MHB BANK AKTIENGESELLSCHAFT Vs. SANGHI POLYESTERS LTD.

JUDGEMENT

(1.) This company petition has been taken out under Section 439(1)(b) and Section 433(e) read with Section 434(1)(a) of the Companies Act, 1956 seeking an order of winding up of the respondent company-M/s. Sanghi Polyesters Limited. The petitioner is a Bank engaged in banking business having its' place of business at Bockenheimer, Landstrasse, 10, 60323, Frankfurt Am Main, Federal Republic of Germany and having a representative office situated at 107, Maker Chambers III, 223, Nariman Point, Mumbai 400 021 under the Laws of the Federal Republic of Germany. The respondent is a company incorporated under the Companies Act, 1956 having its registered office at 4.3.353, Bank Street, Hyderabad, Andhra Pradesh. The respondent company approached the petitioner bank for grant of loan for purchase of seven 32-pos, CW4t-1200/6 POY-HIGH SPEED TAKE UP MACHINES from M/s. Barmag A.G., Germany. The respondent-company granted loan to a tune of DM 16,062,144.00 (Deutsche Marks sixteen million sixty two thousand one hundred forty four only). The respondent-company executed loan documents and availed the loan. Part payments have been made by the respondent-company towards the loan amount. An aggregate outstanding due as on 30th August, 1997 was DM 16,149, 493.23. The petitioner bank addressed series of letters demanding the respondent company to clear the outstanding due. The letters did not yield any fruitful result. Ultimately, the petitioner bank issued a notice under Section 434 of the Companies Act, 1956 making a demand from the respondent company to make payment as per the loan agreement. Despite receiving statutory notice, the respondent company neglected to make payment and thereby, the respondent company has become commercially insolvent warranting an order of it's winding up.

(2.) Notice before admission came to be ordered on 22.2.1999. The respondents filed counter on 27.7.2000.

(3.) It is stated in the counter that the respondent company never neglected to pay the amount due to the petitioner bank. The respondent-company has vast assets. More than one thousand workers and hundreds of distributors would suffer if the prayer as sought for by the petitioner bank is agreed. The company petition is not maintainable since legal proceedings are required to be taken up in accordance with the law of Federal Republic of Germany, as per the Article 19.1 of the loan agreement. As per the loan agreement, the entire loan amount has been disbursed to M/s. Barmag (the machinery supplier) and if there is any non-payment, the petitioner bank as well as HERMS, which is an agency of Federal Republic of Germany, has to jointly initiate legal action against the respondent company. The entire loan amount was guaranteed by the Federal Republic of Germany under the head "Guarantee of the Federal Republic of Germany have tied buyers credit". The company petition has been filed by the petitioner bank as a coercive measure to pressurize the respondent company to repay the debt and the said attempt amounts to abuse of process of Court. The proceedings are required to be initiated by the petitioner bank as well as the Federal Republic of Germany represented by HERMES. Since statutory notice is issued only on behalf of the petitioner-bank, it is not in accordance with the provisions of Section 434 of the Companies Act, 1956. The machinery which has been acquired by the loan availed from the petitioner-bank has been found to be defective which substantially affected the functioning of the respondent-company.