variance in the Deal Confirmation documents: The Respondent claimed a variance between the stamped but unsigned Deal Confirmation and the signed duplicate. The court found both documents identical in terms and rejected the argument of variance. The court noted that this defense was raised for the first time in the affidavit in reply and was not a bona fide defense. 7. Whether the Respondent Company has a bona fide defense: The court examined the defenses raised by the Respondent and found none to be bona fide. The Respondent's liabilities under the Deal Confirmation were clear, and the defenses appeared to be afterthoughts to avoid liability. The court concluded that the Respondent's failure to honor its commitments under the Deal Confirmation entitled the Petitioner to an order of admission of the Company Petition. Conclusion: The court admitted the Company Petition, finding that the Respondent Company had no bona fide defense and was unable to pay its debts. The Petition was made returnable on 3rd October 2016, with directions for advertisement and deposit of publication charges by the Petitioner.
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