SSM 1 cp.348.10.sxw IN THE HIGH COURT OF JUDICATURE OF BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION COMPANY PETITION NO. 348 OF 2008 The Mumbai District Central Co-op. Bank Ltd. .... Petitioners Versus Cane Agro Energy India Ltd. .... Respondent Kevic Setalvad a/w M. P. Rege i/by M. P. Rege & Co. for the Petitioners. Mr. Kapil Moye i/by P. P. Bhosale for the Respondent. Mr. S. D. Shinde for the Intervenor. Mr. R. M. More i/b U. P. Warunjikar for Intervenor. CORAM: S. C. DHARMADHIKARI, J. DATED: 11 th FEBRUARY, 2011. P.C.: This Petition is for winding up of the Respondent Company. The Respondent is incorporated and registered under the provisions of Companies Act, 1956 on 25 th May, 2007. Prior thereto, it was registered as a Sugar Cooperative Society under the provisions of Maharashtra Cooperative Societies Act, 1960 and latter on under the provisions of Multi-State Co-operative Societies Act, 2002. The SSM 2 cp.348.10.sxw Respondent had availed of certain facilities from the Petitioner. It was a Medium Term Loan for setting up a Sugar Factory at Raigaon, Post Hingangaon, Taluka Khanapur, District Sangli. The sanction letter is dated 6 th March, 1999. The Medium Term Loan has been sanctioned in consortium with the Maharashtra State Co-operative Bank Ltd. as lead banker and other principal banks in the Cooperative Sector so also the Central Bank of India. The company was required to pay interest @ 17.5% p.a. with quarterly rest and that the Principal loan amount was repayable in a period of 07 years and to be repaid in twenty quarterly installments with first installment being payable on 1 st April, 2001 and the last installment being payable on 1 st January, 2006. The Respondent by a Board Resolution dated 10 th March, 1999 confirmed the terms and conditions of the loan and that is how the amount came to be disbursed. It is stated in the Petition that the Company executed various documents including admitting the liability to make payment under the terms and conditions of the SSM 3 cp.348.10.sxw sanction letter. Further, there were securities which have been created to secure the repayment of amounts lent and advanced by consortium banks. There are individual guarantees as well. 2. The amount has been utilized, but there after the company was in default. It is clarified in the Petition itself that the medium term loan fell due and as the Respondent was in arrears, there was a re-schedulement of the installments of the amounts to be paid by the Respondent. There was a request made for the reschedulement of the installments which is not accepted by the Petitioner. Thereafter, the predecessors liability has been taken over by limited company namely the Respondents, details of which are set out in paragraph 10 of the Petition. In paragraph 11, the details of the defaults committed and the correspondence on that issue has been referred to and the copies some of the letters are also annexed. It has been pointed out as to how several packages were extended by the State and the Central Government, but taking advantage of the same, the Respondent SSM 4 cp.348.10.sxw continued to commit defaults in repayment of the Petitioners' dues. Therefore, a statutory notice was issued which was duly served at the registered office as is proved by annexure -X to the Petition. In reply to the notice save and except a one time settlement proposal nothing was stated by the Managing Director of the Petitioner vide letter dated 22 nd February, 2008. 3. I had to refer all this in details, particularly, because on the earlier occasion and today the only request made by the Respondent is that the company may be given time to show its bonafides. The record indicates is apparent that the Respondent has never disputed the claim of the Petitioner. 4. In the Affidavit-in-reply, what has been stated is that there are 10,000 families of farmers who are directly involved with the company and livelihood of more than 6000 harvesting families, 800 employees alongwith their families is dependent upon the Respondent. All the time the reference is to some proposals made SSM 5 cp.348.10.sxw and consortium meetings. 5. In the reply Affidavit which has been filed on 17 th September, 2008 a technical objection is raised that the Petition is filed by the Petitioner alone without consent of the lead Bank and members of the consortium. 6. A rejoinder affidavit has been filed on behalf of the Petitioner wherein they have clarified that individual members of consortium have not given up their right to recover the monies due and payable to them. Further, how the one time settlement proposal is not feasible and acceptable has, also, been set out. 7. It has been pointed out as to how the payment made of Rs.2715.27 Lacs to the consortium is eye-wash and misleading statement. In paragraph 5 of the rejoinder this is what is stated:- “I say that apart from aforementioned purported point of defense, it has been contended by the Respondent that it has so far purportedly repaid an amount of Rs.2715.27 Lacs to the Consortium which fact has not been disclosed by the Petitioner and further the said payment discloses the conduct and intention on the part SSM 6 cp.348.10.sxw of the Respondent to repay the loans of the Consortium as alleged. In this regard, I say that in the first place, the Petitioner is not aware of the exact quantum of the total repayment made by the Respondent to the Consortium since the said payment is directly made by the Respondent to MSC Bank, being the Lead Banker. I say that out of the total amount received from the Respondent, the Lead Banker has passed on the share of the Petitioner therein which has been duly accounted for by the Petitioner in the loan account of the Respondent. I say that in view thereof, the Petitioner disclosing the said purported fact that the amount of Rs.2715.27 Lacs to the Consortium does not arise. I further say that it is pertinent to note that mentioning of the said amount of Rs.2715.27 Lacs paid by the Respondent to the Consortium is nothing but an eye wash and a misleading statement with a view to gather sympathy of this Hon'ble Court. In this regard, I say that in the first place the said repayment pertains to the entire consortium finance of Rs.2400.00 Lacs given to the Respondent by the Consortium members in the year 2000 and considering the time period of 8 years elapsed in between the amount repaid is not even sufficient to service the interest dues of the consortium members leave aside the Principal dues as per the terms of sanction. Secondly, Consortium members have given reschedulements and concessions to the Respondent while making the repayment of the loans in question. Moreover, the Central Government under its Package introduced in the year 2005-06 has given concessions in the rate of interest to the Respondent and has further SSM 7 cp.348.10.sxw extended the period of repayment of loans of the consortium to 12 years with two years moratorium. I say that therefore, the part repayment claimed to have been made by the Respondent to the MSC Bank being the Lead Banker, which happens to be a meager portion compared to the outstanding dues payable to the Consortium members, is being made after availing of all such concessions and benefits. I further say that it is pertinent to note that under the aforesaid extended restructuring the reschedulement of the Term Loan in question under the Central Government Package, the first installment thereof was payable on 01.04.2007. I say that, however, the Respondent failed and neglected to pay the said first loan installment on time thereby demonstrating its malafide intention and, dishonest motive of not repaying the loan in question of the Petitioner. I say that in view thereof, the statement made by the Respondent about repaying an amount of Rs.2715.27 Lacs is nothing but an eye wash and a misleading statement made with a view to prejudice the mind of this Hon'ble Court.” 8. There is a sur-rejoinder and a further reply is filed but there is no dispute as far as the liability to pay the amount. Mr. Setalvad is right in his submission that any further opportunity to the Respondent is likely to be misused because the Respondent has not SSM 8 cp.348.10.sxw acted bonafide. In the past, adjournments were sought on several grounds but the said adjournments have been used to approach the BIFR. However, there is no reference on the file of BIFR according to the Petitioner. In the further affidavits that have been filed, all that has come on record is some proposals of repayment. The proposal of payment as per the order dated 18 th February, 2001 is also relied upon and during the course of argument, Mr. Moye appearing on behalf of the Respondent on instructions makes a statement that the Respondent will show its bonafides and deposit a sum of Rs.1 Crore by 15 th March, 2011. Subsequently, he increased that sum to Rs.2 Crores. However, considering the amount that is due and payable which is to the tune of over Rs.5 Crores and finding that the Respondent has avoided to make payment not only to the Petitioner but to other banks and financial institutions so also the liability being in the tune of crores of rupees, it would not be proper to adjourn the matter as requested by the Respondent. This Court has given ample SSM 9 cp.348.10.sxw opportunities to the Respondent to show their bonafides. There is no Reference pending before the BIFR. The Reference forwarded has not been registered. It is stated that on Appeal is filed before AAIFR against the action refusing Registration but no order of Registration has been produced. In Real Value Appliances Ltd. V/s. Canera Bank and ors. reported in AIR 1998 SC 2064, the Hon'ble Supreme Court has held that once the Reference is registered after scrutiny, then, there is a Mandate to hold Inquiry. If there there is no Registration of the Reference, then, S.22 of Sick Industrial Companies (Special Provisions)Act, 1985 does not apply. In such circumstances and finding that from the averments in the Petition and the materials produced at the time of argument, a prima facie case for winding up the Company is made out but bearing in mind the request made by the Respondent, the following order will serve the ends of justice:- (i) On the Respondent depositing in this Court a sum of SSM 10 cp.348.10.sxw Rs.5,00,00,000/- on or before 31 st March, 2011, liberty is granted to the Petitioner to adopt appropriate proceedings for recovery of the loan amount together with interest and the amounts deposited shall be transfered to the credit of the said proceedings/suit. (ii) Needless to state that in default, this Company Petition shall stand admitted and thereafter the Petitioner's Advocate should deposit costs quantified at Rs.2500/- within a period of two weeks from the date on which the default is committed and the Petition stands admitted. Thereafter, the Registry to advertise the Petition in accordance with rules. (S. C. DHARMADHIKARI, J).