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2016 Supreme(Bom) 349

IN THE HIGH COURT OF JUDICATURE AT BOMBAY
V. M. KANADE & REVATI MOHITE DERE, JJ.
NEELKANTH DEVANSH DEVELOPERS PRIVATE LIMITED - APPELLANT
Vs.
URBAN INFRASTRUCTURE VENTURE CAPITAL LIMITED - RESPONDENT
APPEAL NO. 100, 102, 109 OF 2015
WITH
COMPANY PETITION NO. 31, 33, 38 OF 2013
Decided On : 09-03-2016

Advocates:
Advocate Appeared:
Mr. Janak Dwarkadas, Senior Counsel alongwith Mr. Parimal Shroff, Mr. D.V. Deokar, Mr. Sachin Pandey, Mr. Dhruvesh Parikh, Mr. Jehaan Mehta, Ms. Priyanka Rathore, Ms. Nidhi Chheda i/b M/s. Parimal K. Shroff & Co. for the Appellant in Appeal No.109 of 2015.
Mr. D.D. Madon, Senior Counsel alongwith Mr. Gaurav Joshi, Senior Counsel, Mr. Parimal K. Shroff, Mr. D.V. Deokar, Mr. Sachin Pandey, Mr. Dhruvesh Parikh, Mr. Jehaan Mehta, Ms. Priyanka Rathore, Ms. Nidhi Chheda i/b M/s Parimal K. Shroff & Co. for the Appellant in Appeal No.100/15.
Mr. S.U. Kamdar, Senior Counsel alongwith Mr. Riyaz Chagla, Mr. Chirag Balsara, Mr. Parimal Shroff, Mr. D.V. Deokar, Mr. Sachin Pandey, Mr. Dhruvesh Parikh, Mr. Jehaan Mehta Ms. Priyanka Rathore, Ms. Nidhi Chheda i/b M/s Parimal K. Shroff & Co. for the Appellant in Appeal No.102 of 2015.
Dr. Virendra Tulzapurkar Senior Counsel alongwith Mr. Arif Doctor i/b Junnarkar & Associates for the Respondents.

The main legal point established in the judgment is that the defense of a company in a winding-up petition must be bona fide and substantial, and the court will not interfere with the exercise of discretion by the lower court unless the finding is perverse or based on material not part of the record.

Headnote:
ICD Agreement - Company Petitions - Companies Act, 1956 - Section 433(e) - Section 434 - Section 439 - Section 446(2) - Section 537 - Summary of the acts and sections referenced and discussed by the court can be found in the judgment.
Fact of the Case:

The appellants challenged the order of winding up passed by the Single Judge in the Company Petitions filed by the respondents. The respondents claimed that the appellants owed them significant amounts and interest, and after several requests for payment, initiated winding up proceedings against the appellants.
Finding of the Court:

The Single Judge held that the appellants' defense was neither bona fide nor substantial, and ordered winding up of the company unless the amount due was paid within fourteen weeks.
Issues: (i) Whether ICD Agreement is a subject matter of Arbitration, (ii) Whether ICDs form part of the larger transaction of investment by the Urban Group, (iii) Whether the impugned order directing the Company to pay a sum of Rs 23,04,59,942/- amounts to a decree, (iv) Whether any interference is called for with the order passed by the learned Single Judge in an appeal filed under Clause 15 of the Letters Patent Act
Ratio Decidendi: The court found that the ICDs were independent transactions unrelated to larger investment transactions, and the defense of the appellants was not bona fide. The court also held that the impugned order did not amount to a decree, and no interference was called for with the order passed by the Single Judge.
Final Decision: The appeals were dismissed, and the time to make payment was extended by six weeks.

JUDGMENT :

V. M. Kanade, J.

1. Appellants are the original Respondents and are challenging the order passed by the learned Single Judge in the Company Petitions filed by the Respondents/original Petitioners. By the said impugned order, the learned Single Judge was pleased to pass an order of winding up of the Appellants/Company subject to the Appellants depositing the amount which was due and payable under the Inter Corporate Deposits made by the Respondents/original Petitioners.

2. Few facts as are necessary to decide the aforesaid appeals are as under :

At the outset, it may be noted that the facts in the aforesaid three appeals are substantially similar and that only the amounts in each appeal differs. The learned Single Judge, in the impugned order, has referred to the facts in Company Petition No. 31 of 2013, which is appeal No. 102 of 2015.

3. The respondents/original petitioners' case as disclosed in the company petitions broadly is as under :

According to the respondents/original petitioners, the appellant companies were incorporated under the Companies Act, 1956 as Private Companies Ltd. by shares on 1st March, 2007, and that the main objects for which the said Companies were incorporated, were set out in the Memorandum of Association, in particular clauses (1) and (2) thereof. It is further stated that the said Companies were indebted to the respondents/original petitioners for various amounts i.e. Rs. 14,84,00,000/-, Rs. 24,80,00,000/- and Rs. 19,80,00,000/-, together with interest at the rate of 15% per annum from the period mentioned in the company petitions. According to the respondents/petitioners, at the request of the said appellant companies, short term loans by way of inter corporate deposits (ICDs) of Rs. 14,84,00,000/-, Rs. 24,80,00,000/- and Rs. 19,80,00,000/- were granted to the said companies. The respondents/petitioners have relied on the demand promissory note dated 31st March, 2010 executed by the appellant companies, towards the grant and repayment of the loan and the Board resolution accepting the proposal of the said ICDs. According to the respondents/petitioners, the terms on which the short term loan by way of ICDs have been granted, have been set-out in the ICD agreement, executed between the appellant companies and them. It is stated that the agreement requires the appellant companies to pay the entire principal amount of the short term loan in one instalment before the stipulated date mentioned therein, and also provides for interest at the rate of 15% per annum and delayed rate of interest of 18% per annum.

According to them, as the appellant companies failed and neglected to pay the aforesaid amounts and interest despite several requests, the respondents/petitioners vide letter dated 14th March, 2012, recorded the appellant companies' default and called upon the appellant companies to pay the aforesaid principal amounts along with interest. Since the Appellants did not pay the amount, the respondents herein sent a statutory notice to the appellant companies at their registered offices and called upon the appellant companies to pay the respondents/petitioners the aforesaid amounts along with interest within three weeks, failing which, they would initiate winding up proceedings against the appellant companies.

The appellant companies replied to the said statutory notice but the said reply was not satisfactory and that, the repayment of the short term loan and payment of the accrued interest was wrongly disputed by them. A reply was sent by the respondents/petitioners to the reply sent by the appellant companies to the statutory notice. The respondents/petitioners in the said letter contended that the appellant companies were trying to confuse the matter with a view to avoid their liability, by referring to unconnected and unrelated transactions. The Respondents filed three Company Petitions.

4. The appellants case, in brief, is as under :

According to the appellants, Neelkanth Soham Developers Private

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2016 Supreme(Bom) 349

IN THE HIGH COURT OF JUDICATURE AT BOMBAYV. M. KANADE & REVATI MOHITE DERE, JJ.NEELKANTH DEVANSH DEVELOPERS PRIVATE LIMITED - APPELLANTVs.URBAN INFRASTRUCTURE VENTURE CAPITAL LIMITED - RESPONDENTAPPEAL NO. 100, 102, 109 OF 2015WITHCOMPANY PETITION NO. 31, 33, 38 OF 2013Decided On : 09-03-2016

Cases Referred (1)