Back
2016 Supreme(Mad) 3145
IN THE HIGH COURT OF JUDICATURE AT MADRAS
RAJIV SHAKDHER, J.
SBI Global Factors Limited - Petitioner
Vs.
M/s. RKR Gold Private Limited - Respondent
C.P. No. 125 of 2011
Decided On : 04-10-2016
For the Petitioner: Mr. V. Soundararajan.
For the Respondent: Mr. Vidhya Shankar for M/s. Ramani and Shankar.
The court clarified the limitations of a petitioner's right to recourse against a respondent under a trade finance agreement in the event of the Approved Debtor's insolvency.
Headnote:
Companies Act - Company Petition - Sections 433(e), 434(1)(a), 439(1)(b) - 1956 Act
Fact of the Case:
The petitioner, a subsidiary of the State Bank of India, sought to recover outstanding amounts from the respondent under a Trade Finance Facility Agreement. The respondent argued that the petitioner could not take recourse to it due to the insolvency of the Approved Debtor, BCPMS.
Finding of the Court:
The court found that the petitioner's right to recourse against the respondent was limited by the terms of the Trade Finance Facility Agreement and the insolvency of the Approved Debtor. The court also noted that the issue was pending adjudication in a separate suit filed by the respondent's Directors/Guarantors.
Issues: The main issue was whether the petitioner could enforce its claim against the respondent under the Trade Finance Facility Agreement despite the insolvency of the Approved Debtor.
Ratio Decidendi: The court held that the petitioner's right to recourse against the respondent was limited by the terms of the agreement and the insolvency of the Approved Debtor. The court also considered the pending adjudication in a separate suit filed by the respondent's Directors/Guarantors.
Final Decision: The petition was dismissed, and each party was ordered to bear its own costs.
1. This is a Company Petition preferred under Sections 433(e) and 434(1)(a) read with Section 439(1)(b) of the Companies Act, 1956 (hereafter referred to as "1956 Act").
PREFATORY FACTS:
2. It is averred that the petitioner is a subsidiary of the State Bank of India, which, to begin with was incorporated and registered under the 1956 Act, under the name and style: Global Trade Finance Limited.
2.2 It is averred that the petitioner, stood amalgamated with SBI Factors and Commercial Services Private Limited upon a Scheme being sanctioned by the Bombay High court on 15.1.2016.
2.1 It is further averred, upon change in name, from Global Trade Finance Limited to SBI Global Factors Limited, a fresh certificate of incorporation was issued by the Registrar of Companies (ROC), on 18.03.2010.
2.3. In view of the aforesaid averments, made in the petition, I would have thought that the petitioner would have been described in the Company Petition, more appropriately, via its new name. This, evidently, has not been done. The petition has been filed, as it appears under its earlier name.
2.4. Not with standing the above, on merits, the case set up by the petitioner, is that, being in the business of International Factoring, it entered into Trade Finance Facility Agreement with the respondent on 23.09.2006, upon issuance of a sanction letter of even date, i.e., 23.09.2006.
2.5. Under this agreement, the petitioner sanctioned a funding limit upto a maximum of Rs.2,85,00,000/- (Rupees two crores and eighty five lakhs only) in favour of the respondent.
2.6. The said facility was secured by execution of the following documents:
i. Letter of undertaking dated 11.11.2006
ii. Letter of confirmation dated 11.11.2006, by which, the respondent confirmed that in the event, it avails of any pre-shipment finance in respect of any receivables assigned to the petitioner, it will advise the petitioner as to the details of such facility, and that, all payments made in respect of such receivables would be made directly to the pre-shipment account
iii. Execution of a Global Accounts Receivables Management Agreement (in short "GARMA") dated 11.11.2006.
iv. Letter of Guarantee, dated 11.11.2006, issued by Mr. S.V. Sreenivasen, who at the relevant time, was acting in his capacity as the Proprietor of the respondent
v. Letter dated 11.11.2006, issued by Mr. S.V. Sreenivasen, whereby, he undertook, that the Proprietor's Capital Account would not be reduced below Rs.1,42,90,000/-; which incidentally at the relevant time was the balance then obtaining in the account.
vi. Letter dated 11.11.2006, whereby, Mr. S.V. Sreenivasen undertook that none of the debtors mentioned in the sanction letter dated, 23.09.2006, were related to either the proprietor or, relatives of the proprietor. Pertinently, the only debtor, referred to in the sanction letter dated 23.09.2009, was B.C.P.M.S. (Europe) Limited (in short BCPMS)
vii. Lastly, letter 11.11.2006, issued by Mr. S.V. Sreenivasen confirming, thereby, that the post-dated cheque issued in favour of the petitioner in the sum of Rs.2,85,00,000/- was valid and, had been issued with due authorisation.
3. Evidently, the respondent, in the first part of 2007, converted itself into a private limited company, the name by which it is described in the cause title.
3.1. This information was communicated to the petitioner vide a letter dated 08.05.2007.
4. Concededly, prior to that, on 05.01.2007, the sanction letter dated 23.09.2006, was amended, whereby, the maximum trade finance limit was enhanced to Rs.58,72,500/-.
4.1. The important aspect of the amendment letter was that while all other terms and conditions remained the same, it made the respondent liable for the facility extended by including the following term in the amended sanction letter "includes INR 58,72,500/- on (sic) with Recourse Basis".
4.2. The schedule attached to the letter da
