9911796707
TMI Blog2002 (10) TMI 425X X X X Extracts X X X X X X X X Extracts X X X X ..... There were three Company Petitions heard together in which the common order was made. When these appeals were being heard, it was pointed out that the Company Petition No. 240 of 2001 was already withdrawn and in this view of the matter, the learned Senior Counsel for the appellant stated that since the Company Petition No. 240 of 2001 was withdrawn, he wanted to withdraw O.J. Appeal No. 23 of 2002 which was also placed along with these appeals. Accordingly, O.J. Appeal No 23 of 2002 was dismissed as withdrawn by our order dated 24-9-2002 made in that appeal. 3. The facts relevant for the purpose of the present appeals are in a narrow compass. 3.1 The respondents - original petitioners ( the petitioners ) claimed to be the creditors by virtue of being beneficial owners of the Global Notes which were offered in exchange for the earlier Global Notes by the appellant Company ( the Company ). The petitioners have prayed for winding up of the Company on the ground that it was unable to pay its debts, and that it was just and equitable in the circumstances mentioned in the petition to compulsorily wind it up. The petitions were presented after issuing notice of demand on 12th/16t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the notice would be served that the New Notes were due and payable for the principal amount together with all accrued but unpaid interest. The Company, however, did not make any payment and thereupon, the Trustee served a notice by its letter dated February 23, 2001 under Condition No. 9( a ) of the New Notes whereby the New Notes were made immediately due and payable at their principal amount together with accrued interest. Since the Company did not respond, the respondents original petitioners served demand notices on the Company in accordance with section 434(1)( a ) of the Companies Act, 1956 and the present petitions were filed seeking compulsory winding up of the Company and appointment of the official liquidator. 4. Before the learned Company Judge, a preliminary objection was raised against the maintainability of the Company Petitions on behalf of the Company on four grounds, as mentioned in paragraphs 4 and 10 of the impugned order, and these are reproduced hereunder for the sake of convenience: "(1)The petitioners are not Noteholders. (2)Even if the petitioners are Noteholders, they are not debenture holders or holders of any security as contemplated by the Compa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t has been stated that the Company has always acted in a bona fide manner and that despite depressed markets, the Company has made several payments to Noteholders which have been admitted by the petitioners in the present petitions. 6. The learned Company Judge, keeping in mind the nature of the global Notes and type of interests that these beneficial owners had in those Notes and all other relevant material which was placed before His Lord- ship negatived the preliminary objection holding that the petitioners were Noteholders in as much as the company had recognised the concept of New Beneficial Owners of the debts representing the amounts which they had in their respective accounts; that the covenants made by the Issuer Company to the Trustee are for the benefit of the trustee as well as the Noteholders according to their respective interest; that it made no difference whether or not the respondent-company knew about the names and debt amounts of individual Noteholders like the petitioners, because the very nature of the Global Notes did not require such details should be made known to the Company; that in the letter dated 19-2-2002, the Trustee had not contended that the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e governed by section 439(2). It was further contended that right under section 433 read with section 439 of the Act is a right of action which pre-supposes existence of a cause of action. If cause of action does not arise, there can be no question of any conflict between the provisions of the said Act and the bar imposed under the terms of the Trust Deed against initiating legal proceedings. It was submitted that a term of contract barring any person other than the Trustee from bringing an action cannot be said to be in conflict with the provisions of the Companies Act. Moreover, whether a person is a creditor or not should be judged by the English Law since the documents are governed by the English Law as per the stipulations contained therein. It was submitted that the security would have to be proceeded as a whole and no fiction of holder can be created, because, trading is in the interest of rewards of a specific security and not in the security itself. It is submitted that if the Note is a debenture, the question of its being any other security can never arise. 7.1 In support of his submissions, the learned Senior Counsel relied upon the following decisions: "( a )The d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Noteholders who was the company s creditor within the meaning of the term in section 473(3)( b )( i ) of the Corporations Law Reform Act, 1992. That was a provision providing for remuneration of a liquidator by way of percentage or otherwise providing that if there was no committee of inspection or liquidator and the committee of inspection fail to agree, the remuneration would be as may be determined by a resolution passed at meeting of the creditors by a majority of the creditors present and voting. The Court acceded to the request on behalf of the liquidator that the notice of motion be amended to include a claim for a declaration that the provisions of section 473(3)( b )( i ) for determining the liquidator s remuneration had been sufficiently complied with and adjourned the matter for further hearing of the motion to enable service of the material to be effected on the trustee. ( c )The decision of the Supreme Court in Rajahmundry Electric Supply Corpn. Ltd. v. A. Nageshwara Rao , reported in AIR 1956 SC 213 was cited for the proposition that validity of a provision must be judged on the facts as they were at the time of its presentation. According to the learned Senio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e transferor and the transferee, certain equities arise even on the execution and handing over of "a blank transfer", and among these equities is the right of the transferee to claim the dividend declared and paid to the transferor who is treated as a trustee on behalf of the transferee. These equities, however, do not touch the company, and no claim by the transferee whose name is not in the register of members can be made against the company, if the transferor retains the money in his own hands and fails to pay it to him. ( g )The decision of the Supreme Court in M.C. Chacko v. The State Bank of Travancore, reported in AIR 1970 SC 504 was cited to point out that, it was held by the Supreme Court that, a person not a party to a contract cannot, subject to certain well recognised exceptions, enforce the terms of the contract. The Supreme Court held that the recognised exceptions are that beneficiaries under the terms of the contract or where the contract is a part of the family arrangement may enforce the covenant. In paragraph 9 of the judgment, the Supreme Court held that, it must be taken as well settled that except in the case of a beneficiary under a Trust created by a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... D. Kania, reported in AIR 1981 SC 1786 was cited to point out that, whenever a Trial Judge decides a controversy which affects valuable rights of one of the parties, it must be treated to be a judgment within the meaning of Clause 15 of the Letters patent. Accordingly to the learned Senior Counsel, important issues came to be decided under the impugned order and therefore, the appeal would lie against it." 8. The learned Senior Counsel appearing for the respondents - original petitioners raised a preliminary objection against the maintainability of these appeals contending that an appeal cannot lie under section 483 of the said Act against the impugned order, because, it is not an appealable order. It was submitted that when no appeal can be filed against the order of admission of a winding up petition, it cannot lie at this anterior stage. The impugned order according to him does not affect any right of the petitioners and being of procedural nature only, no appeal would lie against it. The learned Senior Counsel, supporting the reasoning of the learned Single Judge in overruling the four preliminary contentions which were raised on behalf of the Company, argued that the peti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to be creditors for the purpose of section 439(1)( b ) and could therefore present the winding up petitions as the creditors of the Company. It was then argued that a winding up petition was outside the purview of any contractual arrangement between the Company and the Trustee and could be presented by the petitioners as creditors being the beneficial owners of interest in the Notes, since the restrictions under clause 6 of the Trust Deed and clause 13 of the Terms Conditions of the Notes was only in respect of the enforcement of the Terms Conditions of the Trust Deed and the Notes, and the enforcement clause did not refer to any winding up proceedings. The nature of the winding up petition was entirely different from an action to enforce the terms conditions of the Trust Deed and the Notes, argued the learned Senior Counsel. It was submitted that a winding up proceeding was a proceeding in rem, and not in personal like a recovery proceeding filed on the basis of terms and conditions of the Trust Deed and the Notes. Referring to the correspondence on record bet- ween the Company and the Trustee and the lawyer of the petitioners as well as the various paragraphs of the repl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e other and the order did not prejudice the appellant. ( c )The decision of the Karnataka High Court in Miland Exports (P.) Ltd. v. A.V. Venkatanarayana [1995] 83 Comp. Cas. 585 , in which the Court observed that the words "any order" in section 483 of the Act shall have to be understood as an order which affects the rights of the person who invokes the appellate jurisdiction of the Court. Unless the right of a party is affected, the question of invoking the appellate jurisdiction would not arise. It was held that, in the context of section 483 and the procedure prescribed for advertisement of a Company Petition after admission, an order admitting the petition could be construed as an order governing procedural matters only. This observation was made on the basis of the decision of the Supreme Court in National Conduit [1967] 37 Comp. Cas. 786, pointing out that even after the petitioner was admitted, it was open to the company to move the court that the petition shall not be advertised. ( d )The decision of the Bombay High Court in Bachharaj Factories Ltd. v. Hirjee Mills Ltd. [1955] 25 Comp. Cas. 227 was cited for the proposition that a secured creditor or debenture ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion for winding up as recognised by the statute. ( g )The decision of the Bombay High Court in Narottamdas Trikamdas Toparani v. Bombay Dyeing Manufacturing Co. Ltd. [1990] 68 Comp. Cas. 300 was cited to point out that the High Court, after elaborately considering the decisions of the Chancery Division in Dunderland ( supra ), Uruguay Central Hygueritas Railway Co. of Monte Video ( supra ), held that there were number of cases where the English Courts had construed debenture holder as a creditor of the company wherever there had been such a direct covenant between the company and the debenture holder. It was held that, in case of Bachharaj Factories Ltd. ( supra ), a Division Bench of the Bombay High Court had distinguished the case of Dundarland ( supra ), and held that, in the case before the Division Bench, there were debentures and not stock certificates and that the debentures contained a personal covenant by the mills to pay the debenture holders. The Court held that, in view of the express provision now contained in section 439(2), there can be no doubt that a debenture holder is a creditor of the Company for the purpose of presenting a winding up peti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d any document which fulfils either of these conditions is a debenture as opined by Chitty, J. ( m )The decision in reported in Laxman Bharmaji v. Emperor AIR 1946 Bom. 18 was cited for the proposition that, in determining what is or is not a debenture within section 2(1) of the Companies Act, 1913, the Court is not bound to hold that an instrument is a debenture, because, it is called a debenture by the company issuing it, nor to hold that it is not a debenture, because, it is not so called by the company. The court must look at the substance of the instrument itself, and without the assistance of any precise legal definition, form the best opinion it can whether the instrument is or is not a debenture. It was held that a document which either creates a debt or acknowledges it and is one of a series may be dealt with as a debenture. A creation of a charge over the assets of the company issuing the debenture, though usual, is not an essential requisite of a debenture. On the facts before it, the Court held that the main features, in its opinion, showed that the Patron Bonds were debentures and the fact that all the holders get an equal chance to partake in the annual distribu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e to that statute instead of setting out for itself at length the provisions which it desires to adopt. It was held that, "Once the incorporation is made, the provisions incorporated becomes an integral part of the statute in which it is transposed and thereafter, there is no need to refer to the statute from which the incorporation is made and any subsequent amendment made in it has no effect on the incorporation statute. ( r )The decision of the Supreme Court in Onkarlal Nandlal v. State of Rajasthan [1985] 4 SCC 404 was referred to point out that the opinion of Lord Esher, M.R. in In re Wood s Estate that if a subsequent Act brings into itself by reference some of the clauses of a former Act, the legal effect of that, as has often been held, is to write those sections into the new Act just as if they had been actually written in it with the pen, or printed in it was approvingly referred. The Supreme Court interpreted Explanation II to sub-section ( o ) of section 2 of the Rajasthan Sales Tax Act, 1954 as if sub-section 2 of section 4 of the Central Sales Act was written out verbatim in the Explanation , holding that, once sub-section (2) of section 4 is written out ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an order of admission is considered to be merely a procedural order which did not affect the rights of the parties, a fortiori , order made at a stage prior to that cannot affect the rights of the parties. No appeal, therefore, lies against the impugned order of the learned Company Judge under section 483 of the said Act. It will be noticed that the proposition that order admitting a winding up petition could be construed to be as an order governing procedural matter only, does not flow from the decision of the Supreme Court in National Conduits (P.) Ltd. v. S.S. Arora [1967] 37 Comp. Cas. 786, as seems to have been assumed by the Karnataka High Court in Miland Exports (P.) Ltd. (supra) which held that in the context of section 483 and the procedure prescribed for advertisement of a company petition after admission, an order admitting a petition could be construed as an order governing procedural matters only and that is why the Supreme Court has also, in National Conduit s case ( supra ) pointed out that even after the petition is admitted, it is open to the company to move the court that the petition shall not be advertised. 9.1 In fact, the Supreme Court in Hind O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the exercise of arriving at a prima facie finding on the points enumerated earlier at a preliminary stage before admitting and advertising the petition must be undertaken after considering the rival versions of the petitioning creditor and the company and they would be purely tentative and prima facie findings which can be re-examined, if the need arises, in greater detail at the stage of trial of the company petition before passing the final order of winding up, if any, and after hearing the rival parties including the parties that might have appeared at the stage of trial pursuant to the advertisement. It was held that prima facie nature of the summary inquiry before admission or even after admission and before advertisement would be for arriving at findings on the aforesaid points. 10. Section 483 of the Act provides for appeals from any order made, or decision given, in the matter of the winding up of a company. The expression "in the matter of the winding up of a Company" is wide enough to include a decision on the aspect of maintainability of a winding up petition taken by the Company Judge by rejecting the preliminary objection and, in the process, judicially de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... horized under section 439(1)( b ) and 439(2) of the Act to invoke the winding up powers of the court by presenting these petitions and the appellants cannot be precluded from demonstrating before the appellate forum that the petitions cannot be proceeded with by the Company Court as its jurisdiction is not invoked by a person entitled to invoke it under section 439. The preliminary objection against the maintainability of the appeal is, therefore, misconceived and cannot be accepted. 11. The winding up petitions have been presented on the ground that the company is unable to pay its debts and that it is just and equitable that the company is wound up. The petitioner claiming to be the creditors on the ground that they were entitled to receive payment of the principal amount, outstanding interest payment and interest accrued from 31-1-2001 to 11-4-2001 in respect of the Floating Rate Unsecured Notes called upon the company to make payment of their dues in terms of the Notes in 21 days from the date of the notice of demand, failing which it would initiate legal proceedings for recovery of the amount including a winding up proceeding under the said Act. According to the petitioner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent which may or may not occur. Prospective Creditor would mean a creditor in respect of a debt which will certainly become due in future, either on some date which has already been determined or on some date determinable by reference to future events. 12. The question is whether the petitioners who have beneficial interest in the Notes can be said to be creditors. In order to judge whether the petitioners are creditors or not, it would be relevant to refer to the nature of their rights created by issuance of the Notes. 12.1 The Company offered to issue New Notes in the exchange offer which it solicited in exchange of the Old Notes which were also held in form of Global Notes and were deposited with a custodian and registered in the name of a nominee of the DTC. The participants of DTC held interest in the Old Notes as shown in the record of the DTC, Certain DTC participants held Old Notes for the benefit of Euroclear System, or Clearstream Banking. Each person who was the beneficial owner of a particular amount of the DTC Global Notes as shown in the record of the DTC participants, or a Clearing system, or their respective account holders, was required to convey its voti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld interest in the New Notes as shown in the records of the DTC. Certain DTC participants were to hold New Notes for the benefit of Euroclear and Clearstream. It was declared that, "Each person (a New Beneficial Owner) who is the owner of a particular nominal amount of the New Notes, will be shown in the records of the DTC or the DTC participants or a Clearing System ( i.e., Euroclear or Clearstream or both as per the Glossary attached for the purpose of the Exchange Offer and Consent Solicitation) or their respective account holders. 12.4 As per the mode of payments, the payments of the principal of and interest on each new DTC Global Notes registered in the name of DTC s nominee was to be made to or to the order of the nominee as the registered owner of such Note. It was declared that the Company expected that the nominee, upon receipt of any such payment, "will immediately credit DTC participants accounts with payments in the amounts proportionate to their respective New Beneficial Owners of the principal amount of the relevant new DTC Global Notes as shown on the records of DTC or the Nominee". 12.5 Transfers of Interest in the new DTC Global Notes with DTC, Euroclear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be made subject to the detailed regulations concerning transfer of Notes, scheduled to the Agency Agreement. The Notes constituted (subject to the condition 4 regarding negative pledge) Unsecured obligations of the issuer. Interest payment dates were mentioned in the Notes. Condition No. 7( a ) pres-cribed the method of payment under which it was provided that; "Interest on Notes will be paid to the persons shown on the Register at the close of business on the 15th day before the due date for the payment of interest". As noted above, each person (a New Beneficial Owner) who is the owner of a particular nominal amount of the New Notes as to be shown in the record of the DTC or the DTC participants or a clearing system or their respective account holders. The beneficial owners of particular nominal amounts of the New Note were thus entitled to the payments made in proportion to their interest in the Note. 13.1 As per condition 8 (Taxation) of the Notes, all payments of principal and interest in respect of the Notes were to be made free and clear of and without withholding or deduction for, any taxes or governmental charges etc. unless such withholding or deduction was required ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s the Trustee may have regard to any information provided to it by such clearing system or its operator as to the identity either individual or by category of its account holders or participants with entitlements to any such DTC Global Note and may consider such interests as if such account holders or participants were the holders thereof. The Trust Deed thus clearly recognised the interests of account holders or participants having entitlements to a DTC Global Note by treating them as if they were the holders of the Note. 15. The above provisions of the exchange offer and solicitation of consent, the Trust Deed and the Notes clearly bring to force that though the Global Notes were to be issued in the name of the nominee of the DTC, the proceeds of these Notes came from the investors who by virtue of the nature of a Global Note could own particular nominal amounts of the New Note to the extent of their investments. The persons who owned such entitlements were the beneficial owners of the Note and the names of such persons who were beneficial owners were to be entered in the records of the DTC, DTC participants or clearing system or their respective account holders. The payment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the company at the instance of such creditor beneficiaries and on just and equitable grounds. The right of the beneficial owners, who had invested in the Global Notes to recover the amounts when due from the issuer company who ultimately was, under its arrangement, bound to pay, cannot be thwarted by the issuer company by creating intermediaries to arrange the management of the Global Notes for its convenience. 16. The doctrine of privity of contract is subject to many exceptions and it has long been settled that where "A" makes a promise to "B" for the benefit of "C", the promise can be enforced by "C" against "A" if "B" has constituted himself trustee of "A s" promise for "C". ( See para 19.065 Chapter 19 at page 998 Chitty on Contracts, Volume I, 28th Edition). Two consequences generally flow from a finding that there is a trust in favour of a third party. First, the third party is entitled to sue the promisor for the money which the promisor had promised to pay to which it is beneficially entitled. But, such third party must join the promisee as a party to the action since otherwise, the promisor might be sued a second time by the promisee. This rule as to joinder of parti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ffering them transferable entitlements in the Global Notes being the securities in which the person were lured to invest for returns. There is no compelling reason of principle or policy which should preclude such creditor - beneficiaries from enforcing their rights when the Trustee fails to safeguard their interests. 16.3 The terms of contract between the Issuer company and the Trustee clearly demonstrate that the parties intended to benefit the third party investors like the petitioners. In other words, there were third party beneficiaries of the contract between the Issuer company and the Trustee in respect of the Global Notes which were the subject-matter of that contract. It appears from the terms of the contract between the Company and the Trustee that the performance of it would satisfy an actual or supposedly asserted duty of the promisee, i.e., the Trustee to the beneficiary and therefore, the beneficial owners were the creditor-beneficiaries. A creditor-beneficiary has the right to enforce contracts made by others for his benefit. The creditor - beneficiaries are intended beneficiaries of the contract and not mere incidental beneficiaries. The terms and conditions o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... creditors of a company for the purpose of section 439(1)( b ) would ordinarily be those would have been creditors had the company gone into liquidation, i.e. , those having pecuniary claim whether actual or contingent against the company. 16.5 The case before us presents a clear instance in which the third parties interests specifically protected by the contract between the issuer company and the trustee in form of the Trust Deed, would be impaired if these creditor beneficiaries were not accorded right to obtain relief against the promisor, i.e. , the Company in the event of a breach. We hold that the petitioners who are creditor beneficiaries are creditors within the meaning of section 439(1)( b ) and can present a winding up petition as creditors. 17. Though the finding that a third party who is intended beneficiary like a creditor beneficiary is entitled to enforce the terms of the contract, i.e. , the trust deed which was entered into for the benefit of the beneficial owners of the Global Notes and therefore, a creditor within the meaning of section 439(1)( b ) should be sufficient to uphold the maintainability of the petition, since the preliminary objection was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nuity especially in the creation of the numerous schemes devised by those who seek the use of money of others on promise of profits. The inclusive definition of the term security is wide enough to include within that definition many types of instruments that might be sold as an investment. 17.3 In order that the interest of investors are protected, it was decided that SEBI would frame regulations with regard to collective investments schemes. It was therefore proposed to amend the definition of Securities so as to include within its ambit the derivatives and the units or any other instrument issued by any collective investment scheme to the investors in such scheme ( See Statement of objects and reasons of the SCR Act and the Amendment Act). 17.4 The term Note is relatively broad to encompass instruments having different characteristics depending on whether issued in a consumer context as a commercial paper or in some other investment context. If the notes are issued in a commercial or consumer context, they will not be treated as securities while those issued in investment context would be securities. Whether the Note is issued in investment context can be ascertain ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act, 1956, controlling and regulating the business of dealing in securities in the areas notified should be read alongwith the definition of securities which is incorporated by reference by section 2(45AA) under the said Act from section 2( h ), is contrary to the elementary cannons of construction. When a definition of a term is incorporated by reference from another statute, it is deemed to have been cut and pasted in the incorporating statute and that is all. Thenceforth, it is to be read as if it is a part of the incorporating statute in the context of its own provisions. The provisions in which it appears in the other statute do not accompany it in the incorporating statute. The definition of securities is to be read as if enacted in the said Act in the same words as it appears in section 2( h ). If what the learned Senior Counsel for the appellant argues is right that the marketable securities should be marketable in India, it would amount to reading the other provisions of the SCR Act 1956 in the Companies Act, though not meant to be incorporated at all. Moreover, an anomalous position will arise, because, in the definition of debenture in section 2(12) of the said Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the purpose of section 439(1)( b ). 18.2 The learned Senior Counsel heavily learned on the ratio of the decisions of the Chancery Division in Dunderland ( supra ) and Uruguay ( supra ) for his contention that a debenture holder did not have an immediate right of action for money lent or for money due, because the company is liable to pay the Trustees under Trust Deed and therefore, the company cannot be sued twice over. The argument one had hoped had been decently interred by the provision of section 439(2) and by the decisions of the Bombay High Court in Toprani s case ( supra ) and other decision referred to above, but its ghost still walks on occasions, and this, it appears, is one of them. The objection that the company may be sued twice over by the trustee is wholly inapposite in the context of a winding up petition which once presented, there would be no additional burden faced by the Company as in suits by different persons on the same cause. The winding up proceedings being the proceedings in rem, it would turn on an entry to the proceedings for all those who want their claims to be proved under section 528 of the Act. There is no question of duplication of pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lder may institute proceedings directly against the issuer unless the trustee, having become bound so to proceed, fails to do so within a reasonable time and such failure is continuing." 19.1 The condition 13 of the Note reproduced above provides that after the Notes become due and payable, the Trustee has a discretion to institute proceedings against the Issuer, i.e. , Company to enforce the terms of the Trust Deed and the Notes, but he need not take such proceedings unless he is directed and is indemnified, as contemplated by the Trust Deed under clauses 8.4 and 6.1. Under clause 6.2 of the Trust Deed, the Trustee may institute legal proceedings against the Issuer Company to enforce any obligation under the Trust Deed and the Notes. Clause 8 though dealing with remuneration of the Trustee contemplates that the payment due under the Notes is to be made by the issuer company to the Noteholder. 19.2 In the present case, the Trustee had already determined the event of default under clause 9.1-3 by issuing letter dated 15-2-2001 on the Company, and that declaration was binding on the company and the Noteholder. By letter dated 23-2-2001, the Trustee called upon the company to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase where the Noteholders were entitled (even on an assumption that winding up proceeding was one such proceeding which in fact was not included under condition 13) to prefer the proceedings under the latter part of condition 13 under which a Noteholder could institute proceedings directly against the issuer company when the Trustee having been bound to so proceed, fails to do so within a reasonable time and such failure is continuing. The settlement of a trust creates a right in personam, against the trustee and an equitable right in rem in the beneficiary. The most fundamental duty owed by the trustee to the beneficiary of the trustee is a duty of loyalty. This duty is imposed upon the trustee not because of any provision in the terms of the trust deed, but because of the relationship which arises from the creation of a trust. A private trust requires a beneficiary definitely ascertained at the time of creation of the trust of definitely ascertainable within the period of the rule against perpetuity. This is the typical trust in which there is both an equitable right in rem and an equitable right in personam in the beneficiary, ( See Jurisprudence by Roscoe Pound Volume V Part 8 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eed and Notes which would be principal and interest and remunerations, expenses and indemnities for the beneficial owners of the Trustee, as the case may be. The winding up proceedings under section 439 are not proceedings for recovery of dues, but are proceedings in rem based on statutory grounds on which a company may be wound up by the Court such as, a company being unable to pay its debts or if the court is of the opinion that it is just and equitable that it should be wound up as contemplated by clauses ( e ) and ( f ) of section 433 of the said Act. The jurisdiction of the Company Court does not extend to mere enforcement of the terms of the contract of the parties to satisfy a claim of a creditor made under it. The function of a court in a winding up proceedings is not to decide matters of recovery of a particular debt owned by the company to any person, but to examine whether there exists any circumstances on the basis of which the company is liable to be wound up. The reliefs granted by a court in a winding up petition are different from the reliefs in an inter-parties enforcement action. Therefore, ability to give a valid discharge test cannot be applied to a creditor ben ..... X X X X Extracts X X X X X X X X Extracts X X X X
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