CIVIL APPEAL 171 of 2012 on 28 December 2012

C.P.No.171 of 2012

V.RAMASUBRAMANIAN,J

This is a petition filed by a creditor seeking the winding up of the respondent under Section 433(e), 434(1)(A) and 439 of the Companies Act, 1956.

2. Heard Mrs.Preeti Mohan, learned counsel for the petitioner and Mr.T.K. Baskar, learned counsel for the respondent.

3. The respondent issued a circular on 20.12.2007, offering upto 50,000,000 unsecured foreign currency bonds due on 28.12.2012 and convertible into 21,505,434 global depository receipts each representing four shares of Rs.10/-. The bonds were issued at 100% of the principal amount. The respondent was bound to redeem each of the bonds at 129.35% of the principal amount on the maturity date.

4. The respondent entered into a deed of trust with the petitioner on 27.12.2007. Under the deed, the petitioner was appointed as the trustee for the bond holders.

5. Under the terms and conditions of the bonds, the respondent was obliged to pay interest. But, the respondent committed default. Upon the happening of the event of default as specified in condition No.17 of the bond, the pay agent sent a communication to the respondent. But, the respondent did not make payment.

6. After exchange of several e-mails, the petitioner issued a statutory notice. But, the respondent failed to make payment despite receipt of the statutory notice. Hence, the petitioner came up with the above petition for winding up.

7. Notice was ordered in the main company petition on 30.7.2012. After the respondent entered appearance, the company petition was taken up for hearing. Thereafter, the company petition was dismissed by this Court by a final order dated 23.4.2013, primarily on the ground that the petitioner could not produce the proof of authorisation by 25% of the bond holders to maintain the present petition.

8. As against the said order, the petitioner filed an appeal in O.S.A.No.231 of 2013. The appeal was allowed by a judgment dated 24.9.2014, remitting the matter back to the Company Court with liberty to the parties to file additional documents. The Division Bench found that the execution of the power of attorney was not in dispute and that the Company Court ought to have impounded the document and sent it to the Collector for revaluation. The Division Bench also held that even otherwise, a fresh document could have been filed by the petitioner. Therefore, the company petition has come up once again for hearing.

9. As seen from the first order passed by the Company Court dismissing the company petition, the main ground, on which the petition was thrown out, was that the petitioner had not produced proof of having been authorized by 25% of the bond holders. But, today, the said objection has been not only overruled by the order of the Division Bench, but also rendered valueless in view of the documents produced. The fact that the petitioner is obliged to act as the trustee of the bond holders is not in dispute. The fact that the petitioner today has a valid authorisation is also not in dispute. Therefore, the only other question that falls for consideration is as to whether the respondent is unable to pay its dues or not.

10. In paragraph 11 of the counter affidavit filed way back in February 2013, the respondent had admitted that they had paid interest to the bond holders only till the end of the year 2009. The relevant portion of paragraph 11 of the counter affidavit of the respondent reads as follows :

"I submit that the company has paid all the interest till the end of the year 2009 and has tried to honor all the payments to the petitioner even after that. I submit that the petitioner was always aware about the situation and

difficulty faced by the company and was also well informed about the efforts taken by the company to make the interest payments. I submit that there was no negligence on the part of the respondent to pay the interest but the severe financial crunch which the company faced made it difficult for the respondent company to pay out all the interest instalments. I submit that around the year ending March 2010, the value of receivables stood somewhere around 314 crores. I submit that due to the prevailing market conditions, many of the customers of the company delayed payments. Further, many clients including MNCs like East Man Kodak (EKC) have declared liquidation which impacted many companies in the mid-tier segment in the United States including MGL."

11. The situation has not improved after 2013. On the contrary, the situation has worsened. The additional documents filed by the petitioner show that the respondent is actually in the red. Therefore, it is clear that the respondent is unable to pay its debts and has made itself liable to be wound up. Hence, the following order is passed :

Admit.

(i) Notice on the court notice board

(ii) Notice to the respondent

(iii) Notice to the Registrar of Companies, Chennai

(iv) Affixure of notice at the premises of the registered office of the respondent company

(v) The petitioner is directed to publish the company petition in one issue of Tamil daily viz Dinamani and in one issue of English daily viz The New Indian Express (both having circulation in and around Chennai) and in the Tamilnadu Government Gazette fixing the date of hearing as 20.7.2015.

(vi) The petitioner is directed to publish the company petition giving at least 21 days clear advance notice.

V.RAMASUBRAMANIAN,J

RS

(vii) The Official Liquidator, High Court, Madras is appointed as the Provisional Liquidator and is directed to take charge of the assets of the respondent company. The Ex-Directors of the respondent company are directed to file their statement of affairs before the Official Liquidator within a period of 21 days. The company shall deposit a sum of Rs.25,000/- towards initial expenses in this matter before the Official Liquidator.

12. Call the company petition on 20.7.2015.

RS

13.4.2015

C.P.No.171 of 2012