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TMI Blog2015 (7) TMI 578X X X X Extracts X X X X X X X X Extracts X X X X ..... the discretion not to order winding-up. Pradeshiya Industrial and Investment Corporation of UP (1994 (2) TMI 267 - SUPREME COURT OF INDIA) decided by the Supreme Court is a case which exemplifies the first category. There, there were certain questions of law raised in defence of the plea against the winding-up under section 433(e): that the promoters‟ agreement was cancelled, which aspect was not taken note of by the company court, that the appellant before the court which was sought to be wound-up was not a debtor at all as it was a financial institution which aspect was also not considered and that the claim was the subject matter of arbitration proceedings, which had also been overlooked by the company court. It was in these circumstances that the Supreme Court held that the defence of the company was a "substantial one and not mere moonshine". In fairness to the petitioner, it must be said that it was stated on its behalf that the effectiveness of the CDR Scheme and its impact on the ability of the respondent-company to repay its debts is a matter that can be examined in detail once the petition is admitted. The right of the respondent-company to argue, at that time ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was put in place would only infuse an amount of ₹ 150 crores into the company with a possible ₹ 40 crores to be kept aside for the benefit of the petitioner, which, according to the petitioner, was inadequate to meet the bond-liability of about ₹ 688 crores and would not even be sufficient to meet the interest liability. 4. An appeal was preferred by the company against the order passed on 13-12-2012 by this court before the Division Bench in Co.Appeal No. 114/2012. The main contention of the company (appellant in the appeal) was that the CDR scheme would be beneficial not only to the company but also to the bondholders who will be protected if the scheme is allowed to go on and that under the scheme the company would be required to create additional charge on its assets which would not be possible in view of the order of restraint passed on 13-12-2012. It was submitted that unless the company signs the agreement under the CDR scheme its secured creditors/lenders would no longer be bound by the concessions already granted but may also declare the account of the company as a Non Performing Asset‟ (NPA) and also initiate proceedings for the winding up of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 377; 150 crores which would be woefully inadequate to meet even the interest liability on the bonds. (c) In the above circumstances, the respondent-company has no right to be heard at the time of the admission of the petition and that if at all it is to be heard, it may be heard after admission and before the winding-up order is passed. 9. The contentions of the respondent-company are that: (a) the CDR scheme has been implemented and a revival process has been started and the Master Agreement has been signed and therefore unless the company is allowed time to work the revival scheme, it would not be in a position to start repaying its debts; (b) the order of the Division Bench (supra) is in its favour and even the restraint order has been set aside permitting the implementation of the CDR Scheme; (c) the winding-up proceedings, if permitted, would upset the entire process and render the Scheme nugatory; (d) the citation to be published in the papers would carry a stigma against the company, again rendering all the attempts to revive the company futile and (e) in any event, the court‟s power to order winding- up being discretionary, as is evident from the use of the wor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot at this stage. 11. In support of the above contentions, reliance was placed on three judgments of the Bombay High Court in (i) BNY Corporate Trustee Services Ltd. v Wockhardt Limited (dated 11-3-2011, S.C. Dharmadhikari, J.,) (ii) Sublime Agro Ltd. v Indage Vintners Limited (dated 19-3-2010, S.J. Kathawalla, J.,) and (iii) Bharat Petroleum Corporation Ltd v National Organic Chemical Industries (dated 18-11- 2003, D.Y. Chandrachud, J.,) and it was pointed out that these were also cases where CDR schemes were put in place under the supervision of the RBI, and nevertheless it was held that it was no bar to the winding-up proceedings against the defaulting company at the instance of the unsecured creditors. 12. In so far as the position that the winding-up of a company is a matter of discretion of the court and the court is not bound to pass an order for the winding-up in certain circumstances is concerned, it was pointed out on behalf of the petitioner that it is open, even after the petition is admitted, to the company to show reasons as to why it should not be wound-up and that there is no impediment to the discretion being exercised even after the petition is admitted and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the admission stage. The fact that in the judgment of D.Y. Chandrachud, J., (supra), the judgment of T.P.S. Chawla, J., was dissented from does not trouble me for the simple reason that the dissent was limited to the point as to whether the creditors were entitled, at the admission stage, to be heard and oppose the winding-up petition. Chandrachud, J., (supra) was not dealing with the right of the company sought to be wound-up to appear and oppose the petition even at the admission stage. 16. The more serious objection, however, is to the plea that the discretion should be exercised in favour of the respondent-company, by refusing to admit the petition for winding-up in the light of the attempts made to revive the company‟s business under the CDR Scheme and the infusion of further funds by the consortium of banks. In the judgment of the learned Single Judge of this court (supra), it has been held, on this aspect, that at the admission stage, as soon as a prima facie case for winding up was made out, the petition ought to be admitted and that in contrast, at the hearing, all the facts proved would have to be taken into account for deciding what was the best order to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... note of the moratorium, it seems to me to be not a case where the discretion of this court not to order winding-up can be exercised at the stage of admission. I must here quote, with respect, the very pertinent observations of Chawla, J., (as he then was) in Bipla Chemical Industries (supra): Furthermore, even supposing that the company has sufficient assets to pay its debts, that is cold comfort to its creditors. It was said in In re Focus Advertising Pvt. Ltd. (1974) 44 Comp Cas 567 (Bom.), that once it is established that a debt, regarding which there is no bona fide dispute, is owning to a creditor despite statutory notice of demand, he is entitled to a winding-up order and the court will not listen to a defence on the part of the company that it is not commercially insolvent or that its financial position is not such as to be unable to pay its debts . Here, counsel for the company conceded that the amounts claimed by the petitioning creditors and also by the creditors opposed to the winding-up were in fact due, though there were disputes regarding some small items. It is also apparent from the allegations made by the petitioning creditors, that most of the amounts cl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ge 356 of the report) to the effect that the courts below failed to note that the admission of a winding-up petition is fraught with serious consequences for the company sought to be wound-up cannot be read in isolation, but should be read and understood having regard to the strong defence put up by the company which was found to be substantial and with strong legal basis. 18. Madhusudan Gordhandas Co (supra) laid down general propositions as to when an order of winding-up will not be made. First, in a case where the defence to the debt-claim is a substantial one; second, where there is opposition to the winding-up by the creditors. Reliance however was placed on behalf of the respondent-company on the observation at page 639 of the report to the effect that where the winding- up order would not benefit the creditor who has filed the petition or the creditors generally, it cannot be made. The suggestion is that if the respondent-company is wound-up, that would be to the prejudice of the bond-holders who are unsecured creditors and would rank way below the secured and preferential creditors, whereas if the company is not wound- up they would at least stand a chance of getting s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... plication filed by the workmen of the respondent-company. 20. The judgments of the Bombay High Court, both by two learned Single Judges of that court, cited on behalf of the petitioner-company deal with cases of CDR Scheme and the question whether the implementation of the said Scheme can be used as a bar on the right of the unsecured creditor to file a petition for winding-up. In Sublime Agro Ltd. (supra) Kathawalla, J., held that the scheme is a voluntary scheme which is not binding on the unsecured creditors who are always at liberty to remain out of the scheme and pursue the winding up proceedings and that the Court cannot push back the claims of the unsecured creditors and allow the Company to keep on creating further liabilities so that ultimately what is recovered from the Company upon being wound up is taken away by the secured creditors and the creditors whose claims are to be given priority in law leaving the unsecured creditors high and dry . Quoting Palmer‟s Company Law, Vol.I, it was observed that refusal of the order of winding-up in such a case may rob the unsecured creditors of what is virtually their only remedy . Dharmadhikari, J., was equally categor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unable at the stage of admission to refuse entry to the petitioner to this court. The workmen, however, will have a right to be heard even in the course of the winding-up proceedings, post-admission and advertisement, in terms of the judgment of the Supreme Court (supra) and raise all objections. The application for impleadment of the workmen is allowed. 24. The result of the discussion is this. The winding-up petition is admitted. The workmen are impleaded in the petition for winding-up. Company Application No. 2301/2012 filed by the petitioner for appointment of liquidator is allowed. The official liquidator attached to this court is appointed as the provisional liquidator. He shall take charge of all the assets of the company and prepare an inventory of the same. The directors of the respondent-company are directed to file the details of all the assets, movable and immovable, of the company together with the balance-sheets, profits and loss accounts and bank statements for the past three years. 25. The window for discussion between the parties is however required to be kept open for a reasonable time having regard to the revival attempts. Therefore, the order appointing pr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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