Cheran Holdings Pvt. Ltd. & Anr. vs Data Access(India) Ltd. & Ors.
2009 Latest Caselaw 4747 Del

*     IN THE HIGH COURT OF DELHI AT NEW DELHI

+     Co.App.3-4/2006 and CM No.12982/2009

CHERAN HOLDINGS PVT. LTD. & ANR. ..... Appellant
                 Through : Mr. Sanjay Jain, Sr. Adv.
                            with Ms. Prabhsahay Kaur &
                            Mr. Arjun Mitra, Advs.

             versus

DATA ACCESS(INDIA) LTD. & ORS.     ..... Respondent
                   Through: Mr. Y.P. Narula, Sr. Adv.
                             with Mr. Aniruddha
                             Chaudhary, Adv. for Canara
                             Bank
                             Mr. Rajiv Behl, Adv. for
                             Official Liquidator

                      WITH

      Co.App.5/2006 and CM Nos.12844/2009 & 13044/2009

SPORTING PASTIME INDIA LTD. ..... Appellant
                  Through : Ms. Poli Kataki, Adv.
                            Ms. Harpriya Padmanabhan,
                            Interim Receiver for SPIL

             versus

DATA ACCESS(INDIA) LTD. & ORS. ..... Respondent
                   Through : Mr. Y.P. Narula, Sr. Adv.
                             with Mr. Aniruddha
                             Chaudhary, Adv. for Canara
                             Bank
                             Mr. Rajiv Behl, Adv. for
                             Official Liquidator

%                     Date of Hearing : October 27, 2009

                      Date of Decision : November 20, 2009




Co.App.3-4/2006                                     Page 1 of 12
        CORAM:
       HON'BLE MR. JUSTICE VIKRAMAJIT SEN
       HON'BLE MR. JUSTICE SUNIL GAUR

      1. Whether reporters of local papers may be
         allowed to see the Judgment?                 Yes
      2. To be referred to the Reporter or not?       Yes
      3. Whether the Judgment should be reported
         in the Digest?                               Yes

VIKRAMAJIT SEN, J.

1. Pacific Convergence Corporation Limited has filed a

Petition under Section 433(e) and 434 of the Companies Act,

1956 praying for the winding-up of Data Access (India) Limited

(for short „DAIL‟) on the ground that the loans extended by

PCCL to DAIL have not been paid back. By the impugned Order

dated 18.11.2005 the learned Company Judge has come to the

prima facie conclusion that DAIL is indebted to PCCL and is

unable to pay the debt; that DAIL has lost its substratum and

that it would be just and equitable to order its winding-up; and

that there is no business activity of DAIL and no prospects of its

revival. The Company Petition has been admitted and citation

has been published.

2. The learned Company Judge has also decided several

applications, including CA No.1409/2004 dated 23.11.2004 filed

by Canara Bank/Respondent No.3 before us. It had represented

before the Company Judge that it financed the business of DAIL

in consortium with Syndicate Bank vide Deed of Hypothecation

dated 15.4.2004. As a consequence of these transactions, DAIL

owes about Rupees 92 crores to Canara Bank and approximately

Rupees 17 crores to Syndicate Bank. The Bank deals in public

money and thus to safeguard its interest and secure its security,

it was allowed to move the learned Company Court for

appropriate directions once the provisional liquidator was

appointed by way of the application, where in the cause of

concern ventilated was the alleged diversion of Rupees 75

crores received by DAIL in India. We do not propose to go into

the minute details of the transactions between the Applicant

Bank and the Syndicate Bank [acting in consortium] with DAIL.

Suffice it is to state that the grievance of Canara Bank centres

around transfer of US$17 million from Data Access I&C

(America) which admittedly is a 100 per cent owned subsidiary

of DAIL. This sum of US$17 million was received by DAIL in

Account No.1014374 maintained with ABN Amro, Chennai.

Canara Bank alleges that in terms of the financial arrangement

between the Canara Bank and the DAIL the former had a lien

over all Book Debts of DAIL.

3. Accordingly, it had rights/lien over the said sum of US$17

million received by DAIL in the account maintained by it in ABN

Amro. Learned counsel for the Appellants have stressed upon

the fact that the Account with ABN Amro was opened with the

consent of Canara Bank. Even though this appears to be correct,

we are unable to understand how it compromises or

extinguishes or undermines the lien that Canara Bank could

exercise over the Book Debts of DAIL as it is explained that the

consent for opening the said Account was given for a limited

purpose, that is, receiving investors‟ money and not for

receiving any inward Remittance from Data Access

America. As we have noted, the sum of US$17 million have

been received by ABN Amro on 19.8.2004 and on that

very day it had transferred the entire amount

corresponding to Rupees 78.45 crores to Cheran Holdings Pvt.

Ltd. (CHPL). This sum of Rupees 78.45 crores was

immediately transferred by CHPL, in its Account

No.1103945 with ABN Amro. Instantaneously, CHPL

transferred a sum of Rupees 35,30,46,482/- to Cherian

Enterprises Pvt. Ltd. (CEPL) holding an Account No.922322

with ABN Amro; a sum of Rupees 18,05,00,000/- to KCP

Associates Holdings Private Ltd. in ABN Amro Account

No.94444; and Rupees 25,00,00,000/- to Sporting Pastime India

Ltd. (SPIL) in Account No.912277 with ABN Amro on

28.10.2004. So far as KCP Associates Holdings Private Ltd. is

concerned, it has transferred a sum of Rupees 18,03,00,000/-

in favour of Syndicate Bank. SPIL contends, and this is not

disputed, that on 23.2.2005 the Income Tax Department

"appropriated" Rupees 17,40,29,511/- and further on 19.8.2005

Rupees 7,59,70,489/-. The learned Company Judge has narrated

the circumstances in which DAIL went into financial difficulties,

which appear primarily due to action initiated by BSNL. We

need not concern ourselves with these events. It has further

been held that the sum of US$17 million, equal to Rupees 75

crores, was received on account of the debt due to DAIL and

which was charged/hypothecated with Canara Bank.; on

receiving this information Canara Bank, vide its letter dated

13.11.2004, called upon ABN Amro to remit the said amount to

it. Vide letter dated 16.11.2004 ABN Amro informed Canara

Bank that the funds had been transferred to another account

[which we have already adumbrated above], leaving only a

balance of Rupees 48,000/- in the account of DAIL. Thereafter,

correspondence has been exchanged between two Banks

leading to beneficial consequence so far as the Canara Bank is

concerned. In these circumstances, the Canara Bank had prayed

before the learned Company Judge that the said sum of

US$17 million should be protected. Thereafter, several other

applications have been filed staking claims over the said amount

of US$17 million.

4. The defence of DAIL appears to be that the sum of

US$17 million was received from ODYSSEY America

Reinsurance Corporation (ODYSSEY RE) as a loan allegedly on

two considerations - (a)rollover of loans and bank guarantees

with Canara Bank and Syndicate Bank for a period of twelve

months and (b) reinstatement of all points of interconnect with

BSNL and extension by BSNL of outstanding dues. The learned

Company Judge has noted the submission that Hamblin Watsa

Investment Council (Hamblin) had made this clarification in

their letter dated 12.8.2004 to Data Access America; and a

similar advice was rendered to ABN Amro Bank by CEPL by its

letter dated 12.8.2004. In the background of the twin conditions

mentioned above, Hamblin, by letter dated 18.8.2004, had

requested Data Access America to direct its holding company,

DAIL to place this sum with Cheran. It is on this basis that the

Appellants contend that the sum of US$17 million was not a

Book Debt of Data Access America to DAIL but was a totally

distinct transaction over which Canara Bank could not claim any

lien/charge.

5. The learned Company Judge has duly adverted to

applications filed by CHPL, KCP Associates Holdings Pvt. Ltd.,

SPIL as well as other enterprises. The learned Company Judge

has noted that pursuant to the Consortium Meeting held on

7.9.2004, Canara Bank received letters dated 16.9.2004,

17.9.2004 and 21.9.2004, none of which made any mention of

receipt of loan of US$17 million (Rupees 75,00,00,000/-) from

investors. On the contrary, the letter dated 21.7.2004 informs

that a sum of Rupees 83.81 crores is due from Data Access

America to DAIL as on 31.8.2004. Notice has further been taken

of a letter that in November, 2004 DAIL had taken the stand

before the Enforcement Directorate and the Revenue

Authorities that the new management had fraudulently

transferred funds of DAIL to their own companies and that the

amount of US$17 million were to be deposited with Canara

Bank. What is extremely significant to us, which has been duly

noted, by the learned Company Judge, is that ABN Amro,

Chennai, on receiving this sum of US$17 million on 19.8.2004,

had filed an Inward Remittance Certificate(IRC) with Reserve

Bank of India on the very same day, declaring that the

remittance was received on account of DAIL against outstanding

bills for services rendered.

6. The learned Company Judge has recorded that although

many judgments were cited on the interpretation to be given to

Section 531 of the Companies Act, he considered it

inappropriate to delve into them for the reason that a prima

facie view shall be taken at that stage. The facts, which were

distilled by the learned Company Judge uncontrovertibly, are

the following:-

(a) The amount was received in the account of the company maintained with ABN AMRO Bank.

(b) The amount was received through its subsidiary Data Access America Inc. Whether it was a loan given by Odyssey Re, that too with conditions, is a matter which needs a thorough probe. It is also possible that as Data Access America has to make substantial payments to the company, it borrowed the money from the said parties for making payment to the company.

(c) Although it is alleged that the money was to be given by way of loan by CHPL/Odyssey with certain conditions, even when this money was received on 18th August, 2004, the correspondence on record which is highlighted by the bank shows that much after this date also there were discussions about the investors infusing Rs.75 crores indicating that such a money has yet to come.

(d) This can be inferred from the shareholder‟s agreement dated 26th August, 2004, consortium meeting dated 7th September, 2004 and follow up letters dated 16th, 17th and 21st September, 2004 received by the bank. Even in reply dated 19th November, 2004 counsel for company M/s Dua Associates Ltd. did not refute the allegation of the bank that money was received from Data Access America Inc. in the account of the company.

(e) Although as per the representations made, investors were to infuse Rs.75 crores, money received in US$17 million, i.e. Rs.78.45 crores.

(f) After receiving the amount, ABN AMRO filed inward remittance certificate with RBI on 19th August, 2004, i.e. the same date declaring that the remittance was received in the account of the company against the outstanding bills of services rendered.

(g) No permission of RBI has been obtained by any party for lending foreign exchange to an Indian Company.

7. An Order has thereafter been passed directing "that the

amount which has been transferred from ABN AMRO Account

No.1014374 of the company to CHPL and other companies shall

be remitted back by those parties to the account of the company

maintained with ABN AMRO Bank. Needful in this respect shall

be done within two weeks. After receiving this amount the ABN

AMRO Bank shall remit this amount to Canara Bank. It is

because of the admitted liability of the bank and charge of the

bank over this money. Furthermore, in case it is found

ultimately that the money is to be refunded to Odyssey Re etc.,

appropriate orders can be passed directing Canara Bank to

refund the amount and the bank has sufficient means to carry

out such directions. Appropriate orders shall be passed in the

company petition as to how this amount is to be dealt with

depending on the nature of the final orders passed in the

company petition".

8. Learned Senior Counsel for the Appellants has laid great

emphasis on the fact that the Bank has initiated proceedings

against DAIL in Debt Recovery Tribunal; as they are outsiders to

the Winding-up Petition they have no right to make any claim

before the learned Company Judge. It is, therefore, argued that

the learned Company Judge gravely erred in adjudicating upon

Canara Bank‟s claim and in directing the Appellants to deposit

the withdrawn amount in ABM Amro Account. The said amount

is directed to be transferred by ABN Amro Bank to Canara Bank

with a Caveat that if it is ultimately held that the money is to be

refunded to the respective parties, Canara Bank can be directed

to effect restitution. We are unable to agree with the contention

of Mr. Jain, learned Senior Counsel, since the Order passed by

the learned Company Judge is not an adjudication of the claims

of the Bank but an interim direction, on the basis of a prima

facie view, only to secure the money that had come in the

Account of Company in winding-up, over which the Bank had a

lien.

9. Learned Senior Counsel appearing for the Appellants has

also endeavoured to convince us that the prima facie findings of

the learned Company Judge are erroneous. We have perused the

documents on record in addition to the detailed and lucid

impugned Order. We are not at all persuaded that these prima

facie findings are incorrect. The submissions in this regard are

rejected.

10. The question that immediately follows is whether the

learned Company Judge had fallen into error in returning a

prima facie finding. Learned Senior Counsel for the Appellants

has vociferously argued that the Appeal should be allowed to

the extent of remanding the matter to the learned Company

Judge with the direction that a final finding with regard to the

nature of the remittance of US$17 million should be arrived at.

He has further submitted that till that finding is reached,

contempt proceedings should be held in abeyance. We have

already reproduced the operative part of the impugned Order

and in that regard we are of the firm opinion that the learned

Company Judge was right in returning only a prima facie finding

vis-a-vis factual matrix. The IRC sufficiently is indicative of the

nature of remittance of US$ 17 million. The conclusion arrived

at by the learned Company Judge is further fortified by the fact

that the Inward Remittances in the nature of loans are forbidden

without the prior consent of the RBI. These two considerations

should not be taken as the sole reason for our affirming the

impugned Order. It will be in the interest of justice that a

further and detailed investigation is carried out by the Official

Liquidator. This is possible only after the admission of the

winding-up petition. Passing interim orders are, however, not

precluded, especially since it is the funds of the company in

liquidation that are in focus.

11. A number of cases have been cited before us as were cited

before the learned Company Judge. We do not think it relevant

to discuss these precedents in view of our conclusion that it is

only a prima facie view that should be taken by the learned

Company Judge, to be followed by detailed investigation by the

Official Liquidator.

12. It is in these circumstances that we find the Appeals are

devoid of merit and are dismissed accordingly. Pending

Applications also stand dismissed.

                                         ( VIKRAMAJIT SEN )
                                               JUDGE




                                         ( SUNIL GAUR )
November 20, 2009                             JUDGE
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