Case: Paper Prints (India) Private Limited Vs. Phoenix Arc Private Limited

The Respondent, who instituteda proceeding for winding up before the Company Court, is a company registered as a Securitisation and Reconstruction company under Section 3 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002. DBS Bank Limited had granted a factoring facility/overdraft facility in the amount of Rs. 2.50 Crores to the Applicant Company under a letter of offer dated 18 July 2007. Upon acceptance by the Company, financial facilities were extended by the bank. The bank had issued a notice of demand on 15 September 2008 inspite of which the Company failed to pay its dues. The Bank has moved the Debt Recovery Tribunal for recovery of an amount of Rs. 2.46 Crores due as on 31 January 2009 together with interest.2. DBS Bank Limited assigned its debt to the Respondent by a deed of assignment dated 9 December 2009. The Respondent issued a notice dated 15 April, 2010 under Sections 433 and 434 of the Companies Act. The Company Petition for winding up came up for hearing on diverse dates before the learned Company Judge. No reply was filed. The Company only submitted that only an amount of Rs. 20 Lakhs is due and payable. In these circumstances, the learned Company Judge directed that the Petition should be admitted and advertised.

Court's reasoning:
7 There is no merit in the submission. The first proviso to Section 15 (1) of the SICA, 1985 as introduced by the provisions of the Securitisation Act applies specifically to a situation where financial assets have been acquired by any securitisation company or by a reconstruction company under subsection 1 of section 5 of the Securitisation Act. The second proviso applies to a situation where a reference is pending before the BIFR after the commencement of the Securitisation Act. The second proviso provides the eventuality in which the reference would abate. That eventuality is where the secured creditors representing not less than threefourth in value of the amount outstanding against the financial assistance disbursed to the borrowers have taken measures under Section 13(4).In the present case, the order of the learned Single Judge admitting the Company Petition for winding up was passed on 21 October 2010. Prior thereto on 9 December 2009 the Respondent had acquired the financial assets in question being the debts and receivables of DBS Bank Ltd. Under Section 5 (1) of the Securitisation Act. The reference to the BIFR was made on 26 November 2010. Clearly in view of the specific language of the first proviso to Section 15(1) of the SICA, 1985, the reference was not maintainable.10. For these reasons we do not find any merit in the contention of the Appellant based on the provisions of Section 22 of the SICA, 1985.11. The material on record clearly establishes that a debt is due and payable by the Company. The Company was granted financial assistance and has utilised it. A statutory notice of winding up was issued. No reply was filed to the Petition for winding up. Even before this Court no submission other than what is recorded hereinabove has been urged. The debt is not in dispute.12. By an order dated 2 November 2010 anorder of stay was passed by the Division Bench, during the course of the vacation, subject to the deposit of an amount of Rs. 20 Lakhs, which even according to the Appellant was due and payable. Time to deposit the amount was extended on the request of the Appellant on 15 November 2010. Only an amount of Rs. 5 Lakhs has been deposited.13. For all these reasons, we find no reason to interfere with the order of the learned Single Judge.