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TMI Blog2013 (10) TMI 452X X X X Extracts X X X X X X X X Extracts X X X X ..... rties. As a matter of fact, it is not disputed at the hearing that the title deeds were not deposited with the Appellant. An equitable mortgage cannot be created without the deposit of title deeds and merely on a typed statement. The petition for winding up shall stand admitted and there shall be consequential orders in usual terms for the issuance of an advertisement and publication. - 161 of 2013 - - - Dated:- 16-7-2013 - DR. D. Y. CHANDRACHUD AND S.C. Gupte, JJ. For the Appellant : Rahul Narichania, Amit Jajoo, Ms. Sushmita Gandhi and Rishabh Agarwal. For the Respondent : Zal Andhyarujina. JUDGMENT:- PER : D.Y. Chandrachud The appeal arises from the judgment of a learned Single Judge dated 30 November 2012 dismissing the petition for winding up filed by the Appellant. 2. The Appellant had on 4 November 2005 granted to the Respondent a Reverse Factoring Facility in the amount of Rupees Fourteen crores. The extent of the facility was subsequently enhanced to Rupees Thirty crores on 20 May 2006. Cheques issued by the Respondent were dishonoured. Complaints were filed under Section 138 of the Negotiable Instruments Act, 1881 and the petition for winding ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... all not and is not intended to operate as a waiver of any rights of GTF arising from the previous defaults of KSS or of any of KSS's obligations." (Emphasis supplied) Subsequently on 19 October 2009, the spouse of the ex-director addressed a communication to the Appellant irrevocably agreeing and confirming that she would create a mortgage in respect of the residential flat by handing over title deeds in original within twenty days. Admittedly, the title deeds were not handed over and the mortgage was not created. 4. Respondent issued bonds to the Appellant. On 8 March 2011, the Appellant made a request for conversion of the bonds into equity shares. 5. The Appellant recalled the entire loan by a notice dated 31 May 2011 and instituted a winding up petition after issuance of a statutory notice. 6. The learned Single Judge dismissed the petition by the impugned judgment dated 30 November 2012. 7. The submission of the Appellant is that in breach of the terms and conditions governing the restructuring facility, the Respondent failed to: (i) Create a mortgage of the residential flat by deposit of title deeds; (ii) Convert the bonds into equity shares despite th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... esidual amount due and payable was Rupees Thirty-one crores which was agreed to be restructured in terms of the letter. The Respondent had agreed to make a payment of Rupees Five crores and Two crores which was made though after some time. The balance of Rupees Twenty-four crores was converted into bonds. The Appellant was given an option of requiring the conversion of the bonds into equity shares and the Respondent was obliged within twenty-four hours of a notice of conversion to complete the formalities for the conversion of the bonds into equity shares. There is no dispute about the fact that though on 8 March 2011 the Appellant exercised the option for conversion, the Respondent did not allot equity shares in compliance with its obligation to complete the conversion. Hence the Respondent was in breach of its obligations under the restructuring: firstly, it did not convert the bonds into equity shares and secondly, no mortgage was executed in favour of the Appellant. 10. The defence of the Respondent in the affidavit-in-reply was to the following effect. "9. As stated hereinabove it was one of the essential terms of the settlement that the Petitioner would withdraw all ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Obviously, the Appellant did not agree to a withdrawal of proceedings instituted unless its constituent had complied with the terms on which the trade facility had been restructured. 12. The consequence of the failure of the Respondent to observe the terms of restructuring are made evident in Clause 11 of the letter of sanction dated 17 September 2009. Under Clause 11, until all the terms and conditions of the letter have been complied with by the respondent, the Appellant reserved rights in relation to the defaults under the facility. Consequentially, once the Respondent committed a default in complying with the terms and conditions of the letter of sanction, the Appellant was justified in recalling the amount due under the facility. The amount became due and payable on default. There is clearly a debt due and payable which fulfils the mandatory institution of a proceeding for winding up. 13. There is no merit in the contention that the debt of the Appellant stands replaced by a contractual settlement and that the remedy of the Appellant must lie in an action for breach of contract either by a way of a suit for specific performance or a claim for damages. In the present case ..... X X X X Extracts X X X X X X X X Extracts X X X X
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