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TMI Blog2013 (12) TMI 1653X X X X Extracts X X X X X X X X Extracts X X X X ..... for ₹ 1,32,45,104/- which was disbursed on 6.3.2012 became due on 6.4.2012. Despite several reminders the respondent could not pay back the amount, compelling the petitioner to serve a loan recall notice in September, 2012. Thereafter, the statutory notice under section 434(1)(a) of the Act was served on the respondent, calling upon the respondent to return the amounts with interest at the agreed rates within 21 days, failing which winding up proceedings were threatened to be taken. There is no dispute that the notice was served on the respondent-company at its registered office on 3.10.2012. There was no reply to the statutory notice and hence the present winding up petition. 3. Initially there were talks for settlement between the parties but then they failed and on 2.9.2013 this Court passed an order admitting the company petition but deferred further proceedings such as publication of citation in the newspapers and appointment of provisional liquidator for a period of 8 weeks to enable revival of the talks or settlement proposals, at the initiative of the respondent-company. It was observed by this Court in the said order that in case nothing happens at the end of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he drew my attention to the following: (a) Para 2.5.4 of the report in which the production facilities of the respondent-company have been stated to be satisfactory and it was opined by the consultant that considering the all-round increase in prices, the level of operation ( in value) is achievable subject to availability of orders and adequate working capital funds. The achievable level of operation was pegged at ₹ 250 crores during the year 2013-2014 and at the level of ₹ 1 crore per day or ₹ 300 crores per annum for all the subsequent years. This is the figure of production/sales. (b) Para 2.5.5 of the report in which restructuring of the loans and infusion of adequate working capital into the system was recommended. These may come from not only the banking system, but also from the promoters. It was recommended that the management may try to bring back the morale of the employees so that the projected level of operation is achieved. (c) Para 2.6.2 in which the reasons for strained relations between the respondent and Navistar, USA, a leading commercial vehicle manufacturer have been traced. It was noted that for certain reasons Navistar did not pick ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Two of the lenders i.e. RIICO and DEG agreed to consider rescheduling of the outstanding loans in September, 2013 when a clear position about the operation of the respondent-company is available and to maintain parity with banks regarding payment of due interest. 8. The learned counsel for the respondent-company also drew my attention to the valuation of the property of the respondent-company in Ahmedabad at ₹ 450 lakhs. It is submitted that this property was offered to the petitioner as security for the outstanding amount, but the offer was rejected by the petitioner. It is further submitted that for the time being the property at Ahmedabad can be retained as security by the petitioner and if the amount which is outstanding is not paid to the petitioner by 31.3.2014, the respondent was agreeable to the property being sold in realisation of the arrears. It was also claimed that by 30.11.2013, the consortium of banks had agreed to pump in a sum of ₹ 7.74 crores as working capital into the respondent-company. The learned counsel further contended that all other creditors of the respondent-company are extending their co-operation and it is only the petitioner who is in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n placed by the respondent-company before this Court as to whether those conditions have been met or not; and (g) if the respondent-company is really serious in paying off the debt due to the petitioner, it can sell the property at Ahmedabad which is valued at ₹ 450 lakhs and pay the amount due to the petitioner. 10. I have carefully considered the facts of the case in the light of the rival submissions. By order dated 2.9.2013, the winding up petition was admitted, but further proceedings such as citation in the newspapers and the appointment of provisional liquidator were deferred for a period of 8 weeks. It was stated in the order that this was only to enable the talks or settlement proposals, if any, for which the initiative should be taken by the respondent-company. In case nothing happens at the end of 8 week period, the law has to take its own course . It is nobody's case that the respondent-company initiated any talks or settlement proposals at any time after the passing of the aforesaid order and before the winding up petition was taken up for hearing on 12.11.2013. In these circumstances, the question to be considered is whether the petition should be adv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Hindustan Thomson Associates Ltd. (1999) 95 Company Cases 532]. 12. The remedy under section 433(e) is not a matter of right; it only enables and empowers the Company Court to pass an order of winding up in an appropriate case. The Court is not bound to order winding up. The inability on the part of the company to pay the debt may arise for a variety of reasons and the Court is obliged to consider whether it is the outcome of any deliberate or designed action, or mere temporary shock and effect of economy upon the market. In a given case, it may happen that a company may become unable to pay its debts for a while but that by itself is not a criterion to wind up the company. The Company Court is under a duty to consider the financial status, strength and substratum of the company in an overall context and should be able to distinguish between a temporary cash crunch and a state of affairs which clearly indicates that the company has fallen sick without any hopes of revival. High sales and turnover are not necessarily an indication of cash surplus, if the liabilities of the company are also on the high side. It must be remembered by the Company Court that the effect of winding u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Investitions in connection with certain loan agreements. However, apart from the reference to the minutes of the lenders' meeting held on 11.7.2013, no further information was forthcoming as regards the developments in the month of August, 2013. It may be recalled that in the lender's meeting held on 11.7.2013 at the conference hall of the Karol Bagh branch of State Bank of Travancore, the agenda was, interalia, to discuss the current performance of the company and the current status of transfer of raw material and other machines to Bhiwadi. As regards the current performance of the company, the Chairman and Managing Director of the company informed the lead bank that - (a) an agreement has been signed with the labourers for settlement of the issues of pending remuneration; (b) the lenders were informed that once the company started payment in terms of the agreement, the labourers will not impede the transportation of the plant and machinery from Faridabad to Bhiwadi; (c) there were no dues on account of provident fund, but there were dues of about ₹ 15 crore towards sales tax which was to be paid in instalments; (d) the dues towards excise duty amounted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the second instalment was paid to the labour and whether the request to the banks for release of enhanced working capital limits was examined by them, and if so, what was their response. 16. Another important decision taken in the meeting of the lenders was that no legal or debt-recovery action was presently being contemplated by the lenders as the company is showing signs of meeting level of operations. Banks agreed not to take coercive action and give a fair opportunity to the company to perform after such long drawn labour problems . 17. The minutes also record that the non-bank lenders i.e. RIICO and DEG agreed to consider rescheduling of the outstanding loans during September, 2013 when a clear position about operations would be available and maintain parity with the banks regarding payment of due interest. No information was placed before me as to the developments in September, 2013. 18. The only development after the last order, which was brought to my notice, was the e-mail sent by State Bank of Travancore to the other banks which were members of the consortium on the subject rework of the existing restructuring package . It merely states that the company's ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , Times of India (English) and Navbharat Times (Hindi) that the winding up petition against the respondent-company has been admitted. 22. However, I cannot also lose sight of the fact that publication of the citation that the winding up petition against the company has been admitted is likely to have an adverse impact in the restructuring proposals/proceedings which are under consideration by the consortium of banks and on the labourers who are awaiting settlement, having assured the company that they will not hamper the process of shifting the factory to Bhiwadi. It is significant to note that the banks took a decision not to take any legal steps or action in the Debt Recovery Tribunal against the company as the company is showing signs of meeting the level of operations. Though there is no information as to what happened in August and September, 2013 about the progress of the restructuring proposal, there is also no information to the effect that the restructuring proposal has been terminated or dropped. If the proposals are still under consideration and for some reason or other have merely been deferred to a future date beyond September, 2013 and are still alive, an immediate ..... X X X X Extracts X X X X X X X X Extracts X X X X
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