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TMI Blog2004 (2) TMI 349X X X X Extracts X X X X X X X X Extracts X X X X ..... anctioned the short-term loan of Rs. 500.00 lakhs to the respondent, repayable within 90 days, subject to the condition of the respondent furnishing personal guarantee of its managing director, corporate guarantee and pledge of shares. The respondent in token of availment of the said short-term loan, executed promissory note and furnished the personal guarantee of its managing director, corporate guarantee of Saritha Steel and Industries Ltd., and pleged 80 lakh shares of Rs. 10 each of the respondent held by Sri Vasavi Holdings and Investments Ltd., in eight share certificates in physical form. The respondent did not repay the loan amount within the stipulated period of 90 days. However, at the request of the respondent, the petitioner vide its letter dated 12-6-2001, extended the period of loan upto 21-9-2001 and requested the respondent to confirm the dues of the petitioner, which, as on 23-6-2001, stood at Rs. 5,16,02,740. The respondent, by its letter, dated 3-7-2001, is said to have confirmed the dues of the petitioner. When the respondent failed and neglected to pay the dues even after the expiry of the extended period, the petitioner, during April 2002 and June 2002, got ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to be the creditor of the respondent. Hence, the company petition is not maintainable, and is liable to the dismissed. 4. The petitioner filed reply to the counter of the respondent. It is stated that the deponent of the counter has to prove his authorisation to file the counter, and inasmuch as no authorisation is filed, the counter filed by the deponent is liable to be rejected. It is stated that to secure the loan amount, 80 lakh shares of Rs. 10 each of the respondent held by Sri Vasavi Holdings and Investments Ltd., were pledged. It is stated that the petitioner being a financial institution, is governed by RBI Guidelines, and having regard to the Guidelines issued by the RBI in Circular DBOD No. Dir. BC.90/13-07-05/98, dated 28-8-1998, the banks were required to transfer the pledged shares info their names whenever the loan granted to the borrower exceeded Rs. 10 lakhs, and inasmuch as the loan granted to the respondent exceeded Rs. 10 lakhs, the petitioner got transferred the pledged shares into their name. It is further stated that the RBI Guidelines stipulated exclusive and unconditional voting rights under such transferred shares in the banks. The petitioner had me ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 19 of the Debts Recovery Act or the proceedings in a civil suit, being independent of each other, there can be no impediment for maintaining this company petition for winding up of the respondent which has not only failed and neglected to pay the loan amount, but has also become insolvent. In support of this contention, he placed reliance on the judgments in State Bank of India v. Hegde and Golay Ltd. [1987] 62 Comp. Cas. 239 (Kar.), Smt. Vijayalakshmi v. Harihara Ginning Pressing Co. (P) Ltd. [1999] 3 Comp. LJ 283 (AP) and Viral Filaments Ltd. v. IndusInd Bank Ltd. [2001] 4 Comp. LJ 44 1 (Bom). 7. The learned senior counsel denied the contention of the respondent that it had discharged the debt when the petitioner got transferred the pledged shares furnished by the respondent towards security. He submitted that the petitioner being a financial institution is governed by RBI Guidelines. The Guidelines issued by the RBI in Circular DBOD No. Dir.BC.90/ 13-07-05/98, dated 28-8-1998, required every financial institution which had sanctioned and granted loan exceeding Rs. 10 lakhs to get the pledged shares transferred to their name, and having regard to the gui ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s become insolvent, the learned counsel for the petitioner submitted that the respondent has to be wound up, and in support of this submission, he placed reliance on the judgments in Bangasri Ice and Cold Storage v. Kali Charan AIR 1992 Cal 613 and Electro Flame Ltd. v. Mittal Iron Foundry (P.) Ltd. [1998] 3 Comp. LJ 464 1 (AP). The learned counsel in support of his submission that whether or not the defence taken by the respondent is bona fide and one of substance, has to be decided at the time of hearing of the winding up petition and not at the stage of admission, for it is a matter of summary enquiry, placed reliance on the judgments in Sree Aravindh Steel (P.) Ltd., v. Trichy Steel Rolling Mills [1998] 1 Comp. LJ 451 (Mad.) and Airwings (P) Ltd. v. Viktoria Air Cargo Gmbh Langer Kornweg [1995] 1 Comp. LJ 233 (Kar.). 8. Per contra , Sri Kodandaram, the learned counsel appearing on behalf of the respondent, strongly refuted the submissions made by the learned counsel for the petitioner. He submitted that the petitioner got transferred 80 lakh pledged shares of Rs. 10 into its name in demat form during April 2002 and June 2002. At the time when the transfe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ex Court in Amalgamated Commercial Traders (P.) Ltd. v. A.C.K. Krishnaswami [1965] 35 Comp. Cas. 465 (SC) and of the judgments of the High Courts of Karnataka, Madras and Calcutta in T. Srinivasa v. Felmming (India) Apotheke (P) Ltd. [1995] 5 Comp. LJ 438 (Kar.), Kamdhenu Enterprises v. Vivek Textile Mills (P) Ltd. [1984] 55 Comp. Cas. 68 (Kar.), G. Loganayaki v. Moolangudi Chit Funds (P.) Ltd. [1979] 49 Comp. Cas. 644 (Mad.), Divya Export Enterprises v. Producin (P) Ltd. [1991] 2 Comp LJ 263 (Kar.), B. Viswanathan v. Seshasayee Paper and Boards Ltd. [1997] 3 Comp. LJ 209 (Mad.) and J.N. Roy Chowdhury (Traders) (P) Ltd. v. Jainti Enterprises [1987] 2 Comp. LJ 82 (Cal.). 11. Be that as it is, the learned counsel for the respondent submits that inasmuch as the petitioner had already initiated steps for recovery of the alleged debt by invoking the provisions of section 19 of the Debts Recovery Act, the petitioner is precluded from maintaining this company petition for winding up of the respondent for realization of the alleged debt, which according to the respondent stood discharged by reason of transfer of the pledged shares. 12. Heard the learned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d under the RDB Act. . . . Hence, what could be done by the Company Court under section 433( e ) of the Companies Act, 1956, could obviously not be done by DRT. . . . The DRT not having been invested with the power to wind up a company, it would not be possible to urge before Company Judge that the petition should not be heard." (p.47) 14. Holding so, the Bombay High Court held that merely because the petitioning creditor had filed an application before the Debts Recovery Tribunal under the provisions of the Debts Recovery Act, it cannot be said that the petition for winding up would not be maintainable. The proceedings before the Debt Recovery Tribunal and the Company Court being entirely different, distinct and independent of each other, it cannot be held that merely because the petitioner had moved an application before the Debits Recovery Tribunal under section 19 of Debts Recovery Act, and the respondent had also filed written statement therein, the petitioner would be debarred from maintaining this company petition under section 433( e ) of the Companies Act, for winding up of the respondent, and more so, when it has failed and neglected to pay its debts. 15. None can ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e short-term loan of Rs. 500 lakhs stood discharged, and the petitioner itself is due and liable to pay to the respondent a sum of Rs. 89,11,211. 18. It is significant to note that the respondent by their letter dated 14-6-2002, while requesting the petitioner to reschedule the short-term loan, indicated its inability to repay the loan in the very opening paragraph, when they said : "The short-term loan sanctioned to us, which in the normal course should have been repaid on 21-9-2001. However, due to uncertainty and recent development in our industry during the past nine months due to which the company has been facing strain in cash flow and unable to repay the loan ." [Emphasis supplied] 18.1 In the very same letter, the respondent after seeking to explain adverse conditions being faced by the textile industry, under the caption request , stated thus: "Keeping in view the extraordinary conditions prevailing at present, we find it difficult to repay the short-term loan of Rs. 500 lakhs . The interest overdue of the amount of Rs. 25,00,000 for the period ended 31-5-2002 will be paid by 30-6-2002." [Emphasis supplied] 19. It is also pertinent to note that in respon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... had credited the amounts realised therefrom to the account of the respondent. Be that as it may, whether or not by reason of transfer of the pledged shares in the name of the petitioner, the petitioner became the beneficial owner thereof, having regard to the provisions of section 176 of the Indian Contract Act, 1872, Section 130 of the Transfer of Property Act, 1882, the Sale of Goods Act, 1930 upon which the learned of counsel for the respondent placed heavy reliance to contend that by reason of transfer shares, the petitioner had become the shareholder of the respondent or the petitioner ceased to be the creditor of the respondent; for upon transfer of the pledged shares into the name of the petitioner, the petitioner became the rightful owner thereof and is vested with the voting rights, which is disputed by the petitioner, are all matters of enquiry and can be adjudicated only after a full-fledged trial, and therefore, reliance placed by the learned consel for the respondent on the various decisions in support of his submissions do not merit any consideration at this stage. Suffice it to say, that for a company petition to be admitted, the creditor has to make out a prima fac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... na fide and is to be treated as a substantial defence, are questions which will have to be decided from the facts and circumstances of each case. When the respondent-company comes forward and sets forth its defence, the Company Court has to examine the nature of the respective cases pleaded by the parties and if a prima facie case is made out by the petitioner, the respondent should shoulder the onus to disprove it by showing that its defence is in good faith, one of substance, and is likely to succeed in point of law. A plea, which is frivolous, cannot be termed as raising a bona fide dispute, If, for example, the respondent- company has admitted its liability on earlier occasions, kept quiet without responding to the demands made and notices issued by the petitioner, and only after the petitioner has invoked the court s jurisdiction, the respondent-company has unearthed circumstances or materials and opposed the claim, in such a situation, the Company Court may draw an adverse inference against the respondent-company, that the defence is prima facie an afterthought or is a mere cloak to cover up its inability or refusal to pay." (p. 272) 24. In the instant case, the le ..... X X X X Extracts X X X X X X X X Extracts X X X X
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