Case: Katare Spinning Mills Limited Vs. Kotak Mahindra Bank Limited

ny had taken a loan from the ICICI, Mumbai under the Loan Agreement dated 14 August 1997. In the year 2000, ICICI had called upon the appellant to repay the outstanding amount with interest and other charges. Thehad suggested the proposal for settlement by way of one time resettlement of loan. Ultimately, on 12 December 2001, ICICI agreed to accept the one time settlement (OTS) of the company at Rs. 3.50 crores subject to certain conditions. According to the petitioning creditor, the appellant did not abide by the conditions, but the appellant did make some payments purporting to pay towards the part payment of OTS.3. It appears that under a Deed of Assignment dated 31 March 2005 and the Deed of Confirmation dated 20 April 2005, Kotak Mahindra Bank Limited (petitioning creditor) stepped into the shoes of ICICI and thereafter filed winding up petition No.5 of 2006 against thein this Court on 28 November 2005. During pendency of the said petition, the Debt Recovery Tribunal, Pune issued an interim recovery certificate for an amount of Rs.3.27 crores. After giving credit for the payments made by the appellant, the petitioning creditor claimed an amount of Rs.3.16 crores on the basis of the said interim recovery certificate. The Company Court, therefore, passed an order dated 8 June 2006 after referring to the admission made by theply to the said company petition No.5 of 2006, that is admission of the liability to pay Rs.3.16 crores as the principal amount plus interest thereon.4. At the hearing of the said winding up petition, after considering the rival submissions, the Company Court passed the order on 14 July 2006 disposing of the winding up petition (company petition No.5 of 2006) in the followingIn my view, considering the totality of the circumstances, one opportunity needs to be given to the Company to pay the admitted sum atleast. The matter was adjourned to enable Mr.Risbud to take instructions. Now, his instructions are that the Company seeks two years time for payment of a sum of Rs.This request is opposed by Shri Goradia.8) In my view, the following order would meet the ends of justice;(a) Respondent Company is directed to deposit a sum of Rs.3,16,00,000/in monthly instalments of Rs.26 lakhs each on or before 31st December, 2007. The said amount shall stand transferred to the credit of the Original Application filed by the petitioner.(b) Thereupon, it would be open for the Petitioner to make appropriate application for adjustment and appropriation of this amount towards the decretal claim.(c) Needless to state that such application shall be considered on its own merits and in accordance with law.(d) At the request of Mr.Risbud the first instalment of rupees Twenty Six Lakhs be deposited on 15th of September, 2006 and every instalment thereafter shall be paid on 15th of each succeeding month till the entire amount stipulated above is deposited.(e) In the event of the Company failing to deposit the first instalment or committing default in payment of any two instalments the company petition shall stand admitted and to be advertised by the petitioner in Free Press Journal on payment of usual charges.(f) Needless to state that if the amount is deposited within the time stipulated then the same will be dealt by the D.R.T./Recovery Officer in accordance with law. All contentions in that behalf of both sides are specifically kept open.(g)orders passed on 8th June, 2006 by this Court shall continue and liberty is reserved to the petitioner to apply for appointment of Provisional Liquidator in the event of the respondent committing default in payment of first instalment or any two subsequent instalments."5. There is no dispute about the fact that thedid pay the aforesaid amount of Rs.3.16 crores by 31 December 2007 and that the question of appointing the provisional liquidator did not arise.6. Thereafter, the DRT made order dated 20 August 2009 directing issuance of recovery certificate in favour of the petitioning creditor and against theOn the basis thereof, the recovery officer issued the recovery certificate for an amount of Rs.8,86,68,936/together with interest at 10% per annum from 8 April 2004 (the date of application before the DRT) till realization.7. On the basis of the above recovery certificate and calculating the interest on the principal amount, the petitioning creditor issued notice to thecalling upon the company to pay the bank an amount of Rs.14.26 crores together with further interest from 1 March 2010 and other charges. Thesubmitted its reply dated 1 April 2010 contending that ICICI had accepted the OTS of the company for an amount of Rs.3.50 crores which constituted a new agreement, superseding all the previous agreements. The bank thereupon filed the present company petition (No.47 of 2011) on 7 January 2011.8. In the meantime, thehad challenged the order of the DRT before the Debt Recovery Appellate Tribunal in appeal being Appeal No. 285 of 2009 and filed application for waiver of condition ofbeing Misc. Application .No.969 of 2009. On that application, DRAT passed order dated 18 July 2011 directing the appellant to deposit a sum of Rs.6.50 crores by 30 September 2011, failing which the appeal shall not be entertained. Thereview application from that order is still pending before DRAT.9. The learned Company Judge before whom the winding up petition of the bank was pending, referred to the aforesaid orders and noted the contention of the bank that the recovery was sought for the sum of Rs. 15.56 crores in January 2011. The learned Company Judge thereafter passed order dated 14 November 2011 directing theto deposit an amount of Rs.1.50 crores without prejudice to the rights and contentions of both sides. In default, the Court would pass an order of admission of the winding up petition and also consider the request of the petitioning creditor for appointment of the Official Liquidator as a Provisional Liquidator.10. In the order dated 12 January 2012, the learned Company Judge noted that thehad brought a pay order for a sum of Rs. 1.5 crores. However, the time was required to be extended for deposit of the same. Ultimately, in the impugned order dated 1 February 2012, the learned Company Judge noted that though the time was granted to deposit the pay order of Rs.1.50 crores, the same was not deposited with the Registry and therefore, the learned Company Judge passed the impugned order admitting the winding up petition and for publication of the advertisement. It is the aforesaid order which is challenged in this appeal.

Reasoning:
17. As regards the appellants contention that the petitioning creditor cannot invoke Section 433(e) of the Companies Act for winding up on the basis of the recovery certificate issued by the Debt Recovery Tribunal, so long as the recovery certificate is not returned unsatisfied in whole or in part, we are not required to express any opinion, because the appeal deserves to be allowed on other grounds, particularly having regard to the fact that the first winding up petition being Company Petition No.5 of 2006 by this very petitioning creditor against the same company was dismissed by this Court in terms of order dated 8 June 2006 which was complied with by the company (i.e. the appellant herein) and also because thehas agreed to pay a further amount of Rs.3.25 crores over and above the amounts paid by thein compliance with the said order dated 8 June 2006 in the above company petition. The fact that thehas raised a defence about one time settlement between ICICI and theand the petitioning creditor claims to be a mere assignee from ICICI and that the defence of the company on this ground is pending examination before the Debt Recovery Appellate Tribunal, are also relevant facts indicating that thehas raised a bonafide dispute which is pending before another forum.18. As held by the Supreme Court in IBA Healath (India) Private Limited v.Systems SDN. BHD., (2010)10 SCC 553 , the Company Court is not to be reduced as debt collecting agency or as a means of bringing improper pressure on the company to pay a bonafide disputed debt.19. Theis a going concern with 470 employees and has turned around the corner withturnover of Rs.44.95 crores andcash profits (profit before depreciation) of Rs.1.45 crores in the year ended 31 March 2011, as against the loss of Rs.19 lakhs in the previous year ended 31 March 2009. Any order of admitting the winding up petition at this stage will trigger a series of cross defaults which will result in acute insolvency, without thegetting any chance to argue its appeal pending before the Debt Recovery Appellate Tribunal.