9911796707
TMI Blog2014 (6) TMI 1003X X X X Extracts X X X X X X X X Extracts X X X X ..... sed power plants by use of rice husk, paddy straw or woody biomass, agricultural waste and thermal power plants by use of liquid, gaseous or solid fuels for the purpose of light, heat, motive power and for all other purposes for which electric energy can be employed. To carry on and generate power supply either by hydro, thermal, gas, air, diesel oil or through renewal energy such as solar, photo voltaic, wind mill or by non-conventional means and or any other team transit, distribute, supply Central/State Governments, or private companies or electricity Boards to industries and to Central/State Governments, other consumers of electricity including for captive consumption or for any industrial projects promoted by this Company or promoter companies, and generally to develop, gene accumulate power at any other place or places and to transmit, distribute, sell and supply such power. To construct, establish, operate, manage power stations, boiler houses, steam turbines, switch yards, transformer yards, substations, transmission lines, accumulators, work shops and all such works necessary for generating, accumulating, distributing and supply of electricity. To construct, lay down, est ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment of the loan instalments, the petitioner has caused notice dated 7-6-2013 issued under the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act 2002 (for short "the SARFAESI Act") calling upon the respondent to pay a sum of Rs. 4,07,51,719/- towards "pending instalments and other overdue amounts" within seven days of the receipt of the notices, failing which the petitioner shall proceed further under the SARFAESI Act. Simultaneously, the petitioner approached the Delhi High Court by filing OMP No. 923/2013 under Section 9 of the Arbitration and Conciliation Act, 1996 (for short "the 1996 Act") for interim measures. By order dated 16-9-2013, the Delhi High Court restrained the respondent and others from creating any third party interests in the power project located at Khajuri village, Baloda Bazar, Raipur District, Chhattisgarh , besides directing that the receivables related to the said power project be deposited with the court along with a complete statement of account. By order dated 17-7-2013, the BIFR has dismissed reference No. 61/2012. 6. A few days thereafter, i.e., on 23-7-2013, the petitioner caused notice under Section 13(2) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r has also indicated that the said notice is without prejudice to its right to initiate appropriate legal proceedings before the appropriate courts and/or tribunals for recovery of the outstanding amounts and also without prejudice to its right for undertaking prosecution of any complaint filed by it under Section 138 of the Negotiable Instruments Act, 1881 (for short "the 1881 Act"). 8. As the respondent failed to respond to the said notice issued under the SARFAESI Act, the petitioner has issued the statutory notice under Section 433 and 434 of the Act without prejudice to its right to initiate/institute/continue the requisite recovery proceedings or any other legal proceedings before the court/tribunal in accordance with the law of the land. 9. On 22-10-2013', the petitioner caused statutory notice under Section 13(4) of the SARFAESI Act issued to the respondent for taking symbolic possession of the properties under mortgage. On 14-11-2013, the petitioner has put the mortgaged property to auction by causing paper publication of the auction notice. 10. The respondent has challenged the measures taken by the petitioner under the SARFAESI Act by approaching the Debt Recovery ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by not making the working capital available to the respondent, IFSL has created severe financial crunch which resulted in the closure of the power plant. That IFSL has made the respondent to pass two more resolutions on 10-9-2012 and 15-3-2013 to continue the management of the power plant by the aforesaid two officers representing IFSL. 14. That the petitioner who claims to be the successor of IFSL has initiated measures under the SARFAESI Act. The objections raised by the respondent on 10-9-2013 to the notice dated 23-7-2013 issued under Section 13(2) of the SARFAESI Act were rejected by the petitioner vide letter dated 30-9-2013. The petitioner issued possession notice under Rule 8(1) of the Security Interest (Enforcement) Rules 2002 (for short "the 2002 Rules") on 28-10-2013 and issued sale notice dated 12-11-2013. 15. That the respondent assailed the legality and validity of the demand notice dated 23-7-2013, possession notice dated 28-10-2013 and sale notice dated 12-11-2013 by filing an application under Section 17(1) of the SARFAESI Act before the DRT, registered as S.A. No. 759/2013 on 11-12-2013. The petitioner appeared through its counsel on 11-12-2013 before the DRT an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Delhi High Court and therefore the petitioner had not stepped into the shoes of IFSL in terms of Section 394 of the Act. The respondent relied upon the Division Bench Judgment dated 4-2-2014 of this Court in M/s. Deccan Chronicles Holdings Limited v. The Union of India W.P. No. 37381/2013, dt. 4-2-2014 wherein it was held that the provisions of the SARFAESI Act cannot be invoked by the amalgamated company in respect of the monies due do it and that by the same analogy the provisions of the Act cannot be invoked by the petitioner. 20. That having taken over the management of the power plant w.e.f. 28-1-2012, IICL has miserably failed in running the same and taken recourse to remedies under law ignoring their inaction in reviving the power plant. IICL cannot therefore be allowed to take advantage of its own mistakes. The proceedings under Section 138 of the 1881 Act are initiated by the petitioner in respect of which the respondent has approached the Punjab and Haryana High Court under Section 482 Cr.P.C. for quashing the criminal proceedings and that the same are pending. That having taken recourse to criminal law and the SARFAESI Act, the petitioner ought not to have filed the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly insolvent and unable to pay its debts to its debtors and that therefore this is an eminently fit case for ordering winding up of the respondent. 25. Opposing the above submissions, Sri P.S. Rajasekhar, learned Counsel for the respondent, made the following submissions: (i) That having taken recourse to the jurisdiction under the special laws such as SARFAESI Act, the 1996 Act and the 1881 Act, the petitioner is estopped from invoking the discretionary jurisdiction of this Court under the Act. (ii) That the proceedings under the SARFAESI Act are pending before the DRT and in view of Section 35 of the SARFAESI Act, the provisions of the said Act have overriding effect over all other Acts and therefore the petitioner's winding up petition is not maintainable in view of the pendency of the proceedings under the SARFAESI Act. (iii) That the petitioner has contemplated initiation of proceedings under the Arbitration and Conciliation Act and obtained an interim order under Section 9 of the Act from the Delhi High court and as the whole dispute is under reference to arbitration, even before an award is passed, the disputed debt cannot be enforced by taking recourse to the provis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es of its creditors and may decline to make the winding up order by attaching greater weight to their views. The Supreme Court also held that winding up order will not be made on a creditor's petition if it would not benefit him or the company's creditors generally. Referring to the Judgment in Tweeds Garages Ltd., Re (1962) Ch. 406 : 1962 Comp. Cases 795 (Ch.D), the Court held that where there is no dispute that the company owes the creditor a debt entitling him to a winding-up order but the exact amount of the debt is disputed, the court will make a winding-up order without requiring the creditor to quantify the debt precisely. 28. In Amalgamated Commercial Traders (P) Ltd. v. A.C.K. Krishnaswami and another 1965 (35) Comp. Cases 456 (SC) the Apex Court held that a winding up petition is not a legitimate means to seek enforcement of payment of debt which is bona fide disputed by the company and that a petition presented ostensibly for a winding up order, but really to exercise pressure will be dismissed and under the circumstances may be stigmatised as a scandalous abuse of the process of Court. 29. In Pradeshiya Industrial & investment Corporation of U.P. v. North Indi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n no genuine and substantial grounds, it should not be able to avoid the statutory demand; that law should be allowed to proceed and if demand is not met and an application for liquidation is filed under Section 439 in reliance of the presumption under Section 434(1)(a) that the company is unable to pay its debts, the law should take its own course and the company, of course, will have an opportunity on the liquidation application to rebut that presumption. 34. A slew of Judgments have been rendered by the Apex Court and various other High Courts on these legal principles. In his pains taking Judgment in Krishna Kilaru and another v. Maytas Properties Limited (2013) 176 Comp. Cases 483 (A.P.), Ramesh Ranganathan, J. delved into various facets of the law relating to winding up of a company for non-payment of debt. This Court does not intend to burden this Judgment by referring to all of them. From the various judicial pronouncements, some of which are referred to above, the following legal principles are deducible: 1. If the debt is bona fide disputed and the defence is a substantial one, the Court will not wind up the company. Conversely, if the plea of denial of debt is a moonsh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g a privy to the loan transaction, cannot seek enforcement of the debt and consequently it cannot maintain the present Company Petition. To buttress this plea, the learned Counsel placed reliance on the Judgment of Division Bench of this court in M/s. Deccan Chronicle Holdings (1-supra). Opposing this submission, Sri S. Niranjan Reddy, learned Counsel for the petitioner has drawn this< Court's attention to the order of the Delhi High Court dated 12-12-2012 in C.P. No. 457/2012 and contended that with the approval of the scheme of arrangement by the Delhi High court, the whole of the undertaking, properties, rights and powers of IFSL (amalgamating company) stand transferred to and vest in the petitioner (amalgamated company) without any further act or deed. Therefore, contends the learned counsel, the petitioner has stepped into the shoes of IFSL under the approved scheme of amalgamation. 37. In M/s. Deccan Chronicle Holdings (1-supra), IBFSL advanced the loan to the petitioner therein. Later, IBFSL got merged with M/s. Indiabulls Housing Finance Limited (the petitioner herein) in C.P. No. 457/2012 referred to supra, w.e.f. 8-3-2013. Respondent No. 4 therein has got itself regi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Scheme coming into effect, the Petitioner/Amalgamating Company shall stand dissolved without winding up. It is however clarified that this order will not be construed as an order granting exemption from payment of stamp duty or taxes or any other charges, if payable, in accordance with any law or permission/compliance with any other requirement which may be specifically required under any law." 40. The remedy under the Act under Sections 433 and 434 was very much available to IFSL even if it had not been amalgamated. Therefore, the respondent has not suffered any additional disadvantage on account of amalgamation by being subject to winding up proceedings by the amalgamated company i.e., the petitioner herein. On the contrary, the petitioner having stepped into the shoes of IFSL under the statutory scheme sanctioned by the Delhi High Court, is legally entitled to maintain the present winding up petition. This submission is accordingly rejected. 41. The sheet anchor of the case of the respondent is that having availed the remedies under the SARFAESI Act and the 1996 Act, the petitioner is not entitled to invoke the jurisdiction of this Court under the provisions of the Act fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with the settled legal principle, that if there is a dispute as to the liability or if there is an admitted debt, then a proceeding under Section 433 of the Act would lie for an order of winding up of the debtor company. 42. In Maharashtra Apex Corporation Ltd. (12-supra), another learned Judge has however held that where once arbitration proceedings are initiated or the arbitration award is under challenge and/or where the arbitration award has not attained enforceability, it cannot be said that the debt is admitted and the company failed to discharge its debts. The learned Judge further held that when the creditor has taken up the proceedings under the 1996 Act, a company petition for winding up would not be maintainable. With due respect to the learned Judge, the legal proposition is too broadly stated in that Judgment. 43. Mere reference of a dispute to arbitration does not always presuppose that the debt is disputed by the debtor. Even non-payment of the admitted debt may also be the subject matter of arbitration dispute, for, by mere admission of the liability by the debtor, a creditor cannot recover the money unless there is a decree or award of the Court or arbitrator, a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... certain categories of proceedings are reserved by the legislature exclusively for public fora as a matter of public policy. Certain other categories of cases, though not expressly reserved for adjudication by public fora (courts and tribunals), may by necessary implication stand excluded from the purview of private fora. Consequently where the cause/dispute is inarbitrable, the Court where a suit is pending, will refuse to refer the parties to arbitration under Section 8 of the Act, even if the parties might have agreed upon arbitration as the forum for settlement of such disputes. The well-recognised examples of non-arbitrable disputes are, (i) disputes relating to rights and liabilities which give rise to or arise out of criminal offences; (ii) matrimonial disputes relating to divorce, judicial separation, restitution of conjugal rights, child custody; (iii) guardianship matters; (iv) insolvency and winding up matters; (v) testamentary matters (grant of probate, letters of administration and succession certificate); and (vi) eviction or tenancy matters governed by special statutes where the tenant enjoys statutory protection against eviction and only the specified courts are co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny other fora, such as, Civil Court Debt Recovery Tribunal under the provisions of the Recovery of Debts Due to Banks and other Financial Institutions Act, 1993 or an Arbitrator under the 1996 Act. 49. No Judgment was cited either before the learned Judge in Shapoorji Pallonji Finance Ltd. (13-supra) or before this Court in which it was held in absolute terms as a proposition of law that invocation of other remedies such as arbitration and the S ARFAESI Act for recovery of the debt due as a ground to dismiss a petition for winding up of a debtor-company. Following the legal propositions deducible from the various authoritative pronouncements referred to above, a petition filed for winding up can be dismissed on one or more of the following grounds, namely, (a) where the debt is bona fide disputed and the defence is a substantial one; (b) where the winding up petition is presented ostensibly for winding up order but really to exert pressure to pay the bona fide disputed debt; and (c) where even the company's inability to pay the debt is proved, but such winding up is not in the interests of its shareholders and creditors. 50. In the instant cases, the debt is not disputed, nay ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of Sections 433 and 434 of the Act and any of the provisions of the SARFAESI Act. The provisions of these two enactments operate in their designated fields, in that, while the SARFAESI Act enables the borrowers and other financial institutions registered under the said Act to initiate various measures for recovery of the loans advanced to the debtors, as noted above, Sections 433 r/w. Section 434 of the Act, vested a right in a creditor to seek winding up of a company for non-payment of an undisputed debt. Therefore, there is no scope for any inconsistency between the provisions of these two enactments. Indeed, no such inconsistency exists, as a fact. The only occasion on which such inconsistency may arise is when the property is sought to be liquidated by way of sale. Such a situation would not arise till the measures for sale of the property are initiated either by the Official Liquidator or by the creditor under the SARFAESI Act. I therefore hold that Section 35 of the S ARFAESI Act does not bar the petitioner to institute and pursue the present winding up petitions. 54. Lastly, the learned Counsel for the respondent submitted that due to various circumstances beyond its cont ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
