Madras High Court
Indowind Energy Ltd vs The Bank Of New York Mellon on 17 October, 2024
Author: M.Sundar
Bench: M.Sundar
O.S.A No.152 of 2020
IN THE HIGH COURT OF JUDICATURE AT MADRAS
DATED: 17.10.2024
CORAM
THE HONOURABLE MR.JUSTICE M.SUNDAR
and
THE HONOURABLE MRS.JUSTICE K.GOVINDARAJAN THILAKAVADI
O.S.A No.152 of 2020
&
C.M.P.No.7326 of 2020
in
O.S.A No.152 of 2020
Indowind Energy Ltd.,
incorporated under the Provisions
of the Companies Act, 1956 and having its
Registered Office at
IV Floor, Kothari Buildings
114, Mahatma Gandhi Salai
Nungambakkam, Chennai - 600 034 ... Appellant
Vs.
The Bank of New York Mellon
a Company incorporated in New York
under the laws of the state of New York
Having its Registered Office at One Wall Street
New York, NY 102 68 and having its Principal
Office at One Canada Square, 40th Floor
London, E14, 5AL, United Kingdon through its
Attorney Mr.Navneet Singh .. Respondent
Original Side Appeal filed under Order 36 Rule 1 of Original
Side Rules read with Clause 15 of Letters Patent to set aside the judgment
and decree dated 20.05.2020 in C.P.No.172 of 2011.
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1/15
O.S.A No.152 of 2020
For Appellant : Mr.N.Murali Kumaran
Senior counsel
for Mr.R.Gopinath
For Respondent : Mr.Arun Karthik Mohan
of M/s.Mcgan Law Firm
JUDGMENT
(Judgment of the Court was delivered by M.Sundar, J.)
Captioned intra-court appeal, for all practical purposes is a
vintage matter, if not ancient. It is vintage because the epicenter is a
Company Petition viz., C.P.No.172 of 2011, which was filed in the
Company Court (on the Original Side of Madras High Court) on
23.11.2011 more than one decade and two years ago. In about one month
from now, it will be 13 years from the date of filing of the company
petition. This 'C.P.No.172 of 2011' shall be referred to as 'said CP' for the
sake of convenience and clarity.
2. The said CP is a typical creditors winding up petition. In the
classic sense, it is a petition under Section 433 (e) and (f) of 'the
Companies Act, 1956' [hereinafter 'said Act' for the sake of convenience
and clarity].
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3. Before proceeding further, this Court makes it clear that it is
acutely conscious that vide THE COMPANIES ACT, 2013 (18 of 2013)
and THE COMPANIES (AMENDMENT) ACT, 2020 (29 of 2020), both
of which are conditional legislations, many new provisions have since
kicked in. 'THE COMPANIES ACT, 2013' shall be referred to as 'New
Act' and 'THE COMPANIES (AMENDMENT) ACT, 2020' shall be
referred to as 'Amendment Act', both for the sake of brevity and
convenience. It is not necessary to delve into the New Act or the
Amendment Act thereat, which are conditional legislations and as to the
question whether equivalents sub-sections (e) and (f) of Section 433 of
said Act have kicked in, as there is no disputation or contestation that
said CP is governed by said Act and not by the New Act.
4. Reverting to the case on hand, 'Bank of New York Mellon'
[hereinafter 'said Bank' for the sake of convenience] is the creditor
petitioner and 'Indowind Energy Ltd.,' [hereinafter 'said Company' for the
sake of convenience] is the Company which is sought to be wound up.
5. Short facts are that said Company is engaged in generating
power from wind; that said Company issued an Offer Circular on
13.12.2007 announcing issue of 2.5% convertible bonds, which are also
known as Foreign Currency Convertible bonds to the value of 30 Million
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USD [USD 30,000,000]; that the bonds were to mature on 22.12.2012
with interest at 2.5% per annum payable semi-annually on the 6th and
12th month of each calender year after the issue date; that it is to be noted
that issue date is 21.12.2007; that it is the case of the said Bank that from
second semi-annual interest due on 21.12.2009, the said Company had
not paid interest that had become due and payable on the scheduled
dates; that according to said Bank, this default continued for 5 days in
each of the instances and became an event of default; that notices in this
regard were exchanged between said Bank and said Company; that in the
exchange of notices, said Company contended that it had attempted to re-
structure the bond in the year 2009; that all bond holders were put on
notice about such re-structuring but the formal re-structuring had not
taken place; that it is under such circumstances, said CP was filed by said
Bank.
6. This Court, having set out the factual matrix in a nutshell,
now proceeds to capture the trajectory of the matter in the Company
Court.
7. The Company Court, on institution of said CP, issued notice
and after hearing said Company, passed an order admitting the winding
up petition, restraining said Company from transferring, alienating,
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encumbering or dealing with immovable assets and directed publication
in two Newspapers; that this is vide order dated 20.05.2020, this
20.05.2020 order has been called in question before us and therefore, the
same shall be referred to as 'impugned order' for the sake of convenience
and clarity. The said Company has filed the captioned OSA assailing the
impugned order.
8. Notwithstanding myriad grounds in the memorandum of
grounds of appeal, Mr.Murali Kumaran, learned Senior Advocate
instructed by Mr.R.Gopinath, learned counsel of M/s.Mcgan Law Firm
appearing for the appellant (to be noted, said Company is the appellant)
made crisp submissions by predicating captioned appeal on three points
and they are as follows:
(a) Company Court which made the impugned
order lacks territorial jurisdiction;
(b) the Power of Attorney given in favour of an
individual on the basis of which said Bank filed CP was not
renewed; and
(c) that the liability itself is disputed.
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9. Elaborating on the aforementioned submissions, learned
Senior counsel submitted with regard to Point No.1 that said Bank is
situate in United Kingdom, the convertible bonds are listed in Singapore
Stock Exchange and therefore, there is no territorial jurisdiction. On
Point No.2, it was pointed out that the Power of Attorney is valid for a
period of one year and thereafter it was neither renewed nor resuscitated.
On the third point as regards liability, it was submitted that as a bonafide
dispute has arisen, it is not a debt.
10. In response to the aforesaid three points, Mr.Arun Karthik
Mohan, learned counsel for said Bank submitted that as regards first
point, the said Company is an Indian Company incorporated in India
under Indian Law (Public Limited Company) and therefore, Indian
Courts alone will have jurisdiction qua a winding up petition. In support
of this submission, learned counsel pressed into service Sterlite
Industries case [Haryana Telecom Ltd., Vs. Sterlite Industries (India)
Ltd., reported in (1999) 5 SCC 688] to say that winding up is de hors
contractual terms. As regards the second point turning on Power of
Attorney, it was pointed out that the Power of Attorney is dated
19.09.2011, said CP was filed on 23.11.2011 and therefore, said Power
of Attorney was very much in force on the date of filing of the said CP.
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On the third point, it was pointed out adverting to the inter se
correspondence between said Company and said Bank, more particularly
sub-paragraphs (f) to (n) of Paragraph 18 captioned 'Discussion' of the
impugned order that the Company Court has come to the conclusion that
prime facie there is a debt and on that basis ordered admission,
publication (advertisement) and interim order against alienation.
11. This Court carefully considered the afore-referred points,
our discussion and dispositive reasoning is as follows:
i) As regards the first point, the Sterlite Industries
case pressed into service by learned counsel for said Company
is really one pertaining to Section 8 of 'The Arbitration and
Conciliation Act, 1996 (Act No.26 of 1996)' [hereinafter 'A
and C Act' for the sake of brevity] and not a winding up
petition. In this context, Hon'ble Supreme Court held that
power to order winding up of a Company is contained under
the Companies Act and it is conferred on the Court and that
an AT (Arbitral Tribunal) notwithstanding any agreement
between the parties, would have no jurisdiction to order
winding up of a Company. Therefore, it is more on
arbitrability of a creditors winding up petition. In this regard,
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we respectfully remind ourselves of declaration of law in
Padma Sundara Rao case i.e., Padma Sundara Rao Vs.
State of Tamil Nadu reported in (2002) 3 SCC 533. In
Padma Sundara Rao, on facts, land acquisition proceedings
vide Land Acquisition Act, 1896 were put in issue and the
question as to whether the State would get a fresh period for
making a declaration under Section 6 when a 4(1) notification
is quashed arose. In this context, Constitution Bench of
Hon'ble Supreme Court laid down the manner in which
precedents have to be relied on. This is captured in paragraph
9 of Padma Sundara Rao case and the same reads as
follows:
'9.Courts should not place reliance on
decisions without discussing as to how the factual
situation fits in with the fact situation of the
decision on which reliance is placed. There is
always peril in treating the words of a speech or
judgment as though they are words in a legislative
enactment, and it is to be remembered that judicial
utterances are made in the setting of the facts of a
particular case, said Lord Morris in Herrington v.
British Railways Board [(1972) 2 WLR 537 : 1972
AC 877 (HL) [Sub nom British Railways Board v.
Herrington, (1972) 1 All ER 749 (HL)]].
Circumstantial flexibility, one additional or
different fact may make a world of difference
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between conclusions in two cases.'
If Padma Sundara Rao principle is applied, Sterlite Industries
case does not come to the aid of said Bank. Be that as it may,
the principle that the claim in a petition for winding up is not
for money and that petition of this nature under the Companies
Act i.e., said Act in this case, would be to the effect that the
Company has become commercially insolvent and therefore,
should be wound up is indisputable. The further principle that
the power to order winding up of a company is contained in
Companies Act and is conferred on the concerned Court is also
indisputable. Therefore, applying this simple logic that said
Company is a Public Limited Company incorporated in India
under said Act, there is no difficulty in accepting the
submission that power to entertain and order winding up (if
that be so) qua said Company is only with the Company Court
in India. This by itself draws the curtain on first point on
territorial jurisdiction.
ii) The above takes us to the next point on Power
of Attorney. This Court finds that there is no disputation or
contestation that Power of Attorney is dated 19.09.2011. It
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is for a period of one year and therefore, it was valid on the
date of filing of the said CP i.e., on 23.11.2011. The fact
that it was thereafter not renewed is a matter which would
fall for consideration when the said CP progresses further
and that cannot be a basis for testing the impugned order of
admission, advertisement and interim order qua alienation.
Therefore, it is the end of the road as regards the second
point.
iii) This takes us to the third point on liability itself
being disputed. A careful perusal of the impugned order
brings to light that in sub-paragraphs (f) to (n) of Paragraph
18 captioned 'Discussion', Company Court has elaborately
gone into the exchange of notices between the parties and
concluded that there is a prima facie reason to believe that
there is a debt. In any event, there should be proof of debt
under Rule 149 of 'THE COMPANIES (COURT) RULES,
1959' [hereinafter 'said Company Court Rules' for the sake of
convenience] and Rule 149 of said Company Court Rules
reads as follows:
'149. Proof of debt – (1) In a winding-up by the
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Court, every creditor shall, subject as hereinafter provided,
prove his debt, unless the Judge in any particular case directs
that any creditors or class of creditors shall be admitted without
proof.
(2) Formal proof of the debts mentioned in
paragraph (d) of sub-section (1), of section 530 shall not be
required, unless the Official Liquidator shall in any special case
otherwise direct, in a winding-up by the Court.'
Therefore, this argument really does not cut ice or to put it
differently, it does not pass muster in assailing the impugned
order which is one for admission of CP, ordering of
publication and an interim order qua alienation of assets of
said Company. This means that the third point also does not
enure to the benefit of appellant i.e., said Company.
12. Before we write the concluding part of this order, we deem
it appropriate to recollect that there is no disputation or contestation
before us that said CP is governed by said Act and not by New Act as
already alluded to supra. To put it differently, both learned counsel
submitted in unison in one voice that said CP will be governed by said
Act and not New Act. This means that said Company Court Rules would
come into play. Said Company Court Rules consists of about 361 Rules.
To be noted, said Company Court Rules is a set of Rules made by
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Hon'ble Supreme Court of India (after consulting High Courts) in exercise
of Rule making power inter alia under Sub-sections (1) and (2) of
Section 643 of said Act. In this said Company Court Rules, entire Part III
consisting of Rules 95 to 338 (244 Rules) deals with winding up. To be
noted, Part III under which Rules 95 to 338 sit in codification has been
captioned WINDING-UP (Winding-up by Court).
13. Let us look at some of the Rules that are relevant for the
case on hand. Rules 95 and 96 read as follows:
'R.95. Petition for winding-up - A petition for winding-
up a company shall be in Form No.45, 46 or 47, as the case may
be, with such variations as the circumstances may require, and
shall be presented in duplicate. The Registrar shall note on the
petition the date of its presentation.'
'R.96. Admission of petition and directions as to
advertisement - Upon the filing of the petition, it shall be posted
before the Judge in Chambers for admission of the petition and
fixing a date for the hearing thereof and for directions as to the
advertisements to be published and the persons, if any, upon
whom copies of the petition are to be served. The Judge may, if
he thinks fit, direct notice to be given to the company before
giving directions as to the advertisement of the petition.'
Rule 149 as alluded to supra captioned Proof of debt, reads as
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follows:
'Rule 149. Proof of debt -
(1) In a winding-up by the Court, every creditor shall,
subject as hereinafter provided, prove his debt, unless the Judge
in any particular case directs that any creditors or class of
creditors shall be admitted without proof.
(2) Formal proof of the debts mentioned in paragraph
(d) of sub-section (1), of section 530 shall not be required, unless
the Official Liquidator shall in any special case otherwise direct,
in a winding-up by the Court.'
14. Therefore, the question of Power of Attorney not being
extended which turns on facts and liability itself being disputed can be
gone into inter alia vide Rule 194 of said Rules. One of the reasons is,
the matter turns heavily on facts. Another important reason is, the
impugned order is an order of admission and advertisement albeit along
side a interim order restraining alienation qua assets of the said Company
and therefore, it is a prima facie view and this prima facie view will be
subject to what the Company Court decides as the matter progresses and
when the said CP goes through the legal drill vide the procedure laid
down in said Company Court Rules.
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15. In the light of the narrative, discussion and dispositive
reasoning set out supra, it is clear that all the three points which were
urged by the appellant are not cut ice with us in the captioned OSA and
therefore captioned OSA fails. Consequently, captioned CMP thereat
also perishes with the OSA. However, the observation regarding the legal
drill when the CP progresses is the window in the case on hand.
Captioned OSA and CMP thereat are dismissed albeit with the
window in the form of observation supra. There shall be no order as to
costs.
(M.S.J.) (K.G.T.,J.)
17.10.2024
Index:Yes/No
Neutral Citation: Yes/No
gpa
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M.SUNDAR.J.,
and
K.GOVINDARAJAN THILAKAVADI, J.,
gpa
17.10.2024
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