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TMI Blog2015 (2) TMI 867X X X X Extracts X X X X X X X X Extracts X X X X ..... observations regarding public policy to be kept in mind by the Company Court, observed that publication of an admission notice may damage creditworthiness or financial standing of the company, which may also have other economic and social ramifications. The Company Court, at times, has not only to look into the interest of the creditors, but also the interests of the public at large. In Canara Bank's case [2000 (4) TMI 757 - SUPREME COURT OF INDIA], this court opined that despite the debt being admitted, still considering the fact that the company was employing about 3,000 workmen and officers and paying their salaries regularly; honouring its tax liability; as there were number of shareholders and dealers, who were having indirect financial nexus with the company and it was established that the company was progressing towards revival, the petition was not admitted. It was opined that admission would be a loss to one and all, though debt of the petitioning-creditor may be paid of. Considering the aforesaid factual matrix, in my opinion, it would not be in the fitness of things to admit the petition for winding up against the respondent-company. However, it is expected th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4. Before dealing with the preliminary objection raised by the respondent and also the issue on merits, it would be appropriate to deal with two applications filed by Consortium of Banks and the workers employed with respondent-company for being impleaded as party to the petition. Applications Under Order 1 Rule 10 CPC by Consortium of Banks and Workers' Union 5. In the application filed by Allahabad Bank representing the Consortium of Banks (hereinafter referred to as 'the applicant'), who advanced loans to the respondent-company, for being impleaded as a respondent in the petition, it is seeking permission of this court to object to the admission of the winding up petition. Mr. Anand Chhibbar, learned senior counsel for the applicant submitted that Section 557 of the 1956 Act has to be read with Sections 433, 434 and 439 of the said Act, as winding up proceedings are not between two parties, rather, once the order is passed, it is applicable in rem. It is not that only the person who is filing the petition or the respondent-company is affected, rather, the other creditors, the employees and many persons connected with the affairs of the company are also affected ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (for short, 'the 2002 Act'), but still considering the fact that the company is serving the debt properly and as a banker, the applicant has the right to object to the winding up of such a company. On account of recession in the market and finding that net worth of the company and the value of assets was more than the liabilities, debt restructuring was allowed and further loan was advanced. The applicant has full confidence in the company. He did not dispute the fact that in case the company is wound up, the secured creditors will have priority to receive their amount against the mortgaged properties as against the unsecured creditors. He further submitted that there are many fatal consequences in case petition against a running unit is admitted. Once a creditor can be heard after admission of the petition, there is no bar in affording him hearing before admission. The result of admission of a petition against the running unit will have adverse impact on the goodwill of the company. The shares of a company may fall and the business is likely to be affected. The same will h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d, merely because there is a contrary view of other High Court, the same cannot be ignored. The judgment of Delhi High Court in Bipla Chemical Industries v. Shree Keshariya Investment Ltd., (1977) 47 Company Cases 211 was followed by this court in Chemical Enterprises and another's case (supra). 12. Further contention raised by learned counssel for the nonapplicant- petitioner is that in view of the judgments of this Court in Chemical Enterprises and another's case (supra) and Delhi High Court in Bipla Chemical Industries' case (supra), a secured creditor does not have any right of hearing before admission of the petition. 13. Learned counsel further submitted that in National Textile Workers' Union's case (supra), Hon'ble the Supreme Court carved out an exception for granting right of hearing to the workmen before admission of the petition in exceptional circumstances. It was in terms of various interim orders passed therein where their salaries had been withheld and they were starving. The principles laid down therein cannot be extended to the creditors, much less the secured creditors as the applicant is. Otherwise, it has been specifically mentione ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oan and seeking to create further charge on the assets of the company, as a result of which chances of payment of unsecured amount to the bondholders will be further reduced. Judgment of Hon'ble the Supreme Court in Allahabad Bank v. Canara Bank and another, (2000) 4 SCC 406 was referred to. 16. While referring to the aforesaid judgment, learned counsel further submitted that there are two options available with the secured creditors, i.e., either to submit to the jurisdiction of the Company Court or to remain outside. Under these two different options, it has different remedies, rights and liabilities. The applicant is required to choose one and not to sail in two boats. 17. Learned counsel further submitted that the applicant in the present case is hand in glove with the respondent-company. The petition was filed in this court on 29.9.2012. This court granted interim stay against the respondent-company for creating further charge on its assets on 17.10.2012. The order was appealed against by the company vide Company Appeal No. 2 of 2013, wherein vide order dated 17.1.2013, operation of the order passed by the learned Company Judge was stayed. The order passed by the Di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and objected to the impleadment of the applicant. The order was passed with reference to settlement of claims with the petitioner. It has specifically been noticed therein and the same is without prejudice, hence, no effect on the rights of the parties. 20. In response to the contentions raised by learned counsel for the applicants, learned counsel for the non-applicant/petitioner submitted that such a plea has already been raised in arguments on behalf of the respondent-company. In fact, both the applicants have been made to file applications before this court by the respondent-company. They are all hand in glove and do not deserve to be heard before admission of the petition. However, after admission, whosoever has a right to be heard can either support or oppose the winding up order. 21. In response to the contentions raised by learned counsel for the non-applicant/petitioner, learned counsel for the applicant-Consortium of Banks submitted that despite there being no provision under the 1956 Act, still Hon'ble the Supreme Court provided for a right of hearing to the workmen before admission of the winding up petition as they were to be adversely affected. On the same a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are financial institutions and investors who provide funds required for production. The important role of the consumer and other members of the community is also not less important. Relevant paragraphs thereof are extracted below: It would be contrary to every recognised principle of fair judicial procedure and violative of the rule of audi alteram partem which constitutes one of the basic principles of natural justice, to deny to the workmen the right to be heard before an order is made by the Company Judge prejudicially affecting their interest. The objection as to the right of the workers' unions to be heard in the winding up proceedings is untenable as the applications were made by the Unions on behalf of the workmen represented by them and though made in the name of the Unions, the applications were in reality and substance applications of the workmen who were members of each respective Union. xx xx xx The workers are entitled to appear at the hearing of the winding up petition whether to support or to oppose it so long as no winding up order is made by the court. The workers have a locus to appear and be heard in the winding up petition both before the windi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hould have voice or a right to be heard in the determination of the question whether the enterprise should continue to run or be shut down under an order of the court. In Bharat Petroleum Corporation Ltd.'s case (supra), application filed by consortium of bank for being heard before the petition is admitted was allowed while referring to Section 557 of the 1956 Act and opining that it had wide application considering the plain language which use the words relating to winding up of company . The same does not prescribe a stage. The judgment of Delhi High Court in Bipla Chemical Industries' case (supra) was distinguished. 24. In Re: Umang Boards Pvt. Ltd. (M/s)'s case (supra), in appeal before a Division Bench of Rajasthan High Court, the order impugned was passed by the learned Company Judge dismissing the application filed before the Company Judge opposing admission of the petition. The application seeking opportunity of hearing before admission of the petition in the aforesaid judgment was filed on the strength of agreement to purchase shares entered into by the applicant with JME Employees Credit Thrift Society Ltd. An application filed by the applicant ther ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e the Supreme Court while taking into consideration the principles of audi alteram partem, opined that the workers should be offered opportunity even before admission of the petition as they may have some proposal for revival of the company or otherwise. In that case, Hon'ble the Supreme Court opined that the object of winding up is to realise assets of the company and pay the amount so realised in terms of the priority as fixed in the 1956 Act. There are many provisions in the 1956 Act, which speak of winding up of company being carried on with due regard to the interest of creditors and the contributories or after consultation with them. The provisions of Sections 454, 456, 478, 517, 542, 543, 549, 556, 557 and 560 of the 1956 Act were referred to while opining that these provisions apply at a stage after the winding up order is made by the court or in a case of voluntary winding up. At that stage, what remains to be done is only to wind up the company, pay the creditors and if there is any surplus, distribute the same among the share-holders. It was opined that the aforesaid provisions do not deal with a situation prior to making of the winding up order, when the question is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es to be rejected as it does not have any right of hearing before admission of the petition. Ordered accordingly. 31. As far as the application filed by the applicants-workers' union of the company is concerned, in view of the judgment of Hon'ble the Supreme Court in National Textile Workers' Union's case (supra), they have a right to be heard before winding up petition is admitted and an order for its advertisement is passed. They have been conferred this right even after the petition is admitted. The reason on account of which learned counsel for the petitioner sought to distinguish the judgment in the case in hand is not tenable in law. The closure of a manufacturing unit certainly affects the livelihood of workers. In the present case, it is claimed that there are more than 6,000 workers/ employees working in the company, many of whom have been provided residential quarters as well, hence, the application filed by the workers for offering them opportunity of hearing is accepted. 32. One of the preliminary objection raised by counsel for the respondent-company was regarding the power of attorney annexed with the petition to be inadmissible as the same was n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been filed by the petitioner under Section 11 of the Indian Arbitration and Conciliation Act, 1996. At the time of hearing of this application learned counsel for the respondent has raised an objection that the general power of attorney dated 15.12.1997 issued by the petitioner Company of Malaysia in favour of Mr. Noor Amiruddin Bin Mohd. Nordin, Senior Vice-President/ General Manager, South-Asian Region executed at Kuala Lumpur has not been properly stamped according to the Indian Stamp Act, 1899 and that, therefore, it is not admissible in India. The present petition under Section 11 is signed by the said power-ofattorney holder. Learned counsel appearing for the petitioner has stated that, assuming the said plea is tenable, the petitioner has no objection to make good the required stamp duty and penalty. Under Section 3(c) of the Indian Stamp Act, 1899, stamp duty is payable on every instrument (other than a bill of exchange or promissory note) mentioned in the Schedule, which, not having been previously executed by any person, is executed out of India on or after that day, relates to any property or to any matter or thing done or to be done in India and is received in In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Challan No. 46 dated 10.11.2000. 4. In the meantime, IA No. 4 of 2000 was filed by the respondent to recall the order dated 3.11.2000, contending that the power of attorney dated 15.12.1997 was produced beyond 3 months from the date of execution outside India and that therefore under Section 18 of the Indian Stamp Act, read with clause (b) of Section 32 of the Indian Stamp Act, it is not permissible to follow the course adopted by this court in its earlier order abovementioned, inasmuch as more than 3 months have elapsed from the date of execution of the document. 5. In my view, the point raised in the IA is not tenable. In a case where the unstamped document (other than bill of exchange) is produced as evidence, within three months of execution, the stamp duty can be collected without impounding and without penalty. If the document is sought to be used as evidence beyond three months, the abovesaid bar of three months shall not apply and the document can be impounded under Section 33 and stamp duty and penalty are levied, even after expiry of three months. 6. According to the decision of the Full Bench of the High Court of Allahabad in Mohd. Amir Ahmad Khan v. Dy. Comm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an un-stamped power of attorney dated 16.7.1997, however, after the objection was raised, a fresh power of attorney dated 18.10.2004 was filed in court which was executed on proper stamp paper and was also attested by Counsulate General of India, New York. The fresh power of attorney clearly mentioned execution of earlier power of attorney. The action of the attorney holder, who instituted the company petition initially, was specifically approved and ratified in the fresh power of attorney. It was further opined therein that in case the earlier power of attorney was not duly stamped as per Indian law, it was merely an irregularity which could be cured. The judgment of Hon'ble the Supreme Court in United Bank of India's case (supra) was referred to while holding that ratification can be proved even at the appellate stage. In Hindustan Steel Ltd.'s case (supra), Hon'ble the Supreme Court opined that the Stamp Act is a fiscal measure and enacted to secure revenue for the State on certain classes of instruments. It is not enacted to arm a litigant with a weapon of technicality to meet the case of his opponent. The provisions have been conceived in the interest of re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n to the admissibility of the same was raised by learned counsel for the respondent when final arguments in the petition were being heard. In reply to the petition, there is no specific objection regarding the power of attorney being not stamped, hence, inadmissible. It is not only at the stage of filing of the reply to the petition but even in appeal against the interim order dated 9.1.2013, against which Company Appeal No. 2 of 2013 was filed, no such issue was raised, when according to learned counsel for the respondent, this sole ground was enough to non-suit the petitioner. Thereafter, the matter went to Hon'ble the Supreme Court. Even there, no such plea was raised by the respondent. It is being so noticed for the reason that the stand taken by the petitioner is that had this objection been raised earlier, it would have produced the original power of attorney and paid the duty and penalty immediately and cured the defect, as it was merely an irregularity and not illegality. The original power of attorney was produced in court, which was taken on record. The objection raised by learned counsel for the respondent at the time of hearing is not sustainable. Execution of power ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ary Objection raised by the respondent in the main petition 34. Mr. U. K. Chaudhary, learned senior counsel appearing for the respondent-company raised a preliminary objection regarding maintainability of the present petition. For the purpose, he relied upon a judgment of the Karnataka High Court in Company Petition No. 203 of 2010- The Bank of New York Mellon v. Cranes Software International Limited, decided on 4.3.2014. He submitted that in the aforesaid judgment, the petitioner herein was the petitioner. An identically worded Trust Deed was under consideration where the court opined that petition for winding up was not maintainable. As per clause 25.1 of the Trust Deed, the same is to be governed and construed in accordance with English law. The petitioner to be entitled to file the present petition has to show that it is a creditor as per English law and has a right to file winding up petition in terms thereof. While referring to clause 25.2 of the Trust Deed, it was submitted that exclusive jurisdiction regarding the dispute has been given to the courts of England and Wales. In case the petitioner wants to avail of the remedy under the 1956 Act, it has to first get the debt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nnexed. With the rejoinder, authorisation on behalf of two of the bond holders conveyed by them to the petitioner in London was annexed, which was of the same date as that of the statutory notice. Arguments of the petitioner 37. In response to the contentions raised by learned senior counsel for the respondent regarding maintainability of the present petition, Mr. Arun Kathpalia, learned counsel for the petitioner submitted that the issue of jurisdiction being raised by the respondent is beyond pleadings. The question of jurisdiction is a mixed question of law and fact. The same cannot be argued in abstract, for this facts are required to be gone into. If the litigation comes to the court, it pre-supposes a dispute. A winding up petition can be filed in case a company is unable to pay its admitted debt. In the case in hand, the fact that the amount due on account of bonds have not been re-paid by the company even on its expiry and there being specific note to that effect in the balance sheet of the company, clearly establishes that there is no dispute about the facts. Once there is no dispute, no interpretation of the Trust Deed is required to be got from the courts in England a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onstitution of the Trust Deed was clearly provided for in offering document. The trustee represents all the bond holders. In fact, the bond holders cannot approach this court individually unless the trustee fails in discharge of its duties, namely, does not take action within 60 days of the resolution. The powers of the trustee are unlimited and its decision is final between the trustee and the bond holders. As per the Trust Deed, the amount due had to be paid to the trustee or to any one in terms of its order. The petitioner-trustee is the creditor in that scheme of things. The remedies provided under the Trust Deed are over and above any other remedy available in law and the jurisdiction, as conferred on the courts in England as per English law, is not exclusive. Rather, in addition the trustee/bond holders had a right to avail of any other appropriate remedy available to them in law. The remedies are cumulative. It is an admitted case that last date for redemption of Foreign Currency Convertible Bonds (for short, 'FCCBs') was 8.4.2011. On failure of the respondent-company to adhere to the terms, notice dated 3.5.2011 was got issued by the petitioner, which was responded ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ourt has exclusive jurisdiction to deal with a petition for winding up. 43. It was further contended that a petition under Section 433 of the 1956 Act for winding up of a company is an action in rem. When the economy of the country was opened up, corporates are borrowing money from foreign institutional and individual investors at a very low rate of interest. If the amount is not returned on due dates and their action is not sustained on hyper-technical pleas, this will put a dent on creditworthiness of not only the corporates of the country but even the country as such, which is inviting foreign investment. In the case in hand, there is no dispute that the amount is payable, which had not been paid. The governing law as per the Trust Deed is relevant only if there is a dispute pertaining to the terms agreed between the parties, which is none in the present case and as such no adjudication is required. While referring to Clause 24 of the Trust Deed, it was submitted that even if it has not been provided therein that the trustee or the bond holders can file a petition for winding up, the same being a statutory right under the 1956 Act, cannot be taken away. The petitioner can enf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der dated 17.10.2012, whereby this court directed that no charge on the assets of the respondent-company shall be created, submitted that CA No. 762 of 2012 was filed by the respondent-company seeking permission to create further charge on the properties of the company for the purpose of Corporate Debt Restructuring. Vide order dated 9.1.2013, this court dismissed the application and made the orders dated 3.10.2012 and 17.10.2012 absolute. The order dated 9.1.2013 was stayed by a Division bench of this court vide order dated 17.1.2013 in Company Appeal No. 2 of 2013. In Special Leave Petition filed by the petitioner against the aforesaid order, Hon'ble the Supreme Court, vide order dated 1.2.2013, stayed the operation of order dated 17.1.2013. Even review sought by the respondentcompany of the aforesaid order passed by Hon'ble the Supreme Court was also dismissed on 3.4.2013. 46. While summing up his arguments, learned counsel for the petitioner submitted that debt in the present case is admitted and so is the inability. Section 434 of the 1956 Act is a deeming provision, which should be given its logical effect. Right to sue is statutory, hence, even the agreement betwe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion Agent and the Registrar appointed under the Agency Agreement. The petitioner has not been shown to be a creditor in the books of accounts of the respondent-company. It was further submitted that even if for argument's sake it is admitted that the petitioner can be said to be a creditor, still whether it has a right to file a winding up petition is to be decided in terms of various clauses in the Trust Deed, which would require interpretation thereof, as the intention of the parties has to be deciphered therefrom. The issue regarding proper law was not raised in any of the judgments cited by learned counsel for the petitioner, hence, these are not relevant. Even the judgments of Delhi High Court in Shin Satellite Public Co. Ltd.'s case and Aturia Pompe S.P.A.'s case (supra), cited by learned counsel for the petitioner, are not relevant as these were not the cases of a petition filed by a trustee. The petitioners therein were the creditors. So is the judgment of Hon'ble the Supreme Court in Booz Allen and Hamilton Inc.'s case (supra), which was a case under the Arbitration and Conciliation Act, 1996. 50. Learned counsel for the respondent further submitted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cture claiming it to be a creditor, as is sought to be in the case put up. The creditor cannot be for and on behalf of some other persons. Even notice for winding up can be issued by a creditor or the assignee, but the petitioner is none of them. Though it is sought to be pleaded that in case the winding up petition is not allowed, the petitioner will suffer irreparable loss, but it is none as it is neither a bond holder nor a creditor. 53. As per Section 439(2) of the 1956 Act, a trustee of bond holders is a person in whose favour security is created. Such a trustee is required to be registered with Securities and Exchange Board of India as per Securities and Exchange Board of India Regulations, 1993 (for short, 'the 1993' Regulations). The deeming provisions in Section 439(2) are restricted in application to only 439(1)(b) of the 1956 Act. The same cannot be imported in Section 434 of the 1956 Act for entitling the petitioner, who is not a creditor, to issue a notice for winding up, as such even the notice is defective. It has always been the case of the respondent-company that the amount is due to the bond holders and not the petitioner. 54. Another contention rais ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amount and the default are to be seen. Even if both these facts are admitted, still it is the discretion of the court as to whether winding up petition is to be admitted or not. There are many other factors to be considered like the interest of other creditors, number of employees working, contribution to the State, whether it is commercially insolvent and to let it continue is not in public interest where even other creditors have lost faith. The assets of the company are more than its liability. The valuation thereof was got done in terms of the order passed by this court on 19.9.2013, wherein it was found that total realisable value of the assets is ` 929 crores. Even the distress sale value is about ` 749 crores. The liabilities are ` 605 crores. In fact, after the debt restructuring by the banker and advancement of more loans, the company has been able to turn around. Its liabilities have been reduced. It has started generating cash profit. Referring to production capacity, actual production and exports, it was submitted that the company should not be directed to be wound up merely on a petition filed by one of the unsecured creditor. Facts in totality have to be seen. All oth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ioner submitted that Section 439(2) of the 1956 Act was already existing in the Act when Sections 117A to 117C of the 1956 Act were added. A subsequently added section will not control the meaning of the section already existing. It can be harmoniously read to mean that Section 117B of the 1956 Act deals only with one kind of debentures, which could be secured and unsecured. The argument that for the purpose of maintainability of a winding up petition in this court, English law is to be seen, the same would mean that Indian courts are sought to be made subject to English law. The contention is totally misconceived. All judgments cited by learned counsel for the respondent on the issue of governing law are irrelevant as the cases do not pertain to FCCBs or like clause 25.1 in the Trust Deed. When there is no dispute that the amount is due to the bond holders, the governing law is irrelevant. If there is a dispute, then even under the local laws enquiry is not possible in winding up jurisdiction. 60. Regarding the contention that the notice got issued by the petitioner being invalid, learned counsel for the petitioner submitted that in reply to the notice, the status of the petiti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lt with extensively. The issuance of FCCBs cannot be said to be de hors the 1956 Act as it contained a clause for its optional conversion into equity, which is governed by the 1956 Act. 63. Once the liability in the present case is admitted, as the bonds had become due for redemption in April, 2011, no payment having been made thereafter to the bondholders who did not opt for its conversion into equity, the inescapable conclusion in case the locus of the petitioner to file the petition is accepted, is that the company is unable to pay its debt, hence, the petition deserves to be admitted. Discussions regarding maintainability 64. It is a case in which the company issued an offering circular on 31.3.2006 for issue of US$ 30,000,000 2.5% convertible bonds subject to an additional over allotment of US$ 4,450,000. The interest was payable on the bonds semi-annually on 7th day of April and October every year. Unless previously redeemed, converted, purchased or cancelled, the bonds were optionally convertible into equity at any time on or after 7.5.2006 till 8.3.2011 at the rates defined. The bonds could be redeemed in whole or in part at the option of the company at any time on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y other currency); or (D) Enforcement Proceedings: A distress, execution or other legal process is levied, enforced or sued upon or against any material part of the property, assets or revenues of the Issuer or any of its Subsidiaries by any person or entity and is not discharged or stayed within 60 days of having been so levied, enforced or sued out; or (E) Security Enforced: An encumbrancer takes possession or a receiver, manager or other similar person is appointed over, or an attachment order is issued in respect of the whole of any material part of the undertaking, property, assets or revenues of the Issuer or any of its Subsidiaries and in any such case such possession, appointment or attachment is not stayed or terminated or the debt on account of which such possession was taken or appointment or attachment was made is not discharged or satisfied within 30 days of such possession, appointment or the issue of such order; or (F) Insolvency: The Issuer or any of its Subsidiaries is declared by a court of competent jurisdiction to be insolvent, bankrupt or unable to pay its debts, or stops, suspends or threatens to stop or suspend payment of all or a material part ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... debtedness for borrowed money means any present or future indebtedness (whether being principal, premium, interest or other amounts) for or in respect of (i) money borrowed, (ii) liabilities under or in respect of any acceptance or acceptance credit or (iii) any notes, bonds, debentures, debenture stock, loan stock or other securities, issued or distributed whether by way of public offer, private placing, acquisition consideration or otherwise and whether issued for cash or in whole or in part for a consideration other than cash. Upon such notice being given to the Issuer, the Bonds will immediately become due and payable at their Early Redemption Amount. Under current regulations of the RBI applicable to convertible bonds, the Issuer would require the prior approval of the RBI before providing notice for or effecting such a redemption prior to the Maturity Date and such approval may or may not be forthcoming. 15.3 Entitlement of the Trustee In connection with the exercise of its functions (including but not limited to those in relation to any proposed modification, authorisation or waiver) the Trustee shall have regard to the interests of the Bondholders as a class ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y payment of any sum due in respect of the Bonds made to or to the account of the Principal Agent as provided in the Agency Agreement shall, to that extent, satisfy such obligation except to the extent that there is failure in its subsequent payment to the relevant Bondholders under the Conditions and (b) a payment made after the due date or pursuant to Condition 11 will be deemed to have been made on the third Business Day after the full amount due (including interest accrued to that third Business Day) has been received by the Principal Agent or the Trustee and notice to that effect has been given to the Bondholders if required under Clause 9.10 (Notice of late payment) except (if payment is made to the Principal Agent) to the extent that there is failure in the subsequent payment to the relevant Bondholders under the Conditions. The Trustee will hold the benefit of the covenants in this Clause 2.2 on trust for itself and the Bondholders. xx xx xx 2.4 Payment after a default At any time after an Event of Default or a Potential Event of Default has occurred the Trustee may (but shall not be required to) and shall if directed by an Extraordinary Resolution of the holders of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t) owing in respect of the Bonds pari passu and rateably; and (C) thirdly, in payment of any balance (if any) to the Company for itself. If the Trustee holds any monies in respect of Bonds in respect of which claims have become prescribed under Condition 12, such funds shall be returned to the Company. xx xx xx 9.15 Trust Deed comply with and perform and observe all the provisions of this Trust Deed which are expressed to be binding on it. The Conditions shall be binding on the Company and the Bondholders. The Trustee shall be entitled to enforce the obligations of the Company under the Bonds and the Conditions as if the same were set out and contained in this Trust Deed which shall be read and construed as one document with the Bonds. The provisions contained in Schedule 3 (Provisions for meetings of Bondholders) shall have effect in the same manner as if herein set forth; xx xx xx 10.1 Normal remuneration So long as any Bond is outstanding the Company will pay the Trustee as remuneration for its services as Trustee such sum on such dates in each case as they may from time to time agree in writing, which sums, for the avoidance of doubt, shall be paid fre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... interest arising from circumstances particular to individual Bondholders (whatever their number) and, in particular but without limitation, shall not have regard to the consequences of such exercise for individual Bondholders (whatever their number) resulting from their being for any purpose domiciled or resident in, or otherwise connected with, or subject to the jurisdiction of, any particular territory or otherwise to the tax consequences thereof and the Trustee shall not be entitled to require from the Company, nor shall any Bondholder be entitled to claim from the Company or the Trustee, any indemnification or payment in respect of any tax consequence of any such exercise upon individual Bondholders except to the extent provided for in Condition 10 and/or in any undertakings given in addition thereto or in substitution therefor pursuant to this Trust Deed. xx xx xx 19. POWERS AND REMEDIES CUMULATIVE Except as otherwise provided in this Trust Deed, no right or remedy herein conferred upon or reserved to the Trustee or to the Bondholders is intended to be exclusive of any other right or remedy, and every right and remedy shall, to the extent permitted by law, be cumulati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... concurrently or not). 66. As far as the judgment of Karnataka High Court in The Bank of New York Mellon's case (supra) is concerned, firstly the aforesaid judgment is subject-matter of appeal. Further, in the aforesaid case, the Trust Deed was dated 17.3.2006. The due date for redemption of FCCBs was 18.3.2011. The company petition was filed alleging default in payment of interest due on 18.9.2009. The interest upto March, 2009 was paid. On account of that, the trustee therein called upon the company to pay the total amount of FCCBs. The contention sought to be raised by the company therein was that the petitioner therein was not a creditor and not entitled to file the petition as in terms of the provisions of the Trust Deed, only recovery proceedings could be initiated. While referring to the terms of the Trust Deed, it was argued therein that the bonds and GDRs were to governed and construed in accordance with English law. The terms of the Trust Deed therein provided that courts in England shall have exclusive jurisdiction to settle any dispute in connection with the Trust Deed or the bonds and the courts in England are the most appropriate and convenient courts to set ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of US$ 2,13,334 were still payable. On account of failure to pay the aforesaid amount, winding up petition was filed, where the plea raised was that as per the collaboration agreement, resolution of disputes was by way of arbitration and that too in accordance with laws of Switzerland, hence, the Company Court should not exercise jurisdiction. While negating the plea raised by Aturia Continental, it was held by Delhi High Court that the said plea was not with reference to any dispute in terms of the agreement between the parties, which was required to be resolved as per the agreement. The closure of the factory was pleaded on account of change in economic policy of the government. The inability was pleaded on account of bad financial position. Under these circumstances, the Court opined that in that case the matter could be referred to arbitration only if there was a bonafide dispute which could not be adjudicated upon in summary proceedings by the Company Court. The applicability of law of Switzerland will arise when such a dispute is to be resorted to by means of arbitration. Even if there was any such arbitration clause, the company petition for winding up was held to be maintai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ition can be filed only with this Court, which is the mandate of Section 10 of the Companies Act. 68. In Videocon Industries Ltd.'s case (supra), the Company Court admitted Company Petition No. 528 of 2012 vide judgment dated 5.12.2013, which was upheld in Appeal (L) No. 29 of 2014 vide judgment dated 18/19.7.2014. In the aforesaid case, respondent-Intesa Sanpaolo S.P.A. was a bank incorporated under the laws of Italy. The petitioner-Videocon approached the aforesaid bank for financial assistance. As a condition to secure financial assistance, Videocon offered and issued a guarantee letter styled as 'Patronage Letter' in favour of the bank. In terms of the loan agreement as guaranteed, Intesa advanced financial assistance. On default, Intesa instituted proceedings in the court at Turin, Italy as per the terms of agreement. The same was decreed. Intesa filed a suit in the court in India for enforcement of the decree obtained in the court at Turin. Thereafter, Intesa issued a notice for winding up of Videocon. In response thereto, neither execution of 'Patronage Letter' was denied nor disputed. Even the default was also admitted. As a result, the petition for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Co. Ltd.'s case (supra), winding up petition was filed by Shin Satellite as in terms of an agreement signed by STV Enterprises Ltd. with Shin Satelite to partly utilise and avail the services of non-Preempitible unprotected extended C-Band Regional Beam Transponder of Thaicom-3 satellite of Shin Satellite for the purpose of digital broadcast applications etc. for a period of 5 years commencing from 15.11.2001. As per the said agreement, the service fees of US $ 49,219 per quarter was payable in advance. STV Enterprises failed to adhere to the terms. Shin Satellite issued a notice dated 16.9.2002 to STV Enterprises claiming that there was an outstanding amount of US $ 99,683. The same was admitted by STV Enterprises. In subsequent communication, STV Enterprises admitted outstanding balance of US $ 4,32,570.97 as on 31.12.2003. Notice for winding up of STV Enterprises was issued where the matter was compromised and disposed of for payment in terms of agreed schedule. As STV Enterprises did not adhere to the schedule, application for revival of the company petition was filed. The Company Court found that STV Enterprises was admittedly indebted to Shin Satellite for an amount of US ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of the company is situated. 73. To similar effect is the judgment of Bombay High Court in Rhodia Ltd. and others' case (supra). 74. As a preliminary objection, the respondent-company while referring to clauses 25.1 and 25.2 of the Trust Deed, sought to argue that jurisdiction with reference to the Trust Deed was exclusively with the courts in England and Wales and the Trust Deed is to be governed and construed in accordance with English law. Unless the petitioner first gets it determined under the English law that it is a creditor, it does not have any right to file the present winding up petition, as in terms of Section 439(2) of the 1956 Act, such a petition can be filed only by a creditor. 75. Clause 25.1 of the Trust Deed provides that the Trust Deed shall be governed and construed in accordance with English law. Meaning thereby, if there is any dispute with reference to any of the terms contained in the Trust Deed, the same has to be interpreted in accordance with English law. Clause 25.2 provides that courts of England and Wales shall have the jurisdiction to settle any dispute in connection with the Trust Deed or the bonds and the respondent-company irrevocabl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . This clause provides that at any time after the bonds become due and repayable, the trustee may, at its discretion and without any further notice take such proceedings against the company as it may think fit to enforce repayment of the bonds together with the premium (if any). It can further enforce the provisions of the Trust Deed. However, such proceedings could not be initiated unless there is a request of not less than 25% of the bondholders in writing. This clause specifically provides that no bondholder will be entitled to proceed against the company directly unless the trustee fails to take appropriate action and such failure continues for a period of 60 days and during this period. The case in hand is not such. Meaning thereby, the right to proceed against the company, in case of an event of default, has been specifically conferred on the trustee and not the individual bondholder. 79. Even the issue raised by learned counsel for the respondent that consent of the bond holders having not been produced, the present petition filed by the trustee is not maintainable, is to be noticed and rejected. It is the admitted case of the respondent-company itself that even after iss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ceedings is totally misconceived. Even section 439(2) of the 1956 Act provides that a secured creditor, holder of any debenture, whether or not any trustee or trustees have been appointed, and trustee for holders of debentures shall be deemed to be a creditor within the meaning of clause (b) of sub-section (1), which provides that winding up petition can be filed by any creditor or creditors of the company. The petitioner in the present case is a trustee of the bond holders, hence, entitled to maintain the petition. 82. The contention that the aforesaid deeming provision, as provided for under Section 439 of the 1956 Act, is limited only to the entitlement to file a petition and not for issuance of a notice under Section 434 of the 1956 Act is totally misconceived and deserves to be rejected. Once a trustee has been given right to file a petition and has been treated as a deemed creditor and a creditor has been given a right to issue notice or get the notice issued to a company, then the trustee is entitled to get the notice issued. If the contention of learned counsel for the respondent is accepted, the same will make the provisions of the 1956 Act unworkable. This is the only ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o be exercised considering many factors, namely, whether the company is functional, number of employees working, contribution to the State etc. 87. As per the information available in the annual report of the company for the year 2012-13, the date of commencement of commercial production of the company was 19.12.1946. It is engaged in manufacturing of cotton textiles, synthetics fabrics and nylon filament yarn. As per the balance sheet of the company for the period ending in September, 2013 (18 months), the company suffered operating loss of ` 6399.27 lacs. For six months period from October, 2013 till March, 2014, the company earned operating profit of 302.05 lacs. For the quarter ending 30.6.2014, the same was ` 821 lacs (un-audited) and for the quarter ending 30.9.2014, the same was ` 816 lacs (un-audited). 88. The valuation of the assets of the company was got done by this court vide order dated 9.9.2013, in terms of which the valuer had submitted his report. As per that report, the total realisable value of the assets was ` 929 crores. Even the distress sale value of the assets of the company located at Phagwara, Hoshiarpur and Shri Ganganagar was about ` 749 crores. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... than its liabilities. It suffered losses on account of recession and also apparently on account of non-availability of liquid funds as was claimed that in terms of the exercise being done for Corporate Debt Restructuring Scheme, some of the non-core assets were to be sold to pay of the creditors. Such an opportunity deserves to be afforded to the respondentcompany. It will not be in the fitness of things to give unceremonial burial to the respondent-company, once it is in business for the last more than 68 years. It is further relevant to add here that 50% of even the bond holders have got their bonds converted into equity. It shows that even they have faith in the management and financials of the company. 90. Hon'ble the Supreme Court in M/s IBA Health (India) Private Limited v. M/s Info-Drive Systems SDN. BHD., (2010) 10 SCC 553, while making observations regarding public policy to be kept in mind by the Company Court, observed that publication of an admission notice may damage creditworthiness or financial standing of the company, which may also have other economic and social ramifications. The Company Court, at times, has not only to look into the interest of the credito ..... X X X X Extracts X X X X X X X X Extracts X X X X
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