2014 (3) TMI 756 - HC - Companies Law

Winding up - intervention by the ICICI Bank as fresh applicant showing ignorance of earlier winding up petition by BNYM as a trustee for some holders of unsecured foreign currency convertible bonds issued in 2007 by GOL Offshore. - Applicant (ICICI bank) sought reliefs inter alia in relation to 352 sq ft jack-up rig known as Rig V-351 or Rig Somnath. - Held that - In my view, what ICICI Bank seeks is the creation of an additional security in its favour over Rig V-351, although there is no such pre-existing security, and although ICICI Bank is otherwise sufficiently secured for any claim that it might have against GOL Offshore. - ICICI Bank s claim is not yet due. There is the matter of the peculiar cast of ICICI Bank s prayers, expansive in scope and far-reaching in consequence. They seek nothing less than a complete sequestration of the rig to ICICI Bank to the exclusion of all others. Mr. Dwarkadas and Mr. Madon may not be entirely incorrect in saying, therefore, that the present application is mala fide and mischievous, and is nothing but an attempt to hijack the jack-up rig. In this scenario, where it does not appear that ICICI Bank s application has any semblance of bona fides, and is, prima-facie, nothing but an attempt to steal a march on a large body of creditors, both secured and unsecured, I do not see why I should exercise any discretion at all in favour of ICICI Bank. It is not enough, in my view, for an applicant to show that it is a secured creditor and to therefore claim intervention as a matter of right. Were that so, there would be no question of discretion under Section 557 of the Companies Act; every creditor would be instantly legally entitled to intervention. Where an application is found not to bona fide, that discretion cannot be exercised. So it is in this case. The application must, in my view, be dismissed in its entirety. Such an applicant, wholly wanting in bona fides, cannot claim the exercise of discretion in its favour. Application of ICICI Bank dismissed with Cost. - ICICI Bank shall pay to BNYM and GOL Offshore each costs quantified at Rs.2.5 lakhs. - Decided against the petitioner.

Summary

Issues Involved:
1. ICICI Bank's application for intervention and modification of court orders.
2. Validity of ICICI Bank's claim over Rig V-351.
3. The court's discretion under Section 557 of the Companies Act, 1956.
4. Costs and consequences of ICICI Bank's application.

Detailed Analysis:

1. ICICI Bank's Application for Intervention and Modification of Court Orders:
ICICI Bank sought to be impleaded as a respondent to the Company Application filed by BNYM, or alternatively, leave to intervene. Additionally, ICICI Bank requested a modification of the order dated 11th December 2013, seeking security over Rig V-351 and prioritization of sale proceeds for repayment of amounts due to ICICI Bank. The court, after hearing the arguments, was not persuaded to grant any reliefs. It found that ICICI Bank was attempting to create an additional security over Rig V-351 without any pre-existing security and that ICICI Bank's claim was premature and unjustified.

2. Validity of ICICI Bank's Claim Over Rig V-351:
BNYM had filed a Company Application seeking various reliefs concerning Rig V-351. The court had passed orders on 28th October 2013, 29th November 2013, and 11th December 2013, including an injunction against GOL Offshore from disposing of the rig. GOL Offshore had committed to paying BNYM US$ 45.2 million from the sale proceeds of the rig. ICICI Bank's claim was based on a clause in the Short Term Loan Facility Agreement, which required prepayment from the proceeds of any rig sale. However, the court noted that ICICI Bank had no security over Rig V-351, which belonged to a subsidiary of GOL Offshore, and ICICI Bank was otherwise fully secured.

3. The Court's Discretion Under Section 557 of the Companies Act, 1956:
ICICI Bank argued for intervention based on Section 557, which allows the court to consider the wishes of creditors in winding-up matters. The court referred to precedents, emphasizing that the discretion to allow intervention must be exercised judiciously. The court found ICICI Bank's application to be self-serving, lacking candour, and based on incorrect statements and deliberate distortions of facts. Therefore, it did not exercise discretion in favour of ICICI Bank, as the application was not bona fide.

4. Costs and Consequences of ICICI Bank's Application:
The court noted that ICICI Bank's application was not merely misguided but a deliberate action by a financial behemoth with ample legal resources. The application proceeded on a distorted version of facts. Consequently, the court dismissed the application and imposed exemplary costs on ICICI Bank, ordering it to pay Rs.2.5 lakhs each to BNYM and GOL Offshore within four weeks.

Conclusion:
The court dismissed ICICI Bank's application for intervention and modification of the court orders, finding it premature, unjustified, and lacking bona fides. The court exercised its discretion under Section 557 judiciously, emphasizing the need for candour and fidelity to facts. ICICI Bank was ordered to pay exemplary costs for its mala fide application.