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The Bank of New York Mellon, London Branch, By its Constituted Attorney, Aneish Kumar Vs. M/s. Cranes Software International Limited - Court Judgment

LegalCrystal Citation
CourtKarnataka High Court
Decided On
Case NumberO.S.A. No. 22 of 2014
Judge
AppellantThe Bank of New York Mellon, London Branch, By its Constituted Attorney, Aneish Kumar
RespondentM/s. Cranes Software International Limited
Excerpt:
companies act, 1956 €“ section 9, section 10, section 433(e), section 57(2), section 424g, section 483, section 439, section 433, read with section 434 - karnataka high court act, 1961 - section 4 - indian evidence act, 1872 - section 57 - default of payment of interest - territorial jurisdiction - winding up sought -respondent-company issued convertible bonds and a trust deed was executed, whereby appellant was appointed as trustee for bonds, which were all issued in favor of persons outside india - notice was issued by appellant to respondent-company, mentioning that interest payable on said date had not been paid and thus called upon respondent-company to pay the same €“ as, company did not even pay interest, a statutory notice for winding up under section 433,.....(prayer: appeal is filed under s.483 of the companies act, 1956, r/w section 4 of the karnataka high court act, 1961, praying to set aside the order dated march 04, 2014 dismissing the company petition no.203 of 2010, etc.) vineet saran, j. 1. the primary question to be decided in this appeal is whether, in the facts of the case at hand, a company court in india having territorial jurisdiction, can entertain a petition for winding up of the company having its registered office in india. 2. briefly stated, the facts of this case are: the respondent-company, m/s cranes software international limited, is a public limited company, incorporated in india with limited liability, with its registered office in bangalore. the said company had issued convertible bonds for value of ‚ 42,000,000.....
Judgment:

(Prayer: Appeal is filed under S.483 of the Companies Act, 1956, r/w Section 4 of the Karnataka High Court Act, 1961, praying to set aside the order dated March 04, 2014 dismissing the Company Petition No.203 of 2010, etc.)

Vineet Saran, J.

1. The primary question to be decided in this appeal is whether, in the facts of the case at hand, a Company Court in India having territorial jurisdiction, can entertain a petition for winding up of the Company having its registered office in India.

2. Briefly stated, the facts of this case are:

The respondent-Company, M/s Cranes Software International Limited, is a public limited company, incorporated in India with limited liability, with its registered office in Bangalore. The said Company had issued convertible bonds for value of ‚ 42,000,000 (Euro forty two million or Euro four crores twenty lakhs). The said bonds were issued in September 2006 and were due for maturity in the year 2011. The bonds carried an interest at the rate of 2.5% per annum, which was to be paid by the Company on a six monthly basis, falling due on 18th March and 18th September of each year. A Trust Deed was executed, whereby the appellant was appointed as the trustee for the bonds, which were all issued in favour of persons outside India. The first installment of interest due on 18th September, 2006, was duly paid by the Company to the appellant - Trustee. Similarly, the interest due on March 18th 2007, September 18th 2008 and September 18th 2007, March 18th 2008 was also paid within time. The first default which occurred was regarding payment of interest for March 2009, which was not paid on March 18th 2009, but with a delay of 13 days. Until now, there was no dispute raised with regard to payment of interest, or fulfilling the commitment by the respondent-Company.

3. The interest due to be paid thereafter on September 18th 2009 could not be paid and the respondent-Company defaulted. A notice was then issued by the appellant to the respondent-Company on 22.12.2009, mentioning that interest payable on September 18th 2009 had not been paid and thus called upon the respondent-Company to pay the same. A response to the same was given by the respondent-Company on the same day through E-mail, wherein request for recalling the notice was made. Thereafter, correspondence was exchanged between the petitioner-appellant and the respondent-Company. When the Company still did not even pay interest due in March, 2010, then on 12.08.2010, a statutory notice for winding up under Section 433, read with section 434, of the Companies Act, 1956, was issued by the appellant, calling upon the Company to pay the interest amounting to ‚ 1,050,000 (Euro One Million and Fifty Thousand) which was the total of the amount of interest payable on 18th September 2009 and 18th March 2010. Further, the accreted principal amount under the bonds for a sum ‚ 46,672,420.79 (Euro Forty-Six million, Six Hundred and Seventy-Two Thousand, Four Hundred and Twenty and Seventy-Nine cents only) along with the accrued interest on the principal amount of the bonds, was also demanded. In the said notice, it was specifically mentioned that in default of payment of the said amount, the appellant would be constrained to initiate appropriate legal proceedings, including proceedings for winding up of the Company.

4. In response thereto, the respondent-Company replied on 01.09.2010, admitting that they had failed to make payment of interest on the convertible bonds, by stating that we regret the circumstances pursuant to which we have been unable to make interest payment on the Bonds ?. The reply, thereafter, gave details of the difficulties and problems of severe cash flow being faced by the Company, because of which, there was slow down in the business of the Company, and thus it was unable to pay the interest. In the end of the reply, the Company requested the appellant to withdraw the letter/notice and to co-operate with the Company in restructuring the Bonds and grant time of 6-8 months to start making payment of interest to the Bondholders.

5. It was in these facts that the appellant filed Company Petition No.203/2010 before the learned Single Judge of this Court, for winding up of the respondent “ Company.

6. After hearing the learned Counsel for the parties, the learned Single Judge-Company Court, by a detailed reasoned order dated 19.3.2012, admitted the appeal and directed for advertisement of the same. The said order was challenged by the respondent-Company before Division Bench of this Court in OSA No.12/2012, whereby the application for grant of stay of the order dated 19.03.2012 passed by the learned Single Judge was refused by the Division Bench by another detailed reasoned order dated 10.04.2012. Pursuant to the same, the Company Petition was advertised in the newspapers. After two years, the Company Petition then came up for hearing before the learned Single Judge, who, vide the impugned order dated 04.03.2014, has dismissed the Company Petition on the ground of jurisdiction. While deciding the petition, the learned Single Judge had framed four points for consideration, which are as follows:

i. What is the nature of the contract between the parties?

ii. Whether the petitioner, having chosen to confer exclusive jurisdiction on the English courts and having intended the application of the English law to the contract, is justified in seeking to invoke the jurisdiction of this court?

iii. Whether the petitioner has demonstrated that after the default, by the respondent under the contract, the conditions under the contract have been satisfied to enable the petitioner to prefer this petition?

iv. Whether the respondent is to be ordered to be wound up?

7. While dismissing the Company Petition, the learned Single Judge had primarily considered the second point, which relates to the jurisdiction of the Company Court in entertaining the Company Petition. After considering the provisions of the Trust Deed, mainly clauses 20.1, 20.2, 20.3 and 20.4 and also the conditions in the Offering of the Bonds, the Company Court, after holding that the English Courts would have jurisdiction to entertain a winding up petition against the respondent-Company, even though it may be a Company registered in India, further observed that or for that matter, it could even be with reference to the winding up proceedings under the Companies Act, 1956, subject to the petitioner satisfying that there has been an adjudication and findings on the assertions as to the breach of contract, the liability thereof and the inability on the part of the respondent to pay its debts, with reference to English law, by a competent court with jurisdiction “ on which this court could act ?.

8. The Company Court, thus, held that in terms of the Trust Deed, the jurisdiction was agreed to be conferred on the English Courts and not the Indian Courts, and that even if by virtue of Clause 20.4 the jurisdiction for instituting any legal proceedings by the appellant may have been with the English Courts, but for interpreting the clauses of the Trust Deed, it would be the English law which would be applicable, and it would be the English Courts which could adjudicate the same, and thus the winding up petition filed by the appellant before the Court in India would not be maintainable. Challenging the said order dated 04.03.2014 of the Company Court dismissing the Company Petition, this appeal has been filed.

9. We have head Sri Uday Holla, learned Senior Counsel appearing along with Sri Anind Thomas, learned Counsel for the appellant, as well as Sri K G Raghavan, learned Senior Counsel appearing along with Mr Pradeep Nayak, learned Counsel for the respondent, at length and have perused the record.

10. For proper appreciation of the facts of this case, the relevant provisions of the Trust Deed entered between the respondent - Cranes Software International Ltd and the appellant “ Bank of New York, Mellon, are reproduced below:

13. Enforcement, Waiver and Proof of Default

13.1 ..

13.2 ..

13.3 Legal Proceedings

At any time after the Bonds have become due and payable, the Trustee may, at its discretion and without further notice, take such proceedings against the Issuer as it may think fit to enforce repayment of the Bonds and to enforce the provisions of this Trust Deed or the Conditions, but it will not be bound to take any such proceeding unless (a) it shall have been so directed by an Extraordinary Resolution or so requested in writing by the holders of at least one quarter in principal amount of the outstanding Bonds and (b) it shall have been indemnified and/or secured to its satisfaction against all liabilities, proceedings, claims and demands to which it may thereby become liable and all costs, charges and expenses which may be incurred by it in connection therewith and provided that the Trustee shall not be held liable for the consequence of taking any such action and may take such action without having regard to the effect of such action on individual Bondholders. Only the Trustee may enforce the provisions of the Bonds or this Trust Deed and no Bondholder shall be entitled to proceed directly against the Issuer unless the Trustee, having become bound so to proceed, fails to do so within a reasonable time and such failure is continuing.

20. Governing Law and Jurisdiction

20.1 Governing Law

This Trust Deed and the Notes and all matters arising from or connected with them are governed by, and shall be construed in accordance with, English law.

20.2 English Courts

The Courts of England have exclusive jurisdiction to settle any dispute (a Dispute'), arising from or connected with this Trust Deed or the Bonds (including a dispute regarding the existence, validity or termination of this Trust Deed or the Bonds) or the consequences of their nullity.

20.3 Appropriate forum

The parties agree that the courts of England are the most appropriate and convenient courts to settle any Dispute and, accordingly, that they will not argue to the contrary.

20.4 Rights of the Trustee and Bondholders to take proceedings outside England

Clause 20.2 (English courts) is for the benefit of the Trustee and the Bondholders only. As a result, nothing in this Clause 20 (Governing Law and Jurisdiction) prevents the Trustee or any of the Bondholders from taking proceedings relating to a Dispute ( ˜Proceedings') in any other courts with jurisdiction. To the extent allowed by law, the Trustee or any of the Bondholders may take concurrent Proceedings in any number of jurisdictions.

20.5 .

(emphasis supplied)

11. The relevant clause 10.1 and 21 of the Bond, issued by the Company in favour of the Bond holders, of which the appellant is the Trustee, are also reproduced below:

10 Events of Default

10.1 The Trustee at its discretion may, and if so requested in writing by the holders of not less than 25% in principal amount of the Bonds then outstanding or if so directed by an Extraordinary Resolution shall (subject to being indemnified and/or secured by the Bondholders or by a third party acting on their behalf to its satisfaction), give notice to the Issuer that the Bonds are, and they shall accordingly thereby become, immediately due and repayable at their Accreted Principal Amount as at such date together with accrued and unpaid interest to such date (subject as provided below and without prejudice to the right of bondholders to exercise the Conversion Right in respect of their Bonds in accordance with Condition 6 (Conversion) if any of the following events (each an Event of default') has occurred.

21 Governing Law and Jurisdiction.

21.1 Governing Law

The Trust Deed and the Bonds and all matters arising from or connected with the Trust Deed and the Bonds are governed by, and shall be construed in accordance with, English Law.

21.2 Jurisdiction

The Issuer has in the Trust Deed:

(a) agreed for the benefit of the Trustee and the Bondholders that the Courts of England shall have exclusive jurisdiction to settle any dispute (a Dispute') arising from or connected with the Bonds;

(b) agreed that those courts are the most appropriate and convenient courts to settle any Dispute and, accordingly, that it will not argue that any other courts are more appropriate or convenient;

(c) designated a person in England to accept service of any process on its behalf.

The Trust Deed also states that nothing contained in the Trust Deed prevents the Trustee or any of the Bondholders from taking proceedings relating to a Dispute ( ˜proceedings') in any other courts with jurisdiction and that, to the extent allowed by law, the Trustee or any of the Bondholders may take concurrent proceedings in any number of jurisdictions.

(emphasis supplied)

12 The relevant sections “ 2(11), 9, 10, 433 and 439 (2) of the Companies Act, 1956 are reproduced below.

S.2(11) : the Courtmeans “

(a) with respect to any matter relating too a company (other than any offence against the Act), the Court having jurisdiction under this Act with respect to that matter relating to that company, as provided in section 10;

(b) with respect to any offence against this Act, the Court of a Magistrate of the First Class, or, as the case may be, a Presidency Magistrate, having jurisdiction to try such offence.

S.9: Act to override memorandum, articles, etc “

Save as otherwise expressly provided in the Act “

(a) the provisions of this Act shall have effect notwithstanding anything to the contrary contained in the memorandum or articles of a company, or in any agreement executed by it, or in any resolution passed by the company in general meeting or by its Board of Directors, whether the same be registered, executed or passed, as the case may be, before or after the commencement of this Act; and

(b) any provision contained in the memorandum, articles, agreement or resolution aforesaid shall, to the extent to which it is repugnant to the provisions of this Act, become or be void, as the case may be.

S.10: Jurisdiction of Courts “

(1) The court having jurisdiction under this Act shall be -

(a) the High Court having jurisdiction in relation to the place at which the registered office of the company concerned is situate, except to the extent to which jurisdiction has been conferred on any District Court or District Courts subordinate to that High Court in pursuance of sub-section (2); and

(b) where jurisdiction has been so conferred, the District Court in regard to matters falling within the scope of the jurisdiction conferred, in respect of companies having their registered offices in the district.

2 ..

3 .

S.433: Circumstances in which company may be wound up by Tribunal -

A company may be wound up by the Tribunal “

(a) if the company has, by special resolution, resolved that the company be wound up by the Tribunal;

(b) if default is made in delivering the statutory report to the Registrar or in holding the statutory meeting'

(c) if the company does not commence its business within a year from its incorporation, or suspends its business for a whole year;

(d) if the number of members is reduced, in the case of a public company, below seven, and in the case of a private company, below two;

(e) if the company is unable to pay its debts;

(f) if the Tribunal is of the opinion that it is just and equitable that the company should be wound up'

(g) if the company has made a default in filing with the Registrar its balance sheet and profit and loss account or annual return for any five consecutive financial years;

(h) if the company has acted against the interests of the sovereignty and integrity of India, the security of the State, friendly relations with foreign States, public order, decency or morality;

(i) If the Tribunal is of the opinion that the company should be wound up under the circumstances specified in section 424G;

Provided that the Tribunal shall make an order for winding up of a company under clause (h) on application made by the Central Government or a State Government.

S.439: Provisions as to application for winding up “

(1) .

(2) A secured creditor, the holder of any debentures (including debenture stock), whether or not any trustee or trustees have been appointed in respect of such and other like debentures, and the trustee for the holders of debentures, shall be deemed to be creditors within the meaning of clause (b) of sub-section (1).

(3)

(4) ..

(5) ..

(6) ..

(7) ..

(8) ..

(emphasis supplied)

13 Section 57(2) of the Indian Evidence Act, 1972 is also reproduced below:

S.57: Facts of which Court must take judicial notice:

(1)

(2) All public Acts passed or hereafter to be passed by Parliament of the United Kingdom, and all local and personal Acts directed by Parliament of the United Kingdom to be judicially noticed.

(emphasis supplied)

14. The submission of the learned counsel for the appellant is that though under clause 20.2 of the Trust Deed, Courts of England are to have exclusive jurisdiction to settle any dispute arising from or connected with the Trust Deed or the Bond or the consequence of their nullity but by virtue of clause 20.4, the Trustee (i.e., the appellant) would have a right to take proceedings relating to a dispute, in any other Court with jurisdiction and are also permitted to take concurrent proceedings in any number of jurisdictions. It is submitted that though Clause 20.1 provides that all matters arising from or connected with the Trust Deed are governed by, and shall be construed in accordance with English law, but even the Courts in India would be legally entitled to do the same by virtue of section 57 of the Indian Evidence Act.

15. The contention of Sri Udaya Holla, learned Senior counsel, thus, is that any dispute relating to the Bond may be governed by English laws but the same would not exclude the jurisdiction of Indian Courts to wind up the Company registered under the Companies Act in India, for its inability to pay debts in India under the relevant Section 433 (e) of the Companies Act. It is contended that in reply to the statutory notice issued by the appellant on 12.8.2010 (under Section 433/434 of the Companies Act), the respondent Company has accepted its liability and merely asked for further time, meaning thereby that the debts are duly admitted and acknowledged by the Company and as such, the condition laid down in Section 433(e) of the Companies Act were duly fulfilled. It is also contended that in the balance sheet of the company, it has duly accepted such debts due to be paid to the appellant, as its liabilities. It is, thus, contended that under the relevant clause of the Trust Deed, even if clause 20.4 is ignored, then too, the dispute arising from or connected with the Trust Deed may have to be taken to the English Courts alone, but if the liability to pay the admitted debts is accepted, and there is no such dispute with regard to the liability or terms of the Trust Deed, then the winding up petition can always be filed in the Court in India having jurisdiction. It is thus contended that dismissal of the Company Petition for winding up, on the ground of jurisdiction, was not warranted in the facts of the present case.

16. On the other hand, Sri K G Raghavan, learned Senior counsel appearing for the respondent Company has submitted that, firstly, the appellant does have the locus to present the winding up petition; secondly, appellant does not have the right to present the winding up petition under the terms of the Bond; and thirdly, the Karnataka High Court does not have the jurisdiction to entertain the winding up petition and decide the disputes raised in the winding up petition. Learned counsel has, however, fairly stated that the first two questions have not been considered by the learned Company Judge and hence, the same may not be necessary for being decided by this Court as the only question on which the company petition has been dismissed, is because of lack of jurisdiction and thus, it is the third point which has to be decided by this Court in this appeal.

17. It is contended by learned Senior Counsel for the respondent that by agreeing to the jurisdiction of the English Courts, appellant had given up the right of filing a winding up petition in India. It is contended that the question of appellant having right to file a winding up petition has to be decided by the English Courts alone and that too by applying the English law, and thus, nothing can be looked into by the Indian Courts, if it is a matter arising out of the terms of the Trust Deed. According to the learned counsel, appellant has to first approach the English Court to know whether it has a right to file a winding up petition or not, and if yes, then it may file such petition in England or India, as the case may be. It is further submitted that though clause 20.4 of the Trust Deed gives a right to the Trustee or Bond holder to approach the Court having jurisdiction, but since the Company Court would not be the Court with jurisdiction to entertain the winding up petition, learned Company Judge has rightly dismissed the Company Petition for lack of jurisdiction. It was lastly contended that even otherwise, the Company Court will not have jurisdiction to decide disputed questions of fact between the parties, as have been raised in the Company Petition.

18. Sri Raghavan has, however, during the course of arguments, accepted that under clause 20.4 of the Trust Deed, the appellant has a right to approach either the Indian or English Courts with regard to any dispute, including a dispute of Trust Deed/Bond, and that by virtue of clause 20.2, the restriction of approaching the English Courts alone, would be on the respondent Company because a conjoint reading of the two sub-clauses of the Trust Deed makes it clear that clause 20.2 is for the benefit of Trustee/Bondholders and sub-clause 20.4 specifies that nothing in clause 20 prevents the Trustee/Bondholders from taking proceedings relating to a dispute in any other Court/Courts having jurisdiction. Sri Raghavan has raised certain other questions which have not been considered by the learned Company Judge, and on his request the same have been considered by us in appeal.

19. We have heard learned counsel for the parties at length, who have also relied on certain case laws, which shall be dealt with at the time of considering their submissions.

20. Section 9 of the Companies Act provides that the provisions of the Act shall have effect, notwithstanding anything to the contrary contained in any agreement which may be executed, meaning thereby that the Companies Act would override the provisions of the agreement or the Trust Deed. Section 10 of the Act provides that the Court having jurisdiction under the Act would be the High Court having territorial jurisdiction in relation to the place at which the registered office of the Company is situate. In the present case, it is not disputed that the registered office of the Company is at Bangalore, which is within the territorial jurisdiction of the Karnataka High Court at Bangalore. Sub-section (11) of Section 2 defines Courtto mean the Court having jurisdiction under the Act, with respect to that matter relating to that Company, as provided in Section 10'. Sub-section (2) of Section 439 provides that any Trustee/s having been appointed in respect of the debentures, and the Trustee for holders of debentures, shall have a right to file a petition for winding up of the Company. Clause (e) of section 433 provides that the Company can be wound up if it is unable to pay it debts. Section 434 gives the details as to when the Company would be deemed to be unable to pay its debts.

21. While passing the impugned order dismissing the Company Petition for lack of jurisdiction, learned Company Judge has relied on the decision of Swastik Gases Pvt Ltd Vs Indian Oil Corporation Ltd “ (2013) 9 SCC 32, wherein the issue was with regard to invoking of jurisdiction in Jaipur Court, where a part of the contract had been performed by the parties in Jaipur and also in Kolkata, but the agreement provided that the Kolkata Court would have jurisdiction to entertain all cases arising out of the dispute with regard to the agreement. In such facts, it was held that Kolkata Court would have the jurisdiction and not Jaiput Court. Relying on the said decision, learned Company Judge has considered and interpreted clause 20 of the agreement and held that the English Courts alone would have jurisdiction to try any case regarding a dispute with regard to the Trust Deed.

22. There cannot be any quarrel with regard to the law laid down by the Apex Court in the case of Swastik Gases (supra). However, the facts in the present case are quite different. The Trust Deed (clause 20) does not impose a blanket ban on the jurisdiction of the Indian Courts to try any matter. It may be reiterated that what is stated in clause 20.1 is that the cases relating to the Trust Deed would be decided as per English law, and in clause 20.2, though it has been mentioned that the Courts of England would have exclusive jurisdiction, but clause 20.4 would clarify that the embargo is not for the Trustee/appellant or the Bond Holders. Clause 13.3 relates to legal proceedings which may be taken by the Trustee at any time after the Bonds have become due and payableand it provides that the Trustee may, at his discretion and without further notice, take such proceedings against the issuer i.e., the Company, as it may think fit to enforce repayment of the Bonds and to enforce the provisions of the Trust Deed or the conditions.

23. In the case of Swastik Gases (supra) part of the contract was performed both at Kolkatta and Jaipur and parties had agreed to the jurisdiction of Kolkatta Court to entertain all cases arising out of any dispute. Such is not the position in the present case. As such, in our view, the ratio of the said case will not apply to the facts of the present case.

24. At this juncture, we may also place on record that by virtue of Section 57 of the Indian Evidence Act, Courts in India are to take judicial notice of all public Acts passed by Parliament of the United Kingdom, and all local and personal Acts directed by the Parliament of the United Kingdom are also to be judicially noticed by the Courts in India, meaning thereby that the English Statute Laws can be tried and considered by the Courts in India.

25. In light of the aforesaid, when clause 20.1 of the Trust Deed provides for all matters arising there or connected with it, to be governed or construed in accordance with the English laws, there can be no dispute of the fact that Indian Courts can also try the same by applying English Law. Clause 20.2 of the Trust Deed provides for Courts of England to have exclusive jurisdiction to settle any dispute arising out of the Trust Deed or the consequences of their nullity. This clause is with a caveat, provided in clause 20.4, which clarifies that nothing in the said clause 20.2 would prevent the Trustee or the Bond Holders to raise a dispute in any other Court with jurisdiction, or to take concurrent proceedings in any number of jurisdictions, meaning thereby that the restriction imposed by clause 20.1 would be only on the respondent Company and not on the appellant/Trustee or the Bond Holders, as clause 20.2 is for the benefit of Trustee/Bondholders only. The right of the Trustees of the debenture holders to file a winding up petition has been given under Section 439 of the Companies Act. As such, it cannot be disputed that, in the facts of the present case, the winding up petition filed by the Trustee, would be maintainable in the High Court of Karnataka, which has the territorial jurisdiction to entertain such petition. As already noted in paragraph 18 hereinabove, learned counsel for the respondent Company has also accepted that under clause 20.4 of the Trust deed the appellant Trustee would have a right to approach either the Courts in India or England, with regard to any dispute. He has, however, made his submission on other issues which shall now be considered.

26. The other question raised by the respondent is whether for enforcement of such right, Trustee can file a winding up petition in the Courts in India or not, as the liability to pay any amount to the appellant is in dispute. In the light of response given by the Company to the statutory notice issued under Section 433/434 of the Companies Act for winding up of the Company, wherein the Company has accepted its liability, as well as considering the admission of such liability in the balance sheet, it cannot be said that liability of the company to pay the Bond Holders is disputed, or not admitted.

27. This we say so, also because while admitting the Company Petition by order dated 19.3.2012, such question was considered and on challenge before the Division Bench, while refusing to grant stay, the Division Bench had observed that examining the present application in this background, we find the company obviously is unable to meet its commitment'.

28. Much emphasis has been laid by learned counsel for respondent with regard to the correct interpretation of the Trust Deed that appellant/Trustee would not be entitled to maintain a company petition, as disputed questions of fact would be involved, which cannot be gone into by the Courts in India.

29. A bare perusal of clause 13.3 would show that the same relates to legal proceedings which may be initiated at any time after the bonds have become due and payable. The due date for maturity of the bonds was in 2011 and the claim of the appellant is with regard to payment of interest, which was to be paid half yearly, and the Company had admittedly defaulted in payment of such interest. Though the clause in the Trust Deed provided for enforcing payment of the entire amount of Bond (if the interest was not paid), but the fact that the interest was due and liable to be paid, which had not been paid by the Company to the Bond Holders or the Trustee, is not a matter in dispute.

30. It may be true that the disputed questions of fact can normally not be gone into in a Company Petition filed for winding up of a company. What is meant by the same is questions which may require consideration by way of leading of evidence by the parties. As we notice, in the present case the respondent Company has not, at any stage, disputed the fact that the interest due and liable to be paid after March 2009, remained due to be paid. Thus, there is no dispute that there is an admitted amount or debt due to be paid by the Company to the Bond holders, which has not been paid.

31. The only question which remains is as to whether the appellant Trustee can represent the Bond holders or not. With regard to this, learned counsel for respondent has relied on clause 10.1 of the Bond. Firstly, the same is a clause of the Bond and not the Trust Deed. Secondly, it provides that the Trustee, at his discretion, and if so requested in writing by holders of not less than 25%, may proceed to initiate proceedings. It is the interpretation of this clause, which learned counsel for respondent states, that the Company Court cannot decide in a Company Petition for winding up, and it is the English Courts, applying the English law, which alone can interpret the said clause. In our view, the said contention does not have merit because, as we have already clarified hereinabove that English law can be applied by Courts in India, and also that the bar of approaching the Indian Courts is on the Company, and not the Trustee/appellant. Further, the interpretation of clause 10 of the Bond is a question of law to be interpreted in terms of the relevant law, which may be Indian law or the English law, which can always be gone into by the Courts in India, including the Company Court.

32. Reverting back to clause 13.3 of the Trust Deed, what has been submitted by learned counsel for respondent is that the said clause is for enforcement of payment, and filing of a winding up petition for enforcement of payment, is not the proper mode. However, it cannot be denied that filing of a winding up petition on account of the Company being unable to pay its debts is a proper course, which can be taken by the creditor. A creditor, in its wisdom, may chose to file a suit for payment of its debts, but merely because of having such a right available, would not bar the creditor from filing a winding up petition, where the debts are admitted by the Company and it is unable to pay. By saying this, we are not recording a finding to the effect that the Company is unable to pay its admitted debts, but where the Company Petition has been filed on the ground that there are admitted debts to be paid by the Company to the appellant, which it is unable to pay, it would be for the Company Court to take a final decision in the matter and then decide whether, in the facts of the case, the Company is to wound up or not. However, saying that because of clause 13.3 of the Trust Deed, the option of filing of Company Petition by the appellant Trustee is taken away, would not be correct.

33. It was also argued by learned counsel for respondent that the question to be considered would be as to whether under the terms of the Trust Deed, appellant Trustee would actually be a Trustee or an agent of the Bond Holders. As such, it has been contended that the question as to whether appellant ought to be treated as a Trustee or an agent cannot be looked into by the Courts in India and more so, by the Company Court. As we have already observed above, questions of law can always be looked into by the Courts in India by applying, either Indian law or English law, as the case may be. For deciding this question, all that would be required is interpreting the provisions of the Trust Deed by applying Indian law or English law. In our view, the same can always be done by the Company Court, if such question is raised before it during the course of the proceedings.

34. Learned counsel for respondent has relied on the decision of the Apex Court in the case of Pradeshiya Industrial and Investment Corporation of Uttar Pradesh Vs North India Petrochemicals Ltd “ (1994) 3 SCC 348. In the said decision, reliance has been placed on another decision of the Apex Court in the case of Madhusudhan Gordhandas Vs Madhu Wollen Industries Pvt Ltd - (1971) 3 SCC 632 wherein it has been held that principles on which the court acts are “ firstly that the defense of the company is in good faith and one of substance; secondly, the defense is likely to succeed on point of law; and thirdly, the company adduces prima facie proof of the facts on which the defense depends'. Reliance has also been placed by the Apex Court on another of its decision rendered in Amalgamated Commercial Traders (P) Ltd Vs ACK Krishnaswami and Anr “ (1965) 35 Company Cases 456, wherein it has been held that it is well settled that a winding up petition is not a legitimate means of seeking to enforce payment of the debt which is bonafide disputed by the company. A petition presented ostensibly for a winding up order but really to exercise pressure will be dismissed, and under circumstances, may be stigmatized as scandalous abuse of the process of court'.

35. There cannot be any dispute with regard to such proposition of law as has been laid down by the Apex Court. However, the Apex Court has also in various cases held that where the debt is undisputed, the company will not act upon the defense that the company has the ability to pay the debt, but the company chooses not to pay that particular debt. The position of law is absolutely clear, that it is for the company petitioner to prove that the debt liable to be paid is either admitted or duly proved, and also that the company is unable to pay such debt. It is only in such circumstance, the petition for winding up would be allowed. In the present case, since such question has not been gone into by the Company Judge, who has dismissed the petition only on the ground of lack of jurisdiction, we would not be inclined to make any observation in this regard, and would leave it to the Company Court to record its finding on this issue.

36. In the light of the aforesaid discussion, we are of the opinion that the dismissal of the Company Petition on the ground of jurisdiction, cannot be sustained in the eye of law. Accordingly, the judgment of the Company Court dated 14.3.2014 dismissing the Company Petition, is set aside and the matter is remanded back to the Company Court for fresh decision, in accordance with law, as expeditiously as possible.

Appeal is allowed.


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