Gujarat High Court
Aaheli Constructions Private Limited vs Welspun Projects Limited on 21 January, 2014
Author: K.M.Thaker
Bench: K.M.Thaker
O/COMP/42/2012 CAV JUDGEMNT
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
COMPANY PETITION NO. 42 of 2012
FOR APPROVAL AND SIGNATURE:
HONOURABLE MR.JUSTICE K.M.THAKER
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1 Whether Reporters of Local Papers may be
allowed to see the judgment ?
2 To be referred to the Reporter or not ?
3 Whether their Lordships wish to see the fair
copy of the judgment ?
4 Whether this case involves a substantial
question of law as to the interpretation of the
Constitution of India, 1950 or any order made
thereunder ?
5 Whether it is to be circulated to the civil
judge ?
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AAHELI CONSTRUCTIONS PRIVATE LIMITED....Petitioner(s)
Versus
WELSPUN PROJECTS LIMITED....Respondent(s)
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Appearance:
MR SAURABH SOPARKAR, SR. COUNSE, WITH MR AMAR N BHATT,
ADVOCATE for the Petitioner(s) No. 1
M/S WADIAGHANDY & CO, ADVOCATE for the Respondent(s) No. 1
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CORAM: HONOURABLE MR.JUSTICE K.M.THAKER
Date : 21/01/2014
CAV JUDGEMNT
In present petition, under Sections 433 & 434 r.w. Section 439 of the Companies Act, 1956 [hereinafter referred to as "the Act"], the petitioner has prayed, inter alia, that:-
"9(A) The Company, Welspun Projects Limited may be wound up by this Hon'ble Court under the provisions of the Companies Act, Page 1 O/COMP/42/2012 CAV JUDGEMNT 1956.
(B) The Official Liquidator attached to this Hon'ble Court be appointed as the Liquidator of the Company with all powers under the Companies Act, 1956 including powers to take charge of the assets, affairs, books of accounts, documents, vouchers, bills, etc. of the Company."
1.1 Essentially on the premise that the respondent company has not made payment of its dues even after statutory notice, the petitioner has preferred present petition and has alleged that the respondent company has lost its capacity to discharge its debts and it is unable to make the payments of its creditors or has failed and neglected to make the payments of dues and payable amounts and therefore, the respondent company deserves to be wound up.
2. So as to support and justify the request, the petitioner has claimed in the petition that, the petitioner had placed two fixed deposits with the Corporation Bank. One of the two fixed deposits was in the sum of Rs.1,00,00,000/- and another one was in the sum of Rs.95,75,000/-. According to the petitioner's claim, the said fixed deposits were to mature on 16.2.2011. The petitioner has alleged that around that time, the respondent company was in need of funds and had, therefore, approached the Corporation Bank (the Bank where the petitioner had placed the aforesaid two fixed deposits) for Term loan. The Bank required that the respondent company should tender security for the Term loan and therefore, the respondent company requested the petitioner, vide its letter dated 5.8.2010, to give security on its behalf and also requested that the fixed deposits which the petitioner had placed with the Bank may be offered towards security for the loan to the respondent by Bank. In view of the said request by Page 2 O/COMP/42/2012 CAV JUDGEMNT the respondent company, the petitioner agreed to allow the Bank to mark lien on the said two fixed deposits so that the respondent company can avail loan from the Bank to the extent of 90% of the value of the said two fixed deposits. The petitioner has also claimed that it had clearly written to the respondent company that fixed deposits should be returned on or before the date on which the fixed deposits would mature and in the event of failure or delay, the respondent company shall be liable to pay interest at the rate of 30% p.a. The petitioner claimed that on the strength of the said two fixed deposits, the respondent company availed the Term loan from the Bank. The petitioner has further claimed that on the date of maturity of the fixed deposits, the petitioner had addressed letter dated 30.11.2010 to the Bank to release the collateral security, i.e. the fixed deposits which were offered in security for extending loan facility to the respondent. The petitioner has further claimed that the said letter dated 30.11.2010 was followed by letters dated 10.12.2010, 20.12.2010 and 2.2.2011. The petitioner has alleged that despite the repeated requests and reminders, the respondent company did not pay the outstanding dues of the petitioner. The respondent also did not make payment of the loan availed by it from Bank on the strength of the fixed deposits. The petitioner has alleged that due to the respondent's default, the bank appropriated the fixed deposits towards outstanding loan against the respondent.
2.1 The petitioner has further alleged that:-
"6.2 The Petitioner wrote a letter dated 16/2/2011 (Copy at Annexure "H" hereto) requesting the Company to arrange for the funds to pay off the loans. However, the Company did not repay the said loan. On 16/2/2011 the FDRs of the Petitioner were Page 3 O/COMP/42/2012 CAV JUDGEMNT renewed by the Bank as per the following details Sr.no. FDR No. Amount Rs.
1. KCC/01/110352 1,02,84,761/-
2. KCC/01/110351 98,42,508/-
The Bank vide its letter dated 25/2/2011 (Copy at Annexure "I"
hereto) informed the Petitioner that the Bank has appropriated the said FDRs of the Petitioner towards the outstanding in the Company's account on 22/2/2011 to the extent of Rs.2,01,27,269/-. The amount of the FDRs was credited in Company's loan account by the Bank. The Petitioner therefore wrote a letter dated 26/2/2011 (Copy at Annexure "J" hereto) and requested the Company to make payment of the amount of FDRs to the Petitioner with interest at 30% per annum."
2.2 According to the petitioner company, instead of making the payments, the respondent company addressed a letter dated 9.3.2011 to the petitioner and raised dishonest stand claiming that the company's Board of Directors had not approved the action of availing loan from the Bank and therefore, there was no question of the petitioner having given the fixed deposits as security for the loan to the respondent company. In view of the said response from the respondent company, the petitioner issued registered notice dated 14.5.2011 calling upon the respondent company to pay Rs.2,01,27,269/- which came to be appropriated by the Bank against the loan granted to the respondent company. According to the petitioner company, despite several reminders and even after statutory notice, the said amount of Rs.2,01,27,269/- have not been paid by the respondent company and the respondent company has neglected to make the said payment.
3. The petition is opposed by the respondent company, who has filed affidavit dated 8.8.2012 disputing and denying the allegations by the petitioner. The respondent has claimed and Page 4 O/COMP/42/2012 CAV JUDGEMNT asserted in the said affidavit that the petitioner's claim arise out of Share Purchase Agreement dated 18.3.2010 entered into between Mr. Ashok Khurana and other members of the Khurana family on the one hand and Welspun Infratech Limited on the other hand. The respondent has also claimed that there is no debt as contemplated under the Act which the respondent company is obliged to discharge so far as the petitioner is concerned. The respondent company has also claimed that there are several disputed questions involved in present case which give rise to factual disputes and that therefore, remedy of petition under Sections 433 & 434 of the Act is not proper remedy and the petitioner company ought to be directed to avail ordinary civil remedy. The respondent has also claimed that Welspun Infratech Limited has already invoked arbitration (and the proceedings are in progress) for resolution of all disputes and that therefore also, the petition is not maintainable. On such grounds and factual disputes as to whether the amount in question was given by the Director of the petitioner company to the respondent company by virtue of Share Purchase Agreement or by way of security to the Bank, etc., the petition is opposed by the respondent company.
4. Mr. Soparkar, learned Senior Counsel for the petitioner, reiterated the factual details mentioned in the petition as regards the two fixed deposits which were placed by the petitioner company with the Corporation Bank and about the respondent's request to the petitioner company to provide security to the bank for extending loan to the respondent company and the fact about the petitioner company having agreed to mark lien on its fixed deposits so as to enable the respondent company to avail temporary loan from the Bank.
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Mr. Soparkar, learned Senior Counsel, submitted that the respondent company intentionally and calculatively allowed the time for keeping the loan to expire and it intentionally and calculatively did not repay the loan amount so that, ultimately, the bank would adjust the amount of fixed deposits towards the outstanding loan of the respondent company. According to the petitioner, the said action was part of respondent's design to avail the loan and thereafter to make default in repayment. Mr. Soparkar, learned Senior Counsel, contended that on maturity of the fixed deposits when the petitioner company demanded discharge of fixed deposits, the bank and the respondent company intentionally gave evasive replies. Relying on the document/letter dated 5.8.2010 [Page-9 of the petition], learned Senior Counsel for the petitioner submitted that the petitioner accepted the request made by the respondent company vide its letter dated 5.8.2010 and in response, the petitioner company vide its letter of even date, i.e. 5.8.2010, informed the respondent company about its agreement and conditions for the said agreement.
4.1 The learned Senior Counsel for the petitioner contended that the respondent company is obliged to return the said amount of Rs.1,95,75,000/- with interest at the rate of 30% p.a., however, the respondent company has taken dishonest stand and refused to return the said amount. So as to support his submission that the respondent company had made the above mentioned request to the petitioner with clear intention of not making payment to the bank, learned Senior Counsel for the petitioner relied on the document/letter dated 3.11.2010 [Page-23 of the petition].
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4.2 Mr. Soparkar, learned senior counsel for the petitioner submitted that despite repeated requests, the amounts due and payable from the respondent are not paid and in view of the fact that neither payment is made nor reply is given in response to the statutory notice, it is clear from the facts of the case that the respondent is unable to pay and discharge its dues and therefore, the petitioner is entitled for order of admission of petition.
5. Per contra, Mr. Bhatt, learned senior counsel for the respondent company submitted that the entire claim made by the petitioner is completely unjustified and baseless and the respondent company is not under any obligation to pay any amount to the petitioner and there is no debt towards the petitioner. He relied on the details mentioned in the reply affidavit, more particularly the objections raised in the reply affidavit against maintainability of the petitioner. It is also contended by the respondent that the petition is abuse of process of law by said Mr. Khurana and the petition is vexatious which is evident from the correspondence exchanged between the company, the Corporation Bank and said Mr. Khurana. Mr. Bhatt, learned senior counsel for the respondent submitted that the claim made by the petitioner is actually covered under and governed by the share purchase agreement dated 18.3.2010. According to the respondent, the said share purchase agreement was entered into between one Mr. Ashok Khurana and other members of his family on one hand and a company named Welspun Infra Tech Ltd., on the other. It is also contended by the respondent that as part of the transaction covered under the said share purchase agreement, the company named Welspun Infra Tech Ltd. also Page 7 O/COMP/42/2012 CAV JUDGEMNT entered into another purchase agreement with the petitioner and in view of the said share purchase agreement, the petitioner sold its shares to Welspun Infra Tech Ltd. Mr. Bhatt, learned senior counsel for the respondent further contended that in view of the disputes between the parties in connection with the said share purchase agreements (which contains arbitration clause/agreement), arbitration remedy is already invoked and that this Court has, vide order dated 6.7.2012, referred the parties to the dispute to arbitration proceedings before the learned Sole Arbitrator and that, therefore also the petition does not deserve to be entertained. Mr. Bhatt, learned senior counsel for the respondent relied on various provisions in the said share purchase agreements and he, in particular, made reference of clause 2(A), 2(B), the terms 'affiliates' and 'agreement' contained in clause 1.1 and the term 'promoted directors' in clause 1.1. Mr. Bhatt, learned senior counsel for the respondent also relied on clause 2.1 as well as clause 7.9.
5.1 So far as the factual aspects, which, according to the respondent, are disputed, are concerned, learned senior counsel for the respondent referred to and relied upon paragraphs No.9.1 to 9.5, which read thus:
"9.1 Welspun Infratech Limited which is now the parent of the Company, was desirous of purchasing the shares of the Company from the Khurana family and their affiliate companies, who were the erstwhile Promoters of the Company. The Khurana family and their affiliate companies, including the Petitioner, are represented and controlled by one Mr. Ashok Khurana. Welspun infratech accordingly entered into the Promoter SPA dated March 18, 2010 by way of which the Promoters sold their entire shareholding in the Company to Welspun Infratech. (Annexure B1 hereto) Welspun Infratech also entered into the Sellers' SPA dated March 18, 2010 (Annexure B2 hereto) with Ashok Khurana's affiliate companies, including the Petitioner abovenamed by way of which Ashok Khurana's affiliate/group companies, including the Petitioner, sold their entire shareholding in the Company to Welspun Infratech. The entire transaction comprising the sale of shares and transfer of Management and control was completed on or about August 16, Page 8 O/COMP/42/2012 CAV JUDGEMNT 2010 viz. the Share Sale Closing Date. The same has been admitted by the Petitioner's representative Mr. Ashok Khurana in his letter dated February 2, 2011 addressed to Corporation Bank on behalf of his affiliates/associated, including the Petitioner (Annexure F to the captioned Petition).
9.2 However, prior to the completion and closing of the transaction and in prima facie breach of the Promoter SPA and Sellers' SPA, on August 3, 2010 the said Mr. Ashok Khurana appears to have entered into certain transactions with Corporation Bank fraudulently and without any approval or authority of the Board of Directors of the Company. These transactions, including the opening of an Overdraft Facility (the "OD"), were entered into in collusion with Mr. Ashok Khurana's affiliate/associate companies, including the Petitioner, Although Mr. B K Goenka and Mr. Yogesh Verma, nominees of Welspun Infratech were appointed as directors of the Company, during the relevant period, the Board of Directors of the Company was completely unaware of the above transactions. The fact that the above transactions were entered into at the behest of the said Mr. Ashok Khurana is admitted by the Petitioner in its advocate's notice dated May 14, 2011 wherein the Petitioner has stated that "the said lien was provided by my client on the request of Mr. Ashok Khurana, as he was having good relations with my client".
(Annexure L to the captioned Petition).
9.3 The collusive and fraudulent nature of the transaction is apparent from the fact that while the OD obtained from Corporation Bank is dated August 3, 2010 (Annexed hereto and marked as Annexure "D" is a copy of the On Demand Promissory Note issued to Corporation Bank), the request by the Company to the Petitioner for keeping the Petitioner's FDRs as security for the said OD was made only on August 5, 2010, i.e. after sanctioning of the OD facility (Annexure A to the captioned Petition). Also, the Petitioner's response purporting to offer to the Company the FDRs as security for the said OD was issued on the same day, i.e. August 5, 2010, even though the two companies are situated in different cities (Annexure B to the captioned Petition). This discrepancy in dates clearly indicates that the transaction involving the Petitioner's FDRs was an afterthought and had been executed by Mr. Ashok Khurana and the Petitioner in collusion with each other. Moreover, it is submitted that these transactions were never approved by the Board of Directors of the Company and therefore cannot and do not bind the Company in any manner.
9.4 As the above transactions were entered into fraudulently without the authority of the Board of Directors of the Company, the Company was not responsible for any FDRs that the Petitioner may have placed with Corporation Bank. The Company, by its letter dated March 9, 2011 addressed to the Petitioner, has already informed the Petitioner the subject transactions with Corporation Bank were unauthorized and unapproved by the Board of the Company and had been entered into by the Petitioner in collusion with its promoter Mr. Ashok Khurana. The Company categorically denied all liability towards the Petitioner in connection with the said FDRs.
9.5 In addition to executing the above fradulent and collusive
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transactions with Corporation Bank in breach of the Promoter SPA and Sellers' SPA, the Petitioner's representative / promoter Mr. Ashok Khurana has also breached / defaulted in performing his various obligations under the SPA. In order to resolve the disputes arising out of the subscription/ acquisition of shares of the Company from the Khurana and their affiliates, Welspun Infratech has invoked arbitration vide its notices October 31, 2011 and December 7, 2011 (Annexure A1 and A2 hereto). Moreover, this Hon'ble Court, vide its Order dated July 6, 2012 has referred the parties to the SPA to arbitration and has appointed Hon'ble Justice Shri D.A.Mehta (Retd.) as a sole arbitrator to resolve all disputes between the parties arising out of the purchase of shares of the Company, including disputes arising out of the said SPA (Annexure C hereto)."
In light of the said details, learned senior counsel for the respondent has urged that the petition may be dismissed.
According to the respondent, the fact that the parties are referred to arbitration, establishes that there are disputes between the parties and that, therefore, when the disputes related to factual aspects are involved, ordinarily the Court would not entertain the petition seeking winding up of going concern and therefore also the petition may not be entertained. It is also claimed that the petition is filed for enforcing payment of disputed debt and that, therefore also the petition is not maintainable. It is also claimed that the respondent company is a profit-making and going concern and it is fully solvent and able to discharge its liabilities and having regard to the said fact related to the company, the petition may not be entertained.
6. Heard Mr. Soparkar, learned Senior Counsel, for the petitioner with Mr. Bhatt, learned counsel for the petitioner, and Mr. M.R.Bhatt, learned Senior Counsel, for the respondent and also considered the material on record of present petition.
7. At the outset, it is necessary to mention that present Page 10 O/COMP/42/2012 CAV JUDGEMNT petition is taken out against the company named Welspun Projects Limited which, according to the petitioner, was originally incorporated as MSK Projects (India) Limited and is a separate and independent company incorporated and registered under the Companies Act, 1956. The petitioner has clarified in the petition that originally the said respondent company was incorporated as and in the name and style of M/s. MSK Projects (India) Limited and subsequently, its name came to be changed to Welspun Projects Limited. In this context, the petitioner has averred, inter alia, that:-
"2. The Company abovenamed viz. Welspun Projects Limited (hereinafter referred to as "the Company") was originally incorporated in the month of December 1994 (as MSK Projects (India) Limited) under the Companies Act, 1956 as a Private Company limited by shares. It is now known as Welspun Projects Limited."
Therefore, actually the petitioner's claim is against MSK Projects (India) Limited and consequently, against Welspun Projects Limited.
According to the petitioning creditor, the respondent company owes certain amounts, as specified in the petition to the petitioner company and the said outstanding dues have not been paid by the respondent company to the petitioner despite repeated requests and demands and even after due and proper service of statutory notice under Sections 433 and 434 of the Act.
It is also pertinent to note that the said statutory notice dated 24.10.2011 was also served to the said respondent company, i.e. Welspun Projects Limited.
It is alleged and claimed by the petitioner that despite and even after service of the said statutory notice, the respondent company not only failed and neglected to pay the Page 11 O/COMP/42/2012 CAV JUDGEMNT outstanding dues, but any reply in response to the said notice was also not given by the respondent company within the prescribed time limit of 21 days. The petitioner, therefore, filed present petition.
7.1 The request said to have been made to the petitioner company to offer its fixed deposits worth about Rs.2 crores as security was made by said M/s. MSK Project (India) Limited i.e. the respondent company vide communication dated 5.8.2010. The said letter dated 5.8.2010 is annexed as Annexure-A, Page-8 to the petition. The reply to the said request is given by the petitioner company to the respondent on the same date, i.e. 5.8.2010, the said letter is at Annexure-B, Page-9 to the petition.
It is pertinent that the said two letters are exchanged between the petitioner and the respondent company and not the said other company named Welspun Infra Tech Limited.
Another letter which calls for consideration is a communication dated 3.11.2010, which is placed on record at Annexure-II Page 23 to the petition. The said letter is addressed by the concerned bank to the respondent company.
7.2 On the same date, i.e. 3.11.2010, the respondent company has also addressed a letter to the concerned bank intimating the bank that "we further like to inform you that personal guarantee and collateral security offered by director of MSK Projects (India) Ltd is not to be released till you receive communication from us." The said letter is placed on record at Annexure-II Page 24 to the petition.
7.3 The Bank has, on the next day, i.e. on 4.11.2010 Page 12 O/COMP/42/2012 CAV JUDGEMNT addressed another letter to the respondent company. A copy of the said letter is placed on record at Annexure-III Page 25 to the petition.
7.4 One more letter is available on record viz. letter dated 16.2.2011 which is addressed by the petitioner company to the respondent. The said letter is placed on record at Annexure - H Page 31 to the petition.
7.5 On 26.2.2011, the petitioner company seems to have addressed another letter to the respondent company which is placed on record at Annexure - J Page 33 to the petition.
7.6 It is pertinent that it is after the said letter dated 26.2.2011 that the respondent company, for the first time, raised dispute about the credit facility and the creation of charge over the petitioner's FDs. The said dispute is raised by the respondent company for the first time in its letter dated 9.3.2011, which is forwarded in response to the petitioner's letters dated 16.2.2011 and 26.2.2011.
8. The letter dated 5.8.2010 on which the learned Senior Counsel for the petitioner relied to support the submissions that the respondent company had requested the petitioner to make its FDs available for term loan facility is addressed by the respondent (i.e. MSK Projects (India) Ltd.) and it reads thus:-
"August 5, 2010.
To,
The Director,
M/s. Aaheli Construction P Ltd
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24, Laxmi Chambers, Navajeevan Press road Opp Old Gujarat HighCourt Road Ahmedabad Sub: Request for your Bank Deposit receipts with Corporation Bank to the extent of Rs.2.00 Cr.
Dear Sir, This is to request you to offer your fixed deposits worth Rs.2.00 Cr to keep as security against temporary Loan to be availed from Corporation Bank, Alkapuri, Vadodara. We shall return the deposit receipt to you on or before the due date of the deposit receipts. In case, there is any default or delay in returning the deposit back to you we are agreeable to pay interest @ 30% p.a. along with the principle amount.
We request you to hand over the deposit receipts alongwith a copy of board resolution to enable us to avail the loan facility from Corporation Bank immediately.
Thanking you, Yours faithfully, For MSK PROJECTS (INDIA) LTD."
8.1 The relevant part of the communication dated 5.8.2010 [Page-9 of the petition] on which learned Senior Counsel for the petitioner relied to show that the petitioner accepted said request is addressed by the petitioner to said MSK Projects (India) Ltd. i.e. the respondent and it reads thus:-
"With reference to your request letter dated 2 nd August 2010 we are pleased to inform you that our Board of Directors agreed to your request and offering the following deposit receipts to mark lien to avail temporary Loan by your company to meet urgent working capital needs.
1. Deposit receipt No: KCC/01/100876 for Rs. 95,75,000- 00
2. Deposit receipt No:KCC/01/100875 for Rs. 1,00,00,000- 00 Rs. 1,95,75,000- 00 It is the condition that the deposit receipts should be returned to us on or before the due date of the deposits unless agreed to renew it further period. In case of any default/delay you are liable to pay interest @ 30% p.a. at monthly rest from the date of default till the date of payment of principle and interest."
8.2 The relevant part of the letter dated 3.11.2010 on which the petitioner relied to contend that instead of releasing the Page 14 O/COMP/42/2012 CAV JUDGEMNT amount to the petitioner on maturity of the fixed deposit, is addressed by the Bank to said MSK Projects (India) Ltd. i.e. the respondent company, and it reads thus:-
"...We request you to kindly send us a letter, duly signed by the authorized official, confirming the acceptance of the terms and conditions as mentioned in the sanction intimation pending approval of rate of interest aspect. Further note that company is enjoying CCSDL limit against third party deposits belonging to the group companies of Mr. Ashok Khurana. Please note that we have to release the title deeds, deposits and the third party Guarantee pertaining to Mr. Ashok Khurana and family members and their group companies."
8.3 In response to the said letter dated 3.11.2010 from the concerned bank, the said M/s. MSK Projects (India) Ltd., i.e. the respondent forwarded its reply dated 3.11.2010 to the bank. The respondent's letter dated 3.11.2010 (Annexure-2, page
24) reads thus:
"Corporation Bank 14-15 national Plaza R.C. dutt Road Alkapuri Vadodara-390 007 Kind Attn: Shri Manjunath Dear Sir, Re: Request for various concessions.
We thank you very much for considering our various requests against working capital facilities. You have also agreed to waive Collateral Security given by director of MSK Projects (India) Ltd. We further like to inform you that Personal Guarantee and Collateral Security offered by Director of MSK Projects (India) Ltd is not to be released till you receive communication from us."
Thereafter, on the next day, i.e. 4.11.2010 (Annexure-4, page 25) the said bank addressed a letter to the Director of said M/s. MSK Projects (India) Ltd., i.e. to the Director of the respondent company. The said letter dated 4.11.2010 reads thus:
"Mr. Ashok Khurana, Director, MSK Projects (India) Limited, Page 15 O/COMP/42/2012 CAV JUDGEMNT Vadodara.
Sir, Subject: Various Deposits in the name of Group Companies held as lien to CCSDL of MSK Projects (India) Limited and Release of Collateral Securities and Personal Guarantee.
With reference to the above, we wish to inform you that the Company has informed that personal Guarantee and Collateral Securities offered by you, should not be released until we receive further communication from them.
Further, they have advised us to continue the CCSDL account No.100002 int he name of MSK Projects (India) limited, sanctioned against the third party deposits of various Group companies, until further instructions.
This is for your kind information."
At this stage, it is pertinent to note that from the said letter dated 4.11.2010, it emerges that the letter is addressed to one Mr. Ashok Khurana in his capacity as Director of M/s. MSK Projects (India) Ltd., i.e. the respondent company.
In light of the said fact (i.e. the fact that Mr. Ashok Khurana is described as Director of the respondent company by the bank in its above-mentioned letter dated 4.11.2010), it becomes relevant and necessary to also refer to letter dated 30.11.2010 (Annexure-C, page 10) and letter dated 10.12.2010 (Annexure-D, page 14) as well as letter dated 20.12.2010 (Annexure-E, page 15), letter dated 2.2.2011 (Annexure-F, page 17) because the said letters are addressed by said Mr. Khurana to the said bank, i.e. Corporation Bank and more important fact which emerges from the said letters is that said Mr. Khurana has addressed the said letters on behalf of the petitioner company and other associate companies of the petitioner company viz. D.F. Invest Ltd., Aaheli Construction Pvt. Ltd., Waa Solar Pvt. Ltd., Classic Inns Pvt. Ltd. and MSK Finance Pvt. Ltd. Thus, on one hand, said Mr. Khurana is Page 16 O/COMP/42/2012 CAV JUDGEMNT addressed and described as Director of the said MSK Projects (India) Ltd., i.e. the respondent company and on the other hand, same person, i.e. Mr. Khurana has acted also on behalf of petitioner and its associates. Hence, the transaction in question (i.e. the respondent approaching the petitioner with the request mentioned in letter dated 5.8.2010 and the petitioner responding vide its letter dated 5.8.2010) deserves to be considered in light of the above-mentioned fact also.
Besides the above-mentioned letters, one more letter, i.e. letter dated 31.12.2010 (Annexure-7, page 29) was exchanged between the said bank and said Mr. Ashok Khurana. The said letter dated 31.12.2010 reads thus:
"To:
Mr Ashok Khurana No.1, Vikram Society, Gotri Road, Vadodara 390 021.
Dear Sir, Subject: Release of third party guarantees / collateral securities etc., for credit facilities sanctioned to M/s Welspun Projects Limited (Formerly known as MSK Projects (India) Limited) We are in receipt of your two letters dated 20.12.2010 submitted by you, for self and on behalf of your associates.
In this regard, we would like to inform you that we have already taken up the issues with the captioned Company for early resolution."
It is pertinent that in the said letter also, the bank has made reference of two letters, both dated 20.12.2010 written by said Mr. Khurana on his behalf and on behalf of associates which include the respondent company.
Another letter which also, in light of above-mentioned facts, appear to be relevant is the letter dated 12.2.2011 Page 17 O/COMP/42/2012 CAV JUDGEMNT (Annexure-G, page 30) which is addressed by the said bank to said Mr. Khurana. In the said letter, Mr. Khurana is described/addressed as authorized person on behalf of the above-mentioned different companies which are said to be associate companies of the petitioner. The said letter dated 12.2.2011 reads thus:
"Mr. Ashok Khurana, D A Finvest Private Limited, Aaheli Construction Private Limited, Classic Inns Private Limited, WAA Solar Private Limited Vadodara.
Dear Sir, Subject: Deposits in the names of your Companies - bearing lien in favour our bank for the loans extended to MSK Projects (India) Limited. - CCSDL 100002 This is to inform you that following deposits held with us as lien towards the loan sanctioned to the captioned company have either become due or becoming due shortly. The details are furnished here below:
Deposit No. Name of the deposit Holder Due date KCC 100873 D A Finvest Private Limited 03.02.2011 KCC 100875 Aaheli Construction Private Limited 05.02.2011 KCC 100876 Aaheli Construction Private Limited 05.02.2011 KCC 100871 D A Finvest Private Limited 03.02.2011 KCC 100872 D A Finvest Private Limited 03.02.2011 KCC 110073 Classic Inns Private Limited 08.03.2011 KCC 110072 D A Finvest Private Limited 08.03.2011 KCC 100988 WAA Solar Private Limited 23.08.2011 We request you to kindly note that these deposits have to be appropriated towards the outstanding in the loan account on the due dates in the absence of specific request for the continuance of the deposits from Depositors.
In view of the above, we request you to look into the matter and inform us accordingly at your earliest."
Thus, according to this letter, Mr. Khurana represents all companies mentioned in said letters.
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From the the conspectus of, and on conjoint reading of, the above-mentioned letters, it emerges that Mr. Khurana is common person / Director so far as the petitioner company and the respondent company, i.e. the petitioning and the alleged debtor are concerned.
In present case, the said facts gain importance in present case in view of the respondent's allegation that the respondent company / its Board of Directors had not sanctioned/approved decision to avail loan and/or to request the petitioner to allow its FDRs as collateral security and it was said Mr. Khurana who had on his own and without sanction/approval of respondent company / its Board of Directors entered into and executed said transaction by taking disadvantage of the position that he alongwith others (most of them were associate of petitioner / Mr. Khurana) was promoter of said MSK Projects (India) Ltd., i.e. the respondent and was also one of the Directors in the petitioner company. According to the respondent company, the said transaction was unauthorised. In light of such allegations, the said facts gain relevance and importance.
Another important aspect which emerges in light of the reply by the respondent company is the fact that the entire transaction (which, according to the petitioner company, started in pursuance of letter dated 5.8.2010 by the respondent company) was initiated after the share purchase agreement (between the said third company viz. Welspun Infratech Ltd.) dated 18.3.2010 was executed.
It is pertinent that said Mr. Khurana and other associates are party to the said share purchase agreement dated 18.3.2010 as promoters of M/s. MSK Projects (India) Ltd., i.e. the respondent and after having executed the said agreement Page 19 O/COMP/42/2012 CAV JUDGEMNT dated 18.3.2010, the transaction of availing the disputed term loan against collateral security of fixed deposit extended by the petitioner company, was executed.
One of the questions which, therefore, arises is that after execution of said share purchase agreement dated 18.3.2010 why would said M/s. MSK Projects (India) Ltd. - wherein said Mr. Khurana is one of the promoters approach the petitioner company - wherein also said Mr.Khurana is one of the Directors - and request the petitioner company to allow its fixed deposits as collateral security and that too almost five months after the execution of share purchase agreement.
Another issue which also arises in light of the reply affidavit by the respondent company is that when the respondent company has raised the contention that the term loan in the name of respondent company was availed without sanction of the company / its Board of Directors and similarly the facility of collateral security in form of fixed deposits of the petitioner company from the petitioner company was also availed without sanction of the company / its Board of Directors, why the petitioner company has not placed on record resolution which ought to have been passed by said M/s. MSK Projects (India) Ltd. before availing term loan and before availing facility of collateral security in form of fixed deposits of the petitioner company.
In response to the said contention by the respondent company, the petitioner company could have and ought to have placed on record copy of the resolution which might have been passed by the said M/s. MSK Projects (India) Ltd.
8.4 It appears that vide its letter dated 26.2.2011 [Page-33 of the petition], the petitioner informed the respondent company Page 20 O/COMP/42/2012 CAV JUDGEMNT that:-
"We request you to pay the amount immediately along with the interest @ 30% from 03/08/2010 till the date of payment. We request you to clear the amount within a period of 15 days from the date of this letter, failing which, we shall be constrained to initiate legal proceedings against you as stated herein below, as deemed fit and proper:
(a) Civil proceedings for recovery of the amount along with interest @ 30% p.a.
(b) Winding-up proceedings as against you.
(c) Criminal proceedings as against you.
(d) Attachment proceedings for attachment of your movable and
immovable properties.
We hope you will repay us immediately but earlier than 15 days as requested above."
8.5 In reply to the said letter dated 26.2.2011, the respondent company addressed a letter dated 9.3.2011 [Page- 34 of the petition] stating, inter alia, that:-
"It seems that you have acted on instruction on Mr. Ashok Khurana, then Chairman of the Company. Please note that Mr. Ashok Khurana, was never authorized by the Board of Director (the Board) of the Company to act in this regard. Further you were never requested by the Board of the Company to provide security in favour of the Bank, in connection with the loan availed by the Company.
You as a prudent person while extending security in favour of the Bank, should have confirmed whether Mr. Khurana, then Chairman of the Company has obtained necessary approval of the Board of the Company for availing loan from the Bank. Mr. Khurana, then Chairman of the Company has acted beyond scope of his authority as Chairman of the Company and you have failed to exercise proper due diligence in this regard. We allege that Mr. Khurana and you have acted in collusion by availing unauthorized loan from the Bank without approval of the Board of the Company and are responsible for precarious financial conditions of the Company. We reserve all our rights and remedies in the matter."
8.6 In light of the said two letters dated 26.2.2011 and 9.3.2011 by the petitioner company and the respondent company respectively (and from other material / documents which are placed on record by the contesting parties), relevant fact which emerges is that when the petitioner company directly approached / communicated with the respondent company vide its said letter dated 26.2.2011, the respondent Page 21 O/COMP/42/2012 CAV JUDGEMNT company forwarded its reply to the petitioner vide its letter dated 9.3.2011 (wherein the respondent company raised the issue about sanction in respect of the term loan by the company / its Board of Directors).
The above-mentioned aspects, which emerge from the material / documents placed on record, lead to a situation which supports the objection / contention raised by the respondent company against maintainability of present petition on the ground that the petition and the claim raised by the petitioner involve and raise various issues of disputed facts.
In this context, it is appropriate to refer to below mentioned details contained in letter dated 30.11.2010 (Annexure-C, page 10) addressed by said Mr. Khurana to the bank:
"Further to my letter under reference regarding subject matter, it state that by Company's letter dated 14th April, 2010, you were informed about Taking over of MSK Projects (India) Ltd by Welspun Infratech ltd. You are aware that a joint meeting was held on 24/09/2010 at Mumbai in connection with the Taking over of Company MSK Projects (Indai) Ltd so that you, as Lead Bankers for the Consortium, could take a decision whether to recall the loans or continue your relationship with the Company. In the latter case, your decision to continue relationship with the Company implied that you had arrived at agreement with the Company regarding the terms and conditions of your relationship and that all Personal Guarantees, Collateral Securities and Deposits (towards the Margin of Bank Guarantee as well as CCSDL) belonging to me, my family members, relatives and associates given by me were to be forthwith released.
A binding contract being arrived at your bank was bound to release all the Personal Guarantees and Collateral Securities. You bank confirmed to us that it would be releasing all the personal Guarantees, Collateral Securities and Deposits vide its letter dated 03/11/2010. If the Company gives instructions to the contrary and/or causes delay in completing the pending formalities, we are not concerned with it; and our interests should not be prejudicially affected thereby.
Further, as per clause 7.9 of the Share Purchase Agreement (True copy of the clause enclosed) entered between Promoters and Welspun Infratech Ld. The purchaser i.e. Welspun Infratech ltd. has agreed to release the personal guarantees issued by the Promoters Page 22 O/COMP/42/2012 CAV JUDGEMNT within 3 (three) months of the Share Sale Closing Date i.e. 16/08/2010. Hence, the purchaser has to release all the guarantees, securities given by the Promoters before 15/11/2010. Hence, under this clause also we are entitled for getting our securities back."
The said details also bring out that either directly or indirectly the transaction in question (i.e. the transaction whereby the respondent availed the term loan and the petitioner offered collateral security is connected with the agreement dated 18.3.2010 and the relation which came into existence as a result of the agreement dated 18.3.2010. This is also evident from the fact that Mr. Khurana, as authorized signatory on behalf of the petitioner and its associates, himself has made reference of the said agreement dated 18.3.2010, particularly clause No.7.9 as well as clause No.4.1.1 of the said agreement. Even in his subsequent letter dated 20.12.2010, Mr. Khurana has made reference of the meeting of the consortium when he claimed, in the said letter, that during the meeting of the consortium, it was decided to waive personal guarantees and collateral securities in form of movable and immovable properties, FDRs offered by the promoters and affiliates against the facilities sanctioned to MSK Projects (India) Ltd. The said aspects also give rise to rival contentions and allegations which involve disputed facts.
8.7 At this stage, it is appropriate to make reference of the factual aspect emphasized by the respondent in its reply affidavit. The said factual aspect also brings out the discrepancy between the facts mentioned by the petitioner and the facts emerging from the record. In paragraph No.9.3 of its reply affidavit, the respondent has emphasized that:-
"9.3 The collusive and fraudulent nature of the transaction is apparent from the fact that while the OD obtained from Corporation Bank is dated August 3, 2010 (Annexed hereto and marked as Page 23 O/COMP/42/2012 CAV JUDGEMNT Annexure "D" is a copy of the On Demand Promissory Note issued to Corporation Bank), the request by the Company to the Petitioner for keeping the Petitioner's FDRs as security for the said OD was made only on August 5, 2010, i.e. after sanctioning of the OD facility (Annexure A to the captioned Petition). Also, the Petitioner's response purporting to offer to the Company the FDRs as security for the said OD was issued on the same day, i.e. August 5, 2010, even though the two companies are situated in different cities (Annexure B to the captioned Petition)....."
8.8 The aspects which are mentioned and discussed hereinabove, particularly from paragraphs No.8 to 8.7 also give rise to the question to the effect that when the transaction in question, more particularly the transaction of allowing the fixed deposit receipts as collateral security was executed in August-2010 and the fixed deposits were offered and taken as collateral security on or around 3.8.2010/4.8.2010, then which are the fixed deposits referred to and mentioned in the share purchase agreement dated 18.3.2010 and in the petitioner's letter dated 30.11.2010 addressed to the bank.
9. Having regard to and in view of the above-mentioned aspects and details, the Court is of the view that the controversy between the parties involve factual disputes, i.e. disputed facts and the said disputed facts are such which would necessitate documentary oral evidence by both sides. Ordinarily, Company Court would not entertain and maintain petitions invoking provisions under Sections 433 and 434 of the Act when the petition involves disputed facts which would oblige the parties to lead oral evidence. Such process would be feasible and practicable in ordinary civil remedy, i.e. suit proceedings before appropriate Court.
In this view of the matter, the Court is not inclined to entertain present petition and would rather relegate the parties to ordinary civil remedy with the clarification that the Page 24 O/COMP/42/2012 CAV JUDGEMNT observations made in the order are only for the purpose of deciding maintainability of the petition and do not reflect views of the Court on the merits of the dispute or controversy, much less about the merits of the claim of the petitioner or defence of the respondent. The petition, therefore, is not accepted. Orders accordingly.
(K.M.THAKER, J.) kdc/bharat Page 25