The main legal point established is that failure to repay a guaranteed amount and financial insolvency can justify the winding up of a company under the Companies Act.

1. This petition is filed under Section 433 (e) and (f) r/w Sections 434 (i) (a) and Section 439(i) and (b) of the Companies Act 1956 for winding up of the respondent company.

2. It is stated in the company petition that the respondent company approached the petitioner for advancing advance, performance and financial guarantee favouring one Bunge SA. The petitioner granted the facility upto the limit of Rs.40,54,50,000/-.

3. The petitioner states that the said Bunge S.A to whom it had issued guarantee favouring the respondent assigned the guarantee to ICICI BANK, Canada and the guarantee was also duly invoked by the ICICI Bank, Canada in September, 2008. In pursuance to the invocation of the guarantee by ICICI Bank, Canada, the petitioner paid a sum of USD 9,900,000 equivalent to Rs.45,87,68,821.12 to ICICI Bank, Canada on 19.09.2008. The respondent company is bound to pay the said amount to the petitioner company as per the terms of Omnibus guarantee dated 28.08.2007. As the respondent company failed to make the repayment, the petitioner company by its recall notice dated 26.12.2008, recalled the guarantee facility granted to the respondent and called upon the respondent to repay the outstanding including the interest accrued thereon. The respondent did not come forward to repay the outstanding and therefore, the petitioner forced to appropriated a sum of Rs.24,50,000/- along with the accrued interest of Rs.1,34,84,099/- as part satisfaction of the dues outstanding from the respondent company's deposit account lying with the petitioner.

4. The petitioner also presented a cheque for a sum of Rs.40,54,50,000/- drawn on State Bank of India, Overseas Branch, Chennai issued by the respondent for its obligations to repay the amount when the same because due and the cheque was returned unpaid with an endorsement “Exceeds Arrangements”. Therefore, a notice under Section 138 of Negotiable Instrument Act, 1881 was issued dated 02.01.2009 calling upon the respondent to pay the sum due and the respondent also admitted their liability to the tune of Rs.20,02,84,721.93 along with interest in its reply notice dated 16.01.2009 and prayed for further time for settlement of the outstanding amount. As the respondent did not pay the amount, a statutory notice was issued by the petitioner on 04.05.2009 calling upon the respondent to make the payment of Rs.20,02,84,721.93 with interest at the rate of 35% p.a. from the date of invocation of the bank guarantee to the date of payment, within 21 days from the date of receipt of this notice and despite the statutory notice issued by the petitioner, the respondent has not made any payment and therefore, it is proved that the respondent is unable to pay its dues to the petitioner.

5. It is further stated that the credit worthiness of the respondent has also gone down and ICRA, an independent credit rating agency, revised its rating of long term bank limits of the respondent company to “LC” meaning poor credit quality rating and the rating assigned to short term bank limits of the respondent company has been revised to “A5” which means lowest credit quality rating. It is further stated that the respondent has been listed as willful defaulters published by Reserve Bank of India for an outstanding amount of Rs.24,27,00,000/- to the Chennai Prime Corporate Bank of Canara Bank and therefore, the respondent Company is commercial insolvent and is not in a position to pay its debts and therefore, the respondent company is liable to be wound up.

6. The respondent admitted the guarantee furnished by the petitioner to Bunge SA and the invocation of the guarantee by ICICI Bank. Nevertheless, the respondent stated that due to recession in the global economy, the respondent was not in a position to repay the amount and the respondent company is getting orders and it is not commercially insolvent as contended by the petitioner and considering the business turnover of the respondent it cannot be stated tha