July 10, 2015
Case decided on 01.06.2015 C.V. Nagarjuna Reddy, J. (decided on 01.06.2015) Three petitions are filed under Sections 433, 434(1) (c) and 439(1)(b) of the Companies Act,1956 (for short, 'the Act') for an order to wind up the respondents for non-payment of the alleged debts due to the petitioner Brief Facts: The petitioner is an investment management firm headquartered at Geneva, Switzerland. The petitioner provides investment management advice and finance to microfinance institutions all over the world, including India. The respondent approached the petitioner for arranging financial help to expand its business and the petitioner provided guarantee to Citibank N.A. London Branch and Citibank India in connection with the loan being made available by Citibank India to the respondent through Citibank International the petitioner has funded the Citibank India for providing loan to the respondent. The respondent entered facility agreement and Standby Letter of Credit (SBLC) with Citibank of India, Citibank India entered SBLC with Citibank International and the petitioner entered the Facility agreement and Standby Letter of Credit with Citibank International. The petitioner and respondent entered Guarantee Fee Agreement to pay a fee to the petitioner in connection with the loan being made available by Citibank India to the respondent. Under the said Guarantee agreement the respondent agreed to reimburse the petitioner in case any amount required paying to Citibank International under the Standby Letter of Credit entered by petitioner with Citibank International. Subsequently, the respondent breached its payment obligations under the Facility Agreement and as the said amount was not paid by the respondent within the prescribed time period, the Citibank India invoked the SBLC and received payment from Citibank International and was appropriated towards the amount due from the respondent. Citibank International in turn appropriated the cash collateral placed by the petitioner as security for the obligations of the former under the SBLC. Therefore the respondent has incurred the liability to the petitioner in accordance with the terms of the Guarantee Fee Agreement. The respondent also acknowledged petitioner demand for payment of the outstanding amount. Later on, the respondent entered Corporate Debt Restructuring Scheme with the lenders and also sent a letter to RBI to include the petitioner in CDR Scheme. In reply, RBI has declined the said request because, as per the revised guidelines of RBI of the CDR mechanism, the lenders in foreign currency outside the country are not a part of the CDR Scheme. As the respondent failed to discharge its debt despite its acknowledging the same, the petitioner filed petition under Sections 433 and 434 of the Companies Act, 1956 (the Act) calling upon it to repay the sum due within 21 days. On failure of respondent, the petitioner has prayed for an order to wind up the respondent for non-payment of the admitted debt due to it. Decision: Appeals allowed Reason: The respondent acknowledged the debt to petitioner several times as following: 1) The respondent included the petitioner demand of payment in letter to the RBI; 2) The respondent has also informed the petitioner's counsel that it is currently subject to the CDR Scheme and that no payments can be made to the petitioner without the consent of the lenders forming part of the CDR Scheme and also the microfinance industry as a whole in the State of Andhra Pradesh was severely affected and the operational self sufficiency of microfinance institutions based in the State fell and huge amount was outstanding in the hands of the borrowers from ten large micro finance institutions in Andhra Pradesh. Conclusion: As the petitioner filed the petition on the ground mentioned in clause (e) of section 433 of the Companies Act, 1956. Under this clause, a company may be wound up if it is unable to pay its debts, The Judge ordered the winding up of the respondent company, however deferred the publication of advertisement for a period of six months considering the magnitude of the debts owed by the respondents to the petitioner as well as other financial institutions.