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TMI Blog2013 (2) TMI 942X X X X Extracts X X X X X X X X Extracts X X X X ..... d to the respondent-Company. By and under agreement reached between the petitioner and respondent-Company, the petitioner was entrusted with the scope of work, inter-alia, defined, more particularly in agreement dated 11.08.2008. It is the case of the petitioner that the petitioner is entitled to fees at the rate of 3% of the gross consideration received by the respondent- Company, either by way of finance whether as equity participation or otherwise in any other firm. 4. It is the further the case of the petitioner that the petitioner is also entitled to reimbursement and other fees as per the said agreement. That one Mr. Mani and Mr. Sanjay Nagrath, while representing the respondent-Company gave promises on behalf of the respondent-Company and the same are binding to it. It is further the case of the petitioner that Shri Tarun Shah representing the petitioner was coordinating with them. That the petitioner invested their time and resources in identifying the suitable party, who would be winding in participating in equity of the respondent-Company or otherwise willing to fund. It is the case of the petitioner that the petitioner approached TATA Capital Ltd. and organized several m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the petitioner issued Statutory Notice under Sections 433 and 434 of the Companies Act, 1956, on 03.11.2010. On receipt of the said Notice for first time, the respondent-Company denied its liability to pay the agreed sum to the petitioner and has given moonshine reply, and it is therefore, contended by the petitioner that the respondent- Company is not in a position to make payment to the petitioner, and therefore, the petitioner has filed this petition with a prayer to wound up the respondent-Company under Sections 433, 434 and 439 of the Companies Act, 1956. 5. The petitioner has relied upon various correspondence through emails between the petitioner and respondent-Company as well as other connected persons. 6. In response to the Notice issued by this Court, the respondent-Company has filed Affidavit-in-Reply and has inter-alia, contended that the petitioner approached respondent-Company in the year 2008 and proposed to take his services and advice for equity placement for share in the respondent-Company. 7. It is contended by the respondent-Company that the services proposed to be offered by the petitioner were only for raising equity finance and not for raising any debt. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uccess fees are owed to the petitioner. The respondent has denied the contentions raised by the petitioner in the petition. The respondent-Company has contended that no promise much less an enforceable and binding promise was ever given to the petitioner. It is also contended by the respondent-Company that the TATA Capital Ltd., was not introduced by the petitioner and as such no equity finance has been received from any investor, who came to be introduced by the petitioner. It is specifically denied by the respondent-Company that Mr. Mani Iyer acknowledged in writing that the efforts were put in by the petitioner. The respondent-Company has contended that Mr. Chirag Mehta was never authorized to make any commitment on behalf of the respondent- Company. The respondent-Company has further contended that Mr. Chirag Mehta is no longer with the respondent- Company and in reality that the petitioner has no knowledge of actual amount invested. It is further contended by the respondent-Company that the petitioner had never performed his part of the contract as per the offer letter and therefore, the petitioner is not entitled for any fees, as there is no success which is achieved by the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... speculative in nature. The respondent-Company has also further contended that the invoice, which is produced, had never issued by the petitioner to the respondent-Company and no finance has been received from the Aureos Advisors India Limited and no sanction sanction letter is also issued to the respondent- Company by Aureos Advisors India Limited. The respondent-Company has inter-alia, contended in the Further Affidavit that before the date of invoice, no funds have been received by the respondent-Company by such investors. 10. The petitioner has filed Further Rejoinder to the said Affidavit-in-Reply and has inter-alia, contended that the respondent-Company has not stated true and correct facts about the Aureos Advisors India Limited and has contended that the said invoice dated 21.12.2009 which is placed on record was issued by the petitioner and the same has been received by the respondent-Company. The petitioner has inter alia, contended that as per the said invoice, the petitioner did get sanction from two equity investors namely Aureos Advisors India Limited and TATA Capital Ltd., for the respondent Company. 11. Mr. Mihir Joshi, learned Senior Counsel appearing with Mr. S.P. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s instead of Rs. 75 lacs. It is therefore, contended that the said email constituted an admission on the part of the respondent-Company about the amount which is due to the petitioner. It is contended that on 07.08.2008, one Mr. Sanjay Nagrath, Vice President (Finance) of the respondent-Company had written email to the petitioner to approach funds other than TPG, Kotak, which is clearly indicative of the fact that the petitioner was instrumental in approaching TATA Capital/TATA Group, which ultimately resulted into investment with the respondent-Company. The petitioner relying upon the email dated 26.09.2008 written by Mr. Mani Iyer has further contended that contents of said email speaks of TATA Termsheet and future collaboration between the petitioner and the respondent-Company. 12. It is contended by the petitioner that the defense raised by the respondent-Company in its reply is frivolous and not bonafide, and is raised only with a view to avoid payment of admitted dues to the petitioner. The stand taken by the petitioner that Mr. Chirag Mehta, was not authorized to make admission of payment on behalf of the respondent-Company clearly demonstrates the dishonesty of the responde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urt in the case of IBA India Private Ltd. Vs. Info Drive System Sdn. BHB., reported in 2010(10) SCC 553, the financial health is not of much relevance. It is therefore, contended that as a dispute raised by the respondent- Company is frivolous and not bonafide, which is raised in fact after admission of debt, the petitioner cannot be relegated to file Civil Suit and has therefore, contended that the petitioner has made out a case under Section 433 read with Section 434 of the Companies Act, 1956. 15. As against this, Mr. P.C.Kavina, learned Senior Counsel appearing for the respondent-Company has contended that the petition is misconceived and not maintainable and considering the nature of grievance raised in the petition, the same is speculative. Mr. Kavina, learned Senior Counsel has further submitted that the petition is not a suit for recovery. He further contended that the invoice produced on record creates doubt and there is internal contradiction in invoice and the pleadings. He further contended on behalf of the respondent-Company that the agreement dated 11.08.2008 was for equity placement only and loans are not within the ambit of the work assigned. It is also contended th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any, does not know and is not clear as to from whom has the respondent-Company allegedly received funds and to what extent. The respondent-Company has further contended that on account of such inconsistency and lack of clarity, as to how the amount of Rs. 75 Lacs is allegedly due from the respondent-Company, the petition deserves to be rejected. It may be noted that the respondent-Company also denies having received any such invoice, as is produced on record by the petitioner. It is contended on behalf of the respondent-Company that the agreement of 11.08.2008 annexed at Annexure:A to the petition recognizes that the petitioner is required to provide financial assistance to the Company for raising private equity finance. It is inter-alia, contended that there are different and distinct mode of raising finance, whether they be equity finance or debt finance and both are different and one cannot be substituted for the other, because the consequences arising for the Company are very different, depending upon the mode it chooses. As per the agreement dated 11.08.2008 the petitioner would become entitled to 3% of the success fees only for the success and not merely on efforts made. It i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... It is further contented that the petitioner is silent regarding Aureous India Advisors Limited in the petition and on the basis of sanction letter received from Aureous India Advisors Limited in the Further Affidavit has made an attempt to show that such investment is made by Aureous India Advisors Limited and has received by the respondent-Company. It is contended that the petitioner has relied upon the emails, which does not establish the fact that the respondent- Company has received any finance from Aureous India Advisors Limited, as is indicated from the last correspondence dated 19.05.2009. It is inter-alia, contended by the respondent-Company that the petitioner has not been able to establish by asserting its specific case and the basis of the claims in the present petition. It is contended that in a winding-up petition, the petitioner does not have the luxury of alleging certain amount as been due and then settling for such lesser amount as the Court may upon evidence find due and payable as is done in a Civil Suit. It is further contended that a winding-up petition is a statutory remedy entailing serious consequences for the Company and therefore, it is not enough and suff ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al Report for the year 2010-11, indicates that profit before the tax of the respondent-Company for the year ended on 31.03.2011 was Rs. 1170.07 Lacs and its Reserves and Surplus as on 31.03.2011 were Rs. 3,392,038,627/-, whereas it Fixed Assets excluding depreciation for the year were of Rs. 1,596,393,790/- and capital Work-in-Progress was of Rs. 1,499,296,740/-. It is the case of the respondent- Company that the respondent-Company is profit making Company and a going concern and the petition being frivolous deserves to be rejected with costs. It is contended that the respondent-Company and its subsidiaries are involved in the pharmaceutical sector, engaged, inter alia, in research and development of Biotech Drugs. It is also pointed out by the respondent-Company that its subsidiary Indus Biotherapeutics Ltd., is one of the few recognized commercial R D corporations by the Department of Science and Industrial Research, Government of India. Celestial Biologicals Ltd., is mainly in the business of plasma therapeutics. The respondent-Company has relied upon the ratio laid down by the Hon'ble Apex Court in the case of (i) IBA India Private Ltd. Vs. Info Drive System Sdn. BHB., repo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the Finance Company. 28. It further appears from the record of the petition which is in form of email/correspondence that the petitioner did make attempts. After the communication in form of agreement dated 11.08.2008 came into existence even the Termsheet came to be prepared. In the Statutory Notice dated 3.11.2010, the petitioner has averred that the petitioner invested Time and Resources in identifying suitable party who would be willing to participate in equity of respondent-Company or otherwise willing to fund in respondent-Company in a suitable manner and it is also averred that the petitioner approached various parties including TATA Capital Ltd. The petitioner organized several meetings with the Director of the respondent- Company and also plant visits of Aureous Advisors Indian Ltd., were planned who also gave Termsheet to invest Rs. 60 Crores in the month of May 2009. It is also averred that in the Statutory Notice, the petitioner could generate TATA Capital Ltd s interest in the respondent-Company and as a result of which, TATA Capital Ltd., confirmed to invest Rs. 60 Crores by way of equity, and accordingly, TATA Capital Ltd., invested Rs. 25 Crores in the respondent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... India Advisors Limited and TATA Capital. 30. It is not the case of the petitioner that the respondent-Company received any funds from Aureous India Advisors Limited. Considering the contents of the agreement dated 11.08.2008, which is the genesis of relationship between the petitioner and respondent- Company, entitlement of fess is termed as success fees and even the work which was assigned to the petitioner speaks as a financial advisor, which entails six different phases as noted herein above ends at the completion of transaction. The said agreement while providing for success fees inter-alia, provides that the completion of transaction will be signified by signing of definitive agreement, whereas invoice speaks of sanction. The email dated 02.11.2009 is prior to the date of the invoice. All these cumulatively therefore, leads to a conclusion wherein it cannot be inferred that as per the agreement dated 11.08.2008, the petitioner has completed all six phases of work assigned. The agreement is executed for arranging equity finance for the respondent-Company. In addition to this, debt finance cannot be equated with private equity finance. The facts arising from the record of the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uestion about the liability to pay the debt that the Court sees that there is a question to be decided. It must also be remembered that the onus is on the company to bring forward a prima facie case, which satisfies the court that there is something which ought to be tried either before the Court, itself or in an action or by some other proceedings. There are various factors and facets, contours and chronicles emerging from the facts of the case requiring consideration before adjudicating upon the plea of winding up by the Court. When the petitioner is forcing payment of debt, which it knows to be in substantial dispute the evidence may support an action by the company against the petitioner for the tort of malicious prosecution. No monetary loss or special damage to the company need be proved for the presentation of the petition is, from its very nature, calculated to injure the credit of the company. It will be interesting to refer to a decision in A - Company (No.003729 of 1982), (1984) 1 W.L.R. 1090, that even in a case where the company in good faith and on substantial grounds disputed the debt and could not know the sum due but was willing to pay a lesser amount, its omission ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the petitioner's inability to establish the locus standi to present a petition under what is now section 124(1) of the Insolvency Act, 1986. The case of an undisputed debt with a genuine and serious cross-claim is different, in that the dismissal or staying of the petition can only be a matter for the discretion of the court, albeit that its exercise may have been narrowed by authority. So, there may be two categories of cases, one disputed debt category and another cross-claim case category. In the present case, there is a bonafide dispute of debt and also substantial dispute of counter claim. The principles, which we have enunciated hereinabove, are extensively, explored in catena of judicial pronouncements. For short, we cannot resist the temptation of referring the following decided cases: (1) Madhusudan Gordhandas Co. v. Madhu Woolen Industries Pvt. Ltd, (1972) 42 Company Cases, 125 (SC), wherein, it is held that one act of dishonesty on the part of the petitioner is sufficient for rejection of petition. (2) Harinagar Sugar Mills v. Court Receiver, H.C.Bombay, AIR 1966 SC 1707, wherein it has been observed, relying on Palmer's Company Precedents that a winding up or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nless it is essential to do so. Learned counsel for the petitioner then contended that as the petitioner has also invoked section 433(f) and having regard to the financial position of the company it is just and equitable to wind up the company. After the petitioner had ceased to be a creditor, the winding up petition at the instance of such person either on the ground of inability to pay its debts, or on the ground that it is just and equitable to wind up, will not lie. Moreover, a petition on just and equitable grounds will not be entertained when an adequate alternative remedy is available to the petitioner. If the petitioner has a legally enforceable claim against the respondent, it is open to the petitioner to resort to remedies in civil courts which he is entitled to do. The petitioner cannot, merely by asserting that it has a claim even though the claim is barred by limitation, further assert that it is just and equitable to wind up the company. A case for winding up on the grounds that it is just and equitable to do so has also not been made out in the petition. In any event, the petitioner cannot be heard at this stage to contend that the company should be wound up on that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rining the suit is confined to recovering the amount of each instalment in respect of which default may have been committed. It will be seen that in clause 3(b) of the agreement, all that is provided is that, on a default, the defaulting company would be liable to pay the interest @ 3% per month. There is no clause suggesting that whole of the amount would become due and recoverable on a single or more defaults. I respectfully agree with the law laid down in the above mentioned ruling. 22. The end result of all this discussion would be that a suit would clearly be barred by limitation on the date on which the petition under section 433 of the Companies Act was filed. In that view, the petition itself would be of no consequence and will be required to be dismissed as there is a valid and bona fide defence of limitation available to the respondent company. 34. It would also be advantageous to refer to the judgment of the Apex Court in the case of Madhusudan Gordhandas and Co., Vs. Madhu Woollen Industries Pvt. Ltd., reported in (1972) 42 Company Cases 125 (S.C.), wherein it has been observed as under:- Two rules are well settled. First, if the debt is bona fide disputed and the defen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... however, be tested by the court on the grounds as to whether the case of the persons opposing the winding-up is reasonable; secondly, whether there are matters which should be inquired into and investigated if a winding -up order is made. It is also well-settled that a winding-up order will not be made on a creditor's petition if it would not benefit him or the company's creditors generally. The grounds furnished by the creditors opposing the winding up will have an important bearing on the reasonableness of the case. (See P J. Macrae Ltd. In re [1961] 1 All ER 302; [1961] 31 Comp Case 424 (CA). It is beyond dispute that the machinery for winding up will not be allowed to be utilized merely as a means for realising its debts due from a company. In Amalgamated Commercial Traders (P.) Ltd. vs. Krishnaswami (A.C.K.) [1965] 35 Comp Case 456, 463 (SC) this court quoted with approval the following passage from Buckley on the Companies Acts, 13th edition, page 451: It is well-settled that a winding-up petition is not a legitimate means of seeking to enforce payment of the debt which is bona fide disputed by the company. A petition presented ostensibly for a winding-up order but re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ide disputed, there cannot be neglect to pay within the meaning of Section 433(1)(a) of the Companies Act, 1956. If there is no neglect, the deeming provision does not come into play and the winding up on the ground that the company is unable to pay its debts is not substantiated and non-payment of the amount of such a bona fide disputed debt cannot be termed as neglect to pay so as to incur the liability under Section 433(e) read with Section 434(1)(a) of the Companies Act, 1956. Commercially solvent 24. The appellant Company raised a contention that it is commercially solvent and, in such a situation, the question may arise that the factum of commercial solvency, as such, would be sufficient to reject the petition for winding up, unless substantial grounds for its rejection are made out. A determination of examination of the company's insolvency may be a useful aid in deciding whether the refusal to pay is a result of the bona fide dispute as to liability or whether it reflects an inability to pay, in such a situation, solvency is relevant not as a separate ground. If there is no dispute as to the company's liability, the solvency of the company might not constitute a sta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tation caused by maliciously and unreasonably commencing liquidation proceedings against a company and later dismissed when a proper defence is made out on substantial grounds. A creditor's winding-up petition implies insolvency and is likely to damage the company's creditworthiness or its financial standing with its creditors or customers and even among the public. Public policy considerations 34. A creditor's winding-up petition, in certain situations, implies insolvency or financial position with other creditors, banking institutions, customers and so on. Publication in the newspaper of the filing of winding-up petition may damage the creditworthiness or financial standing of the company and which may also have other economic and social ramifications. Competitors will be all the more happy and the sale of its products may go down in the market and it may also trigger a series of cross-defaults, and may further push the company into a state of acute insolvency much more than what it was when the petition was filed. The Company Court, at times, has not only to look into the interest of the creditors, but also the interests of the public at large. 35. We have referred t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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