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TMI Blog2018 (3) TMI 561X X X X Extracts X X X X X X X X Extracts X X X X ..... had approached the respondent a nonbanking financial institution for financial assistance of Rs. 100/ crores. An offer letter dated 16 October 2011 was issued by the respondent enclosing the terms and conditions for the said term loan facility being Rupee Term Loan facility. The usage of the term loan was to part fund for infusion of equity into the power project namely "Vandana Vidhyut Ltd. (VVL)" floated by the promoters / promoters group and associate companies of the borrower Vandana Udhyog Ltd., for setting up a 540 mega watt power project at Village Salora, Katghora, District Korba and Chhattisgarh. Some of the relevant terms and conditions on which the parties have addressed the Court reads thus: "Principle Terms & Conditions for Rupee Term Loan facility of upto Rs. 1000 mn to Vandana Group. 1 Borrower Vandana Udhyog Ltd. 7 Tenor 36 Months from date of first disbursement 8 Put/Call Option The Lender & Borrower will have Put/Call option at the end of 12/24 months with a prior written notice of 45 days. .. . ... ... .... ... 13 Repayment In 4 equal quarterly installment at the end of 27th, 30th, 33rd and 36th month from the date of first disburs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of VVL decide to offload a certain stake in VVL to a new buyer, except the transfers within the group, the Investors shall also have a right to offer its shares on the same price and other terms and conditions. (c) Negative Covenant: The Promoters will undertake that the following matters with respect to VVL/Borrowers shall require the prior approval of IFIN: * Any new business initiative which VVL/the Borrower wishes to undertake other than those approved in the Business Plan; * Any change in the capital structure, shareholding pattern or management control of VVL/the Borrowers. * Mergers, amalgamations and acquisitions, demerger, reorganization and disposition of assets (including both acquisition and disposal) of VVL/the Borrowers; * Any change of the existing Statutory Auditors of VVL/the Borrowers. ....... 3. Consequent to the said offer letter, the parties entered into three agreements namely (i) 'Loan Agreement' dated 6 January 2012 entered between the borrower - Vandana Udhyog Limited and the respondent; (ii) a 'Pledge Agreement' dated 6 January 2012 entered between the borrower ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the date of issuance of "Put Notice". The appellant responded to the said "Put Notice" disputing the invoking of the option agreement by the respondent. Thereafter, on account of the persistent default by the borrowerVandana Udhyog Ltd., the petitioner also sold the pledged shares of Viconic Vyapaari Pvt.Ltd. which were sold in the period ranging from 3 April 2014 to 6 October 2014 at the rate of Rs. 23/ to Rs. 23.23 pers share and gave a credit of the realized amount to the borrower Vandana Udyog Limited. 7. As substantial debts remained due and payable, a statutory notice dated 13 September 2014 under Section 433 and 434 of the Companies Act was issued by the respondent to the borrowerVandana Udhyog Ltd.. This was replied by the borrowerVandana Udhyog Ltd. who admitted the loan facility as granted by the respondent, however denied its liability under the option agreement on various grounds. As the debt remained outstanding and was not being repaid, the respondent filed in this Court a winding up petition being Company Petition No.782 of 2014 against the appellant. A reply affidavit came to be filed in the said petition by the appellant whereby it was admitted by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion agreement" dated 6 January 2012, it was held that it was the respondent's right to sell and assign the facility to the appellant and its associate - Vandana Ispat Ltd. (VIL) on terms and conditions as contained in the option agreement and demand payment of "exercise price". The learned Single Judge also rejected the contention of the appellant that after sale of the part of the shares which were pledged by Viconic Vyapar Pvt.Ltd. under the pledge agreement, the "Put option notice" could not have been issued by the respondent to the appellant. Learned Single Judge observed, that in fact, the appellant in the reply affidavit filed in the earlier Company petition, in unequivocal terms had admitted that the appellant was a guarantor under the option agreement dated 6 January 2012 to the amounts payable to the respondent by the borrowerVandana Udhyog Ltd.. It is observed that however in paragraph 3(E) of the reply to the present Company petition, the appellant was taking a different stand that the option agreement is not a guarantee document, and the appellant is not a guarantor to the financial facility availed by the borrowerVandana Udhyog Ltd. The learned Single Jud ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion was not the appropriate remedy for the respondent in such a situation. It is submitted that the learned Single Judge has thus misinterpreted the "option agreement". Learned Senior Counsel for the appellant next submits that the learned Single Judge ought not to have observed that the appellant in the reply affidavit filed in Company Petition No.782 of 2014 had admitted that it was a guarantor in respect of the financial facility as extended to the borrowerVandana Udhyog Ltd., as this statement was made inadvertently which was clarified in the affidavit filed in the present company petition. 11. On the other hand, learned Counsel for the respondent would submit that this is a clear case where the appellant had admitted its liability to discharge the debt of the borrowerVandana Udhyog Limited as evident from the reply affidavit filed in the earlier company petition wherein the appellant has clearly admitted that the appellant was a guarantor to the said financial facility. It is submitted that the nomenclature of the agreements may be anything, ultimately it is required to be seen as to what was the intention of the parties. It is submitted that if the option agreemen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ditors security respectively. It is thus submitted that no interference is called for in the impugned order. In support of the submission that the intention of the parties is required to be gathered from the agreements as executed between the parties, learned Counsel for the respondent has placed reliance on the decision of the Supreme Court in the case "Tamboli Ramanlal Motilal (Dead) by LRs. Vs. Ghanchi Chimanlal Keshavlal (Dead) by LRs. And Anr." 1993 Supp(1) SCC 295 12. We have heard the learned Counsel for the parties and with their assistance, we have perused the documents on record as also the impugned order. 13. There are three principal submissions as urged on behalf of the appellant in challenging the impugned order passed by the learned Single Judge. The first submission is that the option agreement was not available to be invoked against the appellant as the same was terminated by the appellant on 4 March 2015. The "option agreement" being terminated was not enforceable in law. As a consequence of termination of the option agreement no dues are payable under the option agreement. Further the adjudication of the validity and purport of the option agreement cannot be a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 2 reads as under: "It is a condition for IFIN agreeing to grant the Facility that VGL and VIL provide IFIN with an unconditional and irrevocable option to sell and assign the Facility to VGL and VIL alongwith the associated rights thereunder in the event in Event of Default occurs under the Facility Agreement. 15. 'Article I' being the interpretation clause, the "Put Option" is defined to mean the right but not the obligation of the respondent to sell and assign the facility to the appellant and VIL on the terms and conditions contained in the said agreement and demand payment of "Exercise Price". The Exercise Price is defined to mean the aggregate amount of all debts and monetary liabilities of the borrowerVandana Udhyog Ltd. to the respondent which are owed, incurred and outstanding as principal, together with interest, charges, costs, expenses and all other monies payable by the borrower alongwith the penalty, if any, under the facility agreement and any other documents in relation to the facility, upon the occurrence of an event of default, under the facility agreement. Article II provides for "Put Option" and as the controversy revolves around the"Put Opt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ditionally agreed and had undertaken to the respondent that in the event of occurrence of a default under the facility agreement, the respondent may at its discretion issue "Put Notice" and upon receipt of the Put Notice, the appellant and Vandana Ispat Ltd., shall without demur or protest make payment of "Exercise Price" to the respondent and accept by way of assignment from the respondent the facility alongwith all rights and liabilities thereunder. The very wording of Article II is suggestive of a guarantee on the part of the appellant to the respondent. The legal position can be clearly noted from Section 126 of the Contract Act which defines a contract of guarantee to mean a contract to perform the promise, or discharge the liability, of a third person in case of his default. It is well settled that a contract of guarantee involves principally three parties namely the creditor, the surety and the principal debtor, where liability may be actual or prospective. Thus necessarily the ingredients of a contract of guarantee are clearly present in the option agreement which are reflected from the unambiguous nature of Article II the "Put Option" whereby the appellant has irrevocably, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he parties to incorporate the termination clause as contained in Article IV is to bind the parties only in the stipulated and agreed mode of termination and in no other form or method. In fact what is pertinent is that the parties had categorically avoided to enter any other form of termination when they agreed to incorporate Article IV. Thus, the appellant's contention that in view of termination letter dated 4 March 2015 the "Put Option" could not have been exercised by the respondent is wholly untenable. The appellant's contention of the validity of the option agreement being considered by the learned Single Judge in the summary proceedings of a winding up petition, hence is wholly unfounded. 19. Before parting, we may also note that by the impugned order the winding up petition of the respondent has been admitted and was directed to be advertised. It is not in dispute that the winding up petition has already been advertised and to that extent the impugned order is already implemented. As regards the final hearing of winding up petition, as informed to us, the learned Single Judge has placed the winding up petition for final hearing on 16 March, 2018. 20. In view of the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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