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TMI Blog2003 (2) TMI 413X X X X Extracts X X X X X X X X Extracts X X X X ..... plied the same towards purchase of project and other fixed assets and other pre-operative expenses. The said loan had become due and carried a very high rate of interest. The purpose of applying for a loan from the applicant was to repay the said high interest loan from M/s. Reliance Capital Limited. Their plant had already commenced commercial production and the prospects for the business were very bright. The respondent offered to secure the due repayment of the principal amount of the loan, instalments and interest thereon by mortgage of their factory, land and building near Karaikal and hypothecation of all fixed assets. The security so created would rank without any preference or priority and equally with the loans granted by M/s. ICICI and South Indian Bank, which were then outstanding. The applicant considered the proposal and sanctioned term loan of Rs. 400 lakhs carrying interest at 17.5 per cent, per annum compounded quarterly. Though the loan was sanctioned on March 18, 1998, the respondent did not create the security stipulated till May, 1998. On May 15, 1998, the petitioner disbursed the loan amount to the respondent and security documents were also executed. Right fro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d could ill afford. The enquiries revealed that the respondent is trying to make payments to chosen creditors. On August 17, 2001, the respondent owed a sum of Rs. 4 crores and odd. A statutory notice has been sent by the petitioner and the respondent sent a reply about the liability, but falsely denied that the petitioner rescheduled the loan for their benefit. The petitioner had already declined the said offer as the same involved huge sacrifice of public money. The respondents have thus far failed to come out with a reasonable offer. The economic prospects for a turn around are bleak. The respondent is unable to pay the debt and hence the petition. The respondent filed a counter-affidavit and denied the various averments. The respondent approached the petitioner for a loan of Rs. 400 lakhs and it was sanctioned. The security and the mortgage was created on May 15, 1998. The loan was to be repaid in 20 quarterly instalments of Rs. 20 lakhs spread over 60 months beginning from June 1998, as per the terms of the loan. They requested the petitioner to shift the repayment of the first loan instalment to September, 1998, and it was agreed. Due to recession in the market and low pric ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... k in keeping with the settlement, the excise duty and sales tax. The respondent is already on the road to recovery and an order of winding up will severely hamper the progress efforts made by them. It has fixed assets worth Rs. 46.35 crores and it employs 79 staff and workmen. The company's performance is improving year by year and no case is made up to wind up as well and the application is liable to be dismissed. Heard learned counsel for the parties. The points that arise for consideration are (1)Whether the petitioner had made out a case to admit the company petition ? (2)Whether the objections raised by the respondent are sustain able ? (3)To what relief ? Points : The petitioner Allahabad Bank, Mount Road Branch, Chennai has filed this petition to wind up the respondent-company on the ground that they are unable to pay the debts. There is no dispute that the respondent approached the petitioner-bank and they have also sanctioned term loan of Rs. 400 lakhs as per the terms and conditions entered into between the parties. It is also not in dispute that this loan had been availed of by the respondent-company to discharge their earlier loan taken from M/s. Reliance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wind up the respondent-company and put them in trouble. The respondent-company has got assets worth more than Rs. 46 crores and there are about 79 staff working under them. Since it is a growing and running concern, any order of winding up would affect the position of the company as well as the employees. Moreover/ the petitioner is a secured creditor and they can always avail of the remedy under the alternative forum, namely, to initiate proceedings before the Debt Recovery Tribunal and claim the amount. The balance-sheet of the respondent-company would clearly indicate that it is not a commercially insolvent company. Learned counsel also placed reliance upon sub-section (2) of section 443 of the Companies Act. Learned counsel for the petitioner-bank contended that the debt payable to the petitioner-bank is admitted in various correspondence and there are enough materials to come to a conclusion that the respondent-company is unable to clear the debt. Even assuming that the ICICI as well as South Indian Bank had accepted the offer given by the respondent-company, the petitioner-bank cannot be compelled to accept the same. The respondent-company had already borrowed nearly Rs. 5 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... titioner-bank is bound by the same. Moreover, in pursuance of the settlement entered into between the two banks, the respondent-company has made payment of Rs. 5 crores as down payment to ICICI and the sum of rupees one crore to the South Indian Bank and the position statement as on March 31, 2002, clearly establish the same. Learned counsel for the petitioner relied on the decision reported in Bharat Overseas Bank Ltd v. Shree Arcee Steels P. Ltd. [1985] 58 Comp. Cas. 174 (Bom.), wherein it has been held as follows (headnote) : "The company court is not justified in dismissing a petition for the winding up of a company at the stage of admission on the ground that the petitioner is a secured creditor. The petition is required to be admitted and advertised and it is at that stage that the court could go into the question as to whether the security is sufficient or not and exercise its discretion to accept the petitioning creditor's claims and requesting for winding up or to reject the same on judicial consideration." Reliance is also placed on Sri Shanmugar Mills Ltd. v. S.K. Dharmaraja Nadar [1969] 39 Comp. Cas. 297 ; AIR 1970 Mad. 203, as follows (headnote of AIR 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ified in dismissing the petition in limine at the threshold . . . The court must in each case exercise its discretion in deciding whether in the circumstances of the case, it would be in the interest of justice to wind up the company." The same view has been reiterated in Canara Bank v. Arihant Industries Ltd. [2002] 110 Comp. Cas. 70 (Punj. Har.) also. It has been held in Allahabad Bank v. Canara Bank [2000] 101 Comp. Cas. 64 ; [2000] 4 SCC 406 that (headnote of 101 Comp. Cas. 64 ) : "Alternatively, the Companies Act, 1956, and the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (RDB) can both be treated as special laws, and the principle that when there are two special laws, the latter will normally prevail over the former if there is a provision in the latter special Act, giving it overriding effect, can also be applied. Such a provision is there in the RDB Act, namely, section 34. Therefore, in view of section 34 of the RDB Act, the said Act overrides the Companies Act, to the extent there is anything inconsistent between the Acts". Sub-section (2) of section 443 reads as follows : "Where the petition is presented on the ground that it is jus ..... X X X X Extracts X X X X X X X X Extracts X X X X
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