9911796707
TMI Blog2017 (2) TMI 563X X X X Extracts X X X X X X X X Extracts X X X X ..... petitioning creditors. The petitioners are not seeking execution of any decree passed by English Courts or other Foreign jurisdiction against the Respondent – Company. They have invoked the winding up of Respondent- Company before this Court under Section 433 read with Sections 434 and 439 of the Companies Act, 1956 and have been able to satisfy this Court with the relevant and cogent material that the specified amounts of debts are due to be recovered by them from the Respondent – Company and the Respondent - UBHL under its contractual Guarantee obligations incurred by it for the financial obligations of the KFAL, which it has failed to discharge, despite due notice without any cogent reasons. It is neither a question of treating these winding up petitions as civil Suits for recovery of monies but it is a matter of forming a reasonable and fair opinion that whether from the facts and figures, contentions and defences, this Court can form a reasonable opinion about the commercial insolvency and erosion of its net worth and inability of the Respondent Company, UBHL, to pay-off its admitted dues or not. This Court does hold this opinion against the Respondent - Company, UBHL. Ther ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Respondent- Company in terms of the provisions of the Companies Act for winding up, there is no legal bar in the institution and pursuing of two or more remedies against the Respondent – Company, UBHL, while the effect of the relief granted upon such institution of legal proceedings is bound to be different. The deposits of ₹ 1280.00 crores made in the Court under Interim Orders of the Court will of course be utilized for distribution, if the Respondent – Company, UBHL is to be wound up. The argument that such deposit being in excess of claims of unsecured creditors or suppliers and therefore the Respondent –Company does not deserve winding up ignores the much larger claim of Secured Creditors, Banks led by SBI, whose dues are far in excess of said deposits and their preferential claim cannot be ignored. It is that huge gap which renders the Respondent – Company, UBHL commercially insolvent and a mere skeleton of some assets and liquidity. The presentation of the same as a Going Concern in Annual Reports by skewed, distorted and misleading presentation of facts and figures in Balanace Sheets leads one to draw an adverse inference against the Respondent – Company, UB ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the Founder - Promoter and Chairman of the Respondent - Company UBHL, Dr. Vijay Mallya has since left the Country, India, for the last about one year and various Civil and Criminal proceedings are pending in different Forums and Courts of law in the Country against him and Group Companies including Respondent UBHL and the concerned Enforcement Agencies, including Central Bureau of Investigation (CBI) are pursuing him for their respective recoveries. 4. The Debt Recovery Tribunal, Bengaluru Bench, recently after the arguments in the present winding up petitions were concluded before this Court on 11/01/2017, vide its judgment and order dated 19/01/2017, a copy of which was placed before the Court when the matter was again listed before the Court on 25/01/2017, has directed a sum of ₹ 6203.35 crores to be recoverable from the Respondent Company, UBHL, for the default in repayments made by the KFAL and invoking the Corporate Guarantees given by the Respondent - Company, UBHL has been held to be under a legally valid obligation to pay off its dues and the petitioning Banks have been allowed to proceed to recover the said sum of ₹ 6203.35 crores from the Responde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e obligations and the net-worth of the Respondent - Company is also in negative and there is not even an iota of hope of the said Company, UBHL reviving its net worth in positive in such a manner to meet the financial obligations of the petitioners against it and it is not only a commercially insolvent Company, but otherwise also it is absolutely just and equitable to wind up the Respondent -Company. The winding up is thus sought under Section 433(c),(e) and (f) of the Companies Act, 1956. 8. They have also contended before the Court that the surreptitious deals made by the Ex-Chairman, Dr. Vijay Mallya of transfer of shares held by Respondent Company, UBHL in its Group Company, United Spirits Limited (USL) is also a matter pending investigation and the said Ex-Chairman, Dr. Vijay Mallya has absconded from India for the last one year and the matter is being pursued even before the Hon ble Supreme Court and various Enforcement Agencies including CBI, who are seeking the extradition of the said Dr. Vijay Mallya who is said to be residing presently in the United Kingdom. 9. Though the new Companies Act, 2013 has been enforced in India and some jurisdictions under that new Law ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ties faced by it, KFAL requested the petitioners - Banks to re-cast the Working Capital facilities and term loan facilities. Accordingly, in April 2010, a Lenders meeting was held between the petitioners- Banks and KFAL and a Master Debt Re-cast Agreement (MDRA) was entered into on 21/12/2010 and the various Rupee Term loan facilities provided to KFAL is treated as Single Rupee facility and the various Working Capital facilities provided to KFAL were treated as Single Working Capital facility and the financial documents and securities were created in pursuance of the said MDRA. 15. The State Bank of India was appointed as Lenders Agent by other petitioners and the borrower, KFAL and other subsidiaries, that is, Respondent Company, UBHL and Dr. Vijay Mallya executed the Corporate Guarantee in favour of the petitioners. The State Bank of India Cap Trustee Limited (SBICAP) was appointed as Security Trustee for the benefit of petitioners - Banks and the KFAL, the Respondent - UBHL and King Fisher Finvest (India) Limited (KFFIL) entered into a Pledge Agreement dated 21/12/2010 for the purpose of pledging certain shares owned by the pledgors in favour of SBI, kept for the benefit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Corporate Guarantees and raising sham defences which deserve to be overruled, the petitioners have prayed for winding up of the Respondent - Company and appointment of Official Liquidator to take charge of all the remaining assets of the Company for realization and pro-rata distribution amongst the secured and unsecured creditors as per Section 529, 529-A and other relevant provisions of the Indian Companies Act, 1956. 20. They also contended that Dr. Vijay Mallya took huge amount as compensation or gift for stepping down from the post of Chairman of Respondent Company, UBHL and has diverted those funds for his personal gains and has absconded from India last year and is reported to be living in London, United kingdom and Indian Enforcement Agencies and CBI are hotly pursuing him by seeking his extradition and come here to account for all such Civil and Criminal liabilities which he has incurred. 21. Besides all serious arguments, on lighter side to a query as to what was the subject of Ph.D. of Dr. Vijay Mallya, the learned Senior Counsels appearing on defence side without being specific, only passed an intriguing smile. Company Petition No.57/2012 - IAE Internat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed (RRPF) (petitioner Company in Co.P.No.122/2012) entered into a Master Engine Lease Agreement on 30/09/2005 with KFAL to provide a standing facility permitting the Lessee to lease Aircraft engines and Associated Equipments from the petitioner and RRPF from time to time. 26. The Engine Lease Agreement No.1 was entered into between petitioner and KFAL on 30/09/2005 and according to that, the lessee agreed to make payment of loan to the petitioner in advance on each Rent Date and the Engine Lease Agreement No.2 dated 30/09/2005 was in respect of the new Aircraft Engine being IAE V2527 A5 Engine with MSN V12416 (Engine 2) and the lessee and both the parties also entered into a Maintenance Reserves Letter dated 07/10/2005. The Respondent Company, UBHL executed a Corporate Guarantee on 25/01/2006 in favour of the petitioner and RRPF in respect of amounts due and payable by the KFAL, the lessee. 27. In 2007, on 28/03/2007, the Engine Lease Agreement No.4 was also executed and Respondent UBHL again executed a Corporate Guarantee in favour of the petitioner, on 27/09/2007. Since the Respondent UBHL, lessee failed to pay its outstanding amount of USD 11,580,055.72 (Rs. 64,28,08, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hase the Aircrafts from G.I.E. Avoins de Transport Regional (the Manufacturer) of Blagnac, France and KF Aero agreed to immediately lease its Aircraft to KFAL pursuant to lease Agreements dated 05/06/2006, the Hypothecation lease was executed on 21/06/2006 by KFAL in favour of KF Aero. Under each Loan Agreement, a Dollar term facility loan was made available to KF Aero by the petitioner, in the aggregate amount equal to the Total Commitment. KF Aero was obliged to repay the petitioner, BNP Paribas, by way of bi-annual instalments of principal and interest under the Loan Agreements and in the event of default in payment of loan to KF Aero by KFAL, within five business days following due date, was authorized to proceed by appropriate action to enforce performance by KFAL of the relevant Lease Agreements. The governing law and the jurisdiction qua its Lease Agreements was agreed to be of the English Courts according to the petitioner Company. 32. Learned counsel, Ms.Fereshte Sethna, appearing for BNP Paribas explained that an integral aspect to the financing arrangements was the execution and delivery by the Respondent, UBHL of three Guarantees, all dated 17/06/2006, pursuant to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g a sum of ₹ 386.62,31.757.07 along with interest by serving a legal notice on the Respondent Company, UBHL and KFAL on 08/11/2012 against various lease facilities extended to KFAL including cash credit facilities, Working Capital Term Loan (WCTL), Funded Interest Term Loan (FITL) Term Loan (PDP), with interest, the petitioner Bank claims a sum of ₹ 450,02,31,757.07 against the Respondent UBHL and filed the present winding up petition in this Court on 21/06/2013. Company Petition No.99/2013 - Hindustan Petroleum Corporation Limited Vs. UBHL 36. The petitioner, a Government of India Enterprise and Supplier of Aviation Fuel to KFAL, has filed this winding up petition, claiming a sum of ₹ 66,72,44,516.73 as outstanding delayed payment service charges (interest) payable by KFAL for which the Respondent, UBHL stood Guarantor. The petitioner supplied Aviation Fuel under the Aviation Fuel Agreement on 07/06/2010 with KFAL and though the Principal amount towards supply appears to be paid with delay, the said outstanding amount is claimed as interest for such delayed payments in terms of the Agreement. The petitioner Company, serving statutory notice upon th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the Respondent-company UBHL to secure the loans and advances by these petitioner- Banks to KFAL, which company has already been ordered to be wound up by this Court on 18.11.2016. 41. Mr.S.S.Naganand, learned Senior Advocate has made the following submissions:- That Respondent UBHL was incorporated way back on 23.03.1915 about 100 years ago but the relevant facts for these winding up petitions have been dealt with in these petitions commenced from the year 2005 onwards, when these Banks had provided loan facilities to the KFAL and since 2010, the said Company KFAL started making losses and its business operations stopped in the year 2011 and therefore, on 21.12.2010, the Master Debt Recast Agreement (MDRA) was recast for restructuring of the various loans of KFAL and even further loans were advanced by these Banks to KFAL. The Security Trustee Agreement was also entered into and SBICAP Trustee Company Ltd.,(SBICTCL) was appointed as trustee of the petitioner Bank to receive and recover the dues from the said borrower KFAL. The Corporate Guarantee Agreement was executed by the Respondent-UBHL in favour of the petitioner-Bank on 21.12.2010. Since 2011-12, the borrower co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e aforesaid SLP before the Hon ble Supreme Court itself was clearly admitted that the assets of the Respondent company are presently worth only ₹ 4,986/- crores, whereas, the liabilities of the respondent aggregated to about ₹ 11,452 crores and thus on the own showing of the Respondent company, it was clear that it was not commercially solvent and was not capable of discharging its admitted debts and was therefore, liable to be wound up under the provisions of the Companies Act. 45. Mr.S.S.Naganand, also drew the attention of the Court towards the audited Balance Sheets of the Respondent-company in public domain for the Financial Year 2012-13 to Financial Year 2015-16 and he submitted that the Respondent-company was consistently making huge losses and it s net worth has completely eroded and turned negative and it was impossible for the Respondent Company, UBHL to pay off all its creditors who are seeking winding up of the Respondent Company, UBHL and since it was a commercially insolvent Company and there was no chance of its revival and retrieval and the substratum of the company has been completely lost and it had already run into several litigations, petitions, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ees were executed by UBHL in favour of the petitioner on 10.11.2010 and on 01.08.2011 and upon the default in payment by KFAL under Rework Agreement and Repayment Agreement, the petitioner- company invoked the Guarantees by issuing two Notices to the Respondent company UBHL on 15.02.2012 and served Statutory Notice under Sections 434 and 439 of the Companies Act, 1956 on 29.02.2012 followed by a Reminder Notice on 16.03.2012. The Respondent company UBHL replied to the said Statutory Notice on 21.03.2012 denying its liability to pay the amount demanded by the petitioner-company and hence, the present winding up petition No.57/12 was filed in this Court on 26.03.2012. 48. The learned counsel for the petitioner- company, Mr.Shreyas Jayasimha also submitted that the defences raised by the Respondent company are merely an eyewash and moonshine defences and mere filing of the suit bearing O.S.No.6406/12 by the Respondent-UBHL against the petitioner-company IAE International AG and others in City Civil Court at Bangalore, does not amount to a valid defence against the winding up petition filed by the petitioner- company and due to the admitted failure of Respondent-company to pay all i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a) 29/02/2012 b) 16/03/2012 * 1,18,77,573 ** 1,88,04,678 3,06,82,251 184,09,35,060/- 2. Co.P.No.121 of 2012 RRPF Engine Leasing Limited 12/06/2012 28/03/2012 7,32,710 4,39,62,600/- 3. Co.P.No.122 of 2012 Rolls-Royce Partners Finance Limited 12/06/2012 28/03/2012 1,04,37,866 62,62,71,960/- 4 Co.P.No.185 of 2012 Avions de Transport 03/09/2012 03/08/2012 1,68,99,970 101,39,98,200/- 5 Co.P.No.248 of 2012 BNP Paribas 05/11/2012 05/07/2012 2,66,34,728 159,80,83,680/- 6 Co.P.No.51 of 2013 United Bank of India (UBI) 19/03/2013 25/02/2013 450,02,31,757/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the Board of Directors of both the companies. Mr.Ramanand also submitted that the effective date of this Loan Agreement was 04.07.2013 as defined in the Shareholders Agreement amongst Respondent-UBHL and Kingfisher Finvest India Limited dated 09.11.2012, which become effective upon completion of the purchase of USL shares by Relay B.V. and Diageo plc, Relay B.V. being indirect wholly owned subsidiary of Diageo plc, pursuant to the Agreement entered into with the Respondent-UBHL on 09.11.2012, as contemplated under the Shareholders Agreement, the USL entered into Deed of Adherence and thereby become the party to that Shareholders Agreement on 04.07.2013. 54. Mr.Ramanand Mundkur further submitted that in view of the events as developed later on, the prior affidavit of USL filed in this Court on 25.01.2016 seeking protection of the Court by appropriate orders in the present winding up petitions, the change of stand shifting from opposing winding up petition to supporting the same now by this Affidavit 10.01.2017 happened in the following circumstances:- 55. That the Company USL originally filed its Affidavit dated 25.02.2015 opposing the winding up of UBHL but slightly shifted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... SL notice of arbitration vide its reply dated 13.08.2016, for the first time stated that since the Hon ble Supreme Court did not stay the operation of the order of the Division Bench of this Court, the Loan Agreement had not become effective and as a consequence thereof, there was no loan outstanding or interest payable by UBHL to USL under the said Loan Agreement. This disclosure of the Respondent UBHL according to the learned counsel, Mr.Ramanand Mundkur, was clearly a moonshine and demonstrates its malafide intention to evade and avoid payment of its legitimate dues. He further submitted that in all its audited statements and Balance Sheets, after the order of the Hon ble Supreme Court dated 11.02.2014, for the Financial Years ending on 31.03.2014, 31.03.2015 and 31.03.2016, the respondent company UBHL has clearly recognized and recorded the amount owed to USL under the Loan Agreement as a liability and therefore, its U-turn taken in the un-audited financial statements submitted to the Stock Exchanges on 10.11.2016 that there is no loan outstanding to USL is completely contrary to the admission of the liability made by the Respondent company in its audited statements and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le in law and the winding up petitions filed by these Banks cannot be converted into money recovery suits resulting in deadly consequences of winding up against the Respondent Company, UBHL which is a serious most consequence, against the Respondent Company. He submitted that the recovery suits have been filed by these Banks before Debt Recovery Tribunal and they have initiated proceedings for recovery under special enactment, the Securitization and reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 ( SARFAESI Act) and have also filed the winding up petitions. 63. The second most emphatic argument made by Mr. Udaya Holla, Senior Counsel is that the Respondent UBHL itself has filed Civil Suit No.6406/2012 in Bangalore City Civil Court against the supplier of Aero Engines to KFAL not only claiming declaratory relief of declaring Corporate Guarantees given by UBHL to IAE International Aero Engines and others as void and non-est but have also claimed compensation to a large extent against these suppliers for supplying defective Aero Engines to KFAL which have not only resulted in huge losses to the said erstwhile subsidiary Company of the Respon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, they cannot seek the winding up from this Court of the Respondent UBHL. 66. Mr. Udaya Holla also submitted that Section 599 of the Companies Act, 1956 bars the Foreign Companies to take any legal proceedings including the winding up proceedings before this Court without complying with the mandatory provisions of Section 592 of the Companies Act, 1956, which requires a Foreign Company which has an establishment in India, to seek requisite approval and Registration from the Registrar of Companies and RBI and since the petitioner M/s. IAE International Aero Engines, while it was actively engaged in the business of supply of Aero Engines to KFAL, had a business establishment in India and was admittedly neither registered with the Registrar of Companies in India nor had obtained any approval from RBI and other competent Authorities, the winding up petitions filed by such Foreign Company before this Court was not maintainable and deserved to be dismissed. 67. Mr. Udaya Holla, Senior Advocate also submitted that the Debt Recovery Tribunal where the secured creditors like SBI and other consortium of Banks had filed recovery proceedings was seized of the said case in O.A.No.766/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dia ( SBI ) and other members of the Consortium of Banks ( Consortium ) that had advanced facilities to Kingfisher Airlines Ltd. ( KFA ) filed a winding up petition against UBHL, being Company Petition No. 162 of 2013. The Consortium s claim arises out of a purported Corporate Guarantee dated 21st December, 2010 issued by UBHL in favour of the Consortium. Suit pending before the Bombay High Court challenging the very validity of the guarantees 75. UBHL, along with Kingfisher Finvest India Limited ( KFIL ) and Dr. Vijay Mallya have filed a Suit in the Hon'ble Bombay High Court, being Suit No. 311 of 2013 on 26th March, 2013 ( Bombay High Court Suit ), inter alia, seeking a declaration that the Corporate Guarantee dated 21st December, 2010 given by UBHL ( Corporate Guarantee ) and the Personal Guarantee dated 21st December, 2010 given by Dr. Vijay Mallya ( Personal Guarantee ) are void ab initio and non est, inter alia, on the ground of coercion and duress. It is pertinent to note that the Bombay High Court Suit was filed even prior to recall of the Kingfisher Airlines facilities and/or invocation of either the Corporate Guarantee or the Personal Guarantee. 76. Each ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ersonal Guarantee. 81. The serious breaches of the Consortium s obligations under the Lender s Liability principles and especially the obligations of strict confidentiality with regard to which all the members of the Consortium have signed an undertaking binding themselves to maintain confidentiality of the information with regard to KFA, UBHL and Dr. Vijay Mallya, by the barrage of disparaging statements made in the media by or on behalf of the Consortium have hindered investment into KFA by external investors, resulting in UBHL and KFIL, by themselves, and through their subsidiaries and associates, being compelled to fund KFA in an aggregate amount of ₹ 3199.68 crores just from 1st April, 2011 till the end of March, 2013. UBHL has claimed the said amount from the Petitioner Banks in Suit No. 311 of 2013 filed in the Hon ble Bombay High Court. 82. The aforesaid constitute unlawful acts by the Consortium and are clearly in breach of the principles of good faith and fair dealings between the parties and the Consortium has now even gone to the length of attempting to initiate draconian measures in an attempt to leave KFA, UBHL and Dr. Vijay Mallya, without an avenue to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not maintainable. 86. That petitioners have invoked and are pursuing two parallel remedies i.e. before the DRT and winding up against UBHL, both the claims cannot be invoked on same subject matter, simultaneously. Hence same is bad in law. 87. The Supreme Court in 1977 (1) SCC 1 and the Karnataka High Court in AIR 2000 Kar. 393 have held that two parallel remedies cannot be pursued by a party in respect of the same matter at the same time. The Bombay High Court in Dalmia Cement v. Indian Seamless Steels and Alloys, reported in 2002 (112) Comp. Case. 314 and QSS Investors v. Allied Fibres, reported in 2001 (107) Comp. Case 587 and the Himachal Pradesh High Court in Azeet International v. HPH Produce Marketing, reported in 2001 (107) Comp. Case. 587 have held that even in respect of winding up petitions, parallel remedies cannot be pursued. The petitioners have admitted that Respondent is solvent 88. The State Bank of India (which is the lead bank in the consortium) has on the one hand declared UBHL as a Willful Defaulter stating that although UBHL has the means to pay, it has not paid the dues of the petitioners and therefore UBHL has been declared as a Willful De ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... seen that the settlement offer already made is largely from distribution of cash deposits and from the disposal of liquid assets with a transparent price determination on the Stock Exchange and therefore not subject to any conditionalities. CO.P.No. 57/2012 International Aero Engines v. United Breweries (Holdings) Limited Pending Proceedings against IAE before the City Civil Court 91. The alleged debt that the Petitioner Company claims is allegedly due and payable by the Respondent Company, is the subject matter of a serious dispute arising out of and in view of the inherently defective, both in design and manufacture, IAE V 2500 A5 Engines fitted on the entire fleet of Airbus A320 family aircraft of KFA, rendering them incapable of commercial use. The investment of the Respondent Company and its subsidiaries (including by way of equity share capital and shareholder loans) in KFA has been seriously damaged primarily on account of the operational and financial woes of KFAL, which in turn has been primarily or in any event decisively been caused by the defective engines supplied, and further on account of the false assurances/representations given made by IAE (th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l in volumes completely dislocates the cash flow. Fall in volumes are inevitable when aircraft remain grounded for want of and/or poor performance of engines, which was the result of the defective engines supplied by IAE to KFA. 96. In or around mid 2010, Kingfisher Airlines, which was already overburdened on account of the aforesaid huge accumulated losses totaling ₹ 4,321 crores, occasioned principally on account of the substandard, inherently defective and commercially unviable IAE V 2500 A5 engines, was faced with no real choice. If it had to survive as an airline, it had to come to terms with IAE and get its fleet back in the air. It is in this background that KFA commenced negotiations with IAE sometime in mid 2010 to try and reach an amicable resolution of this issue. Oral representations were made, in the course of negotiations, by senior officials and officers of IAE to the representatives of KFA and the Respondent to the effect that steps taken by IAE by way of replacing the drums with fully silver coated nuts with new drums without fully silver coated nuts, and the proposed installation of Single Crystal Panels in the combustion chamber, were allegedly a comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A and it was based on the representations of IAE that Respondent gave corporate guarantees even to the consortium of banks. Guarantees are governed by Foreign Law and the same needs to be pleaded and proved 100. The alleged guarantees are governed by English Law, which is a foreign law. The petitioner herein has in the petition neither pleaded the foreign law in respect of the invocation of the guarantees nor proved the same. 101. The Supreme Court in Hari Shankar Jain v. Sonia Gandhi, reported in 2001 (8) SCC 233 has held that a Court shall take judicial notice of all laws within the territory of India. Foreign law is not included. As the court does not take judicial notice of foreign law, it should be pleaded as any other fact, if a party wants to rely on the same. 102. The Bombay High Court in Iridium India Telecom v. Motorola Inc., reported in MANU/ MH/1125/2003 (BOM) has held that the legal position is well settled that foreign law is a question of fact and must be pleaded by the parties who relies upon it. 103. The petitioner in the present winding up petition has neither pleaded nor proved English law which is the foreign law. This being the case, the guar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th the provisions of Section 592 of the Companies Act, 1956. The petitioner not having complied with the provisions of Section 592 is in terms of Section 599 of the Companies Act, 1956 barred from prosecuting any legal proceedings in India. 110. The Chancery Division in Re: Tovarishstvo Manufacur Liudvig Rabenek, reported in 1944 (2) All E R 556, if the representatives of foreign company were often coming and staying in hotel in England for purchase of machinery etc, the foreign company is deemed to have a place of business in England. The judgement of the Chancery Division has been affirmed in the judgement of the Delhi High Court in Dabur (Nepal) P. Ltd. v. Woodworth Trade Links P. Ltd., reported in 2012 (175) Comp. Cas. 338. COP 248 / 2012 BNP Paribas v. United Breweries (Holdings) Limited 111. The Respondent had agreed to guarantee the amounts due to M/s KF Aero. In this regard an application was submitted to the Reserve Bank of India (RBI) seeking permission to provide such a guarantee, guaranteeing the dues of KF Aero. However, the RBI gave permission only to issue the corporate guarantee in favour of KF Aero and not to its successors and assigns. KF Aero in tu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to KF Aero s assignees: 114. As stated earlier, at the time of issuance of the three corporate guarantees, Kingfisher Airlines had by its letter dated 7th June, 2006 applied for prior RBI approval through UTI Bank Ltd. to permit issuance of the three corporate guarantees by UBHL in favour of KF Aero, its successors and assigns ( Annexure R-2 to the Objections of UBHL (pg. 20-23)). However, by its letter dated 12th June 2006 RBI conveyed that it had no objection from FEMA angle to issuance of corporate guarantee by M/s.United Breweries (Holdings) Ltd., Bangalore, in favour of lessor M/s. KF Aero .(Annexure R-3 to the Objections of UBHL. (pg. 24)). Thus, there was no permission of the RBI allowing assignment of the three corporate guarantees to KF Aero s assignees, and although such permission had been expressly sought, it had not been granted. 115. It is submitted that unless prior permission was duly obtained from the RBI, the purported assignment of the three corporate guarantees in favour of BNP Paribas would be void and/or unenforceable in law for such permission would have to precede and not follow the assignment. That BNP Paribas was aware of this position in law is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ur of BNP Paribas are in violation of the law in India and unenforceable. Hence, BNP Paribas has no locus standi to file the present Company Petition, and the same ought to be dismissed in limine with costs. 119. It is pertinent to note that before the Division Bench of this HonRs. ble Court, BNP Paribas cited the decision of the Calcutta High Court in Eurometal Ltd. v. Aluminium Cables and Conductors in support of its proposition that absence of a permission under the provisions of erstwhile FERA would not render a contract void. However, it is submitted that Eurometal as well as all the decisions following Eurometal (including Eurometal) do not refer to the decision of the Supreme Court in Mannalal Khetan and therefore are per incuriam and not good law. 120. The contention that the corporate guarantees are void and/or unenforceable in law is further buttressed by a perusal of Article VIII 2(b) of the Articles of Agreement of the International Monetary Fund. The said article states: Article VIII: General Obligations of Members Section 2. Avoidance of restrictions on current payments (b) Exchange contracts which involve the currency of any member and which are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lines under the Purchase Agreement (as defined in the Tripartite Agreements which, inter alia, includes the Letter Agreement between ATR and erstwhile Kingfisher Airlines which provided for Asset Value Guarantees from ATR in respect of the three Aircraft in question) between ATR and erstwhile Kingfisher Airlines. KF Aero and its assignee BNP Paribas were duty bound to invoke the Asset Value Guarantees against ATR. If KF Aero and/or BNP Paribas have or had so invoked the Asset Value Guarantees, ATR is contractually bound to pay to KF Aero and/or BNP Paribas the Guaranteed Amount, i.e. the entire alleged debt or at least the entire alleged outstanding principal amount claimed in the present Petition. 123. BNP Paribas was therefore, obliged to invoke the Asset Value Guarantees before approaching this HonRs. ble Court by way of the present Company Petition. The Guarantees are governed by Foreign Law, which has to be pleaded and proved 124. The guarantees are governed by English Law. The petitioner in the petition has neither pleaded nor proved English Law. Under the circumstances, the very petition is not maintainable and no order of winding up can be passed against th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Regulations ), prior approval of the Reserve Bank of India is required for establishment of a branch or liaison office or office or any other place of business in India by any entity resident outside India other than a banking company. Petitioners are admittedly not banking companies and have established a place of business in India as is evident from what is stated in the aforesaid objections. Petitioners have not obtain the requisite prior permission from the Reserve Bank of India prior to establishing such places of business in India and hence, are illegally carrying on business in India. On this ground also the petition is liable to be dismissed. CO.P.No.185/2012 ATR v. United Breweries (Holdings) Limited Petitioner being a Foreign Company has failed to comply with Section 592 129. The Respondent Company submits that erstwhile Kingfisher Airlines Limited ( erstwhile Kingfisher ), which inter alia, operated Scheduled Air Transport Services within India and was a part of the UB Group of Companies, had entered into Agreements with the Petitioner for purchase of ATR 72-500 aircraft as well as General Maintenance Agreements ( GMA ) for maintenance of these a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e specialist at all material times. 133. KFA at all material times provided at no cost to the Petitioner Company in KFA s office space and other facilities to the Petitioner s representatives which included use of telephone, telefax, copying machine, Internet access etc. to assist the field service representation and/or the CSR and/or the LMR and/or the engine specialist to fulfill their task properly. 134. These representatives referred to hereinabove carried out the various functions required to be carried out by them under the relevant Agreements including providing dedicated technical support to the products and services supplied by the Petitioner, assistance as well as customer service support to the airline on a day to day basis in respect of the operating fleet of ATR aircraft and also acted as a communication channel between the airline and the Petitioner. 135. Thus, the petitioner had a place of business in India and accordingly had to comply with the requirements of Section 592 of the Companies Act, 1956, which the petitioner has not complied with. As a result of such non-compliance, Section 599 of the Companies Act bars the petitioner from instituting any legal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Vilas Bank Limited (LV Bank) and IFIN Securities Finance Limited (IFIN), all three secured creditors of the Respondent Company, opposed the present set of winding up petitions to support the Respondent UBHL and made the following submissions:- 143. Mr. Sajjan Poovaiah urged that Respondent UBHL is a profit making Company and is a Going concern and employs about 70 to 100 employees in its On-Going business of Leather Products manufacturing and Beer business and therefore, need not be wound up. 144. He submitted that as against the petitioning Trade creditors who have filed these winding up petitions, the objector, unsecured creditor, M/s. Prestige Estate Projects Limited, which has constructed the prestigious King Fisher building in Bengaluru for the Respondent UBHL itself, has dues to the extent of ₹ 94.33 crores against the Respondent Company. But, it is hopeful and quite positive that the Respondent UBHL will repay its dues and winding up of UBHL therefore will not be the solution of the financial crisis, which the Respondent UBHL may be temporarily facing. 145. He submitted that even the secured creditors like HDFC Bank who have their financial ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the said guarantee was executed under the duress and coercion and that is a question still pending trial before the Bombay High Court and therefore, the very basis for these creditors to seek winding up against the Respondent - UBHL on the basis of such Corporate Guarantee Agreements, is subject matter of adjudication before the Bombay High Court and therefore, winding up petitions cannot be proceeded and prosecuted by them. 149. He also drew the attention of the Court towards another Suit, in O.S.No.6406/2012 filed by the Respondent UBHL in Bangalore City Civil Court, similarly raising a question on the validity of the Corporate Guarantee Agreements of the Respondent - UBHL with the Banks and other unsecured creditors on the ground that the Engines supplied by the creditor, IAE International were defective and various other grounds and even that suit is pending trial at Bengaluru and the application filed by the defendants under Order 7 Rule 11 of the Civil Procedure Code, 1908 seeking dismissal of the suit at the threshold has already been rejected by the learned Trial Court on 30/04/2016 and even though the Revision Petitions have been filed by the defendants before thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case laws are relied upon by the learned counsel for the petitioners:- 154. The learned counsel for the petitioners relied upon the following judgments in support of their contentions and also to meet the objections raised by the Respondent company UBHL, they are also briefly discussed and quoted below for ready reference. (i) In Hegde Golay Ltd., vs. State Bank of India (ILR 1987 KAR 2673), the Division Bench of this Court held that the secured creditor like Bank does not have to give up its security in order to pursue the winding up petition against the Respondent company and filing of the suit by the Creditor-Bank for recovery of the dues against the respondent company does not bar the filing up of the winding up petition as well. The relevant portions of the judgment are quoted below for ready reference:- These observations, in our opinion, do not advance the contention of Sri.Shetty any further. Section 529(1) of the Act attracts the rules of insolvency to winding up in relation to the respective rights of secured and unsecured creditors and confines these Rules so attracted to matters that arise between these two classes of creditors. Sections 528 and 529 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re, incidents of Order II Rule 2 CPC are not attracted . (ii) The Delhi High Court Division Bench in the case of Bank of Nova Scotia vs. RPG Transmission Limited [ILR (2004) II Delhi 583], held that the Companies Act 1956 and Recovery of Debts due to the Banks and Financial Institutions Act of 1993 (RDB Act) operate in two different and distinct fields and mutually exclusive jurisdiction and while the purpose of initiating proceedings under RDB Act is to recover the amount due and payable to the Bank/Financial Institutions, the purpose of invoking the winding up jurisdiction is to wind up the company on the ground that it has become commercially insolvent. Paragraph-30 is quoted below for ready reference. 30. Therefore, it cannot be said that RDB Act covers the field for winding up an insolvent company and, therefore, the contentions of Mr.Tripathi are misconceived and are accordingly rejected. The contention that the petitioner could chose one of the remedies available in case where two or more than two remedies are available is applicable when the remedy provided for is one and the same but when two different remedies are provided for two different reliefs, in that event ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lear in the petition that they were pursuing other remedies available to them for realization of securities created in their favour without seeking assistance of this Court for sale/realization of secured assets. In the petition, they have also made a categoric statement that even if all secured assets are sold and their value realized, they would still not realize substantial/large portion of the outstanding dues. Learned Counsel for the parties are ad idem that the worth of Kingfisher House in nay case may not be more than Rs. 300 Crores as against total outstanding of Rs. 6200 Crores. The proceedings under the Act are not recovery proceedings and need to be filed for winding up of the company which is unable to pay its debts. The proceedings initiated by the respondent-Banks under SARFAESI are not alternate to the winding up petition . (iv) In the case of Official Liquidator, Uttar Pradesh vs. Allahabad Bank Others (2013) 14 SCC 381, the Hon ble Supreme Court has held that RDB Act is a complete code in itself and DRT has exclusive jurisdiction for sale of properties for realization of dues of Banks and Financial Institutions. However, being protector of interests of wor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the company can be would up if it is unable to pay it debts. Section 434 gives the details as to when the company would be deemed to be unable to pay its debts. While passing the impugned order dismissing the company petition for lack of jurisdiction, the learned company judge has relied on the decision of Swastik Gases P. Ltd. Vs. Indian Oil Corporation Ltd.,[2013] 9 SCC 32, wherein the issue was with regard to invoking of jurisdiction in Jaipur court, where a part of the contract had been performed by the parties in Jaipur and also in Kolkata, but the agreement provided that the Kolkata court would have jurisdiction to entertain all cases arising out of the dispute with regard to the agreement. In such facts, it was held that Kolkata court would have the jurisdiction and not Jaipur court. Relying on the said decision, the learned company judge has considered and interpreted clause 20 of the agreement and held that the English courts alone would have jurisdiction to try any case regarding a dispute with regard to the trust deed. There cannot be any quarrel with regard to the law laid down by the apex court in the case of Swastik Gases P. Ltd. Vs. Indian Oil Corporat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act does not contemplate such exclusion. To deprive a creditor with a decree of foreign court of this statutory right, will also not be in larger public interest. If a foreign creditor with decree of foreign Court is barred from presenting a petition for winding up on the original course of action and till the decree by Indian Court is passed in it s favour, it will make a distinction between two classes of creditors. This will lead to the Indian companies adopting unhealthy practices of borrowing capital abroad and then refuse to repay admitted debts and resist winding up. This will have negative effect on the cross border flow of capital and international commerce. Thus there is no warrant to read such an exclusion of the statutory right by way of interpretation. 47. Therefore, there is no impediment in the way of the Petitioner to proceed on the basis of the Patronage Letter as a creditor of the Company for presenting this petition for winding up. There is no question of merger of the Patronage Letter into the decree. The admissions as regards the liability given in the correspondence is sufficient to form basis of the petition for winding-up. Even assuming that there is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aw See Dicey Morris, on cit; and Cheshire North, e.g. cit; and what may be regarded as part of Indian Law, namely, that a foreign corporation is resident in India only if it carries on business in India. A foreign corporation carrying on business in India is amenable to the jurisdiction of the local courts and is for all practical purposes present in India. This test is satisfied only if its business is carried on at a fixed and definite place which is, to a reasonable extent a permanent place within India. The mere presence of a representative of the foreign corporation is not sufficient if his only authority is to elicit orders from customers, but not to make contracts on behalf of the corporation. The question really is, as stated by Lord Loraborn, does the corporation really keep house and does business in India? Its real business is carried on where the central management and control actually abides . De Beers Consolidated Mines Ltd. V. Howe, (1906) AC 455, 458 (see above). While a company is domiciled where it is incorporated, it is resident where its controlling power and authority is vested. Although dual residence is conceivable where there is division of management a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... passed, it would be a decree on merits. Where, however, no evidence is adduced on the plaintiff s side and his suit is decreed merely because of the absence of the defendant either by way of penalty or in a formal manner, the judgment may not be one based on the merits of the case . (ix) The leading case on the maintainability of the winding up petition when there is a bonafide dispute about the debt was rendered by the Hon ble Supreme Court in the case of Madhusudan Gordhandas Co., vs. Madhu Woollen Industries Pvt. Ltd., [1972]2 S.C.R. 201, the Hon ble Supreme Court has laid down the principles in the following terms:- Two rules are well settled. First if the debt is bona fide disputed and the defence is a substantial one, the court will not wind up the company. The court has dismissed a petition for winding up where the creditor claimed a sum for goods sold to the company and the company contended that no price had been agreed upon and the sum demanded by the creditor was unreasonable (See London and Paris Banking Corporation). Again, a petition for winding up by a creditor who claimed payment of an agreed sum for work done for the company when the company con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Holla on behalf of the Respondent UBHL at this stage would be appropriate. 156. In IBA Health (India) Private Limited Vs. Info-Driver Systems SDN. BHD. [(2010) 10 SCC p.553], decided on 23/09/2010, the Hon ble Supreme Court held that where the Company has a bona fide dispute, the petitioner cannot be regarded as a creditor of the Company for the purpose of winding up. In fact, the dispute implies the existence of a substantial ground for the dispute raised. The Court should dismiss the winding up petition and leave the creditor first to establish his claim in an action, lest, there is danger of abuse of winding up procedure. A dispute would be substantial and genuine if it is bona fide and not spurious, speculative, illusory or misconceived. The Company Court in a winding up proceedings is not expected to hold a full trial of the matter. If the debt is bona fide disputed, there cannot be neglect to pay within the meaning of Section 433(1)(a) of the Companies Act, 1956. The relevant portion of the judgment is quoted below for ready reference. A party to the dispute should not be allowed to use the threat of winding-up petition as a means of enforcing the company to pay ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Fisheries Pvt. Ltd. And Others, decided on 10/09/1984, [1985 (1) Kar.Law Journal 155], a learned Single Judge of this Court held that the Company Court, while exercising its jurisdiction under Section 433 of the Act, cannot convert itself into a Court of Original Jurisdiction settling civil dispute including drawing up of a decree in favour of one or the other parties in proceedings under Section 433 of the Act and then convert itself into a kind of Executing Court by passing a winding up order and such an exercise of jurisdiction should be avoided. In paragraph 4 of the judgment, the Court has held as under: 4. The Company Court under the provisions of the Act cannot convert itself into a Court of original jurisdiction setting civil disputes including drawing up of a decree in favour of one or the other of the parties in proceedings under Sec.433 of the Act. It is true, the Company Court does have original jurisdiction to settle claims of all kinds when it exercises its power under Sec.446 of the Act. But the nature of jurisdiction and the nature of power exercised under the two sections are widely different. Under the latter section jurisdiction is acquired only if an order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case of Globe Detective Agency Vs. Subbiah Machine Tools P.Ltd. and others, decided on 09/03/1984, [1984(2)K.L.J.P.207], wherein the winding up petition was filed by the petitioner M/s. Globe Detective Agency had provided security guards to the Respondent - Company and some of the security guards employed by the petitioner - Company took away the key bunch of the Factory premises resulting in loss of machine hours in one shift on 24/02/1982 and the Respondent - Company refused to pay the security charges to that extent of ₹ 4,450-60. The Court held that where there were certain allegations and counter allegations and claims and counter claims involving disputed question of facts, the substance of the defence of the Respondent - Company was that it was under no obligation to pay the amounts claimed by the petitioner- Company on account of the loss suffered by it due to the negligence of the Guards furnished by the petitioner- Company and in such circumstances, leaving the parties to settle the disputes in an appropriate Civil Court, the learned single Judge dismissed the winding up petition against the Respondent Company. 161. The argument of Mr. Holla based on this ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he petitioner in the office of the secretary of the State of Delaware. Nothing is pleaded about its legal effect. These documents only show that the certificate of ownership and merger merging Capital Controls (Delaware) Inc. (Delaware Corporation) into Severn Trent Water Purification Inc. were filed before the same authority. In the absence of pleading of the relevant laws of merger prevalent in the State of Delaware or under the law of the commonwealth of Pennsylvania under which merger is said to have taken place, it is very difficult to examine the aspect as to whether by virtue of the said merger, there is a blending of the two entities and the status of the two companies thereafter. 166. In support of his contention that where the Civil Suit had been filed by the petitioning creditor for recovery of the money in question, the same creditor cannot pursue the winding up proceedings against the Respondent Company like the petitioning Banks, SBI and others are pleading before this Court, Mr. Udaya Holla relied upon the judgment of the Bombay High Court in the case of Dalmia Cement (Bharat)Ltd. Vs. Indian Seamless Steels and Alloys Limited, decided on 31st August, 2001 [200 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... loan, the Court held, that the liability was bona fide disputed by the Respondent Company and the winding up petition was liable to be dismissed. Moreover, the petitioners had resorted to the civil remedy and therefore the petition could not be entertained. 169. In Divya Export Enterprises Vs. Producin Private Ltd. (I.L.R.1990 Kar.1610), the learned Single Judge of this Court held, that a mere assertion of debt payable was not sufficient to attract the discretion of winding up under Section 433 (e) of the Companies Act, 1956. 170. On the issue of compliance of Sections 592 and 599 of the Companies Act, 1956, Mr. Udaya Holla also relied upon a Foreign judgment, in the case of Re TOVARISHESTVO MANUFACTUR LIUDVIG RABENEK, decided on 12/06/1944,[1944(2) All E. Reporter 556], in which the Court there found that where it was the practice of the Director on such visits to stay at a Manchester Hotel which was used as regular place of business for the Company and to which, the correspondence was addressed and the Company kept Banking Accounts in London, but it was contended by the Respondent - Company that the Company could not be wound up under Section 338 of the Indian Companies Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dmitted failure of KFAL to meet its financial obligations towards the secured and unsecured creditors who are petitioners before this Court, the liability of Respondent UBHL exists in law and there is also no dispute that the principal borrower, KFAL has failed to pay off and discharge its financial obligations towards the creditors and was accordingly ordered to be wound up by this Court on 18/11/2016 and those winding up petitions by the secured and unsecured creditors against it were not even defended and contested by the Respondent KFAL itself nor by the extended arm of the Guarantor and its Holding Company, Respondent, UBHL. 174. The findings recorded in the judgment and order dated 18/11/2016 winding up Respondent KFAL therein are also extracted below for ready reference. 17. There has been no opposition as such to the present winding up petition and such of other winding up petitions against the respondent-company. The alleged defences of pendency of civil suit filed by holding company against the manufacturers but not against petitioner- Aerotron Ltd., locus standi of petitioner company to file this winding up petition, there being chance of revival of the business et ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds a tinge of doubt and mischief, cavalier manner, lack of bona fides and find them to be too far-fetched without any solid foundation and it is difficult to see such defences to really succeed either before this Court or at appropriate Forums where they have been raised against and instituted as legal proceedings against the petitioning creditors. 177. Taking up the arguments of Mr. Udaya Holla, learned senior counsel for Respondent Company, UBHL, that UBHL has instituted Civil Suits in Bombay High Court and Bengaluru City Civil Court, challenging the validity of the Corporate Guarantees itself as having been given under duress or coercion or that on account of defective supply of Aero Engines, the said company, KFAL suffered huge losses and went out of business operations and therefore the Respondent Company has claimed huge damages against the suppliers and also to declare the Corporate Guarantees itself as non-est and void, this Court does not find any substantial ground in law upon which the Respondent UBHL hopes to succeed in such proceedings. 178. The assertion of duress or coercion on a corporate body like Respondent - Company, UBHL, at the point of time when thes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tribunal:- The above contention of coercion raised by second and third defendants are so unworthy of any consideration for the simple reason that there was none. Not only the applicant banks are dealing with the public money, but it was also the defendants 1 to 3, who knowingly availed public money as loans from the Banks with a promise to repay the same. It is the bounden legal duty of the banks and the borrowers to ensure that such loans are properly secured by mortgage over immovable properties, hypothecation over movables and guarantees of directors and all other types of guarantees including even that of third parties wherever offered or possible. The second and third defendants cannot expect the banks to give away public money as loans to them without even guarantee from them for the repayment in addition to other securities and loan documents. In fact, the second and third defendants would have done well to have volunteered execution of such guarantees, being the holding company and the Chairman and as Rajya Sabha member. It is unfortunate that the defendants are challenging these guarantees without any basis or material to support their contention of coercion. If insis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ajeed v. Khirode Chandra Pal I.L.R. 42 C.690, that where there is ample security, the exaction of excessive and usurious interest in itself raises a presumption of undue influence which it requires very little evidence to substantiate . Their Lordships think that decision to be wrong. There is no such presumption until the question has first been settled as to the lender being in a position to dominate the borrower s will In the present case no pleadings or documents are produced to prove that the banks have dominated the will of defendants 2 and 3. In fact as stated above vice-versa may be true in this case with worries for the banks to recover such a huge outstanding. Therefore, it is clear from the above that the question of coercion on the basis of banks being in an advantageous/dominant position to take guarantee, charge interest etc. raised by the defendants 2 to 3 are baseless. In fact, in my view, it was the defendants 1 to 3 herein who were in dominant position of demanding restructuring of the loan by not repaying the huge loans already availed by them from the banks. In my opinion, therefore, it was the bank which, just for the sake of arguments, can be heard ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ontest to the liability of the Respondent, UBHL as a Guarantor towards the petitioning creditors and learned counsels for the petitioners brought to the notice of the Court, the letter written by the Chairman of the Respondent Company, Dr. Vijay Mallya himself to one Mr. Ian of petitioner IAE International Aero Engines, AG, the supplier of the Aero Engines on 30th December 2011 in which the said Chairman, Dr. Vijay Mallya not only acknowledged all the debts towards the said Company and expressed his difficulties faced by the Company in meeting its obligations towards the company KFAL but sought for the co-operation of the said creditor supplier, IAE International Aero Engines AG, in the following manner and to complete this contextual background, the entire letter is quoted in- extenso below: From: Vijay Mallya To: Aitken, Ian (IAE) Cc: [email protected] Sent: Fri Dec 30 17:08:11 2011 Subject: Kingfisher Dear Ian December has been an unusually hard month for me to get anything meaningful done. We have had one of the most stormy sessions of Parliament in recent history that has occupied the minds and time of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... positive policy changes which would impact the entire Aviation industry and Kingfisher in particular. I am painfully aware that Kingfisher is in serious default on its payments to you and that quarterly financial reporting as of tomorrow is important. I write to first acknowledge that you have put your faith in me and trusted me for which I am truly grateful. I also know that our ongoing out standings which you wanted to be paid this week is a major cause of concern. You have the ability both legally and morally to ground and repossess your planes and you are entitled to take such action. Keeping all your rights in mind, I am writing to appeal to you to continue your trust in me. I have put USD 800 million into Kingfisher which should demonstrate my absolute commitment to making the Airlines a success. I was confident that all our negotiations with the Government, Ministry of Finance, Banks and all those involved would be concluded before mid December and that you would be paid your overdues. Sadly, this did not happen due to the pre-occupation of Government Ministers that I have explained. However, I write with confidence that everything will ge ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es thereon. The Annual Report for the next year, 2014-15, gives the picture of a Dry Tree on a Stone or Hillock in a pond and the base stone has a reflection in the water body also and no title is given to this Annual Report. Similarly for Annual Report 2015-16, with no separate title given, the Flying Horse of UB Group is on the Front Cover of the Annual Report. 186. While these photographs and description of Annual Reports do not indicate or establish anything in particular, but the selection of the photos and Logos by the Company, UBHL, carries some hidden message . Be that as it may. 187. These winding up petitions have to be dealt with on harder facts and figures and financial results as reflected in these Balance Sheets and commented upon by the Auditors including independent Auditors. Therefore, a glance through their comments and financial figures follows herein: 188. In the Audit Report dated 24/08/2012, for the year 2011-12, the Auditor, Mr. S. Vishnu Murthy, Chartered Accountant of M/s. Vishnu Ram and Company, vide Note No.4 in his Audit Report drew the attention of the stake holders including Government, Creditors and public at large towards the said Guar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Chairman of the Company, Dr. Vijay Mallya while giving his over-view of the Company s performance under the heading of Management Discussion Analysis , noted the position as under:- While Kingfisher Airlines was an unquestionable success in terms of consumer satisfaction, the still restrictive regulatory environment and prohibitory cost of operations resulted in the entire sector incurring huge losses. As one of the largest players in the industry, Kingfisher Airlines incurred very significant losses. The global financial environment, during this period, triggered by the collapse of Lehman Brothers in 2008 meant that the Company could not raise equity in a timely fashion, thus increasing its dependence on borrowings, some of which necessitated underlying support from the Company. Kingfisher Airlines ceased operations in October 2012 primarily on account of suspension of license by the Civil Aviation Regulator in response to constant disruption by crew and staff. Your Company has continued its efforts to find a suitable investor who could capitalize on the still strong reputation and license. With this intent, your Company continues to fund Kingfisher Airlines. Cert ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... its of ₹ 433.970 on account of such impugned sale of Pledged Shares was shown as profits which is a misleading picture, but taking note of the said profits shown in the Balance Sheet, the Auditors gave the following remarks: Winding up petitions filed against the Company have been admitted by the Honourable High Court of Karnataka and are being heard (Ref. note no.45); the Honourable High Court of Karnataka has restrained the Company from disposing of any of its assets [Ref. note no.52(e)]; the Company is a defendant in recovery suits instituted by certain creditors/lenders for recovery of their dues of ₹ 62,033 million [Ref. note no.45]; some of the lenders have recovered their dues by disposing of the securities pledged by the company [Ref. note no.37]. Yet, the company has prepared its financial statements on going concern basis for the reasons stated in note no.52. The appropriateness of preparation of financial statements on going concern basis in subject to the Company being able to successfully defend itself in the petitions/suits filed against it and obtaining substantial reliefs in the suits filed by it as mentioned in note no.45. The Company has no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owers, could not be sold which has impacted the cash flow. The said application is pending. Having regard to the totality of all the above facts and also the substantial assets of the Company which can be monetized in case of necessity, the financial statements for the year ended 31st March 2015 have been presented on principles applicable to Going Concern. 196. For the latest year, the Balance Sheet for the year 2015-16, for the Financial Year ending 31st March 2016, the loss shown in the Profit and Loss Account as on 31/3/2016, soared upto ₹ 451.304 crores and the seriousness of the qualifications by the Auditor of the Company also increased and while noting that the lenders of KFAL have taken the possession of the Company s property in Goa to recover its dues, the Auditor reported the following qualifications in his Report dated 31/08/2016. The company had extended corporate guarantees of ₹ 87,072 million in favour of lenders/lessors/creditors of Kingfisher Airlines Limited (KFA) an erstwhile subsidiary of the company (Refer note no.31 to financial statements). The beneficiaries of such guarantees have invoked the guarantees and are pursuing recovery a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (Holdings) Ltd ( UBHL ), Dr. Vijay Mallya Kingfisher Finvest (India) Ltd ( KFIL ) (collectively the Offerors ) The Consortium of Banks through SBICAP Trustees Limited had issued a Notice dated 3rd May, 2013 under Section 13(2) of the Securitisation and Reconstruction of financial Assets and Enforcement of Security interest Act, 2002 ( SARFAESI Act ) to the Offerors, in which it was alleged that the aggregate outstanding principal amount (both fund based and non-fund based outstanding) was Rs. 5,440 crores plus unapplied interest of ₹ 1,131 crores. In addition thereto, 4 Banks (PNB, OBC, UBI and Corporation Bank) have filed Original Application No.158 of 2014 before the Debt Recovery Tribunal, Bangalore ( DRT ), inter alia, against the Offerors in respect of Pre-Delivery Payment Loans raising an aggregate claim of ₹ 192 crores plus interest thereon. PNB has also filed O.A.No.1844 of 2014 in the DRT, inter alia, against the Offerors in respect of Pre-Delivery Payment Loans raising an aggregate claim of ₹ 18 crores plus interest thereon. In the Original Application No.766 of 2013 filed by the Consortium of Banks before DRT, it is alleged that the alleg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsortium of Banks/Asset Re- construction Company, an aggregate amount of ₹ 1,603 crores shall forthwith in the first instance be paid/secured in the manner following: (a) Rs. 700 crores, consisting of a sum of ₹ 651 crores together with accrued interest thereon, are lying deposited in the Hon ble Karnataka High Court to the credit of O.S.No.25877 of 2013 filed by the Consortium of Banks before the Hon ble City Court, Bangalore pursuant to the order dated 20th June, 2014 passed in Writ Petition No.28577 of 2014. The Offerors will cause KFA, UBHL and KFIL to consent to the aforesaid sum of RS.700 crores being paid over to the Consortium of Banks in full and final settlement of their claims in O.S.No.25877 of 2013; (b) The residual value of 4,116,306 equity shares of United Spirits Ltd held by UBHL shall be pledged in favour of the Consortium of Banks (Petitioners), the current residual value of which (net of MAT and dues payable to pledgees) being approximately ₹ 660 crores. These shares shall be liquidated so as to maximize the total amount recovered, subject to the Offerors receiving a minimum credit of ₹ 660 crores (net of MAT and dues payable to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shall forthwith release 3,459,090 equity shares of United Spirits Ltd in favour of USL Benefit Trust which are the subject matter of Writ Petition No.49864-49865 of 2013 pending in the Hon ble Karnataka High Court. (iii) all orders passed by any of the Banks against any of the Offerors declaring them willful defaulters shall be kept in abeyance and not acted upon. The Consortium of Banks shall inform the Reserve Bank of India and CIBIL accordingly. Upon the Offerors making payment of the balance amount of ₹ 1,853 crores and causing assignment of all and any amount that UBHL may recover under that claim made against the Defendants in O.S.No.6406 of 2012 as aforesaid, inter alia. (i) all legal proceedings filed by the Consortium of Banks against the Offerors shall stand dismissed as withdrawn, and all ad-interim and interim orders passed therein shall stand vacated. (ii) all security/security interests other than those created hereinabove, shall stand released in favour of the party which created the security/security interest in favour of the Consortium of Banks. (iii) all orders passed by any of the Banks against any of the Offerors declaring them wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ey have made another proposal. Mr. Shyam Divan, learned senior counsel, has submitted, on instruction, that even the said proposal is not acceptable and still, the Consortium is not against a negotiated settlement. It is further submitted by Mr. Shyam Divan that for a meaningful negotiation, the presence of the third respondent is absolutely necessary. Mr.C.S. Vaidyanathan and Mr. Parag P. Tripathi, learned senior counsel appearing for Respondent Nos.1 to 4 have submitted that they may be given short time to file their response to the main petition. Accordingly, they are granted time upto 21.04.2016 to file their response. In the response filed by the third respondent, he shall disclose the details of all his properties movable, immovable, tangible, intangible, share holdings and any right, title or interest including beneficial interest and those held in fiduciary capacity, in private trusts, public trusts, companies, partnerships, limited liability partnerships, and/or any other entity/ies both in India and abroad etc. in any form whatsoever and also the rights, indicated above, in the name also of his wife and children, as on 31.03.2016. It shall also be in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be pleaded and proved as a fact, as if in the realm of trial of a Civil Suit, does not merit acceptance of such a contention by this Court. The same is therefore liable to be rejected and is accordingly rejected. 203. Another contention about the petitioning Companies other than the secured creditors like SBI and consortium of Banks and others that such Foreign Companies ought to have obtained due permissions from Registrar of Companies (ROC) or Reserve Bank of India (RBI) in terms of Sections 592 and 599 of the companies Act, 1956, also is equally devoid of merit. If the Respondent Company wanted to challenge the locus standi of the petitioners, it was for them to establish before the Court that such Companies had a permanent establishment of business in India so as to fall within the definition of a Foreign Company, requiring registration and permissions in terms of Sections 592 and 599 of the Act. No such material has been placed by them before this Court to question the locus standi of the petitioning creditors. Mere presence of some sales representatives while undertaking business of supply of Aero Engines and Allied Equipments does not establish in any manner that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... spondent - Company and winds up the Respondent Company, UBHL in accordance with the provisions of the Companies Act, 1956. Therefore, these defences are also without any merit and the same are hereby rejected. 207. If the Respondent Company, UBHL had any bona fides in the matter and they had some reasonable and concrete proposal to salvage the Respondent Company and settle its financial obligations amicably with the petitioning creditors, a viable, reasonable and bona fide arrangement or Scheme could always be produced before the Court, after consultation and concurrence of the creditors even during the course of these winding up petitions. But no such effort was made by the Respondent - Company before this Court. On the contrary, it was brought to the notice of the Court that one such proposal submitted before the Hon ble Supreme Court in Special Leave Petition Nos.6828-6831/2016 (SBI Others Vs. KFAL Others) and the relevant extract of which proposal is also given above, was not approved and not accepted by the Banks before the Hon ble Supreme Court itself. Even if such a proposal was to come before this Court also, ex-facie, it reflects lack of bona fides on the part o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... spondent Company, UBHL rather than being swayed by false picture sought to be projected by Company itself and its Supporting Creditors. All these contentions are, not bona fide and are therefore rejected. 211. Therefore, on a totality of the facts and circumstances, this Court is of the firm and clear opinion that the Respondent Company, UBHL also deserves to be wound up for its failure to discharge its admittedly liability towards the petitioning creditors, which is far in excess of its net worth and the assets of the Respondent - Company whatever they are left now and which cannot be left in the control, possession and active management of the Respondent - Company as it exists now and it would be necessary, safe, reasonable and expedient to takeover these Assets from the Respondent - Company and hand over the same to the Official Liquidator to proceed further for winding up the Respondent Company, UBHL, in accordance with law. Accordingly, the Respondent Company, UBHL is ordered to be wound up. All I.As. filed in various Company Petitions also stand disposed of by separate orders in terms of this order. 212. This winding up order be published in The Hindu and Udayava ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
