2012 (11) TMI 36 - HC - Companies Law

Winding up - credit facilities granted by the appellant bank - cheques deposited by both the companies dishonoured - demand notice u/s 434 by bank followed by winding-up proceeding - Held that - If we give a close look to the order particularly the operative portion, we would find, the learned Judge admitted the winding up petition for the exact amount that was found to be due and payable by the company to the creditor and asked the company to make payment of the said sum together with interest at that rate of 10% per annum on and from a date that would commensurate with the date of dishonour of relevant cheques along with costs as a condition precedent to stall the advertisement process that would make the winding up petition a representative one. In case the company would pay the amount they would be entitled to resist the process otherwise the process would continue which might culminate in a final order of winding up.If we give a close look to Section 434 a creditor having a claim more than a minimum amount prescribed therein would be entitled to maintain his petition. The test is whether the company would be able to resist the same by disputing the claim bona fide. As in the present case number of letters written by the company admitting their liability that would foreclose the scope of the company to dispute the claim. The company from time to time suggested repayment proposals. The correspondence predominantly suggests, the claim was never disputed - unable to accept the contention of the appellant that bank is not a secured creditor. Even if the provisions of Debt Recovery Act or SARFAESI Act would empower the Bank to recover their dues through special mode prescribed therein that would not operate as a bar to apply for winding up, thus no scope of interference. As the Bank already advertised the notice in newspaper and the winding up petition has already taken its representative character. Dismissal of these appeals would not preclude the company to make any proposal for the payment before the learned Company Judge and in case such proposal is made the learned Company Judge would be at liberty to deal with the same.

Summary

Issues Involved:
1. Immediate payment obligation under the agreement.
2. Interest rate and payment timeline.
3. Availability of collateral security.
4. Quantified realizable debt requirement for winding up petition.
5. Applicability of SARFAESI Act over Companies Act.

Issue-wise Detailed Analysis:

1. Immediate Payment Obligation Under the Agreement:
The appellants argued that the agreement did not specify that the outstanding sum had to be cleared immediately upon the Bank's demand. The court found that the financial arrangement allowed the appellants to enjoy credit facilities against deposited cheques, which were dishonored. Consequently, the Bank issued a demand notice under Section 434 of the Companies Act, 1956, leading to the winding-up proceedings. The court upheld that the agreement implied an obligation to clear dishonored cheques immediately, supporting the Bank's claim.

2. Interest Rate and Payment Timeline:
The appellants contended that the sanction letter provided for interest at the base rate plus 4.25% per annum, implying the money would not be immediately payable. The court dismissed this argument, clarifying that the interest rate applied to delayed payments and did not defer the principal debt's immediate payability. The court interpreted the interest provision as a penalty for delayed payment rather than a deferment of the debt.

3. Availability of Collateral Security:
The appellants argued that the Bank should rely on the collateral security offered instead of pursuing winding-up proceedings. The court noted that the offered LIC policies covered only Rs.20-22 lacs against the principal claim of Rs.18.8 crores and that the intended mortgage on immovable property was never executed. The court concluded that the Bank was not a secured creditor under the SARFAESI Act and was justified in seeking winding-up.

4. Quantified Realizable Debt Requirement for Winding Up Petition:
The appellants claimed that the creditor must have a quantified realizable debt for a winding-up petition to be admissible, which was absent in this case. The court found that the appellants had admitted their liability through various correspondences, thus foreclosing any bona fide dispute regarding the debt. The court emphasized that a creditor could maintain a winding-up petition if the debt was undisputed and the company failed to pay.

5. Applicability of SARFAESI Act Over Companies Act:
The appellants argued that the SARFAESI Act, being a special statute, should prevail over the Companies Act, 1956. The court rejected this argument, stating that Section 37 of the SARFAESI Act explicitly provides that its provisions are in addition to and not in derogation of the Companies Act. The court held that the SARFAESI Act did not preclude the Bank from filing a winding-up petition under the Companies Act.

Conclusion:
The court dismissed the appeals, upholding the maintainability of the winding-up petitions. The court found that the appellants had admitted their liability and failed to provide sufficient collateral security. The court also clarified that the SARFAESI Act did not bar the Bank from seeking winding up under the Companies Act. The judgment emphasized that a creditor could pursue winding-up if the debt was undisputed and the company failed to pay. The court directed that the winding-up process would continue unless the company made a satisfactory payment proposal to the learned Company Judge.