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TMI Blog2013 (6) TMI 301X X X X Extracts X X X X X X X X Extracts X X X X ..... the dispute in that case was not the one which raised in this petition. The question to be determined in this case is as to whether the petition as framed is competent or not. Thus as noticed that it is now well settled law that winding up is not legitimate means to enforce the recovery by pressurizing the company to enter into a settlement. The fact that the respondent is a running company is not controverted nor it is controverted that there is financial crunch on account of non receipt of dues form the customers. That being the case, it will be too harsh to order winding up of a running company, merely on the petition by trustee, filed without proper authorisation. Consequently, finding no merit, the company petition is ordered to be dismissed. The petitioner shall however be at liberty to enforce their rights in accordance with law to recover the amount due to bondholders, in terms of Trust deed. - C. P. No. 171 of 2012 - - - Dated:- 23-4-2013 - Vinod K. Sharma,JJ. For the Petitioner : Mr. Thriyambak J. Kannan For the Respondent : Mr. T. K. Baskaran ORDER Deutsche Trustee Company Ltd. has invoked the jurisdiction of this Court under section 433(E), 434(1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is bound to redeem each of the Bonds at 129.35% of its principal amount on the Maturity date. 9. That the respondent company also entered into a trust agreement with the petitioner, dated 27.12.2007. Under the Trust deed, the petitioner was appointed as the trustee for the Bondholders. 10. That Clause 2.2 of the Trust deed stipulates that the respondent company shall unconditionally pay or procure to be paid to or to the order of the Trustee in US Dollars in immediately available funds the principal amount of the Bonds becoming due for redemption or repayment on the date when the Bonds or any of them become due to be redeemed in accordance with the terms and conditions of the Bonds, together with any applicable premium and interest in accordance with the Bond conditions. The liability of the company to pay the amounts due under the Trust deed is absolute and unconditional. 11. Condition 4.1 of the Bonds provides that the Bonds shall bear interest from and including the Issue date at the rate of 2% p.a. and which is payable in equal instalments in arrears on 27th June and 27th December in each year commencing with the interest payment falling due on 27.6.2008. 12. Condition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f any of the Bonds for more than 10 days when due, or .........." 15. That on 3.6.2010, Corporate Trust and Agency services, Deutsche Bank (the "Paying Agent") sent a facsimile to the Company intimating that the payment of the interest of USD.500,000.00 (United States Dollars five hundred thousand only) falling due on 28.6.2010. The Company was asked to make payment on or before 8.7.2010. The Company failed to keep its commitments and thereafter vide letter, dated 5.7.2010 the company was directed to make payment within 10 days of the grace period i.e. 8.7.2010, otherwise, it would constitute event of default under Clause 17.1 of the Bonds. 16. The Company however failed to pay interest amount within grace period and the interest instalments payable to the Bondholders under Condition 4.1 of the Bonds. The Company on the other hand, kept reassuring the petitioner time and again that it intended to pay the interest payment due to the Bondholders. But the Company has failed to make such payment. The Company thus, failed to pay the amount admittedly due to the Bondholders under the Bond. 17. That on 25.6.2010, Mr. Sivakumar Srinivasan, a representative of the Company, in response ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r before a further information notice was sent to the Bondholders. The Company replied to the email on the same day i.e. 14.9.2010 expressing their purported willingness to resolve the matter. Once again, no payment was forthcoming. 23. That it is surprising that after constant assurances from the company, that it would meet its interest payment obligations for over three months since the interest fell due, the Company for the first time in September, 2010 attempted to renege from its obligation of paying the interest amount and default interest admittedly due on the basis of the liquidity crunch being faced by the Company without providing any explanation to this effect. 24. This indicates that for all this while the Company was postponing the interest payment to prevent any action by the Bondholders. The petitioner is of the view that such conduct of the Company is indicative of the fact the Company at no time intended to pay the Bondholders. However, it was due to this conduct of the Company, that the Petitioner, under the bona fide belief that the Company had the intention to pay the Bondholders, refrained from taking action against the Company. 25. That as a last attempt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Companies Act, 1956 but has failed and neglected to pay the Petitioner or to secure to the Petitioners satisfaction, the said amounts due and payable. The Companys liability to pay the same is absolute and unconditional. The Petitioner submits that the aforesaid facts and circumstances, establish that the respondent is commercially insolvent since it has failed to pay the debt due by it to the Petitioner within 21 days from the date of the Winding Up Notice. 34. The respondent Company therefore is deemed to be unable to pay its creditors the amounts owed to them when due and payable and consequently, the Petitioner submits that the respondent statutorily deserves to be wound up by this Court. 35. That the Petitioner submits that as set out hereinabove, the respondent has neither paid nor evinced any intention to pay the said monies or any part thereof which is legitimately due to the Petitioner, inspite of the service of the winding up notice. 36. That the Company thus is, deemed to be unable to pay its debts in terms of Section 434(1)(a) of the Companies Act, 1956, and consequently is liable to be wound up by the orders and directions of this Court in terms of Section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hardest hit was the United States of America, where more than 95% of the Company s clients are located. As a result, not only did several of the clients of the respondent;s Company delay payments due to the Company but also several other Companys customers did not renew contracts on account of the prevailing economic situation. (vi) That the respondent's wholly owned subsidiary's (WOS) banker, M/S.Laurus Master fund in the US filed for Voluntary Liquidation in the year 2008 whereby, the respondent Company's WOS from a position of total credit of $30 million were reduced to a credit of $5 Million. This resulted in a severe financial crunch for the respondent Company as they were primarily dependent on the cash flow for the services rendered to its WOS and all the cash flow due to the respondent company has been adjusted by the liquidators to reduce their credit exposure. (vii) That the respondent is slowly recovering with the improving situation in the United States of America. The respondent Companys efforts to raise capital in the international markets have also not been successful due to such economic situation in USA and in the European capital markets. Merely it is deni ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssurance for payment. (xiii) That respondent Company was trying to generate funds to make payments with respect to the interest. (xiv) That assurances were given on the belief that it would recover huge amount of receivables from its customers and on account of non receipt of receivables, it became difficult for the respondent to pay interest. (xv) That failure on the part of the respondent is neither willful nor wanton, but it is the reason beyond the control of the respondent company due to the financial crunch faced by the entire I.T. Industry. (xvi) That there was no negligence on the part of the respondent company with regards to payment of interest or creation of any security of the said amounts and the respondent Company trying its level best to come out of the financial crunch. (xvii) That the respondent company is commercially insolvent as the respondent Company is still operating and has several employees working with the Company and it is due to the financial crisis faced by the entire IT industry, there had been a temporary delay in making payments towards the interest and components, but that does not in any way show that the respondent Company is insolvent o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... up petition. (ii) That the petitioner could file a petition or take legal action against the respondent company under specific authorisation of 25% of the Bond holders, but in this case, the petitioner has not placed on record any such authorisation. This fact was not even disputed, that the petitioner not place on record, the authorisation by 25% of the bond holders along, with the Company petition. (iii) That the learned counsel for the respondent also referred to statutory notice issued by the petitioner to contend that even in the statutory notice, it was not stated that 25% of the Bond holders have authorised the petitioner to issue notice, nor list of 25% Bondholders is forthcoming which could entitle the petitioner to maintain the present petition. (iv) That the Power of Attorney placed on record also cannot be a basis to file this petition, as it is neither stamped properly nor it is endorsed by the competent authority to be acceptable in Indian Court. It is thus, contended that the company petition deserves to be rejected. (v) That mere non payment of admitted liability cannot be a ground to wind up the company, as winding up petition is not a legitimate means of r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... up. In my view, the said contention is unacceptable as it is no more res integra. In fact, the learned Single Judge in Gramerey's case had taken note of the similar clause No.13 relating to enforcement by a minimum requisite number of Bondholders who should authorise such action and had held that in such circumstances the minority Bondholders cannot institute a petition but the Trustee is required to be made a party to the petition and such liberty was granted to implead the Trustee in the petition. 18. In fact, the Division Bench on the other hand was of the view that the requirement of consent by minimum number of note holders as contained in clause 13 which had arisen for consideration is only for the purpose of recovery proceedings. It is held that the same cannot bar a statutory remedy available under Section 439 of the Companies Act and that even the note holders can institute such proceedings. In the instant case, as evident, the Trustee themselves have filed the petition invoking the statutory provision contained in the Companies Act. It is no doubt true that the petitioner in their statutory notice as well as rejoinder filed in the instant petition have contended that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t Products (Pvt.) Ltd. (1996)85 Comp Cas 190(Cal) wherein it was held that when the respondent did not set up any claim against the petitioner by disclosing any disputes or compounds the petitioner's claim and defence of the respondent is found untenable, that the petition for winding up can be admitted. 49. On consideration, I find that this company petition deserves to fail. 50. Admittedly, in the present case, under the trust deed authorised the petitioner can maintain the petition for recovery only if 25% of the bondholders authorised the filing of a petition. Inspite of preliminary objection, the petitioner failed to place on record authorisation by the 25% of the bondholders to maintain the present petition. 51. The filing of memo after judgment reserved, is not permissible, as no permission was sought from the court to place additional document or record. 52. The judgment of Karnataka High Court on which reliance was placed also cannot advance the case of the petitioner, as admittedly, in that case, the memo was filed with notice to the respondent and opportunity was to the respondent to contest the authority so given and to place on record documents in defence. 53 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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