Chattisgarh High Court
The Greater Bombay Co-Operative Bank ... vs Shri Adishwar Oils And Fats Limited on 25 July, 2017
Author: Sanjay K. Agrawal
Bench: Sanjay K. Agrawal
Comp.Pet.No.2/2015
Page 1 of 11
AFR
HIGH COURT OF CHHATTISGARH, BILASPUR
Company Petition No.2 of 2015
Order reserved on: 20-6-2017
Order delivered on: 25-7-2017
The Greater Bombay Co-operative Bank Ltd. having their Registered
Office at 89, GBCB House, Bhuleshwar, Mumbai 400 002.
---- Petitioner
Versus
Shri Adishwar Oils and Fats Limited, a company incorporated under the
provisions of the Companies Act, 1956 and having its Registered Office
at H.No.213, Station Road, Mahasamund, Chhattisgarh - 493 445.
(CIN: - U01514CT1991PLC006211)
---- Respondent
For Petitioner: Mr. Rishabh Shah and Mr. Parag Kotecha,
Advocates.
For Respondent: Mr. Ankit Singhal, Advocate.
Hon'ble Shri Justice Sanjay K. Agrawal
C.A.V. Order
1. Invoking the jurisdiction of this Court under Sections 433 and 434
of the Companies Act, 1956, the petitioner herein - The Greater
Bombay Co-operative Bank Limited has filed this petition stating
inter alia that the petitioner Bank is a Scheduled Co-operative Bank
registered under the Maharashtra Co-operative Societies Act, 1960
and having its registered office at the address mentioned in the title
of the petition and carrying on its banking business, whereas the
respondent is a company registered under the provisions of the
Companies Act, 1956 and having its registered office at H.No.213,
Station Road, Mahasamund and engaged in the business of
Comp.Pet.No.2/2015
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manufacturing and exporting of Soya DOC production of Soya Oil
(Solvent Extraction Plant).
2. The petitioner had sanctioned, advanced and disbursed to the
respondent a cash credit ad hoc limit of ₹ 50 lakhs on 2-1-2010
vide sanction letter dated 26-6-2010 and in addition to ₹ 5 crores
advanced vide sanction letter dated 31-3-2010 in consortium with
State Bank of India under a cash credit working Capital Consortium
Agreement dated 12-1-2009, entered into between the respondent
and State Bank of India as a lead Bank and the petitioner. The
respondent has availed and utilised the facilities granted to it and
the sanction was also accepted by the respondent Company.
3. It is further pleaded that the respondent Company has accepted
the terms and conditions under the aforesaid sanction letters and
also executed a Joint Deed of Hypothecation by creating a first
pari-passu charge created in favour of State Bank of India and
executed all the security documents and all the guarantors have
executed personal guarantees by accepting the terms and
conditions without demur and protest. All other documents have
been executed by the respondent Company. Charge of various
assets has also been executed by the respondent Company.
4. It is also pleaded that the respondent Company has failed to serve
the account by way of payment of principal or interest for a period
of 90 days hence, the account was declared as non performing
asset on 30-5-2011. Notice under Section 13 (2) of the
Securitisation and Reconstruction of Financial Assets and
Comp.Pet.No.2/2015
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Enforcement of Security Interest Act, 2002 (for short, 'the
SARFAESI Act') was issued on 29-7-2011 for recovery of ad hoc
cash credit limit of ₹ 50 lakhs, as the petitioner had failed and
neglected to repay the loan amount and also notices were issued
under Section 13 (4) of the SARFAESI Act upon the respondent for
taking possession of the property charges to the petitioner. After
grant of revenue recovery certificate granted by the competent
authority, the total liability is ₹ 5,78,72,146/- which the respondent
Company has audited balance sheet for the year ending on 31-3-
2010 to be ₹ 5,41,41,358/-. It was further pleaded that the
respondent is not doing the business so as to be able to repay the
outstanding dues of the petitioner and the respondent has become
commercially insolvent. Looking to the financial position, if the
respondent Company is allowed to run, the financial position of the
respondent will create more debtors in the market. On 29-10-2014,
legal notice has been served upon the respondent which has been
returned "unclaimed" and as such, the respondent is liable to pay ₹
9,23,52,768-67. Despite demands, the respondent Company has
failed and neglected to pay the amount. Therefore, the petition be
admitted for winding up of the respondent Company.
5. The respondent Company has entered into appearance and
opposed the prayer of the petitioner stating that the petitioner Bank
has also resorted to the provisions of the SARFAESI Act and as
such, the SARFAESI Act would prevail over the provisions of the
Companies Act and the company petition as framed and filed is not
maintainable in law. State Bank of India being the lead bank, the
Comp.Pet.No.2/2015
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petitioner Bank is not entitled to institute the present company
petition. Therefore, the present petition as framed and filed is not
maintainable. The respondent Company is facing financial
hardship and it is not in operation. The petition for winding up
cannot be allowed to be converted into a suit for recovery and the
petitioner must resort to the ordinary remedy of recovering the
amount, if any, before the jurisdictional civil court, as such, the
company petition deserves to be dismissed, as it is does not
deserve to be admitted.
6. In rejoinder submission, the petitioner contends that by virtue of the
provisions contained in Section 37 of the SARFAESI Act, the
remedy under the SARFAESI Act is in addition to and not in
derogation of the remedies available under the provisions of the
Companies Act, 1956 and therefore the remedy of winding up is
not barred on account of invocation of jurisdiction under the
provisions of the SARFAESI Act. Therefore, the objection deserves
to be rejected.
7. Mr. Ankit Singhal, learned counsel appearing for the respondent,
opening the argument would raise preliminary objection and submit
that since the petitioner Bank has already resorted to the measures
provided under the SARFAESI Act, therefore, the company petition
as framed and filed under Section 433 read with Section 434 of the
Companies Act, 1956, would not be maintainable and as such, it be
dismissed as not maintainable and he would place reliance upon a
decision of the Supreme Court in the matter of Pegasus Assets
Reconstruction P. Ltd. v. M/s. Haryana Concast Limited and
Comp.Pet.No.2/2015
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another1.
8. Mr. Rishabh Shah, learned counsel appearing for the petitioner,
replying to the preliminary contention would submit that by virtue of
Section 37 of the SARFAESI Act, the provisions of the said Act and
the rules made thereunder shall be in addition to, and not in
derogation of, the provisions of the Companies Act and therefore
the objection raised by the respondent deserves to be overruled.
9. I have heard learned counsel for the parties on the question of
preliminary objection.
10. It would be expedient to notice Section 37 of the SARFAESI Act
which reads as under: -
"37. Application of other laws not barred.--The
provisions of this Act or the rules made thereunder
shall be in addition to, and not in derogation of, the
Companies Act, 1956 (1 of 1956), the Securities
Contracts (Regulation) Act, 1956 (42 of 1956), the
Securities and Exchange Board of India Act, 1992 (15
of 1992), the Recovery of Debts Due to Banks and
Financial Institutions Act, 1993 (51 of 1993) or any
other law for the time being in force."
11. A focused glance of the aforesaid provision would clearly show that
the provisions of the SARFAESI Act as well as the rules made
thereunder shall be in addition to and not in derogation of the
Companies Act, 1956. The expressions "in addition to" and "not in
derogation of" have been considered by the Supreme Court in the
matter of P.C. Joshi and another v. The State of Uttar Pradesh 2
with reference to Section 198B of the CrPC. Their Lordships have
held that Section 198 of the CrPC in which such phrases "in
1 AIR 2016 SC 494
2 AIR 1961 SC 387
Comp.Pet.No.2/2015
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addition to" and "not in derogation of" have been employed, are an
additional provision and is not intended to take away the right of a
person aggrieved even if he belongs to the specified classes and
the offence is in respect of his conduct in the discharge of his
public functions to file a complaint in the manner provided by
Section 198. Their Lordships pertinently observed as under:-
"The expressions, "in addition to" and "not in
derogation of" mean the same thing - that S. 198B is
an additional provision and is not intended to take
away the right of a person aggrieved even if he
belongs to the specified classes and the offence is in
respect of his conduct in the discharge of his public
functions to file a complaint in the manner provided by
s. 198. "Derogation" means, taking away, lessening or
impairing the authority, position or dignity, and the
context in in which sub-s. (13) occurs clearly shows
that the provisions of S. 198B do not impair the remedy
provided by S. 198. It means that by S. 198B, the right
which an aggrieved person has to file a complaint
before a Magistrate under S. 198 for the offence of
defamation even if the aggrieved person belongs to the
specified classes and the defamation is in respect of
his conduct in the discharge of his public functions, is
not taken away or impaired. If sub-s. (13) be construed
as meaning that the provisions of S. 198B are to be
read as supplementary to those of S. 198, the non-
obstante clause with which sub-s. (1) of S. 198B
commences is rendered wholly sterile, and unless the
context compels such an interpretation, the court will
not be justified in adopting it."
12. The expressions "in addition to" and "not in derogation of" are a
legislative device and they have been used by the legislature in
their wisdom in some of the statutes. Section 3 of the Consumer
Protection Act, 1986 also provides such phrases "in addition to"
and "not in derogation of". Their Lordships of the Supreme Court in
umpteen number of cases have held that where the phrases "in
addition to" and "not in derogation of" are used, that would be an
Comp.Pet.No.2/2015
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additional remedy. Their Lordships of the Supreme Court while
dealing with Section 3 of the Consumer Protection Act, 1986, which
provides pari materia provision held that such a provision is an
additional remedy and availability of other statutory remedies would
not bar.
13. The Supreme Court in the matter of Secretary, Thirumurgan Co-
operative Agricultural Credit Society v. M. Lalitha (Dead)
through LRs and others3 has held as under:-
"12. As per Section 3 of the Act, as already stated
above, the provisions of the Act shall be in addition to
and not in derogation of any other provisions of any
other law for the time being in force. Having due
regard to the scheme of the Act and purpose sought to
be achieved to protect the interest of the consumers
better, the provisions are to be interpreted broadly,
positively and purposefully in the context of the present
case to give meaning to additional/extended
jurisdiction, particularly when Section 3 seeks to
provide remedy under the Act in addition to other
remedies provided under other Acts unless there is a
clear bar.
***
14. In Fair Air Engineers (P) Ltd. v. N.K. Modi4 the Supreme Court, after referring to Lucknow Development Authority case5, held that the provisions of the Act are to be construed widely to give effect to the object and purpose of the Act. It went on to say that:
"It is seen that Section 3 envisages that the provisions of the Act are in addition to and are not in derogation of any other law in force. It is true, as rightly contended by Shri Suri, that the words "in derogation of the provisions of any other law for the time being in force" would be given proper meaning and effect and if the complaint is not stayed and the parties are not relegated to the arbitration, the Act purports to operate in derogation of the provisions of the 3 (2004) 1 SCC 305 4 (1996) 6 SCC 385 5 Lucknow Development Authority v. M.K. Gupta, (1994) 1 SCC 243 Comp.Pet.No.2/2015 Page 8 of 11 Arbitration Act. Prima facie, the contention appears to be plausible but on construction and conspectus of the provisions of the Act we think that the contention is not well founded. Parliament is aware of the provisions of the Arbitration Act and the Contract Act, 1872 and the consequential remedy available under Section 9 of the Code of Civil Procedure, i.e., to avail of right of civil action in a competent court of civil jurisdiction. Nonetheless, the Act provides the additional remedy."
14. Further dealing with the jurisdiction of the forums under the 1986 Act in para 16 the Supreme Court has stated thus:
"16. It would, therefore, be clear that the legislature intended to provide a remedy in addition to the consentient arbitration which could be enforced under the Arbitration Act or the civil action in a suit under the provisions of the Code of Civil Procedure. Thereby, as seen, Section 34 of the Act does not confer an automatic right nor create an automatic embargo on the exercise of the power by the judicial authority under the Act. It is a matter of discretion. Considered from this perspective, we hold that though the District Forum, State Commission and National Commission are judicial authorities, for the purpose of Section 34 of the Arbitration Act, in view of the object of the Act and by operation of Section 3 thereof, we are of the considered view that it would be appropriate that these forums created under the Act are at liberty to proceed with the matters in accordance with the provisions of the Act rather than relegating the parties to an arbitration proceeding pursuant to a contract entered into between the parties. The reason is that the Act intends to relieve the consumers of the cumbersome arbitration proceedings or civil action unless the forums on their own and on the peculiar facts and circumstances of a particular case, come to the conclusion that the appropriate forum for adjudication of the disputes would be otherwise than those given in the Act."
15. Their Lordships finally held as under:-
"20. Thus, having regard to all aspects, we are of the view that the National Commission was right in holding that the view taken by the State Commission that the provisions under the Act relating to reference of disputes to arbitration shall prevail over the provisions Comp.Pet.No.2/2015 Page 9 of 11 of the 1986 Act is incorrect and untenable. ..."
16. In the matter of Haryana Telecom Ltd. v. Sterlite Industries (India) Ltd.6, winding up petition was filed by a creditor before the High Court and the Company moved an application under Section 8 of the Arbitration and Conciliation Act, 1996, stating inter alia that the High Court should refer the matter to arbitration. The contention was rejected by the High Court and when the matter was taken-up before the Supreme Court, the Supreme Court pointed out that "The claim in a petition for winding up is not for money. The petition filed under the Companies Act would be to the effect, in a matter like this, that the Company has become commercially insolvent and, therefore, should be wound up. The power to order winding up of a Company is contained under the Companies Act and is conferred on the Court."
17. The Supreme Court in the matter of Sri Vedagiri Lakshmi Narasimha Swami Temple v. Induru Pattabhirami Reddi 7 has authoritatively held that in every situation where the Legislature has excluded jurisdiction of the Civil Court, the exclusion has to be applied only to the extent the Legislature intends and not a wit beyond it. It was further observed that "Any other construction would lead to an incongruity, namely, there will be a vacuum in many areas not covered by the Act and the general remedies would be displaced without replacing them by new remedies".
18. Likewise, the Supreme Court in the matter of Allahabad Bank v. 6 (1999) 5 SCC 688 7 AIR 1967 SC 781 Comp.Pet.No.2/2015 Page 10 of 11 Canara Bank and another8 held that the Companies Act, 1956 and the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 can both be treated as special laws and the principle is that, where there are two special laws, the latter will normally prevail over the former, if there is a provision in the latter special Act giving it overriding effect.
19. The Bombay High Court in the matter of Viral Filaments Ltd., Mumbai v. Indusind Bank Ltd., Mumbai 9 has clearly held that the admission of petition for winding up under Section 433(e) of the Companies Act, 1956 need not be preceded by an adjudicated liability of the company. It proceeds upon the inability of the company to pay its debts. Section 434(1)(a) prescribes a statutory presumption of such inability on the part of the Company if the conditions prescribed therein are fulfilled. Thus, the Company Court had nothing but the statutory presumption to fall upon at the time of admission of the company petition.
20. Thus, the objection raised by the respondent that since the petitioner Bank has resorted to the provisions of the SARFAESI Act, the petition is not maintainable, deserves to be rejected, as the SARFAESI Act is in addition to and not in derogation of the provisions of the Companies Act, 1956, in view of Section 37 of the SARFAESI Act.
21. This would bring me to the next submission of the petitioner Bank that the respondent Company has become commercially insolvent 8 (2000) 4 SCC 406 9 [2003] 113 CompCas 85 (Bom) Comp.Pet.No.2/2015 Page 11 of 11 and is not in operation and, therefore, it is unable to pay the debts and as such it is a fit case for admitting the petition for winding up of the respondent Company. The respondent has not disputed the facts seriously and simply contested that the alleged debt of the respondent Company is secured by way of creation of equitable mortgage of their secured assets in favour of the petitioner Bank along with the lead bank i.e. the State Bank of India and therefore the petition for winding up is not maintainable and the respondent has not become commercially insolvent.
22. It is not in dispute that the respondent Company is not in operation and is not able to meet its current demands and it is the case of the respondent Company that the respondent Company is trying its best to revive the Company, however, due to market conditions and financial crisis, the Company is facing problem in reviving and since the debts of the petitioner Bank are secured, therefore, it cannot be said that the respondent Company has become commercially insolvent. After hearing counsel for the parties, considering the evidence available on record and pleadings of the parties and also considering the statutory notice served to the respondent Company and its failure to pay the amount, along with material brought on record, I am of the considered opinion that it is a fit case where the petition should be admitted for winding up.
23. List it for further orders on 28-7-2017.
Sd/-
(Sanjay K. Agrawal) Judge Soma