TATA CAPITAL FINANCIAL SERVICES LIMITED Vs. STATE

JUDGEMENT

(1.) THE parties are not to blame for this creditor 's winding-up petition having lingered for an unnecessary length of time and there being a more protracted hearing than is ordinarily called for in a matter of this kind. It was only an observation of the court that led to a relatively innocuous matter being blown out of proportion upon the court considering it to be significant that subsequent to the present petition being instituted the creditor applied elsewhere for an order in the nature of attachment before judgment against the company and the persons who guaranteed repayment of company 's dues to the petitioner. Further, the fact that the petitioning creditor obtained a substantial order in its favour in the subsequent proceedings also weighed with the court at the initial stage of the final hearing. The cobwebs have, hopefully, now been cleared and the matter seen in proper perspective.

(2.) THE petitioning creditor is a non-banking financial company which claims to have granted credit facilities in excess of Rs.4 crore to the company in terms of a sanction letter of September 17, 2009 and the subsequent loan agreement of October 5, 2009. The agreement recognised a maximum credit of Rs.5 crore being granted by the petitioning creditor to the company at an interest of 12.50 per cent per annum with 3 per cent per annum additional interest being payable in case of delayed payment of instalments. The agreement was backed by the personal guarantees executed by two directors of the company and the purpose of the loan was to enable the company to meet its working capital requirements. The loan was partly secured by the company by a pledge of a fixed deposit held in the name of the company in HDFC Bank Limited for a sum of Rs. 75 lakh. The tenure of the loan was extended on September 28, 2010 and in January, 2011 the company requested the petitioning creditor to renew the facility for a further period of six months to which the petitioning creditor acceded by its letter of January 27, 2011.

(3.) THERE is a bit of wild goose chase that appears to have been undertaken in the petitioning creditor 's anxiety to disabuse the court of what was perceived to be an impression that the petitioner had exposed the company to double jeopardy in instituting seemingly parallel proceedings for realising its claim and in the petitioning creditor apprehending that its obtaining orders in the Bombay High Court during the pendency of the present petition may weigh heavily with the court to dismiss the petition or adjourn the matter till after the conclusion of the arbitral reference. Though the petitioner has referred to several authoritative judicial pronouncements on matters where the creditors had invoked the jurisdiction on grounds other than what is recognised in Section 434(1)(a) of the Act, the petitioner concedes that its prayer for winding-up is based exclusively on such provision. The petitioner endeavours to demonstrate that even a secured creditor can seek winding-up of a company by invoking the legal fiction recognised in Section 434 of the Act on grounds other than the one under clause (a) of sub-section (1) thereof. The petitioner argues that even if it enjoyed substantial security and even if the value of the security was in excess of the petitioner 's claim, it would not preclude the petitioner from seeking an order for the debtor company being wound up. The issue does not squarely arise in this petition and the petitioner may have been inspired to address the court on the larger issue since this matter has been heard analogously with another creditor 's winding-up petition where the right of a secured creditor to seek an order of winding up against a debtor company, relying only on the legal fiction in Section 434(1)(a) of the Act, was involved. Since the judgment in the other matter (Eastern Spinning Mills and Industries Ltd and Kotak Mahindra Bank Ltd) has been delivered immediately prior to this judgment, it is unnecessary to dwell on the larger issue in course of this judgment; but a key aspect of a petitioner 's submission has to be noticed here since the creditor in the other matter has not alluded to the same.