Case: Pearl Engineering Polymers Limited Vs. Deutsche Bank Ag, London & Others

R.M. Borde, J.1. Heard the respective counsel appearing for the parties.2. The Petitioner company is engaged in polyester chips manufacturing and its unit is located at Kurkumbh in Pune District. The company was set up in 1993 however, due to the industrial sickness, it was required to be registered with the Board of Investment and Financial Reconstruction (BIFR), which proceedings concluded with the execution of an amended Loan Agreement dated 24 November 2003 with AFIC i.e. Respondent No.4 herein.3. The Petitioner Company has borrowed from Respondent No.4 and the borrowing is in the nature of External Commercial Borrowings (ECB). The initial borrowing is in compliance with the provisions of the Foreign Exchange Management (Borrowing or lending in foreign exchange) Regulations-2000, Foreign Exchange Management Act 1999 and in consonance with ECB policy. It is not the matter of doubt that as a result of the failure of the company to repay the debt, the loan agreement came to be terminated. Loan amounting to US$ 3,128,855 together with interest of US$ 96,950.37 was due from the Petitioner as on 30 September 2006. Respondent No.4 entered into a Sale and Purchase Agreement of the debt with Respondent No.1 and the Petitioners debt qua AFIC came to be assigned to Respondent No.1. An Application was moved by Respondent No.1 for condonation of delay occurred in registering the debt with Registrar of Company-Respondent No.2 herein, and on payment of the charges levied by Respondent No.2 on account of delay and in pursuance to the Application tendered by Respondent No.1, the debt came to be registered with Respondent No.2, on 29 July 2015.4. The Petitioner is praying for quashment of order dated 29 July 2015 whereby, the loan amount of US$ 4,500,000 approximately equivalent to Rs.1,395 lakhs sanctioned to the Petitioner-company and the outstanding debt of US$ 3,128,855 with underlying Securities, which has been assigned by AFIC to Respondent No.1-Deutsche Bank, in terms of Sale and Purchase Agreement dated 30 March 2007, came to be registered. The Petitioner is also praying for issue of writ of mandamus, directing Respondent No.2 to rectify its register of charges and delete the name of Respondent No.1 or Respondent No.4 therefrom with regard to the Petitioner-company. The Petitioner alleges that, in fact, Respondent No.1 does not have any entitlement to tender an application for registration of debt. The agreement entered into with Respondent Nos.1 and 4 is also not valid, since according to the Petitioner, it is ACTIS AFIC Credit Management Limited has executed assignment in favour of Respondent No.1 whereas, the Petitioner had the financial dealing with Respondent No.4AFIC. The unknown entity ACTIS AFIC Credit Management Limited does not have any entitlement to assign the debt in favour of Respondent No.1 and in turn, Respondent No.1 does not have any entitlement to maintain an application seeking registration of debt under Section 141 of the Companies Act, 1956. The Petitioner also contends that the Sale and Purchase Agreement dated 30 March 2007, assigning the debt in favour of Respondent No.1, being without consent of Reserve Bank of India (RBI), is not legal. It is also contended that the Petitioner-company shall be deemed to have repaid the loan and Respondent No.4 is not entitled to recover anything from the Petitioner-company, in view of bar of limitation.5. Respondent No.1 has presented an affidavit in reply, objecting the contentions and has prayed for dismissal of the Petition. It is the contention of Respondent No.1 that the Petition is not maintainable in law and liable to be dismissed in view of availability of alternate and efficacious remedy for maintaining a challenge to the order dated 29 July 2015 under Section 10F of the Companies Act, 1956, which remedy, the Petitioner has admittedly, not availed of. It is also contended that the Petition is purely an abuse of process of law. Respondent No.1 had presented various proceedings before the various courts, earlier. Respondent No.1 had also filed Company Petition No. 221 of 2012, praying for winding up of the Petitioner on the basis of debt owed by it. The Petition was dismissed on the ground that, it raises disputed questions of fact. Respondent No.1 preferred an appeal, bearing Appeal No. 124 of 2013, which has been admitted by the Honble Court and is pending before the Court. The contentions raised by the Petitioner in the instant Petition in respect of assignment of the debt in favour of Respondent No.1 have already been raised by the Petitioner in the pending proceedings before the Honble Court. In order to avoid the liability of payment, the Petitioner is indulging the multiplicity of proceedings and the instant Petition is a step-in-aid for the said objections. The Petitioner is trying to create a defence to the claim of Respondent No.1 in the winding up proceedings, by raising such contentions in the instant Writ Petition. So far as the assignment of debt is concerned, it is pointed out that the ACTIS AFIC Credit Management Limited is a sister concern of AFIC. In view of certain internal arrangement, which is concluded in a Deed of Trust dated 7 June 2005, various financial assets were divided amongst three different companies. The outstanding debt owed by the Petitioner was agreed to be held by ACTIS AFIC Credit Management Limited. AFIC acted in the capacity of a trustee in respect of the said outstanding debt of the Petitioner and continued to hold the securities and by agreement dated 30 March 2007, transferred the same by assignment to Respondent No.1 on its own behalf and on behalf of ACTIS AFIC Credit Management Limited. In this view of the matter, the challenge raised by the Petitioner in respect of the Agreement of Sale and Purchase arrived at between the AFIC and Respondent No.4 does not survive.6. The Petitioner tendered an Application under Section 141 of the Companies Act, 1956, now under Section 87 of the Companies Act, 2013 praying for following reliefs( i) Declaration that the certificate of Registrar of Companies, Pune dated 21 June 2010 for modification of charge amounting to Rs.1,395 lakhs assigning the charge from AFIC Limited to Deutsche Bank as null and void and no force in law; (ii) Declaration that Respondent No.2 to rectify its Register of Charges and delete the name of Deutsche Bank there from with regard to the Petitioner Company and; (iii) Declaration that the registration of charge in favour of Deutsche Bank as against the Petitioner is nonest, null and void and voidabinitio.7. In order to consider the controversy, it is desirable to quote the provisions of Section 141 of the Companies Act, 1956, which reads as under:141. Rectification by Central Government of register of charges -(1) The Central Government, on being satisfied -(a) that the omission to file with the Registrar the particulars of any charge created by a company or of any charge subject to which any property has been acquired by the company or of any modification of any such charge or of any issue of debentures of a series, or that the omission to register any charge within the time required by this Part or that the omission to give intimation to the Registrar of the payment or satisfaction of a charge, within the time required by this Part, or that the omission or misstatement of any particular with respect to any such charge, modification or issue of debentures of a series or with respect to any memorandum of satisfaction or other entry made in pursuance of section 138 or 139, was accidental or due to inadvertence or some other sufficient cause or is not of a nature to prejudice the position of creditors or shareholders of the company; or(b) that on other grounds, it is just and equitable to grant relief, may, on the application of the company or any person interested and on such terms and conditions as seem to the Central Government just and expedient, direct that the time for the filing of the particulars or for the registration of the charge or for the giving of intimation of payment or satisfaction shall be extended or, as the case may require, the omission or misstatement shall be rectified.(2) The Central Government may make such order as to the costs of an application under subsection (1) as it thinks fit.(3) Where the Central Government extends the time for the registration of a charge, the order shall not prejudice any rights acquired in respect of the property concerned before the charge is actually registered.]8. In exercise of powers under Section 141 of the Companies Act, 1956, the Authority is not empowered to go into the merits of the charge and declare that the charge created by a company is null and void and direct deletion of charge from the record of Registrar of Companies. The Regional Director, in view of the powers delegated to him under Section 141 of the Companies Act, is not empowered to go into the merits of the charge or satisfaction, in full or in part. The Petitioner herein, had tendered an Application earlier for the same relief and the Regional Director was pleased to pass the order on 5 November 2012, as follows -After considering the arguments and written submission made on both sides and without going into the merits of the case but only after considering the preliminary objection regarding the jurisdictional aspect, I am inclined to conclude that the powers vested with CLB U/s. 141 before which the petition was filed and which has since been transferred to RD, WR, Mumbai as per the Notification S.O. 1539 (E) dt. 10/07/2012 delegating the powers of the Central Government, do not allow the Regional Director U/s. 141 to grant relief sought for in the companies petition referred to in para 1 of this order. The relief for the petitioner has to be sought for before a Court of appropriate jurisdiction. The petition fails for lack of jurisdiction and accordingly the petition stands dismissed.9. Being aggrieved by the order, the Petitioner approached the Honble High Court of Bombay and filed Writ Petition No. 2037 of 2013. The Writ Petition came to be allowed and matter came to be remitted back to the Regional Director/Company Law Board with a direction to examine the case of the Petitioner and take decision on merits and in accordance with law. The Honble High Court also observed that Section 141 of the Companies Act, 1956, clearly indicates that the Company Law Board is entitled to rectify any omission or misstatement made to the Registrar regarding particulars of any charge created by the Company and Company Law Board, therefore, can entertain the application for rectification which can be preferred either by company or any person interested as envisaged in sub-clause (b) of Section 141 (1). In the present case, the Petitioner who claims to be the person interested has filed the application on the ground that the change recorded in the Register of Charges has been done on account of omission or misstatement of facts with respect to such charge. Though it is well settled that under section 141, the Company Law Board is not to go into the validity of the charge, it can certainly consider the rectification of the omission or misstatement of particulars of any charge. It is further recorded by the High Court that, in the present case, according to the Court, the Company Law Board has overlooked the aspect of omission or misstatement and, therefore, has erred in holding that it did not have jurisdiction to entertain the Petition. The Company Law Board ought to have considered the Petition so far as it relates to allegation that Respondent No.1 had misrepresented or made misstatement of the particulars of charge; and after giving an opportunity to the Petitioner, should have decided whether any rectification should be made or not by the Registrar. According to the High Court, the Company Law Board has clearly committed an error of Law which is apparent on the face of record.10. That so far as the transaction between the ACTIS AFIC and AFIC as has been recorded, in view of the internal arrangement concluded by the Trust Deed dated 7 June 2005 between the Groups of Companies, the outstanding debt owed by the Petitioner was agreed to be held by ACTIS AFIC Credit Management Limited. The deed of assignment with Respondent No. 1 has been executed by Respondent No.4 in its capacity as Trustee of the outstanding debt of the Petitioner on its own behalf and on behalf of ACTIS AFIC credit Management Limited. The challenge to the Deed of Assignment, in fact, is beyond the scope and purview of the adjudicatory forum, since it is not a Civil Court. The issues, including the validity of documents between two private parties cannot be adjudicated by the Company Law Board under the provisions of Section 141 of the Companies Act, 1956 and those are required to be adjudicated by a Civil Court.11. It is also pointed out that the cover page of Deed of Assignment dated 30 March 2007, mentions the title of document as Participation and Sale and Purchase Agreement between AFIC Limited on behalf of itself and as investment Manager as ACTIS AFIC Credit Management Limited and Deutsche Bank, London as the assignee. On the last page of the document, two parties have signed, out of which one is mentioned as AFIC Limited in its capacity as Investment Manager of ACTIS AFIC Credit Management Limited and the other party is Deutsche Bank, London. The Assignment Deed reveals that AFIC Ltd. is party to the document.12. So far as challenge raised to the legality and enforceability of document is concerned, the same does not fall within the purview of the Company Law Board and the liberty of the Petitioner to question the validity of the document has been kept open in the order dated 29 July 2015. The Petitioner has also raised certain objections in respect of the proceedings initiated by Respondent No.1Deutsche Bank. In fact, those proceedings relate to the winding up of the Company. The Company, in its capacity as the lender under the Sale and Purchase Agreement dated 30 march 2007, in its own right has presented the Company Petition. The Company Petition presented by Respondent No.1 was not entertained for the reason that it involves various questions, which need to be adjudicated before accepting the averments of the present Petitioner Pearl Engineering Polymers Ltd. It is observed by the Court that, the transaction, based upon which the Company Petition was presented, unless screened and declared, the order in respect of winding up of the Company does not deserve to be passed. The foundation of exercise of the discretion shall be, neglect to pay due and agreed amount. It is observed that since the Petition raises disputed questions and the writ petitioner i.e. Respondent No.1 is not remedyless to recover the amount, and as such, the Court refused to entertain the Company Petition.13. The order passed in Company Petition No. 221 of 2012 is a matter of challenge in Appeal 124 of 2013 presented by Respondent No.1Deutsche Bank and the same is admitted and pending for adjudication. The Petitioner herein has raised all the objections relating to the permissibility to recover the amount on account of bar of limitation, so also the issue relating to the validity of the Sale and Purchase Agreement with Respondent No.1Deutsche Bank. These objections are likely to be considered in the pending Appeal. Even otherwise, considering the scope of Section 141 of the Companies Act, the prayers made in the instant Petition do not deserve to be considered.14. In this context, it would be appropriate to refer the Judgment of the ICICI Bank Ltd. Vs. International Industries Ltd. [2008] 84 CLA 1 (CLB)wherein, it is observed that -7. .......... In this connection, I may refer to the judgment of Madhya Pradesh High Court in Choudhary Builders (P) Ltd. Vs. Sanghi Brother s (Indore) Ltd. [2000] 37 CLA 341 =107 Comp Cas 466, wherein the Court has considered a case of similar nature. In that case, the CLB had condoned the delay in spite of the objections raised by the company that the deed of assignment did not create any charge. When the company went on appeal to the High Court, the High Court dismissed the appeal observing:"It appears that the appellant-company had missed to resist the condonation issue and had more concentrated on issues revolving around the validity or otherwise of the terms of assignment deed dated 15th February, 1990. There is nothing to show that the company has taken any serious objection to condonation of delay on the ground that the Board order suffered from some infirmity or perverse in any way".In Mangalore Chemicals & Fertilizers Ltd. Vs. Company Law Board [2004] 60 CLA 290/[2015] 126 Comp Cas 261 (Kar.), the Court observed:"The provisions of Clause (a) of Subsection (1) of Section 141 make it clear that the powers vested in Company Law Board under Section 141 is a discretionary power and that discretion has to he exercised by the Company Law Board judiciously and having due regard to the facts and circumstances of each case and explanation offered before it by a company and then to form an opinion on the question whether the company has made out that it could not file intimation within the stipulated time due to inadvertence or some other sufficient cause. We do not think the provisions of Section 141 arm the Company Law Board to go into the merits of the charge or satisfaction of the charge in part or in full". Thus, it is amply clear that this Board has no powers to adjudicate or look into the validity or otherwise of a charge while considering a petition under Section 141 of the Act. Since the company has not raised any serious objection on condoning the delay nor has contested that the bank has not shown any sufficient cause for condoning the delay, the prayer of the petitioner for condonation of delay deserves to be granted. The petitioner has sought for a direction to the RoC to accept and take eForm No. 8 on record without the eForm No. 8 being signed on behalf of the company. As I have observed earlier, the powers of this Board under Section 141 is limited only to the extent of condoning the delay or allow rectification. The powers do not extend to giving directions as sought for by the petitioner and as such this prayer cannot be granted. Therefore, I only extend the time up to 30 (thirty) days from the date of this order, for filing e-Form No. 8 as per the provisions of Section 141. The petitioner shall file with the RoC, West Bengal, a certified copy of this order, along with the aforesaid documents, within the period as fixed by this order. In case the RoC lakes on record the documents without the eform being signed on behalf of the company, then the petitioner shall pay a sum of Rs. 5,000/- towards costs payable to the said RoC.8. The petition is disposed of in the above terms.

Decision:
0[ds]9. Being aggrieved by the order, the Petitioner approached the Honble High Court of Bombay and filed Writ Petition No. 2037 of 2013. The Writ Petition came to be allowed and matter came to be remitted back to the Regional Director/Company Law Board with a direction to examine the case of the Petitioner and take decision on merits and in accordance with law. The Honble High Court also observed that Section 141 of the Companies Act, 1956, clearly indicates that the Company Law Board is entitled to rectify any omission or misstatement made to the Registrar regarding particulars of any charge created by the Company and Company Law Board, therefore, can entertain the application for rectification which can be preferred either by company or any person interested as envisaged in(b) of Section 141 (1). In the present case, the Petitioner who claims to be the person interested has filed the application on the ground that the change recorded in the Register of Charges has been done on account of omission or misstatement of facts with respect to such charge. Though it is well settled that under section 141, the Company Law Board is not to go into the validity of the charge, it can certainly consider the rectification of the omission or misstatement of particulars of any charge. It is further recorded by the High Court that, in the present case, according to the Court, the Company Law Board has overlooked the aspect of omission or misstatement and, therefore, has erred in holding that it did not have jurisdiction to entertain the Petition. The Company Law Board ought to have considered the Petition so far as it relates to allegation that Respondent No.1 had misrepresented or made misstatement of the particulars of charge; and after giving an opportunity to the Petitioner, should have decided whether any rectification should be made or not by the Registrar. According to the High Court, the Company Law Board has clearly committed an error of Law which is apparent on the face of record.10. That so far as the transaction between the ACTIS AFIC and AFIC as has been recorded, in view of the internal arrangement concluded by the Trust Deed dated 7 June 2005 between the Groups of Companies, the outstanding debt owed by the Petitioner was agreed to be held by ACTIS AFIC Credit Management Limited. The deed of assignment with Respondent No. 1 has been executed by Respondent No.4 in its capacity as Trustee of the outstanding debt of the Petitioner on its own behalf and on behalf of ACTIS AFIC credit Management Limited. The challenge to the Deed of Assignment, in fact, is beyond the scope and purview of the adjudicatory forum, since it is not a Civil Court. The issues, including the validity of documents between two private parties cannot be adjudicated by the Company Law Board under the provisions of Section 141 of the Companies Act, 1956 and those are required to be adjudicated by a Civil Court.11. It is also pointed out that the cover page of Deed of Assignment dated 30 March 2007, mentions the title of document as Participation and Sale and Purchase Agreement between AFIC Limited on behalf of itself and as investment Manager as ACTIS AFIC Credit Management Limited and Deutsche Bank, London as the assignee. On the last page of the document, two parties have signed, out of which one is mentioned as AFIC Limited in its capacity as Investment Manager of ACTIS AFIC Credit Management Limited and the other party is Deutsche Bank, London. The Assignment Deed reveals that AFIC Ltd. is party to the document.12. So far as challenge raised to the legality and enforceability of document is concerned, the same does not fall within the purview of the Company Law Board and the liberty of the Petitioner to question the validity of the document has been kept open in the order dated 29 July 2015. The Petitioner has also raised certain objections in respect of the proceedings initiated by Respondent No.1Deutsche Bank. In fact, those proceedings relate to the winding up of the Company. The Company, in its capacity as the lender under the Sale and Purchase Agreement dated 30 march 2007, in its own right has presented the Company Petition. The Company Petition presented by Respondent No.1 was not entertained for the reason that it involves various questions, which need to be adjudicated before accepting the averments of the present Petitioner Pearl Engineering Polymers Ltd. It is observed by the Court that, the transaction, based upon which the Company Petition was presented, unless screened and declared, the order in respect of winding up of the Company does not deserve to be passed. The foundation of exercise of the discretion shall be, neglect to pay due and agreed amount. It is observed that since the Petition raises disputed questions and the writ petitioner i.e. Respondent No.1 is not remedyless to recover the amount, and as such, the Court refused to entertain the Company Petition.13. The order passed in Company Petition No. 221 of 2012 is a matter of challenge in Appeal 124 of 2013 presented by Respondent No.1Deutsche Bank and the same is admitted and pending for adjudication. The Petitioner herein has raised all the objections relating to the permissibility to recover the amount on account of bar of limitation, so also the issue relating to the validity of the Sale and Purchase Agreement with Respondent No.1Deutsche Bank. These objections are likely to be considered in the pending Appeal. Even otherwise, considering the scope of Section 141 of the Companies Act, the prayers made in the instant Petition do not deserve to be considered.