Gujarat High Court
Vanguard vs Ghcl on 11 April, 2012
Author: Jayant Patel
Bench: Jayant Patel
Gujarat High Court Case Information System
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COMP/20/2009 10/ 10 ORDER
IN
THE HIGH COURT OF GUJARAT AT AHMEDABAD
COMPANY
PETITION No. 20 of 2009
=========================================================
VANGUARD
TEXTILES LIMITED - Petitioner(s)
Versus
GHCL
LTD. - Respondent(s)
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Appearance :
MR
VIMAL M PATEL for Petitioner(s) : 1,
MR RS
SANJANWALA for Respondent(s) :
1,
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CORAM
:
HONOURABLE
MR.JUSTICE JAYANT PATEL
Date
: 26/08/2009
ORAL
ORDER
The present petition is for seeking winding up of the respondent Company, i.e. GHCL Ltd.
Heard Mr.Patel for the petitioner and Mr.Sanjanwala for the respondent Company.
It prima facie appears that the contention of the petitioner is that there is Deed of Guarantee executed by the respondent Company for guaranteeing the liability of the goods supplied to its wholly owned subsidiary Company, viz. Rosebys Operations Limited. It is an admitted position that the Deed of Guarantee was not executed. However, the contention of the respondent Company is that the Deed of Guarantee was executed at UK and therefore, when the goods were supplied by the petitioner to Rosebys Operations Limited(hereinafter referred to as principal debtor/subsidiary Company of the respondent Company), at U.K. the cause of action wholly or in part is outside the Indian territory and at UK and therefore, such claim based on Deed of Guarantee is not enforceable.
As per the petitioner, the goods/material were supplied to the subsidiary Company of the respondent and the payment has not been made and therefore, the guarantee is invoked. The same is coupled with the circumstance that the subsidiary Company is declared insolvent and is under the administration of the concerned Court under insolvency proceeding. The petitioner has lodged the claim before the concerned authority for recovery of the amount from the subsidiary Company. However, no money is realised therefrom and the matter is at the stage of adjudication of the claim. At that stage, the guarantee was invoked. Further, the petitioner filed the Suit based on the guarantee before the Court at UK and as stated in the Judgement, the respondent did not appear and therefore, there is a default Judgement (ex parte) for the sum of £1,11,498.21 on the basis of which statutory notice was served to the respondent Company under the Indian Companies Act. In the very statutory notice, the subsequent claim which remained unpaid by the subsidiary Company of £48,344.13 was also referred to and the demand was made based on the Guarantee from the respondent Company to pay the same. There is no denial by the respondent to such statutory notice in toto, but the communication is that the claim is not verified and therefore, the same is denied.
Mr.Sanjanwala, learned counsel appearing for the respondent Company mainly raised three contentions; one is that no part of cause of action has arisen within the territory in India and have arisen in UK and therefore, the Deed of Guarantee is not enforceable nor any claim based on such Deed of Guarantee is non-enforceable in Indian Courts. Clause 14.1(a)(i) of the Deed of Guarantee reads as under -
(i) For the benefit of the Supplier, the Guarantor submits to the exclusive jurisdiction of the courts of England and Wales in relation to all claims, disputes, differences or other matters arising out of or in connection with this Deed provided that nothing in this clause shall prevent the supplier in its sole and unfettered discretion, from commencing proceedings against the Guarantor in any court of competent jurisdiction. (Emphasis supplied) Therefore, prima facie it appears that the action by the supplier for commencing the proceedings against the Guarantor in any Court of the competent jurisdiction is not barred. If the respondent Company is registered in Gujarat, this Court can be said as that of the competent jurisdiction for entertaining of the proceedings of the winding up. Therefore, prima facie, the contention raised on behalf of the respondent cannot be said as acceptable for ousting the jurisdiction of this Court on a mere ground that the cause of action pertaining to the supply or the delivery or the guarantee had not arisen in India.
The next contention raised by Mr.Sanjanwala was that the Deed of Guarantee is without prior approval of RBI as per the provisions of the Foreign Exchange Management Act, 1999 (hereinafter referred to as 'FEMA'). Therefore, the Deed of Guarantee is non-enforceable in India. It was submitted that if the Deed of Guarantee is non-enforceable in India in absence of the permission of the RBI, the same cannot be invoked nor any liability based on the same can be enforced in Indian Courts by the petitioner.
Prima facie the submission appears to be attractive, but upon a close scrutiny, it appears to be unjust, inequitable, and not bonafide. It deserves to be recorded that as per the Deed of Guarantee, even if the permission of RBI was to be obtained under FEMA, the same was an obligation upon the respondent Company when it executed a Deed of Guarantee. The respondent Company who has made the petitioner to believe as per the Agreement that the necessary permission of the competent authority will be obtained and if has not been obtained and based on such Deed of Guarantee, if the petitioner has acted upon the same, the respondent cannot be permitted to take benefit therefrom. Further, the amount of statutory notice even if considered in toto, is less than $ 100 Million, which is the minimum requirement for seeking sanction of RBI. If the contention of the respondent Company is that on account of any transaction by wholly owned subsidiary Company abroad, the Guarantee as was to be given by the respondent Company being Indian party, the permission of RBI was required to be obtained, then also, such obligation would be upon the respondent Company to obtain the permission. Even if the contention is considered for the sake of examination that the permission was not obtained, the respondent Company cannot get away from its liability to discharge the obligation as per the Deed of Guarantee in any case for the sum equivalent to Indian Rupees. If such a contention is entertained, it would frustrate the basic principles of maintenance of equitable jurisdiction coupled with the statutory power to be exercised as per the provisions of the Companies Act for winding up of the Company. Therefore, the said contention prima facie does not deserve to be accepted. At this stage, reference may be made to the decision of the Calcutta High Court reported at [1983]53 Company Cases 744 (Cacutta) and more particularly, the observations made at para 4 of the said decision.
It was lastly contended by Mr.Sanjanwala, learned counsel appearing for the respondent Company that the decree of Court of England is non-enforceable in India as per the provisions of Section 13B and 13D of CPC and it was submitted that the remedy for enforcement for execution of such decree of the Courts of UK is as per Section 44A of CPC since the UK being a country of reciprocating territory, but in view of the fact that such decree is non-executable as per Section 13 of CPC, and if such decree is non-enforceable, there is no valid claim which can be made as the basis for invoking the power of this Court for winding up of the respondent Company.
It deserves to be recorded that as per the Decree of the Court of UK, the process is served, but the respondent Company has not defended. It may be that the decree is not on merit after dealing with each and every contention of the plaintiff, but thereby, it cannot be said that there is no foreign judgement against the respondent Company. After having being served the statutory notice by the petitioner, nothing prevented the respondent Company for filing the suit for a declaration that the decree is not binding, but such option available has not been exercised. Further, when there is a decree/judgment of a foreign Court for fastening the liability, it cannot be prima facie said that their would not be any liability at all of the respondent. In any case, the aspects of non-enforceability may be required to be considered in execution proceeding, if resorted to, but such cannot be a sole ground to deny the entertainment of the petition for winding up of the Company on the basis of such liability. The reference may be made to the decision of the Andhra Pradesh High Court in the case of Enernorth Industries Inc. Vs. VBC Ferro Alloys Ltd. reported at [2006]133 Comp Case 130 (AP), more particularly the observations made at para 34 and 35 that merely because the other modes are available, it cannot be said that the petition for winding up is not maintainable.
In the above view of the matter, it prima facie appears that the defence as sought to be canvassed on behalf of the respondent Company is not bonafide and is just to create a situation of no liability whatsoever of the respondent Company though it had executed a Deed of Guarantee for supply to be made by the petitioner to its wholly owned subsidiary Company. Therefore, such an attempt on the part of the respondent Company to disown the liability whatsoever can be said as malafide defence. The grounds of breach of certain procedural aspects not followed or certain jurisdictional aspects, prima facie are without substance.
It was submitted on behalf of the respondent Company by Mr.Sanjanwala that the respondent Company is a Limited Company and it is financially very sound Company and therefore, if it has ability to pay the amount, this Court may decline the entertainment of the petition for winding up by dismissing the same at this stage.
Had it been a case where the amount claimed is deposited with this Court, it might stand on different footing. Further, had it been a case where this Court finds that the defence is genuine or non dishonest or substantial, it may stand on different footing. But in a case where neither of the situation arise and the matter is at the stage of admission of the petition, it would profitable to extract certain observations of this Court in the case of Ficom Organics Ltd. Vs. Laffans Petrochemicals Ltd. reported in (1998) 5 Comp LJ 24 (Guj). This Court in the said decision made the observations as under:
IV COURT'S FINDINGS ON BONA FIDES OF COMPANY'S DEFENCE AND ORDERS WHICH MAY BE PASSED UPON SUCH FINDINGS (1) After considering the material on record, if the Court comes to the conclusion that the defence raised by the Company is not only not bona fide, but the defence is reeking with mala fides or the company's conduct leading to the dispute (in respect of which the Company's defence is found to be not bona fide) was dishonest, the Court would admit the petition and pass an order for advertisement.
(2) Where the Court comes to the conclusion that the defence is not bona fide (as distinguished from the conclusion that the defence is mala fide), the Court may give the Company an opportunity to pay the debt to the petitioner within the stipulated time limit. If the debt is not paid, the Court would ordinarily admit the petition, unless a strong case is made out for not admitting the petition. The Court may, in its discretion, even pass a conditional order of admission without an order for advertisement while giving the finding that the Company's defence is not bona fide.
(3) Where the Court gives only a prima facie or tentative finding that the Company's defence is not bona fide, before admitting and advertising the petition the Court must also give a prima facie or tentative finding that the Company is commercially insolvent, that is, the Company is unable to pay its debts as a going concern.
(4) Where the Court gives a finding that the defence raised by the Company is a bona fide one, i.e. substantial, non payment of such debt cannot amount to neglect to pay debt as contemplated by Sec. 434(1)(a) and the petition would have to be dismissed. In such a case, the Company Court may give only a prima facie i.e. tentative finding because the controversy can be finally decided in the civil suit. Of course, such a finding is bound to result into the Company (defendant in the suit) getting unconditional leave to defend (which would be perfectly just and proper) in case the petitioner files a summary suit for recovering the debt in question.
(5) If the case falls in the grey area, that is, the Company's defence is neither found to be substantial nor a moonshine and, therefore, the Court is not in a position even tentatively to give a finding one way or the other whether the defence is bona fide or not, the Court may require the Company to deposit the claim amount or a part thereof in the Court and require the petitioner to prove its claim before the Civil Court to which the amount deposited will be transferred or the Court may require the Company to give security for the amount claimed.
Therefore, keeping in view the aforesaid, if the facts of the present case are considered, prima facie, at the admission stage, the following deserves to be passed :
Admit.
As the defence of the respondent Company is found to be not bonafide, before this Court passes the further order for issuing advertisement in accordance with law, by way of an opportunity to be given to the respondent Company for showing its ability to pay the debt and also to show the complications which may arise on account of the advertisement upon its commercial solvency or insolvency as the case may be, the respondent is directed to deposit the amount of Rs.89,19,840/- being equivalent Indian rupees at the rate of Rs.80/- per pound of £ 1,11,498.21. So far as amount equivalent to £ 48,343.13 is concerned, no order for directing to deposit is made at this stage. Such amount be deposited with this Court without two weeks on or before 15th September, 2009.
S.O. to 17th September, 2009 for passing further orders.
(JAYANT PATEL, J.) *bjoy Top