CIVIL APPLICATION No 106 of 1997
inO.J.APPEALNo 55 of 1997
AMERICAN EXPRESS BANK LTD.VersusCORE HEALTH CARE LIMITED--------------------
Appearance:SINGHI & BUCH ASSO. for applicant
MR SN SOPARKAR for the respondent--------------------------------------------------------------CORAM : MR.JUSTICE Y.B.BHATT andMR.JUSTICE C.K.BUCH
Date of Order: 18/02/98
ORAL ORDER (Per Y.B. Bhatt J.)
1. We have heard the learned counsel for therespective parties. The present application is forinterim reliefs pending the final disposal of the aboveappeal, as per the separate and distinct prayers made inthe present application. For the purpose of deciding thepresent application, we are inclined to consider theprayers made herein, both separately as alsocumulatively, inasmuch as any order we may pass on thebasis of these prayers would to some extent have anoverlapping effect. For the purpose of deciding thepresent application we have kept in mind the basic andfundamental principles as regards the grant of interimrelief in any matter involving civil rights viz. whetherthe applicant has made out a prima facie case, in whosefavour does the balance of convenience lie, and whetherthe applicant would suffer irreparable injury in casesuch interim relief is refused.
2. Before going to the merits of the specificreliefs sought in the present application, we may onlyhighlight certain basic facts which are either undisputedor undisputable.
3. The applicant petitioning creditor had filed thewinding up petition against the respondent company on theground that the respondent company was unable to pay itsdebts, which as of today, admittedly amounts to aboutRs.17.5 crores inclusive of interest. Admittedly theoriginal transaction under which the respondent companyincurred the aforesaid debt was a loan of Rs.50 crores,which has been partly paid up. The aforesaid loan wastaken by creating a security in favour of the applicantpetitioning creditor of approximately Rs.55 crores atthat point of time. As urged by the counsel for theapplicant, we may assume that the security standsdiminished by passage of time, inasmuch as the same isonly against the specified movable property of thecompany, which may have deteriorated in value due topassage of time and/or due to the use to which it was putby the respondent company. In any case, it is on recordthat the present market value of the plant and machinery,which is secured with the applicant-appellant is Rs.31crores. It is, therefore, obvious that the security farexceeds the amount of the current debt in respect ofwhich the appellant has filed the winding up petition.
4. It is also an admitted fact that after theapplicant-appellant filed the winding up petition, duringthe pendency thereof, and before the same came to bedismissed by the learned Company Judge under the impugnedorder, this very same applicant-appellant had taken outproceedings before the appropriate Tribunal underRecovery of Dues due to Banks and Financial InstitutionsAct, 1993 (hereinafter referred to as the Debt RecoveryTribunal). Having obtained an exparte ad interiminjunction restraining the respondent company, it appearsthat no concrete action was taken for pursuing thewinding up petition, and the latter came to be pressedonly after the Debt Recovery Tribunal vacated the blanketinjunction (after hearing the respondent company).
5. The fact situation remains that theapplicant-appellant is amply secured, in respect of theexisting debt, as per the most recent valuation recordedin the proceedings before the Debt Recovery Tribunal.
6. It is also not in dispute or disputable that, onan approximation the total assets of the respondentcompany are worth about Rs.1000/- crores, that aconsortium of financial institutions have agreed torescheduling of the debts due to them of approximatelyRs.800/- crores, and that not a single secured orunsecured creditor has filed a winding up petitionagainst the respondent company except the presentapplicant-appellant. These facts are strongly resortedto by learned counsel for the respondent to support hiscontention that the very purpose of filing the winding uppetition by the applicant petitioning creditor is tobring undue pressure, inasmuch as theapplicant-petitioning creditor, although it is a securedcreditor, has nothing to gain and much to lose in theevent of the company being ordered to be wound up,inasmuch as the applicant-appellant would then lose itssecurity, and would stand in line with other unsecuredcreditors for prorata distribution of the assets of thecompany as and when realised. Without going deeper intothese submissions of learned counsel for the respondent,suffice it to say that the same are not entirely withoutsubstance, particularly when we take into account thefact that the very same applicant has resorted to thealternative remedy of filing proceedings before the DebtRecovery Tribunal.
7. We shall now deal with the prayers made in thepresent application.
7.1 At the outset we may state that the learnedcounsel for the applicant-appellant fairly conceded thatprayer (C) in the application, to appoint a provisionalliquidator during the pendency of the present appeal, isnot a prayer which he could legitimately press for. Thisprayer i.e. Prayer (C) is, therefore, rejected.
7.2 Prayers (B) and (D) may be considered togetherinasmuch as the same may have a certain overlappingeffect. Prayer (B) seeks to stay the operation andimplementation of the impugned order i.e. the orderwhereby the winding up petition is dismissed at theadmission stage. Prayer (D) seeks an injunctionrestraining the respondent company from dealing with,alienating, transferring or in any manner creating athird party interest in the properties of the opponentcompany without express permission of this court. It isboth implied and expressly stated by counsel for theapplicant that by the phrase "properties of the opponentcompany" would mean and include all possible kinds ofproperties, including fixed assets and/or other propertyincluding incorporeal rights. The only exception he madein the context of this prayer was that day-to-daytransactions in the normal course of business may beexcluded.7.3 In the context of the two prayers pressed for, wecan only observe that, in our opinion, the same, ifgranted even to a limited extent and/or withqualifications, would lead to much confusion andunnecessary complication, and would give rise to furtherlitigation and/or proceedings, while conferring no realadvantage or security to the applicant. On the otherhand, there are strong reasons, in our opinion, forrefusing to grant either of the two prayers, on merits,apart from the reason that no substantial prejudice wouldbe caused to the applicant if the same are not granted.
7.4 Firstly, if any stay were granted with or withoutmodification against the implementation and operation ofthe impugned order, viz. the order rejecting the windingup petition, the same would lead to considerable chaosand confusion. If the impugned order rejecting thewinding up petition at the admission stage were stayed,it could be urged, professed, contended, or representedby the applicant-appellant that, in law, the winding uppetition continues to exist and that the same must betreated as pending. We are not expressing any opinion asto whether such would or would not be the effect of thestay. We are only considering the fact that it may beopen to the applicant-appellant to so urge, not onlybefore the learned Company Judge, not only before otherfinancial institutions, but also before the entirebusiness community and the commercial world. This wouldhave a serious impact, and obviously an adverse impact,on the ongoing, pending and future decisions of theConsortium which is dealing with the respondent companyas regards reschedulement of a total debt ofRs.800/-crores. Furthermore, even to impliedly treat thewinding up petition as pending, is likely to give rise tomany cognate and or ancillary proceedings inasmuch asvarious provisions of the Companies Act would then applyto the respondent company, which would not otherwiseapply if a winding up petition had not been filed or wasnot pending. Thus, the indirect effect of staying theimpugned order would amount to giving a positive effectto, and/or partly accepting the contentions raised in thepresent appeal, before deciding the appeal on merits.
8. We have herein only indicated the highlights andsummarised in brief our line of reasoning as to whyneither of the prayers (B) or (D) can be granted, withoutgoing into a detailed discussion of the respectivesubmissions of the parties in this regard.9. For the reasons indicated briefly by ushereinabove, prayers (B) and (D) are also rejected.10. Consequently, this application as a whole isrejected and the same is accordingly disposed of with noorder as to costs.18.02.1998
[Y.B. BHATT J.][C.K. BUCH J.]
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CIVIL APPLICATION No 106 of 1997
inO.J.APPEALNo 55 of 1997--------------------------------------------------------------AMERICAN EXPRESS BANK LTD.VersusCORE HEALTH CARE LIMITED--------------------------------------------------------------
Appearance:SINGHI & BUCH ASSO. for Applicant--------------------------------------------------------------CORAM : MR.JUSTICE Y.B.BHATT andMR.JUSTICE C.K.BUCH
Date of Order: 06/03/98ORDER ON NOTE DT. 2.3.98Per: Y.B. Bhatt, J.
1. This note has been filed for speaking to minutesby the applicant in Civil Application No. 106/97, in thecontext of our order passed in the said Civil Applicationdated 18th February, 1998. We have heard learned counselfor the respective parties in the context of thesubmissions made in the said note, and the consequentialrequest.
2. As a result of the hearing, we direct that thefollowing phrase shall stand deleted from para 4 of thesaid order."and the latter came to be pressed only after theDebt Recovery Tribunal vacated the blanketinjunction ( after hearing the respondentcompany)."
3. We may clarify that the said deletion is madeonly because counsel for the opponent has expressed hisview that he does not object to this deletion, and notfor any other reason whatsoever. In this context, we mayemphasize that the said deletion is made not because itaffects our overall view expressed in the said order inany manner whatsoever, nor does it affect the line ofreasoning which we have expressed in the said order. Thisnote is accordingly disposed off.
[Y.B. BHATT, J.][C.K. BUCH, J.]
