ASHIM KUMAR BANERJEE,J. - (1.) MAHESHWARI Ispat Limited a company registered under the provisions of the Companies Act 1956 was in precarious financial condition. They could not repay their dues to their creditors resulting in litigations at the instance of creditors. Maheshwari however, claimed, they had sixteen secured creditors. However, only one secured creditor was pressing for winding up of the company, others were in favour of restructuring. Tata Capital Finance Service Limited helped the company in difficulties. They extended a short term composite financial assistance to the extent of Rs.5 crores approximately. In terms of working capital demand loan agreement dated October 5, 2009 Tata altogether sanctioned a sum of Rs.5 crores as Working Capital. The directors being Ajit Kumar Mundra and Bhagwani Devi Mundra guaranteed the said loan. The loan was partly secured through pledge of a fixed deposit receipt for Rs.75 lacs with HDFC bank. Maheshwari permitted Tata Capital to encash the said fixed deposit that would clear the dues to the extent of Rs.92.54 lacs towards part satisfaction. Maheshwari confirmed the balance from time to time and assured TDS certificates to be issued in due course. After taking into account, the sums paid from time to time a sum of Rs.2,27,57,975 became due and payable as would appear from the confirmation of the accounts signed by Maheshwari dated July 14, 2011. The parties agreed to have contractual interest at the rate of 15.5% per annum. Adding interest as on the said date to the principal, a sum of Rs.4,12,98,703.81 became due and payable when Tata filed the petition for winding up as against Maheshwari. Tata also initiated parallel proceeding before the Bombay High Court under the provisions of Section 9 of the Arbitration and Conciliation Act 1996 and obtained order restraining disposal of assets by Maheshwari. The directors of Maheshwari being Ajit and Bhagwani filed affidavit disclosing their assets and worth. They assured, they would not deal with their assets unless the dues of Tata would be cleared off.
(2.) MAHESHWARI contested the winding up proceeding. According to them, Tata being an unsecured creditor was successful in getting their claim secured through the Bombay proceeding. They were pursuing their remedy in arbitration. Hence, this winding up petition should not be allowed and the company Court should not exercise discretion in favour of Tata admitting the winding up petition. A group of winding up petitions came up for hearing before the learned Company Judge. The group had a common issue as to whether the secured creditors could file the petition for winding up and if so, what would be the role of the company Court in the matter of admission of the winding up proceeding? The learned Single Judge heard the learned Counsel for the parties in those proceeding. We were also told, subsequently most of the petitions were withdrawn and/or not pressed barring two or three. Two judgements were delivered on the same day being October 12, 2012, one being the decision in the present case and the other in the matter of Kotak Mahindra Bank Limited and Eastern Spining Mills & Industries Limited (CP No. 493 of 2011). In the case of Kotak Mahindra, the learned Judge dismissed the winding up petition whereas in case of Maheshwari His Lordship admitted the same. In both cases, the aggrieved parties approached us in appeal. We disposed of the appeal by the Kotak Mahindra where we remanded the issue back to His Lordship to decide the issue of admission on merits in the light of the observations made by us in the said decision. The present appeal would relate to the other decision in the case of Maheshwari.
(3.) THE learned single Judge held, company was unable to pay its debts, hence, under Section 433(e) the company was liable to be wound up and the winding up petition should be admitted and be given a representative character giving opportunity to all and sundry, either to support or oppose the prayer for winding up. His Lordship held, the right of the secured creditor to present a winding up petition was unfettered by the fact that the creditor would enjoy security that would be inadequate to meet the claim. His Lordship also held, the balance sheet was unimpressive, in any event, before making an order of admission of the winding up proceeding, the Court would have to assess whether the company was solvent and its net worth was positive. His Lordship considered the provisions of the Sick Industrial Companies (Special Provisions) Act 1985 and observed, the sickness of an Industrial Company was a much worse financial position than its commercial insolvency. His Lordship discussed the precedents and the law on the subject particularly, Section 434(1)(a) of the said Act 1956 and held, "If a debt is discharged by causing a third party to liquidate the claim, there is no claim to be carried forward for the Court to assess the possible commercial insolvency of the company. But if security were caused to be furnished by another, it would not be unreasonable for the petitioner to insist that such fact is not to be taken into account to assess the commercial insolvency of the company.";