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1970 (8) TMI 47 - HC - Companies Law


Issues Involved:
1. Validity of the petitioner's status as a holder in due course of the debentures.
2. The company's obligation to pay bearer debenture holders directly.
3. The right of a secured creditor to present a winding-up petition.
4. Interpretation of Section 434 of the Companies Act, 1956.

Issue-wise Detailed Analysis:

1. Validity of the Petitioner's Status as a Holder in Due Course:
The petitioner claimed to be the holder in due course of three debentures issued by the company. The company contended that the petitioner did not collect any interest since July 1, 1960, creating suspicion about the legitimacy of his claim. The petitioner provided a supplementary affidavit corroborating that he purchased the debentures in 1964 from one Kristodhone Chatterjee. The court held that bearer debentures are payable upon presentation and demand by the bearer. The special officer's suspicion was deemed unfounded due to the absence of any other claimant and substantial proof to the contrary. The court concluded that the dispute raised by the special officer was not bona fide.

2. The Company's Obligation to Pay Bearer Debenture Holders Directly:
The company argued that the contract in issuing the debentures was between the trustees and the company, and thus the bearer debenture holders could not claim directly against the company. The court distinguished this case from the English decision in In re Dundsrland Iron Ore Co. Ltd., highlighting that bearer debentures are negotiable instruments. The court referred to clause 40 of the indenture, which recognized the right of the bearer debenture holder to receive payment directly from the company. The court also cited the Bombay High Court decision in Bachharaj Factories Ltd. v. Hirjee Mills Ltd., which supported the right of the bearer debenture holder to present a winding-up petition.

3. The Right of a Secured Creditor to Present a Winding-up Petition:
The company contended that a secured creditor has no right to present a winding-up petition unless the security is insufficient. The court noted that the definition of "creditor" under the Companies Act, 1956, includes secured creditors, allowing them to present a winding-up petition. The court interpreted Section 434 of the Companies Act, 1956, stating that the company must take action to satisfy the creditor that his claim would be paid or that his security is intact. The court held that the company's failure to pay or secure the claim within the statutory period amounted to neglect, giving the secured creditor the right to present a winding-up petition.

4. Interpretation of Section 434 of the Companies Act, 1956:
The court analyzed Section 434, which deems a company unable to pay its debts if it neglects to pay, secure, or compound for the sum due within three weeks of a demand notice. The court rejected the company's argument that further security is not required if the creditor is already secured. The court emphasized that the secured creditor's right to present a winding-up petition accrues due to the company's failure to perform its statutory obligation. The court concluded that the company's failure to satisfy the petitioner's claim within the statutory period amounted to neglect, attracting the deeming provision of Section 434.

Conclusion:
The court dismissed the application for the stay of the winding-up proceedings, holding that none of the grounds raised by the company amounted to a bona fide or substantial dispute regarding the petitioner's claim. The application was dismissed with costs.

 

 

 

 

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