1 jpc IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION COMPANY PETITION NO. 960 OF 2009 Sublime Agro Ltd. .. Petitioner Versus Indage Vintners Limited .. Respondent Mr. Prakash Shinde i/by J. Sagar Associates for the petitioner Mr. Sunip Sen a/w Mr. Yogesh Chawak a/w Ms. Swati Sagrekar i/by Legasis Partners for Respondent Mr.Ranjit Chougule, Managing Director and Mr. Rajesh Chalke, Chief Financial officer of the Respondent present. CORAM : S. J. KATHAWALLA, J. DATE : 19 th March, 2010 P.C.: 1. This Company Petition is taken up for hearing and final disposal. 2. Particulars of the Company Petitions (including the above petition), which are admitted against the Respondent Company-M/s Indage Vineyards Pvt. Limited, formerly known as Champagne Vineyards Limited, are as set out hereunder: 2 Petition No. Date of Admission Amount claimed 477 of 2009 9 th September, 2009 24,68,66,930.00 777of 2009 24 th February, 2010 10,72,44,304.19 787 of 2009 24 th February, 2010 1,96, 82,189.00 959 of 2009 24 th February, 2010 1,41,34,053.00 960 of 2009 24 th February, 2010 1,13,22,276.00 1047 of 2009 24 th February,2010 1,97,05,807.00 Total Amount in words: Rupees Forty one crores eighty nine lacs fifty five thousand five hundred fifty nine and nineteen paise only.) 41,89,55,559.19 In addition to the above petitions, there are other claimants who have come forward with their claims pursuant to the advertisement issued in Company Petition No. 477 of 2009, which includes a claim from M/s Kotak Mahindra Bank to the tune of Rs.18 crores. There are also few Company Petitions filed by the Creditors of the Company which are pending admission before this Court. 3. As set out hereinafter, according to the Respondent Company its Net Current Assets are to the tune of Rupees 200 crores and the fixed assets (as per books) is around 76 crores. The liabilities of the Respondent Company are as under: Secured Creditors ... Rs. 200 crores Unsecured Creditors .. Rs. 200 crores 3 There is not a single asset of the Company which is not charged to any creditor. The executive staff of the Company is not paid from the last 12 months. The employers contribution towards the statutory dues/payments of the workmen is not paid by the Respondent Company. The Company is commercially insolvent. 4. By the above Company petition, the petitioners have sought winding up of the Respondent Company M/s Indage Vineyards Pvt. Limited, formerly known as Champagne Vineyards Limited. The claim of the petitioner against the Respondent Company is to the tune of Rs. 1,13,22,276/- (Rupees One crore, thirteen lacs, twenty two thousand two hundred and seventy six only). The petitioners have admittedly given corporate loans of Rs.25,00,000/-, Rs.25,00,000/- and Rs 50,00,000/- to the Respondent Company, vide letters dated 25 th November, 2005, 27 th December, 2005 and 27 th November, 2007, respectively. The Respondent Company admittedly failed to repay the said loans and have confirmed that an amount of Rs.1,00,00,000/- (Rupees one crore) being the outstanding principal amount is due and payable to the petitioner as on 2 nd May, 2009. A statutory notice dated 10 th August, 2009 was served on the Respondent Company, to which the Respondent Company failed to respond. The present Company petition was therefore filed on 12 th October, 2009. 4 5. The Respondent Company, at the stage of admission, vide its affidavit in reply, contended that due to global recession the Respondent Company is temporarily facing a financial crunch. It is also alleged in the Affidavit-in-reply that the finance facilities were in mutual interest of he parties and the Respondent Company was to repay the amount to the Petitioner as per the financial comforts of the Respondent Company. No particulars of the so called mutual interest are spelt out in the said Affidavit. The aforestated contentions raised in the Affidavit-in-reply were not repeated on behalf of the Company at the time of the admission of the Company petition and in fact no submissions were made before this Court on behalf of the Company. This Court, therefore, recorded in its order dated 24 th February, 2010 that the defence raised by the Respondent Company in its Affidavit-in- reply was devoid of merits and made only for the sake of raising some defence in the affidavit in reply. This Court, therefore further recorded in its order dated 24 th February, 2010 that it was very clear that the Respondent Company was unable to pay its debts, and proceeded to admit the Company Petition. This Court also recorded the statement made by the Advocate for the Respondent Company that the Respondent Company shall not dispose of any of their movable assets except in the ordinary course of business and shall not dispose of any of their immovable assets without the permission of this Court. 5 6. No affidavit in reply is filed after the petition was admitted. Today no submissions on merits of the petition are advanced. An affidavit termed as “additional affidavit” dated 19 th March, 2010 is today tendered in Court. In the said affidavit, the petition is not opposed on merits. It is contended in the said affidavit that the Company has gone through a difficult phase due to the terrorist attack in Mumbai on November 26, 2008, leading to steep fall in tourism and consequently consumption of wine; Sudden changes in the regulatory regime i.e. changes in labeling and marking on the bottles leading to stocks lying blocked; Changes in state excise structure in Karnataka and Goa with retrospective effect and; other factors. Admittedly, except for the contention that there was recession in the business, none of the above circumstances have figured in the Affidavit-in-reply to the Company Petition. It is further stated in the “additional affidavit” that there was a proposal to restructure the Respondent’s debt and operations through the Corporate Debt Restructuring Mechanism through the Corporate Debt Restructuring Cell (“CDR Cell”). It is submitted that in the meeting held on December, 18, 2009, considering the feasibility of the revival of the Respondent, the proposal for admission of the Respondent under CDR Mechanism was approved. ICICI Bank Ltd. has agreed to become the Monitoring Institution and the Monitoring Committee comprises of ICICI Bank Ltd., State Bank of India, IDBI Bank and CDR Cell. It is 6 submitted that the ICICI Bank has agreed to convene a joint Lender Meeting and prepare the financial restructuring package for the Respondent. 7. This Court enquired from the Advocate appearing for the Respondent Company as to what was the basis on which, a decision was reached in the meeting held on December, 18, 2009, that the Respondent Company is viable to be restructured. In response, the learned Advocate stated that it was on the basis of a “business plan” submitted by the Respondent Company. However, the Respondent Company has neither annexed the “business plan” to the “additional affidavit” nor was it able to produce the same before this Court despite the Court calling upon the Respondent Company to do so and despite the Managing Director of the Company being present in Court. 8. Mr. Kishore Jain, the learned advocate appearing for M/s Kotak Mahindra Bank Ltd. in Company Application No. 134 of 2010 pointed out to this Court that the Respondent Company, in Pargraph 6 of its letter dated 6 th January, 2010 addressed to the Kotak Mahindra Bank Ltd. has stated: “ we are currently completing the detail Business Plan which will demonstrate the ability and plans of IVPL. to settle all the liabilities”. Mr. Jain, therefore, submitted that no 7 “business plan”, showing how the Company would settle all its liabilities was available on 18 th December, 2009 and the Respondent Company is making an incorrect statement before the court that on 18 th December, 2009, they had submitted a “business plan” to the ICICI Bank. Mr. Jain submits that it is for this reason that no “business plan” is even today available before this Court. Mr Jain submitted that it is for this reason none of the unsecured creditors have faith in the “CDR Cell” and are not interested in joining the “CDR Cell” which is manned by the secured creditors whose only intention is to protect the interest of the secured creditors and before whom the unsecured creditors are last in priority. 9. In the instant case, admittedly, the Monitoring Committee under the CDR Mechanism comprises of ICICI Bank Ltd., State Bank of India and IDBI Bank. No unsecured creditor is on this Monitoring Committee. Admittedly, no notice was given to the unsecured creditors of the meeting held on 18 th December, 2009 nor are the unsecured creditors invited for the meeting to be held on 29 th March, 2010. The CDR scheme is admittedly a voluntary scheme and not binding on the unsecured creditors of the Company. The unsecured creditors are always at liberty to remain out of the scheme and pursue the winding up proceedings. 10. As far as the creditors of a Company are concerned, the 8 provisions pertaining to the winding up proceedings under the Companies Act are more particularly meant for protecting the interest of the unsecured creditors of the Company who are the worst affected lot when a Company becomes commercially insolvent. The secured creditors of a Company can always pursue their claim by keeping themselves out of the winding up proceedings. The Court cannot push back the claims of the unsecured creditors and allow the Company to keep on creating further liabilities so that ultimately what is recovered from the Company upon being wound up is taken away by the secured creditors and the creditors whose claims are to be given priority in law leaving the unsecured creditors high and dry. This is best explained in paragraph 85-06-85-07 of Palmer’s Company Law Vol-I, which reads thus: “ Where the opposition comes from creditors of a different class, e.g. secured creditors, the court may prefer the wishes of the unsecured creditors since in some cases refusal of the order will rob them of what is virtually their only remedy 97”. Palmer has also referred to several authorities in support of the above proposition in a foot note appended. 9 11. In view thereof the claim of unsecured creditors in the instant case amounting to Rupees Two Hundred Crores cannot be ignored and or pushed back on the ground that the “CDR Cell” is holding meetings for restructuring the debts of the Respondent Company. In fact, all the unsecured creditors who have appeared before this Court today have informed the Court that they are not approached by the “CDR Cell”. In any event they have no faith in the “CDR Cell” and they are not at all interested in joining the “CDR-Cell”. I am, therefore, of the view that this Court should prefer the wishes of the unsecured creditors since in the instant case, borrowing the language used in Palmer’s Company law, “the refusal of the order sought by the unsecured creditors will rob them of what is virtually their only remedy”. 12. Interestingly, in the “additional affidavit”, though the Respondent Company has stated that the net current assets of the Company are to the tune of Rs.200 crores, and the fixed assets of the Company are to the tune of Rs.76 crores, there is not even a whisper in the “additional Affidavit” as to what are the liabilities of the Respondent Company. It was only in response to a query put by this Court, that the Advocate appearing for the Respondent Company, on instructions, informed the Court that the liabilities of the Company towards the secured creditors is to the tune of Rs.200 crores and the liabilities 10 towards the unsecured creditors is also to the tune of Rs.200 crores. Therefore, admittedly, the liabilities of the Respondent Company are far in excess of the assets of the Company. The submission therefore, made in the “additional affidavit” “that the Respondent is commercially solvent”, is an incorrect submission made on oath by the managing director of the Company suppressing the figures pertaining to the liabilities of the Respondent Company. 13. In response to a query raised by this Court, the learned Advocate appearing for the Respondent Company also informed the Court that the Respondent Company has not paid the statutory contributions required to be paid by the Company for the benefit of its workers and has also not paid its executive staff since the last 12 months. All these facts are suppressed in the the “additional affidavit” and in fact as stated above, incorrect statements are made on oath and also across the bar. It appears that it is for this reason, the so called “business plan” prepared by the Respondent Company is also not forthcoming before this Court and the said “additional affidavit” is filed only for the purpose of taking an adjournment on the ground that the “CDR Cell” is in the process of preparing a financial restructuring package for the Respondent Company. 11 14. In view of the above facts, I am of the view that this is a fit case for winding up of the Respondent Company. If the orders as sought by the petitioner are not passed, not only the unsecured creditors whose dues are admittedly to the tune of Rs.200 crores will be left high and dry but ultimately grave prejudice will be caused even to the workers and staff of the Company because the Respondent Company shall in the course of its business continue to create further liabilities than what is existing today, leaving the creditors and workers of the Company high and dry, which would also be prejudicial to public interest. 15. Under the circumstances, the Company petition is allowed in terms of prayer clauses (a) and (b). The Respondent Company admittedly has one crore six lacs litres of wine lying in Vineyards and 5 lac litres of bottled wine which is unsold. The liquidator shall forthwith take possession of the properties of the Company including all its statutory records and stock in trade and after preparing an inventory of the assets as well as the stock in trade, submit his report to this Court and seek necessary directions, more particularly qua the stock in trade of the Respondent Company. The Company petition is accordingly disposed of. 12 16. At this stage, the learned Advocate appearing for the Respondent Company has submitted that the Order be stayed atleast for a period of two weeks. In view of the aforesaid conduct of the respondent Company the Respondent Company cannot be granted an unconditional stay of the order. The order is, therefore, stayed for a period of two weeks on the following conditions: i. The statement made by the Respondent Company and recorded by this Court in its order dated 24 th February, 2010 shall continue to be in force. ii. The Respondent Company shall not dispose of its aforestated stock in trade which is a substantial asset of the Respondent Company without obtaining prior permission from this Court. ( S. J. KATHAWALLA) liter