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TMI Blog2011 (3) TMI 1559X X X X Extracts X X X X X X X X Extracts X X X X ..... in the garb of refusing to entertain the winding up petition, issue any directive or require the petitioners to wait in queue for settlement of their dues, if the petitioner does not choose to do so. Moreover, it is not the case of respondent that the petitioner has accepted the CDR scheme or has participated in the same. Merely because the company finds that it is feasible and some other creditors may have agreed with that view, does not mean that the petitioner can be directed to join the said scheme or the petition at its instance can be dismissed straightaway. The argument on feasibility of the scheme also need not be gone into nor the objection that the scheme is being implemented by giving preference to some creditors and such preference is fraudulent in nature requires any answer. Once a view is taken that the petition cannot be dismissed merely because the scheme is proposed and is being implemented, then, all other contentions are of assistance to the company. In the result the company petition is admitted. - S.C. DHARMADHIKARI, J. Janak Dwarkadas, Sr. Adv., Rahul Narichania, Raksha Kothari, Munaf Virjee, Rohit Kapadia, Pradeep Sancheti, Sr. Adv., Yash Kapadia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... conditionally pay or procure to be paid to or to the order of the trustee in New York City in US $ 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 (hereinafter referred to as the conditions) together with applicable premium. The petitioner is filing this petition in its capacity as a trustee for the Bondholders and in discharge of its obligations as a trustee. 11. The petitioner learnt that on or about March 31, 2009, the company proposed and/or applied for restructuring of its debts and/ or for a composition and/or arrangement with creditors and/or for the benefit of certain creditors to the corporate debt restructuring (CDR) cell in India. 3. It is alleged that the petitioner addressed an e-mail dated April 9, 2009, to the respondent stating that there may be a potential event of default on the bonds and requesting a certificate from the company confirming that the company is compliant with the provisions of clause 9.8 of the trust deed. It is stated that this certificate be provided to the pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... genuine intention to resolve the matter and was employing delaying tactics. Therefore, a notice dated October 12, 2009 (statutory notice) annexed as annexure P to the petition was addressed and a reply thereto by the company was received. In the reply, the execution of the trust deed with the petitioner is admitted. However, it is stated that the initiative to restructure its debt through CDR mechanism has been taken but it was denied that there was occurrence of an event of default. 5. There were certain statements made in this reply, which are termed as false by the petitioner. It is stated that without prejudice to what has been set out in the statutory notice and the foregoing paragraphs of the petition the CDR mechanism is not feasible because the package involved will not satisfy the claim of the petitioner. The averments in that behalf are made from paragraphs 28 to 34 and, therefore, it is alleged that the events would disclose that the company is unable to pay its debts and is commercially insolvent. The debt due to the petitioner has not been paid nor secured to the satisfaction of the petitioner. In these circumstances, reiterating the above position, the usual averme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ces and the facilities from ICICI Bank, LIC, IDBI Bank, Bank of India, PNB, HDFC Bank, ING Vysya Bank, ABN Amro Bank, Citibank NA, SICOM, HSBC, Calyon. The net block of fixed assets of the respondent, excluding intangible assets, as on December 31, 2008, are valued at ₹ 16,352 million. All the fixed assets are mortgaged and/or charged in favour of the secured lenders. Similarly, the current assets of the respondent including stock in trade, receivables, etc., are value at ₹ 16,832 million, as on December 31, 2008. The entirety of these current assets are charged by way of hypothecation or pledge in favour of the aforesaid secured lenders. The value of the lenders in whose favour the fixed assets and the current assets are charged aggregates to ₹ 31,609 million. Hereto annexed and marked exhibit B is a statement giving bank wise particulars of the aforesaid borrowings and the securities or charge created in respect thereof. In the event of winding up of the respondent, the FCCB holders would be entitled to only the residual portion, if any, after all the secured creditors' claims have been satisfied from sale of the respondent's assets and payment of prefer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty or mandate to file the petition. Further the petitioner was not authorised to issue Notice of Acceleration of Bonds annexure K to the petition, wherein, inter alia, it was alleged that an event of default had occurred and, therefore, the FCCBs had become immediately due and repayable on their early redemption amount. Alternatively the trustee is obliged to give such a notice, if so directed by passing of an extraordinary resolution. Neither has there been a request in writing as aforesaid nor any meeting was convened for consideration or passing extraordinary resolution as required under the said clause. In such circumstances, the petitioner does not have an authority or mandate to file the present petition. Since the claim in statutory notice is based on notice for early redemption, even the statutory notice is without any legal basis and invalid. 9. It is stated that the respondent called upon the petitioner to specify the category of FCCB holders which it claimed to represent and who had authorised the petitioner to issue notice. The next plea is that the FCCB holders representing approximately 37.31 per cent. of the principal amount of the total outstanding FCCBs had join ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le. 11. In view of the aforesaid it is submitted that a majority of creditors have chosen to approve and join the CDR scheme showing that they have consciously and deliberately chosen the option of restructuring of the debt of the respondent rather than forcing it into winding up keeping in mind, inter alia, the viability, profit earning potential, goodwill and market capitalisation of the respondent. The petitioner represents a small proportion of creditors and ought not to be allowed to jeopardise the interest of the general body of creditors by filing the present petition. 12. The petitioner filed rejoinder to both affidavits pointing out that the company's stand is false. The company has committed event of default under the terms and conditions of the US $ 110,000,000 Zero Coupon Convertible Bonds issued by the company and is liable to pay an early redemption amount and has in fact admitted its liability. The company is now wrongfully and dishonestly disputing its liability to pay the early redemption amount by raising false and frivolous pleas. If the company's position was sound and it was not commercially insolvent but doing huge volume of business, then, restr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd statements in the affidavit in reply have been dealt with in the rejoinder, including the plea about the FEMA Regulations. In such circumstances it has been stated in paragraphs 11 and 12 of the rejoinder as under : 11. With reference to paragraph 10 of the said affidavit in reply, I say that in view of the event of default committed by the company, the petitioner was constrained to issue the said notice of acceleration. Further, in view of the failure on the part of the company to make payment of the early redemption amount on account of acceleration of the bonds, the petitioner was compelled to issue the said statutory notice. In view of the continued failure on the part of the company to make payment of the amounts claimed by way of the said statutory notice, the petitioner was obliged to file the present company petition. In the meanwhile, however, the bonds matured for payment on October 25, 2009 ('maturity date') at 129.578 per cent. of their principal amount (the maturity redemption amount). Even as on the maturity date and till date, the company is unable to meet its liability. The subsequent events that have transpired after the service of the said statutory ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... editors and have been discriminated against. (a) The CDR lenders, save and except the bondholders and derivatives banks, have been secured by : (i) fixed and current assets of the company, Wockhardt Infrastructure Development Ltd. (WIDL) and Vinton Healthcare ; (ii) pledges of all the unencumbered shares of the promoters and the encumbered shares, as and when those shares are released by those charge holders ; and (iii) the unconditional and irrevocable personal guarantee of the promoter, Mr. Habil Khorakhiwala ; (b) Further paragraph 4 of the 'other conditions' of the CDR scheme provides that the proceeds of the divestments by the ASC are to be utilised only for repayment of the secured lenders. (c) The creditors of Wockhardt EU Operations (Swiss) AG (Wockhardt EU) who have an exposure of US $ 250 million (approx ₹ 1,200 crore) were originally secured for a lower amount. However, under the CDR scheme, the security has now gone up substantially. It is pertinent to note that ICICI Bank Ltd., has an exposure of US $ 30.5 million to Wockhardt EU. (d) The bondholders are unsecured creditors of the company. On converting the Bonds to preference shares, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ffer and cash offer to the instructing bondholders they intend to instruct the trustee to pursue the winding up petition without any further delay and the intervening bond holders will take all such actions are necessary to enforce their rights in connection with the defaulted bonds, including pursuing their respective intervention application and oppositions. 17. Thus, together with the letter of understanding being brought on record, what has been highlighted are the terms thereof. It has been pointed out that the company has not reverted by forwarding their acceptance to the proposals stated in the letter of understanding. 18. The respondent has filed a sur-rejoinder in which while reiterating its earlier pleas, what the respondent-company referred to are the discussions in respect of settlement of the present petition with the petitioner as well as certain instructing the bondholders. It is stated that the consent terms dated August 17, 2010, were not filed in the court. Under the term sheet and the consent terms, the respondent agreed to issue to the bondholders in consideration of the existing bonds held by them, new foreign mandatorily convertible bonds due in 2014 car ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on October 12, 2009, with future interest on the early redemption amount. Mr. Dwarkadas submits that the bonds came to be issued in the manner set out in the petition and the petitioner acts as a trustee under the trust deed dated October 24, 2004. Mr. Dwarkadas submits that the bonds were issued at 100 per cent. of the principal amount and they were redeemable at 128.57 per cent. of the principal amount on maturity date, i.e., October 25, 2009. He submits that document at annexure C (page 230, Volume II) is the trust deed under which the petitioner was to act as trustee for the holders of the bond. Inviting my attention to clause 2.2 thereof, Mr. Dwarkadas submits that in terms of this clause and clauses 9.3, 9.4, 9.8, 9.8.1 to 9.8.3 and 11.13 would show that it is for the petitioner to determine whether or not the event of default or potential event of default has occurred and whether it is capable of being remedied. That determination is conclusive and binding on the respondent-company and the bondholders. Mr. Dwarkadas invited my attention to the terms and conditions of the bond and particularly condition No. 10.1 and submitted that the petitioner became aware that the financia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efore, the question of applicability of the FEMA Regulations does not arise. The early redemption of foreign currency convertible bonds is permissible with prior approval of the RBI. Thus, there is no violation of the FEMA Regulations and the statements made in the affidavit in reply in that behalf are nothing but an attempt to mislead the court. Mr. Dwarkadas submits that the defence that offering circular contains risk factor is a plea which will support the petitioner's case. The risk factor and the contents of the offering circular in that behalf would show that repayment due to acceleration is permissible but prepayment would require prior approval of the RBI. The respondent has not paid or even taken steps towards payment of early redemption amount. The risk will arise only after an application is made to the RBI. Therefore no reliance can be placed on the clause relating to risk factor. 22. Mr. Dwarkadas then submitted that the pleas raised with regard to the CDR scheme, cannot constitute a bona fide defence. Mr. Dwarkadas submits that implicit in the reliance placed on CDR is the fact that the respondent-company acknowledges its liability not only to pay the amount a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the CDR scheme, that the company is undisputedly indebted to the petitioner. It is also clear that the company and each of such creditors who are members of CDR are attempting to deny the amount owed by it and discriminate against the petitioner to their benefit and that of the company's promoters and shareholders. Mr. Dwarkadas has gone into the merits of the CDR restructuring package and pointed out that the same is not acceptable to the petitioners because the options for the FCCB therein requires them to wait for considerably long period. They will have to wait till the company is able to over-come its present crisis. He submits that the FCCB will in addition to being converted from creditor to shareholder, the petitioner's chance of being repaid will be conditional on not only profits in a given year and proceeds of fresh issuance of shares allotted to others and required to be redeemed before those that may be allotted to the bondholders, are actually redeemed. Thus, apart from long wait, options 1 and 2 under the scheme are not viable at all. He submits that it has been pointed out in detail as to how the CDR is unreasonable, arbitrary and discriminatory. 23. Furt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 356 of 2010. He submits that for the reasons mentioned in the affidavit in support of this company application and as an intervenor, who presently holds Zero Coupon FCCBs (ISINXSO201687570) with a face value of US $ 3,927,000 (US Dollars three million and nine hundred and twenty seven thousand) and redemption value of US $ 5,088,528.06 (US Dollars five million eighty eight thousand five hundred and twenty eight and six cents), this petition should be admitted. 25. He submits that the intervenor as a FCCB holder was never part of the CDR process and cannot be bound by the package. The intervenor, therefore, declined to accept the options provided to FCCB holder as part of CDR package. He relies upon the correspondence between the applicant/ intervenor and the respondent post a meeting held in November 2009. He submits that it clarified that CDR package was not binding on the Syndicate Bank. He submits that the affidavit clarifies as to how the process was handled transparently by the applicants. He submits that if the Companies Act and particularly section 557 thereof gives discretion to the court to have regard to the wishes of the creditors or contributories of the company, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... finition of the term trust in section 3 of the Indian Trusts Act, 1882, would demonstrate that a trust is an obligation annexed to the ownership of property and arising out of confidence reposed in and accepted by the owner or declared and accepted by him for the benefit of another or of another and the owner. Mr. Kapadia submits that the person who accepts the confidence is called a trustee and the person for whose benefit the confidence is accepted is called a beneficiary . Ultimately, the subject matter of a trust is called trust property. Therefore, it is the beneficiary who is the owner. The petitioner though styling itself as a trustee is not the owner. He submits that the petitioner has a limited right and, therefore, by virtue of collective method of suing for recovery of monies from the respondent, the petitioner cannot present the petition. In any event, the agreement between the petitioner and the bondholders cannot over-ride the statute and particularly the powers conferred in the trustee by Indian Trusts Act. Further, that power is coupled with a duty as is clear from sections 12 to 18 of the Indian Trusts Act. 28. Mr. Kapadia invites my attention to the terms ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of the CDR. He submits that there are working capital loans and some amounts would be fused in. ICICI has already put in a substantial sum of ₹ 220 crores. There are some internal concessions and moratoriums. The working capital once infused in this manner would improve the financial condition of the respondent enabling it to tide over the temporary crisis. In such circumstances, this court should allow the respondent to come out of the present situation by not admitting the winding up petition. A case has been made out for not exercising the discretionary jurisdiction of this court in favour of the petitioner but that of the respondent. Mr. Kapadia submits that the attack and criticism on the CDR scheme is totally unjustified. Mr. Kapadia invites my attention to the letter dated June 30, 2009, at page 341 of paperbook and pages 379, 380 and 469 and 470 of the paperbook to submit that no one was kept in dark about the CDR scheme and proposals. Everybody concerned was taken into confidence. He submits that the respondent's letter dated July 9, 2009, page 343 of the paperbook and page 345 would demonstrate as to how the CDR scheme is beneficial and feasible. The salient ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1971 Supreme Court 2600 - (M/s.Madhusudan Gordhandas Co Vs. Madhu Woolen Industries Pvt Ltd); (6) 1994 Company Cases 835 - (Pradeshiya Industrial Investment Corporation of Uttar Pradesh Vs. North India Petro Chemical Ltd Anr); (7) 1999 Company Cases 841 - (American Express Bank Ltd Vs. Core Health Care Ltd); (8) 1990 BCLC 324 - (Re MC Bacon Ltd); (9) AIR 1988 Karanataka 1 - (Chief Controlling Revenue Authority in Karnataka Vs. The Manager-Advances, State Bank of Mysore, Bangalore Ors); (10) AIR 1996 Supreme Court 719 - (Commissioner of Income Tax Bombay City II Vs. Shakuntala Ors) 34. Mr. Kapadia has been supported by Mr. Swanand Ganoo who appears for the applicants/intervenors in Company Application No. 37 of 2011. He submits that the president of the Wockhardt Employees Union, who has filed the affidavit in support of this application, has pointed out that the petitioner should not be allowed to disrupt the functioning of the respondent-company for good reason, viz., under the CDR package, CDR lenders/banks have consented to restructure the facilities and the petitioner would be recognised as a secured creditor vis-a-vis the respondent and the company ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by Mr. Kapadia that the petitioners are not the trustees is not on affidavit. If it was raised on affidavit the petitioners would have met it by pointing out as to how it is entitled to file and maintain the present petition. Such pleas when not raised on affidavit have a result of, parties like the petitioner, being taken by surprise. Mr. Dwarkadas submits that it is no longer open to the respondents to raise such a technical objection because it is a party to the trust deed. He submits that deeming fiction in section 439(2) must be given its full effect. The intention of the Legislature is to allow any creditor to present a winding up petition and, therefore, the intention is to enlarge the scope of the provisions enabling filing up of a winding up petition. He submits that reliance on the decision of the Division Bench of the Gujarat High Court in the case of Essar Steel Ltd. (supra) is misplaced because there clause 13 was differently worded. Relying on a decision of Division Bench of this court reported in Nilesh Lalit Parekh (supra) Mr. Dwarkadas submits that the winding up is recognised as a equitable mode of execution and enforcement of claims of creditors. Therefore, the o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of the Companies Act and, thereafter the relevant decisions. 39. Part VII in the Companies Act, 1956 is entitled winding up . Chapter I thereof is entitled preliminary . Below that there is a subheading modes of winding up . Section 425(1) of the Act provides that the winding up of company may be either by the court or voluntary. Sub-section (2) of section 425 clarifies that provisions of the Companies Act with respect to winding up apply unless contrary appears, to the winding up of a company in any of those modes. 40. Section 426 deals with contributories and their obligation and duties. The term contributory is defined in section 428. Then comes Chapter II under this Part which is entitled winding up by the court . Section 433 which falls in this chapter is entitled circumstances in which the company may be wound up by the court . A company may be wound up by the court if the company is unable to pay its debts. Company is deemed unable to pay its debts if a creditor, by assignment or otherwise to whom the company is indebted in the sum specified in section 434(1)(a) has served on the company by causing it to be delivered at its registered office by registered post o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 20 to 23 of the judgment, the Supreme Court reiterated the principle that winding up petition is not a legitimate means of seeking to enforce payment of debt which is bona fide disputed by the company. It cannot be a means to exercise pressure on the company. Even an admission of winding up petition has serious consequences. There may not be neglect to pay and if there is no neglect, the deeming provision, viz., section 434(1) does not come into play. Once the debt is substantially disputed, then, there is no neglect to pay. In paragraphs 24, 25 and 29 the Supreme Court also reiterated that if the company is commercially solvent, then, it should not be called upon to pay the debt and liability which is bona fide disputed by it. In such cases, the winding up petition will have an adverse impact and at times, a disastrous effect on the business prospects of the company. All this has been observed in the context of a disputed debt and which dispute is found to be bona fide and substantial. There cannot be any quarrel with these principles and they are binding upon me. I have applied these very principles to the facts of the present case as I am obliged to. I am also aware of the serio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mmediately available funds the principal amount of the bonds becoming due for redemption or repayment on that date (to be received by 10.00 a.m. New York City time) together with any applicable premium and will (subject to the conditions) until such payment (both before and after judgment) unconditionally so pay to or to the order of the trustee interest in US Dollars on the principal amount of the bonds outstanding as set out in the conditions provided that (a) every payment of any sum due in respect of the bonds made to or to the order 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 10 will be deemed to have been made on the business day in New York City after the full amount due (including interest accrued) 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 9.11) except (if payment is made to the principal agent) to the extent that there is failure in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ow it is to be effected, whether conversion is permitted or not. Even there, clause 8 at page 299 entitled redemption, purchase and cancellation and particularly clause 8.1 therein are material and is reproduced hereinbelow : 8.1 Unless previously redeemed, converted or purchased and cancelled as provided herein, the issuer will redeem each bond at 129.578 per cent. of its principal amount on October 25, 2009 (the maturity date). The issuer may not redeem the bonds at its option prior to that date except as provided in condition 8.2 or condition 8.3 below (but without prejudice to condition 10). Clause 13 has been emphasised by both sides and it deals with enforcement. 46. Thus, the claim of the petitioner is founded on the allegation that on or about March 31, 2009, the petitioner learnt that the company proposes restructuring of its debt and/or composition or arrangement with creditors. It applied to the Corporate Debt Restructuring Cell in India. That is how the e-mail was sent. A copy of this e-mail is at page 329 and the petitioner stated that there may be a potential event of default on the issue. As per clause 9.8 of the attached trust deed, the petitioners stat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (formerly J. P. Morgan Corporate Trustee Service Ltd.) as trustee (the trust deed) relating to the bonds. We also refer to your letter dated May 6, 2009, requesting a certificate from the company pursuant to clauses 9.3 and 9.4 of the trust deed. As mentioned in our letter of April 23, 2009, an application has been made by ICICI Bank as the lead institution on behalf of the company for corporate debt restructuring (CDR) for a possible restructuring of certain of the company's loans. We have now been advised that the application for CDR is an event falling within condition 10.1.4 of the bonds and, for this reason, the company is not in a position to provide you with a certificate confirming that no event of default in respect of the bonds has occurred. 49. In these circumstances, the petitioner states that it addressed a notice of event of default dated May 19, 2009, confirming occurrence of event of default. Thereafter, the petitioner addressed a notice of acceleration of bonds dated June 23, 2009, declaring the bonds as immediately due and payable at their early redemption amount. As a result of occurrence of event of default, the petitioner contemplated payment of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng liquidity issue. The general economic condition was stated to be responsible to all this. The petitioner replied to the same and whilst stating that it is under no obligation to substantiate its authorisation, pointed out that the trustees have acted bona fide and it was for the company to have involved the bondholders in the CDR scheme by placing the proposal for their consent as group by convening the meeting, which was never done. It is pointed out that the company has admitted the event of default. 55. To my mind, it is not open to the respondent to urge that the petitioners have no authority to file the winding up petition. The argument in that behalf clearly overlooks the trust deed. In the trust deed it has been stated very clearly that the trustee will hold the benefits of covenants in trust for the bondholders. If clause 2.2 as referred to above is perused, it is clear that the payment has to be made to the order of the trustee instead in US $. The fact that it is a trust deed and it has been executed by the respondent and the predecessor in title of the petitioner, goes to show that the payment is to be made to the order of the trustee. Merely because a bondholder i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cerned, it is clear that a perusal of the same would reveal that the trustee is capable of presenting a winding up petition. It is not as if the debenture holder has to file a winding up petition. The argument that the Division Bench of the Gujarat High Court would suggest that individual bondholders alone have to file a winding up petition, is not accurate because a reading of the judgment and particularly the following paragraphs would indicate that the observations made were in the context of considering over-ruling the objection to the maintainability of the petition. The court does not suggest that a trustee cannot file a winding up petition under any circumstances. 19.3 Even if it is assumed that it was the trustee who was required to present the winding up petition, the trustee clearly was not wanting to do so on the ground that it was not its job under the terms of the trust deed to file a winding up proceeding. The trustee was bound to show a degree of care and diligence required of it as a trustee as per clause 10 of the deed. The trustee could not have waived the default unless in its own opinion, the interest of the noteholder was not to be materially prejudiced, as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es (e) and (f) of section 433 of the said Act. The jurisdiction of the company court does not extend to mere enforcement of the terms of the contract of the parties to satisfy a claim of a creditor made under it. The function of a court in a winding up proceeding is not to decide matters of recovery of a particular debt owed by the company to any person, but to examine whether there exists any circumstances on the basis of which the company is liable to be wound up. The reliefs granted by a court in a winding up petition are different from the reliefs in an inter-partes enforcement action. Therefore, ability to give a valid discharge test cannot be applied to a creditor beneficiary who is a creditor within the meaning of section 439(1)(b) and can knock at the door of the company court to draw its attention to the circumstances that warrant winding up of the company. The inquiry in the present case will be, whether there is inability on the part of the company to pay its debt and/or whether it would be just and equitable to wind up the company. That has nothing to do with the question of creditor's ability to give a valid discharge, because, a creditor who moves the court may ul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the Division Bench affirmed the judgment of the learned single judge (as his Lordship the hon'ble Chief Justice of this court, then was) of the Gujarat High Court in Gramercy Emerging Market Fund (supra) The statement of the law in paragraphs 27 and 28 of the judgment of the learned single judge has my respectful concurrence. 58. In such circumstances and even the general principles would indicate that the bondholders could be represented by trustee and a deed executed in that behalf, which is binding on the petitioner as also the respondent, then, cannot be ignored. Once that deed does not go contrary to the statutory principle recognised by section 439(2), then, there is no substance in the contention that the petition is not maintainable. In any event, it is conceded that the petitioner is an unsecured creditor . It is defined to mean a person to whom the debt is payable. I do not see how by raising technical objections the respondent can escape its liability to pay the sum due in terms of the bonds and the Trust Deed. 59. Even a reading of clause 10.13 of the terms and conditions of the bonds would indicate that the trustees' rights recognised by the deed o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds that it is feasible and some other creditors may have agreed with that view, does not mean that the petitioner can be directed to join the said scheme or the petition at its instance can be dismissed straightaway. The argument on feasibility of the scheme also need not be gone into nor the objection that the scheme is being implemented by giving preference to some creditors and such preference is fraudulent in nature requires any answer. Once a view is taken that the petition cannot be dismissed merely because the scheme is proposed and is being implemented, then, all other contentions are of assistance to the company and they need not detain me. 61. The other objection raised to the maintainability of the petition is that some of the creditors have found the scheme feasible and have pumped in funds. This also cannot be a ground not to admit the petition because there is no dispute about the liability, there is no denial thereof and there is nothing which would indicate that the respondent has a bona fide defence. The only defence seriously pursued is on the maintainability of this petition. That defence has no substance. There is no denial of the liability or any dispute rai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... decisions also need not be referred to again. The Full Bench decision of the Karnataka High Court reported in Chief Controlling Revenue Authority (supra) Manager, State Bank of Mysore) has been relied upon by both sides and though the observations made therein are in the context of levy of stamp duty, they highlight the principles that it is recognised in Indian law that a trustee can ensure repayment of interest as well as the principle and reliance on paragraphs 13 to 16 of this judgment by Mr. Dwarkadas is apposite. The argument of the respondent that the petitioner is not a debenture trustee but represents the bondholders and no property of the company vests in it overlooks the wide definition of the term debenture appearing in section 2(12) of the Companies Act, 1956. 64. In the result the company petition is admitted. The same be advertised in accordance with the Companies (Court) Rules, 1959, within a period of twelve weeks from today on the petitioners depositing in this court the advertisement charges. The charges be deposited within four weeks from today. 65. Company Application No. 1213 of 2009 for appointment of official liquidator be placed before the regular ..... X X X X Extracts X X X X X X X X Extracts X X X X
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