Madras High Court
Deutsche Trustee Company Limited vs Mascon Glabal Limited on 24 September, 2014
Author: M.M.Sundresh
Bench: Satish K.Agnihotri, M.M.Sundresh
IN THE HIGH COURT OF JUDICATURE AT MADRAS Dated : 24.09.2014 Coram The Honourable Mr.Justice SATISH K.AGNIHOTRI and The Honourable Mr.Justice M.M.SUNDRESH Original Side Appeal No.231 of 2013 Deutsche Trustee Company Limited, Having its registered office at Winchester House 1, Great Winchester Street, London EC2N 2DB, United Kingdom. Rep. by its Constituted Attorneys Mr.Ganeshan Shivaraman and Mrs.Bijal Patel ... Appellant Vs. Mascon Glabal Limited, A public limited company incorporated under the Companies Act, 1956, having its registered office at 2nd, RR Towers IV, T.V.K.Industrial Estate, Guindy, Chennai. ... Respondent Original Side Appeal is filed under Order XXXVI Rule 1 of the O.S. Rules read with Clause 15 of amended Letters Patent, 1865 and Section 483 of the Companies Act, 1956, against the judgment and decree dated 23.04.2013 made in Company Petition No.171 of 2012. For Appellant : Mr.P.S.Raman, Senior Counsel for Mr.P.Giridharan For Respondent : Mr.T.K.Bhaskar JUDGMENT
The appellant, being the petitioner in C.P.No.171 of 2012, filed the Company Petition before the learned single Judge seeking to wind up the respondent Company and to appoint the Official Liquidator, High Court as the Liquidator to conduct the affairs and thereafter distribute the assets in accordance with law. The Petition filed by the appellant was dismissed on the ground that the power deed executed by the trustee is insufficiently stamped and the trustee has not produced the authorisation as required under Clause 10 of the Trust deed dated 27.12.2007 from the Bondholders of atleast one quarter in principal amount of the Bond read with condition No.17 of the Bonds. Challenging the said order passed, the present appeal has been filed.
Facts in brief:-
2. The appellant is a Company incorporated under the Laws of England , being engaged in the business of providing corporate trustee services. The appellant is a creditor of the respondent Company on behalf of the Bond holders for a sum of USD 64036036.29 under the Bonds along with the accrued interest apart from default interest. After several communications, as the required payment was not forthcoming, the appellant served a statutory winding up notice on the respondent. A reply was given on behalf of the respondent by its advocates stating that a detailed reply to the winding up notice was being prepared. However, no such reply was forthcoming. Accordingly, the appellant filed the Company Petition. After the arguments were over, a memo was filed by the appellant seeking to place on record certain decisions along with the 25% of the authorisation as required from the Bondholders. The learned single judge, while rejecting the memo, was pleased to dismiss the Company Petition as not maintainable as there was no authorisation on record and the power of attorney executed by the appellant to the power holder was insufficiently stamped. Challenging the same, the present appeal has been filed. Pending appeal, the appellant has filed an application in M.P.No.1 of 2013 under Order XLI Rule 27 of the Civil Procedure Code seeking to receive certain documents, which include a fresh power deed executed in favour of the power holder and the authorisation letter of 25% of the Bondholders as required under clause 10(1) of the Trust deed dated 27.12.2007.
Submission of the appellant:
3. The learned Senior Counsel for the appellant submitted that the fact that 25% of the Bondholders have directed the trustee to take action in accordance with Clause 10.1 of the trust deed is not in dispute. The leaned single Judge ought to have taken the said document into consideration. The memo has also been served on the respondent. Even otherwise as per the avements made in the Company Petition, the trustee is entitled to take action as per the Trust deed dated 27.12.2007 and the offering Circular dated 20.12.2007 If the power deed is insufficiently stamped as it was executed abroad, the only recourse that can be adopted is to order impounding of the said document by directing the appellant to pay the deficit stamp duty. Even the said issue has paled into insignificance in view of the subsequent one obtained. There is no dispute about the executant of the power deed. The respondent has not given any reply to the notice issued and therefore the learned single judge ought not to have dismissed the Company Petition. The respondent is being adjudicated before the Company Court at the instance of a third party, whose Company Petition has already been admitted. In support of his submission, learned Senior Counsel has made reliance upon the following judgments:
1. Zenith Infotech Ltd. Vs. The Bank of New York Mellon London Branch, (Division Bench Judgment dated 2.9.2013 made in Appeal (L) No.344 of 2013, etc.,on the file of Bombay High Court) (MANU/MH/1379/2013); and
2. Medisphere Marketing P.Ltd Vs. Medi Trade Medical Trading, (Division Bench Judgment dated 28.1.2008 made in Co.App.No.13 of 2006 on the file of Delhi High Court) ((2009) 149 CompCas 108(Delhi)).
Submissions of respondent:
4. Learned counsel appearing for the respondent submitted that the Company Court, having exercised discretion, no interference is required by this Court. For the failure of the appellant in filing the required documents, the order passed cannot be interfered with. The appellant cannot take a different stand than the one taken before the learned single Judge. A further submission has been made by the learned counsel that even assuming the arguments of the appellant are accepted, this Court shall not admit the Company Petition instead of remitting the matter back to the learned single Judge to decide the said issue as it involves serious consequence.
Discussion:-
5. The facts as narrated are not in dispute. In order to decide the issue raised on the interpretation of Clause 10, we deem it appropriate to re-produce the same for better appreciation:
''10. ACTION, PROCEEDINGS AND INDEMNIFICATION 10.1 The Trustee shall not be bound to take any action in relation to these presents (including but not limited to the giving of any notice pursuant to Condition 19.6 or the taking of any proceeding and/or other steps mentioned in subclause 9.1) unless respectively directed or requested to do so (a) by an Extraordinary Resolution or (b) in writing by the holders of at least one-quarter in principal amount of the Bonds then outstanding and in either case then only if it shall be indemnified and/or secured to its satisfaction against all Liabilities to which it may render itself liable or which it may incur by so doing.
10.2. Only the Trustee may enforce the provisions of these presents. No Bondholder shall be entitled to proceed directly against the Company to enforce the performance of any of the provisions of these presents unless the Trustee having become bound as aforesaid to take proceedings fails to do so within a reasonable period and such failure is continuing."
6. Clause 10 of the Trust deed dated 27.12.2002 speaks about the action, proceedings and indemnification by the trustee representing the appellant as against the respondent. Clause 10.1 deals with the rights of the Bond holders vis-a-vis the duties of the trustee. As per clause 10.1, the trustee is not bound to take any action unless he is directed or requested to do so by an extraordinary resolution or in writing of the holders of atleast one quarter in principal amount of the Bonds then outstanding. Therefore, it merely speaks about the action that is required on the part of the trustee when it was sought to be initiated at the instance of the Bondholders. Under clause 9 of the Trust deed, the trustee may, at any time, at its absolute discretion and without any notice, take such proceedings and/or other steps as it may think fit against or in relation to the Company to enforce its obligations under these presents. Therefore, a combined reading of the above said provisions would make it clear that it is a trustee, who can represent either on its own or at the instance of the required Bondholders. The appellant has raised a specific plea in the Company Petition that it has been filed both on behalf of the Bondholders as well as in its capacity as a trustee, as there was a breach of covenants and obligations under the Trust deed on the part of the respondents. Furthermore, the authorisation has also been produced. The respondent has not questioned the validity or genuineness of the said authorisation. Therefore, we are of the considered view that the learned single Judge was not right in rejecting the application on the ground that there was no valid authorisation. There is also no dispute that the memo has been filed after duly serving the respondents. Considering the similar issue, it has been held by the Division Bench of the Bombay High Court in Zenith Infotech Ltd. Vs. The Bank of New York Mellon London Branch, (MANU/MH/1379/2013) in the following manner:
''5. Now, it is in this background that the submissions which have been urged on behalf of the Appellant must be evaluated. Clause 24 of the Deed of Trust provides as follows:
At any time after the Bonds have become due and repayable, the Trust may, at its discretion and without further notice, take such proceedings against the Company as it may think fit to enforce repayment of the Bonds together with premium (if any) and to enforce the provision of this Trust Deed, but it will not be bound to take any such proceedings unless (a) it shall have been so requested in writing by the holders of not less than 25 per cent in principal amount of the Bonds then outstanding or so directed by an Extraordinary Resolution and (b) it shall have been indemnified and/or secured to its satisfaction. No holder of the Bonds will be entitled to proceed directly against the Company, unless the Trustee, having become bound to do so, fails to do so and such failure shall have continued or a period of 60 days and no directions inconsistent with such written request or Extraordinary Resolution have been given to the Trustee during such 60 days period by the holders of a majority in principal amount of the outstanding Bonds.
Under the Deed of Trust, the Respondent was constituted as a trustee. Clause 24 stipulates that no individual holder of the bonds would be entitled to proceed directly against the Company. Upon the bonds becoming due and payable, it was for the trustee, namely, the Respondent, to adopt proceedings against the Company to enforce repayment of the bonds together with the premium, if any, and to enforce the provisions of the Deed of Trust. Clause 24 also stipulates that the respondent is not bound to take such proceedings unless it has been so requested by the holders of not less than twenty five per cent of the principal amount of the bonds then outstanding. An individual holder is not entitled to move a proceeding against the Appellant unless the trustee having become bound fails to adopt necessary steps for a stipulated period.
6. Clause 24 of the Deed of Trust does not preclude the trustee from instituting a proceeding for winding up. Section 2(12) of the Companies' Act, 1956 defines the expression "debenture"to include debenture stock bonds and any other securities of a company, whether constituting a charge on the assets of the Company or not. Section 439(1) provides that an application for winding up can be filed by a creditor among other persons. Sub-section (2) of Section 439 provides as follows:
''(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).
Consequently, the trustee for the holders of debentures is deemed to be a creditor within the meaning of Section 439(1)(b). Hence, there can be no manner of doubt that a petition, at the behest of the Respondent for winding up, was maintainable.''
7. We are of the view that the said judgment applies to the case on hand before us. The execution of the power of attorney is also not in dispute. As rightly submitted by the learned Senior Counsel, the Company Court ought to have impounded the document and send it to the Collector for re-validation. Even otherwise, a fresh document has been filed by the appellant. The genuineness and authenticity of the said document has not been questioned by the respondent. Therefore, we are of the view that the order passed by the learned single Judge dismissing the petition on the ground of insufficiently stamped power deed is also liable to be set aside and accordingly the same is set aside.
8. Coming to the merits of the case, the learned Senior Counsel for the appellant submitted that the liability is not questioned, no reply has been given on merit by the respondent to the notice issued by the appellant and the Company Petition has also ought to have been admitted against the respondent and therefore this Court will have to admit the Company Petition after setting aside the order passed by the learned single Judge. Per contra, learned counsel for respondent submitted that even in the grounds a specific plea has been raised seeking remittal. Admission of the Company Petition would involve serious consequences over a running concern and the learned single Judge also has not gone into the merits. Therefore, it is submitted that the matter may be remitted to the learned single Judge leaving open the issues on merit to be decided afresh.
9. We find considerable force in the submission made by the learned counsel for respondent. Admittedly, the learned single Judge has not considered the merits of the case. Therefore, while setting aside the findings rendered by the learned single Judge in the Order dated 23.04.2013 made in Company Petition No.171 of 2012, we do not propose to admit the Company Petition. Instead, we deem it fit to remit the matter back to the learned single Judge to decide the matter on merit after hearing the parties as to whether the Company Petition requires to be admitted and to be followed by appropriate consequential directions. We are also satisfied with the reasons assigned in the Petition filed in M.P.No.1 of 2013 praying for receipt of certain additional documents.
10. For foregoing reasons, the order passed by the learned single Judge dated 23.04.2013 made in Company Petition No.171 of 2012 is hereby set aside and the matter is remitted back to decide the Company Petition on merits. We also leave open all the issues on merit, both on facts and law, except those decided on the question of maintainability. This appeal stands allowed accordingly. M.P.No.1 of 2013 is also ordered. However, there is no order as to costs.
(S.K.A.,J) (M.M.S.,J.) 24.09.2014
Index:Yes
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Copy to:
The Sub. Asst. Registrar
Original Side
High Court
Madras.
SATISH K.AGNIHOTRI,J.
and
M.M.SUNDRESH, J.
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O.S.A.No.231 of 2013
24.09.2014