Bombay High Court
Sbi Global Factors Ltd vs M/S. K. Sera Sera Production Ltd on 30 November, 2012
Bench: Anoop V.Mohta
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dgm
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
COMPANY PETITION NO. 113 OF 2012
SBI Global Factors Ltd. .... Petitioner
vs
M/s. K. Sera Sera Production Ltd. .... Respondent
Mr. Rafeeque Peermohideen along with Mr. Rishabh Agarwal i/by M/s.
Paras Kuhad & Associates for the petitioner.
Mr. Venkatesh Dhond, Senior Counsel along with Mr. Ashish Kamat,
Mr. Shailesh Mendon, Ms. Dhanyashree Shah, Ms. Nikhila Reddy i/by
M/s. Desai & Diwanji for the respondent.
CORAM: ANOOP V. MOHTA, J.
JUDGMENT RESERVED ON : October 17, 2012
JUDGMENT PRONOUNCED ON : November 30, 2012
JUDGMENT:
The Petitioner is a financial institution and has invoked Section
433 (e) and (f) read with Sections 434 (1)(a) and 439 of the
Companies Act (for short, the Act) and seeking an order of winding
up. The Respondent Company has been listed on the Bombay Stock
Exchange (BSE), National Stock Exchange (NSE) and Luxembourg
Stock Exchange.
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2 On 4 November, 2005 and 20 May 2006, the Petitioner granted
to the Respondent, Reverse Factoring facility initially for a sum of Rs.
14 crores, which was thereafter, increased to Rs. 30 crores. In 2008,
the dispute arose between the parties. On 7 July, 2008, the Petitioner
issued a recall notice against the Respondent.
3 In 2009, the Petitioner instituted Company Petition No. 884 of
2009 in this Court; Summary Suit No. 2238 of 2009 in this Court;
and various criminal complaints under Section 138 of the Negotiable
Instruments Act, 1881. The parties settled the disputes/claims
recorded accordingly in terms of the Sanction Letter in September
2009. On 29 September, 2009, the Respondent paid Rs. 5 crores
vide Banker's cheque No.103477 to the Petitioner. On 10 October,
2009, Notice of postal Ballot was issued to the shareholders of the
Respondent for issuance of the Optionally Convertible Redeemable
Bonds (OCRBs). On 14 October, 2009, an Addendum to Sanction
Letter dated 17 September, 2009 was issued. The Petitioner made an
endorsement on the photo copy of Bankers cheque of Rs. 5 crores
dated 29 September, 2009 on 14 October, 2009.
4 On 9 November, 2009, Postal Ballot Forms received by the
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Respondent in connection with the issuance of the OCRBs. On 10
November, 2009, Resolution passed through Postal Ballot for issuance
of OCRBs. On 10 November, 2009, an Application for in principal
approval with the Bombay Stock Exchange and National Stock
Exchange for issuance of the OCRB's made by the Respondent.
5 On 1 December, 2009, Respondent's letter to Petitioner (MD)
inter alia recording that the Petitioner to withdraw all the legal cases
forthwith pursuant to the compliance of terms and conditions of the
sanction letter dated 17 September, 2009 alongwith its addendum
term sheet dated 14 October, 2009. On 30 December, 2009, the
Respondent paid Rs. 2 crores vide Pay Order No. 103827 in lieu of Rs.
2 crores payable from October, 2009 to March 2010.
6 On 15 January, 2010, received in principal approval from
National Stock Exchange for issuance of the OCRBs. On 28 January,
2010, received in principal approval from Bombay Stock Exchange for
issuance of the OCRBs. On 29 January, 2010, the Respondent
allotted OCRBs for Rs. 23.67 crores in favour of the Petitioner. On 29
January, 2010, the Respondent paid Rs. 1 crore to the Petitioner vide
Pay Order No. 000054.
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7 On 16 February 2010, the Respondent's letter to the Petitioner
inter alia, recording that the Respondent was willing to repay amount
of Rs. 32,50,000/- in lieu of the shortfall in security. On 29 April,
2010, the Petitioner withdrew Company Petition No.884 of 2009
against the Respondent.
On 24 January, 2011, the Respondent's Advocate addressed a
Notice to the Petitioner, inter alia calling upon the Petitioner to
withdraw all the civil and criminal cases initiated by the Petitioner
against the Respondent in terms of the settlement. On 11 February,
2011, the Petitioner's letter in response to the Respondent's Advocate's
Notice dated 24 January, 2011.
9 On 28 February, 2011, the Respondent's wrote letter to the
Petitioner (MD) inter alia calling upon the Petitioner to withdraw all
the legal cases forthwith. On 8 March, 2011, the Petitioner written
letter to the Respondent exercising their right to convert OCRBs of Rs.
2.00 crores face value with interest thereon into equity shares.
10 On 31 May, 2011, Statutory Notice from Petitioner Advocates to
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the Respondents inter alia, alleging that the Respondent was in breach
of the terms of the Sanction Letter and purporting to terminate the
Sanction Letter.
11 On 10 August, 2011, reply by Respondent's Advocate letter to
the Statutory Notice. On 23 August, 2011, Respondent's Advocate
letter to the Petitioner's Company Secretary recording that the
Respondent had not committed any default which would require
reporting to Credit Information Bureau (India) Ltd.
12 On 19 September, 2011, Respondent filed suit No.2530 of 2011
against the Respondent seeking declaration that the sanction letters
dated 17 September 2009 and 14 October 2009 are valid and sought
specific performance thereof.
13 The Petition is dated 22 August 2011 filed by the Petitioner after
delivering Statutory Notice dated 31 May, 2011 on the foundation of
claim to an aggregate sum of Rs.31,18,89,184/- with further 18%
interest per annum, alleged to be due and payable in respect of the
trade finance facilities. The Respondent, by its reply dated 28 June,
2012 resisted the claim/averments in all respects. The Petitioner filed
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rejoinder dated 4 June, 2012 and re-iterated the basic
case/submissions. A further affidavit dated 14 August, 2012 was also
filed by the Respondent, basically to demonstrate the Respondent's
solvency and credit worthiness, referring to Respondent's Auditor's
certificate as on 31 March, 2012 to show that the net worth is over Rs.
284 crores.
It is necessary to note in the matter, in view of the affidavit and
documents so read and referred by the parties, whether there are
triable issues raised and which can be adjudicated in the present
Company Petition and/or in the pending Suit/proceedings. Whether
the Respondent Company is in breach of terms and conditions of the
Sanction letter. The pendency of summary suit and criminal
proceedings referring to erstwhile debt. The aspect of breach of
Sanction Letter and revocation and/or re-calling of the lending is also
important factory. All actions in breach of the Sanction Letter whether
disentitle the Optionally Convertible Redeemable Bonds into the
Equity shares. It it also necessary to adjudicate the entitlement of the
Respondent to specific performance of the Sanction Letter.
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15 There is no denial to the settlement between the parties which
was reflected in terms of the Sanction Letter dated 7 September, 2009
read with other correspondences. The Petitioner admittedly withdrew
Company Petition No.884/2009, but not the summary suits and the
complaints under Section 138 of the Negotiable Instrument Act. This
admitted breach of the Sanction letter which was after settlement
between the parties, in my view also goes to the root of the matter for
passing any winding up order at the instance of the Petitioner at this
stage of the pendency of the proceedings, including this one.
16 There is no dispute that in pursuance to the settlement/the
Sanction Letter, Pay Order dated 29 September, 2009 of Rs. 5 crores
was deposited. The endorsement made thereon that they would be
withdrawing all proceedings against the Respondent just cannot be
overlooked. The Respondent Company paid Rs. 2 crores by one
installment dated 30 December, 2009 instead of paying the amount in
installments from October, 2009 to March, 2010. The Petitioner
admitted this amount without any protest.
17 There is no dispute that the Respondent got approval from its
shareholders and the Bombay and National Stock Exchanges for
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issuance of the Bond of Rs. 24 crores and accordingly Bond of
Rs.23.67 crores were issued by the Respondent to the Petitioner and
the same were accepted by the Petitioner without any protest. The
further payment of Rs. 1 crore was made on 29 January 2010. The
offering of collateral securities in the sum of Rs. 3.5 crores is also
mentioned in the reply to the statutory notice by the Respondent.
It is relevant to note that the Petitioner's claim so raised just
cannot be accepted as agreed due and payable amount as
contemplated under the provisions of the Act, basically to exercise
discretionary and/or equitable jurisdiction. The relevant documents,
events and the conduct of the parties apart from the clear disclosure of
facts and documents are also relevant factor which the Court need to
take into consideration before passing the order. The effect of the
Sanction Letter and the fact that the Respondent has already acted
upon and the Petitioner already got the requisite amount pursuance to
the same, but failed to perform his reciprocal obligation of
withdrawing the summary suit and the criminal proceedings and/or
the effect of this inaction unless adjudicated and decided, it is not
possible to consider the case of the Petitioner in such fashion. The
question of converting the said OCRBs into equity shares and the
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demand so made. The Court need to consider the bonafide dispute
so raised by the Respondent Company in such matter basically in view
of the undisputed position on record referring and/or revolving
around the Sanction Letter.
19 The Supreme Court in IBA Health (India) Private Limited Vs. Info-
Drive Systems SDN. BHD., [(2010) 10 SCC 553], has observed as under :
"20. ...... A dispute would be substantial and genuine if it is
bona fide and not spurious, speculative, illusory or
misconceived. The Company Court, at that stage, is not
expected to hold a full trial of the matter. It must decide
whether the grounds appear to be substantial. The grounds of
dispute, of course, must not consist of some ingenious mask
invented to deprive a creditor of a just and honest
entitlement and must not be a mere wrangle. It is settled law
that if the creditor's debt is bona fide disputed on substantial
grounds, the court should dismiss the petition and leave the
creditor first to establish his claim in an action, lest there is
danger of abuse of winding-up procedure. The Company
Court always retains the discretion, but a party to a dispute
should not be allowed to use the threat of winding-up
petition as a means of forcing the company to pay a bona fide
disputed debt.
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."
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20 The Company Judge, therefore, in view of the above position of
law need to consider whether the dispute so raised and/or objection
raised and/or contention so raised, opposing the winding up petition,
has some substance and/or whether it is bonafide and/or just not
farce and moonshine defence. The Court also need to consider that
even if there is a case of balance payment and/or amount ought to
have been and/or required to be paid, but still whether the Company
deliberately and/or intentionally avoiding to make due and/or
crystalized amount so demanded. It is settled that the amount should
be due and payable and crystalized basically when the statutory
demand is made and also on the date when the Company Petition is
filed with the averments to wind up the Respondent Company on the
foundation that the Company deliberately, intentionally, though have a
capacity and/or no capacity, unable and not in a position to pay the
demanded crystalized amount and/or such related aspects.
21 Admittedly, as there arose dispute between the parties, referring
to the First Sanction Letter dated 4.11.2005 and as parties arrived at
settlement and entered into an agreement and accordingly reflected in
the Sanction Letter dated 17 September 2009 and in fact, both the
parties have acted upon the same. The alleged breach, if any, of
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terms and conditions of Last Sanction letter itself means the Court
need to consider the rival contentions as well as documents placed on
record to justify their respective case/submissions. Having once for
re-structuring and in fact accepted the payment of Rs. 5 crore and the
Bonds worth Rs.23.67 crores out of Rs. 24 crores as agreed, I am
inclined to observe that there was substantial compliance based upon
the re-structuring in question. The Petitioner, therefore, just cannot
re-open and re-call the original claim based upon the first sanction
letter in question to invoke jurisdiction of the Court under the
Companies Act for winding up the Respondent Company.
22 There is no dispute with regard to the endorsement made and
decided by both the parties. The fact of endorsement itself means
that there was agreement which in fact agreed upon by the parties
and acted accordingly. There is no denial to the fact of the contents
of the endorsement. The basic dispute is that the endorsement or
record made only for winding up petition and not for all other
purposes. This, in my view, just cannot be adjudicated on the basis of
averments so made in the Petition and basically by the Company
Judge. The re-structuring, if it was by consent of the parties and in
fact as recorded above accepted the substantial payment based upon
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the same and as alleged, the Petitioner, if fail to perform their part of
the terms and conditions and as pointed out referring to the civil as
well as criminal proceedings, to say that the Respondent Company has
committed default deliberately and to avoid the payment and/or
crystalized the amount not acted further and, therefore, the Petitioner
has no choice, but to move this Petition for winding up.
The parties have entered into the restructuring, the dispute with
regard to the same unless adjudicated and/or settled, whichever way
the parties wants, I am not in a position, in view of the above accepted
case of the Petitioner and also not inclined to exercise discretion in
favour of the Petitioner to pass order of winding up as prayed. I am
not deciding the merits of the matter as all rival contentions so raised,
I am concerned with the present winding up petition and, therefore,
observation, even if so made, is only for deciding the present winding
up petition.
24 Resultantly, the Company Petition is dismissed. There shall be
no order as to costs. All contentions are kept open.
(ANOOP V. MOHTA, J.)
