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IN THE HIGH COURT OF JUDICATURE AT BOMBAYORDINARY ORIGINAL CIVIL JURISDICTION

COMPANY PETITION NO.971 OF 2009

BNY Corporate Trustee Services Ltd. .. PetitionerVersus

Wockhardt Limited .. Respondent

Mr.Janak Dwarkadas, Senior Advocate with Rahul Narichania, Raksha Kothari & Munaf Virjee i/b. DSK Legal for petitionersMr.Rohit Kapadia, Senior Advocate with Pradeep Sancheti, Senior Advocate, Yash Kapadia, Neerav Merchant, Vishal Maheshwari, Kashish Bhatia i/b. Majumdar & Co. for respondentsMr.D.D.Madon, Senior Advocate with Jayesh Desai, Shaib Dhorajiwala i/b. Singhi & Co. for applicant in C.A.1279 of 2009Mr.Gauraj Shah i/b. Vimadalal & Co. for applicant in C.A.10 of 2010Mr.H.Rehman i/b. D.H.Law Associates for applicant in C.A.454 of 2010Mr.Zubin Behramkamdin with Sushma Nagaraj & Ms.Natasha Bopaiah i/b. Bharucha & Partners for applicant in C.A.356 of 2010Mr.Swanand Ganoo i/b. Pamnani & Pamnani for applicant in C.A.37 of 2010

CORAM : S.C.DHARMADHIKARI, J.Reserved on : 25th February 2011Pronounced on : 11th March 2011

ORAL JUDGEMENT:-

1] This company petition is for winding up of the respondent i.e.

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Wockhardt Ltd. It is presented by the petitioner, a company

incorporated in England and Wales and having its registered office at

the address shown in cause title and is engaged in the business of

providing Trusteeship services. The respondent shall for brevity's sake

be referred to as the Company.

2] Respondent was incorporated on 8th July 1999 under the

Companies Act, 1956 as a public company limited by shares. After

setting out the details in relation to the respondents nominal capital

and main objects, it is alleged in para 7 that the respondent is indebted

to the petitioner in aggregate sum of U.S.$ 142,214,060/- (U.S.Dollars

One Hundred Forty Two Million Two Hundred Fourteen Thousand

and Sixty only). This amount which is stated to be outstanding is

reflected in the particulars of claim annexed and marked as Annexure

“A” to the petition. In paras 9 to 11 of the petition, this is what is

alleged:-

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“9. The Company issued US $ 110,000,000/- Zero Convertible Bonds due 2009 in the denomination of U.S.$ 1,000/- each in registered form (hereinafter referred to as the Bonds). Under the said offering Circular, the Bonds were issued at 100% of the principal amount on 25th

October 2004, the maturity date being 25th October 2009 (Maturity Date). Unless previously redeemed, converted, or purchased and cancelled, the company had agreed to redeem each of the Bonds at 129.578 per cent of its principal amount on the Maturity Date. The petitioner craves leave to refer to and rely upon the terms and conditions of the offering circular dated 20th October, 2004 for their true meaning, interpretation and import.”

“10. On 25th October 2004, as issuer of the Bonds, entered into a trust deed (hereinafter referred to as the Trust Deed) with the petitioner (then known as J.P.Morgan Corporate Trustee Services Ltd) as the trustee (hereinafter referred to as the “Trustee”) for the holders of the Bonds (hereinafter referred to as the “Bondholders”). Amongst other things, clause 2.2 of the Trust deed is a covenant by the company to unconditionally pay or procure to be paid to or to the order of the Trustee in New York City in U.S.$ in immediately available funds the principal amount of the Bonds becoming due for redemption or repayment on the date when the Bonds or any of them become due to be redeemed in accordance with the terms and conditions of the Bonds (hereinafter referred to as the Conditions) together with applicable premium. The petitioner is filing this petition in its capacity as a trustee for the Bondholders and in discharge of its obligations as a trustee.”

“11. The petitioner learnt that on or about 31st March

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2009 the company proposed and/or applied for restructuring of its debts and/or for a composition and/or arrangement with creditors and/or for the benefit of certain creditors to the corporate debt restructuring (CDR) cell in India.”

3] It is alleged that the petitioner addressed an email dated 9th April

2009 to the respondent stating that there may be a potential event of

default on the bonds and requesting a certificate from the company

confirming that the company is compliant with the provisions of

clause 9.8 of the Trust Deed. It is stated that this certificate be

provided to the petitioner within 14 days. After reproducing clause

9.8 of the Trust Deed, it is stated that a letter was received from the

company dated 15th April 2009 wherein the company inter alia stated

that it is seeking help in financial restructuring of debts and interests

from various lenders in India through CDR mechanism. However, no

certificate as requested by the petitioner was provided. Therefore, the

petitioner reiterated its request by another email dated 16th April 2009

to the respondent. The respondent company addressed a letter dated

23rd April 2009 inter alia informing that an application has been made

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by ICICI as the lead institution on behalf of the company to the CDR

cell for a possible restructuring of company's loans and confirming

that it shall revert to the petitioner with a submission of particulars

with regard to the matters specified in clause 9.8 of the Trust Deed.

4] In the subsequent paras it is alleged that the company did not

revert as assured even after the time was granted in that behalf.

Therefore, the letter dated 6th May 2009 came to be addressed and the

reply was that the application for CDR is an event falling within

Condition No.10.1.4 of the Bonds and, for this reason, the company is

not in a position to provide certificate confirming that no Event of

Default in respect of the Bonds has occurred. However, the company

reported that its application for CDR has now been accepted. In the

further paras of the petition, the petitioner points out as to how it

addressed a notice of event of default and the company went on

stating that a proposal was made to the CDR cell and that on receipt

of the formal approval, it would intimate the petitioner and the bond

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holders and also advise them about the terms of the CDR package and

make a proposal for restructuring of the bond/ redemption payments.

A meeting was proposed with the representatives of the bondholders

by the petitioner during the week commencing from 20th July 2009.

Thereafter, the company addressed another letter dated 9th July 2009

informing the petitioner about the letter of approval dated 4th July

2009 from the CDR cell. Although, there was a request to organise a

meeting, the company failed to arrange any meeting and in such

circumstances, the petitioner stated that the response to hold the

meeting was delayed which shows that that the respondent company

had no genuine intention to resolve the matter and was employing

delaying tactics. Therefore, a notice dated 12th October 2009

(Statutory Notice) Annexed as Annexure P to the petition was

addressed and a reply thereto by the company was received. In the

reply, the execution of the Trust Deed with the petitioner is admitted.

However, it is stated that the initiative to restructure its debt through

CDR mechanism has been taken but it was denied that there was

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occurrence of an event of default.

5] There were certain statements made in this reply, which are

termed as false by the petitioner. It is stated that without prejudice to

what has been set out in the statutory notice and the foregoing

paragraphs of the petition the CDR mechanism is not feasible because

the package involved will not satisfy the claim of the petitioner. The

averments in that behalf are made from paragraphs 28 to 34 and,

therefore, it is alleged that the events would disclose that the company

is unable to pay its debts and is commercially insolvent. The debt due

to the petitioner has not been paid nor secured to the satisfaction of

the petitioner. In these circumstances, reiterating the above position,

the usual averments are made from paras 36 to 40 of the petition,

including the request to appoint a provisional liquidator. It is these

circumstances, that the petitioner seeks winding up of the respondent

and the necessary prayers are at page 23 of the petition.

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6] An affidavit in reply has been filed by the respondent company

which is at Vol.III of the petition. The affidavit in reply dated 20th

November 2009 is affirmed by Rakesh Jain, Deputy General Manager,

Finance of the respondent. In para 4 of the reply, after denials it is

stated that respondent is a going concern doing huge volume of

business. The present petition is misconceived and an abuse of the

process of the Court. It has been filed only with a view to pressurise

and coerce the respondent to pay up the alleged debts. The

respondent had a turnover approximately of Rs.15,124.75 Million for

the year ended 31st December 2008. The respondent has 4750

employees for its operations in India and it employs 1250 persons

through its various subsidiaries. The shareholders' funds as on 31st

December 2008 aggregate to Rs.6,772.66 million, including reserves

and surplus of Rs.6,225.48 million. Any winding up order would

seriously prejudice the interest of various persons such as creditors,

shareholders, employees, financial institutions, suppliers etc. Thus,

the respondent is a viable undertaking consistently earning large

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amount of profits for the last more than 10 years. The loss caused in

the last financial year was a exception which arose out of the global

economic downturn which affected the economy of most corporates in

countries across the globe. Thus, there is no compelling reason to

wind up the respondent company as that would result in

unemployment of more than 6000 persons. The Government will also

suffer on account of loss of revenue of excise and taxes. The extract

of balance sheet as on 31st December 2008 has been annexed as

Annexure A to the reply.

7] In paras 5 and 6 of the reply, at page 426 to 428 this is what is

stated:-

“ 5. I state and submit that winding up of the respondent would not benefit either the petitioner/ FCCB holders or the other creditors of the respondent. The FCCB holders are unsecured creditors of the respondent and all of the assets of the respondent are encumbered. I say that the

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respondent has, inter alia, taken loans and/or finances and the facilities from ICICI Bank, LIC, IDBI Bank, Bank of India, PNB, HDFC Bank, ING Vysya Bank, ABN Amro Bank, Citibank NA, SICOM, HSBC, Calyon. The net block of fixed assets of the respondent, excluding intangible assets, as on 31st December 2008 are valued at Rs.16,352 million. All the fixed assets are mortgaged and /or charged in favour of the secured lenders. Similarly, the current assets of the respondent including stock in trade, receivables, etc. are value at Rs.16,832 million, as on 31st

December 2008. The entirety of these current assets are charged by way of hypothecation or pledge in favour of the aforesaid secured lenders. The value of the lenders in whose favour the fixed assets and the current assets are charged aggregates to Rs.31,609 million. Hereto annexed and marked Exh.B is a statement giving bank wise particulars of the aforesaid borrowings and the securities or charge created in respect thereof. In the event of winding up of the respondent, the FCCB holders would be entitled to only the residual portion, if any, after all the secured creditors' claims have been satisfied from sale of the respondent's assets and payment of preferential liabilities. Needless to add that any sale/ liquidation through coercive measures or through the aegis of official liquidator is likely to fetch much less value. The FCCB holders, therefore, stands to get a much higher amount under the CDR scheme than they would in the event of winding up. The very fact that a large and substantial body of creditors, both secured and unsecured, has approved the CDR scheme, clearly goes to show that they have consciously and deliberately chosen the option of restructuring of the debt rather than forcing the respondent into winding up keeping in mind, inter alia, the viability, profit earning potential, goodwill, market

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capitalisation of the respondent. Thus the winding up would neither inure to the benefit of the petitioner nor the creditors at large.”

“6. I further say that the present petition is misconceived and not maintainable insofar as it has been filed by the petitioner as Trustee for the foreign currency convertible bond (the FCCB) holders of the respondent, and not the FCCB holders themselves. The Trustee is not a creditor of the respondent. In fact, State Bank of India and Syndicate Bank, together holding approximately 37.31% of the principal amount of the outstanding FCCBs have joined the respondent's corporate debt restructuring scheme. The respondent's corporate debt restructuring scheme, framed as per the guidelines laid down by the Reserve Bank of India (the 'RBI”), was sanctioned on 4th July 2009 (the CDR scheme).

8] In para 7 of the reply it is then stated that without prejudice to

the earlier statements, the petitioner is not entitled to any amounts

claimed in the petition because by virtue of Foreign Exchange

Management (Transfer or Issue of any Foreign Security) Regulations,

2000, (for short FEMA Regulations), no FCCB can have maturity of

less than five years and any call and put option cannot be exercisable

prior to five years. Under Regulation 21 of FEMA Regulations, an

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Indian resident may issue FCCBs upto the value of U.S.$ 500 million

to a person resident outside India in accordance with and subject to

conditions stipulated in Schedule I of the FEMA Regulations. It is

then alleged that as the claim of the petitioner is based on early

redemption of FCCBs, the same is illegal and not maintainable at all.

It is alleged that petitioner has no authority or mandate to file the

petition. Further the petitioner was not authorised to issue Notice of

Acceleration of Bonds Annexure K to the petition, wherein, inter alia,

it was alleged that an event of default had occurred and, therefore, the

FCCBs had become immediately due and repayable on their early

redemption amount. Alternatively the Trustee is obliged to give such

a notice, if so directed by passing of an extraordinary resolution.

Neither has there been a request in writing as aforesaid nor any

meeting was convened for consideration or passing extraordinary

resolution as required under the said clause. In such circumstances,

the petitioner does not have an authority or mandate to file the present

petition. Since the claim in statutory notice is based on notice for

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early redemption, even the statutory notice is without any legal basis

and invalid.

9] It is stated that the respondent called upon the petitioner to

specify the category of FCCB holders which it claimed to represent

and who had authorised the petitioner to issue notice. The next plea is

that the FCCB holders representing approximately 37.31% of the

principal amount of the total outstanding FCCBs had joined the CDR

scheme. When these details were sought from the petitioner, they

addressed a letter dated 5th November 2009 wrongfully contending

that they were under no obligation to inform the respondent and

substantiate their authorisation. In these circumstances, it is stated

that the petitioners have deliberately and consciously failed to disclose

their authority. It is one more reason why the petition should not be

entertained. It is submitted that the petition proceeds on the basis that

the respondents have failed to pay the maturity redemption amount of

the FCCBs on the maturity date. If the petition is based on statutory

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notice dated 12th October 2009 but the FCCBs became due for

redemption by reason of they being matured on 25th October 2009, the

present petition based on statutory notice is not maintainable. It is

then contended that the offering circular contains “risk factors”. The

risks associated with redemption of the FCCBs prior to the maturity

date were expressly set out. Therefore, it is false to allege that

respondents are fraudulently paying some amount to the promoters to

enrich themselves in the form of non-compete fee. The allegations

with regard to non-compete fees are denied. With regard to the

allegation that respondent is commercially insolvent, while denying

the same in para 14 it has been pointed out that the respondent has a

definite standing in the market. Further the respondent also pointed

out the RBI guidelines for CDR and how the CDR scheme works.

The details are pointed out to support the contention that CDR scheme

has inherent safeguards. The respondent justifies the allegation that

the petitioner did not join the CDR scheme, although it was in the

interest of FCCB holders.

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10] The rest of the affidavit in reply contains denials. There is

supplementary affidavit in reply filed by the respondent stating therein

that a majority of the creditors of the respondent company amounting

to Rs.15,902 million out of a total value of creditors of Rs.22,117

million have joined the CDR scheme. The CDR banks and creditors

who have joined the CDR scheme on a transaction basis together

constitute 72% of the respondent's debts. As more particularly set out

in the affidavit in reply to the company petition No.919 of 2009, the

claims on account of derivative transactions are not legally

recoverable or enforceable.

11] In view of the aforesaid it is submitted that a majority of

creditors have chosen to approve and join the CDR scheme showing

that they have consciously and deliberately chosen the option of

restructuring of the debt of the respondent rather than forcing it into

winding up keeping in mind, inter alia, the viability, profit earning

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potential, goodwill and market capitalisation of the respondent. The

petitioner represents a small proportion of creditors and ought not to

be allowed to jeopardise the interest of the general body of creditors

by filing the present petition.

12] Petitioner filed rejoinder to both affidavits pointing out that

company's stand is false. The company has committed event of

default under the terms and conditions of the U.S.$ 110,000,000/-

Zero Coupon Convertible Bonds issued by the company and is liable

to pay an early redemption amount and has in fact admitted its

liability. The company is now wrongfully and dishonestly disputing

its liability to pay the early redemption amount by raising false and

frivolous pleas. If the company's position was sound and it was not

commercially insolvent but doing huge volume of business, then,

restructuring of its debts was not required. It is stated that the

company has suffered huge loss and is in a precarious financial

condition. It is denied that the company has a turnover or number of

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employees as stated in the reply. It is stated that in its latest unaudited

financial report for the quarter ended on 30th September 2009 the

company has disclosed the loss of Rs.340 Crores (34,000 lakhs). It is

stated that this loss is disclosed after adjusting the profit of Rs.

15,347/- lakhs earned from the sale of animal healthcare business in

the quarter of June to September 2009. This itself mandates winding

up of the company. It is denied that the loss caused for the current

financial year is exceptional and arose out of the global economic

down turn which allegedly affected the economy of most corporates in

countries across the globe. All other allegations are denied and it is

asserted that the petitioner has a right to file a winding up petition. It

is stated that as per the condition No.13 of the Conditions, no

bondholder will be entitled to proceed against the company unless the

petitioner i.e. Trustee having become bound to do so fails to do so

within reasonable period and such failure shall be continuing.

Further, the petitioner has been appointed by the Company under the

Trust Deed dated 24th October 2004 as Trustee for bondholders. The

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company is a party to the Trust Deed and has executed the same.

Clause 2.2 creates an obligation on the part of the company to pay to

the petitioner. Thus, the petitioner is a creditor of the company by

virtue of provisions of trust deed. The petitioner is, therefore, entitled

to file and maintain the petition in its own right as Trustee of the

bondholders. In any event as more particularly stated in the petition,

the Trustee is entitled to file and maintain petition under section

439(1)(b) read with 439 (2) of the Companies Act.

13] The petitioner has contended that the CDR scheme is not

binding on the petitioner. It is denied that CDR scheme has been

framed as per guidelines issued by RBI on corporate debt

restructuring and the petitioner does not admit that the same was

sanctioned on 4th July 2009. It is stated that State Bank of India (SBI)

and Syndicate Bank hold 37.31% of the principal amount of the

outstanding and they have not joined the CDR scheme. The other

allegations and statements in the affidavit in reply have been dealt

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with in the rejoinder, including the plea about FEMA regulations. In

such circumstances it has been stated in paras 11 and 12 of the

rejoinder as under:-

“11. With reference to para 10 of the said affidavit in reply, I say that in view of the event of default committed by the company, the petitioner was constrained to issue the said Notice of Acceleration. Further, in view of the failure on the part of the company to make payment of the early redemption amount on account of acceleration of the Bonds, the petitioner was compelled to issue the said statutory notice. In view of the continued failure on the part of the company to make payment of the amounts claimed by way of the said statutory notice, the petitioner was obliged to file the present company petition. In the meanwhile, however, the bonds matured for payment on 25th October, 2009 (“maturity date”) at 129.578 per cent of their principal amount (the maturity redemption amount). Even as on the maturity date and till date, the company is unable to meet its liability. The subsequent events that have transpired after the service of the said statutory notice are relevant and material for the purpose of the hearing and determination of the matter in the present company petition. In the circumstances, it is futile for the company to now allege that the petitioner cannot invoke the provisions of Section 433 and 434 of the Companies Act, 1956 to wind up the company on the basis that the company has failed to pay the maturity redemption amount on the maturity date. I deny that the statutory notice is a mandatory precondition to

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invocation of the provisions under section 433 read with section 434 of the Companies Act, 1956.”

“12. With reference to para 11 of the said affidavit in reply, I say that the company has interpreted the “Risk Factors” contained in the offering circular to its convenience. The Risk Factors state that “any repayment of the bonds prior to maturity as a result of early redemption pursuant to condition 8 or acceleration of the Bonds pursuant to condition 10 would require the prior approval of the RBI.”

“The contention of the company that the Bondholders were aware of the risks associated with the redemption of the Bonds prior to the maturity date i.e., it requires the prior approval of the RBI, is in direct contradiction with its own statement in paragraph 7 of the said affidavit in reply to the effect that the petitioner's claim based on Early Redemption Amount is illegal, and is clearly an admission of its liability to pay the petitioner. Moreover, the issue that any repayment due to acceleration would require prior approval of the RBI is separate from the issue that the company has not paid, or even taken any steps towards payment of the early redemption amount. Further, I submit that the risk will arise only after an application in that regard is made to the RBI. In any event, it is submitted that the company cannot rely upon the clause quoted in the paragraph under reply to justify non payment of the early redemption amount.”

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14] In para 13 of the rejoinder, the petitioner has reiterated that the

promoters of the respondent are seeking to enrich themselves. In para

21, while making allegations of discrimination, this is what is stated:-

“21. It is pertinent to note that there are numerous instances in the CDR Scheme (some of which are set out below) which clearly demonstrate that the Bondholders have not been treated equally with other creditors and have been discriminated against.

(a) The CDR lenders, save and except the Bondholders and derivatives banks, have been secured by:

(i) fixed and current assets of the company, Wockhardt Infrastructure Development Limited (WIDL) and Vinton Healthcare;

(ii) pledges of all the unencumbered shares of the promoters and the encumbered shares, as and when those shares are released by those charge holders; and

(iii) the unconditional and irrevocable personal guarantee of the promoter, Mrr.Habil Khorakhiwala;

(b) Further paragraph 4 of the “Other Conditions” of the CDR Scheme provides that the proceeds of the divestments by the ASC are to be utilised only for repayment of the secured lenders.

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(c) The creditors of Wockhardt EU Operations (Swiss) AG (Wockhardt EU) who have an exposure of U.S.$ 250 million (approx Rs.1200 Crore) were originally secured for a lower amount. However, under the CDR Scheme, the security has now gone up substantially. It is pertinent to note that ICICI Bank Limited has an exposure of U.S.$ 30.5 Million to Wockhardt EU.

(d) The bondholders are unsecured creditors of the company. On converting the Bonds to preference shares, a Bondholder would lose priority in repayment. In the event the company is unable to redeem the reference shares on their redemption date in 2018, the preference shareholder would only be paid after the secured and unsecured creditors' dues have been paid.”

15] In para 23 it is reiterated that apart from the CDR scheme being

not binding on the petitioner, it is also arbitratory, discriminatory and

unreasonable and whilst bond holders have been required by the CDR

to make sacrifice and losses stated therein, the petitioner is not aware

if the CDR lenders are at all suffering any loss or making any sacrifice

because necessary information is with the company and it has not

been provided to the petitioner. Thus, a detailed affidavit in rejoinder

has been filed and there is also supplementary affidavit in rejoinder

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affirmed on 15th December 2009 in which what has been stated is that

the respondent company has committed event of default and has in

fact admitted its liability. More over, for the bonds matured for

payment on 25th October 2009, at 129.578% of their principal amount,

the company is unable to meet the liability even on the matured date

and subsequently. In such circumstances, while pointing out that the

amount due and payable is not a small amount, it is stated that the

defence of the respondent is not bonafide. In para 6 of this

supplementary affidavit in rejoinder together with Annexure A thereto,

it is pointed out as to how CDR is not viable.

16] The petitioner has also filed a further/ supplementary affidavit

affirmed on 15th December 2010 and filed on 5th January 2011 in

which what has been brought on record are the facts relating to letter

of understanding. The details have been pointed out in paras 3 and 4

of this affidavit. It is stated that what the letter of understanding

effectively states is that each of the instructing holders and the

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intervening holders confirm to the Trust that such holders intend to

settle each of their respective claims in connection with defaulting

bond, if company offers settlement proposal with terms reasonable,

satisfactory to the instructing and intervening holders. There are

certain options which are set out and what the instructing and

intervening holders have stated in the letter of understanding is that if

the company is unwilling to offer a proposal consisting of the bond

offer and cash offer to the instructing bondholders they intend to

instruct the Trustee to pursue the winding up petition without any

further delay and the intervening bond holders will take all such

actions are necessary to enforce their rights in connection with the

defaulted bonds, including pursuing their respective intervention

application and oppositions.

17] Thus, together with the letter of understanding being brought on

record, what has been highlighted are the terms thereof. It has been

pointed out that the company has not reverted by forwarding their

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acceptance to the proposals stated in the letter of understanding.

18] The respondent has filed a sur-rejoinder in which while

reiterating its earlier pleas, what the respondent company referred to

are the discussions in respect of settlement of the present petition with

the petitioner as well as certain instructing bondholders. It is stated

that the consent terms dated 17th August 2010 were not filed in the

Court. Under the term sheet and the consent terms, the respondent

agreed to issue to the bond holders in consideration of the existing

bonds held by them, new foreign mandatorily Convertible Bonds due

in 2014 carrying a coupon rate of 3.5% per annum. The details of the

said offer are set out. In para 8, the allegation is made that Company

Application No.454 of 2010 was filed by Sun Pharma with oblique

motive and by way of pressure tactics. It is only to object to the

consent terms being filed in the Court. The objections were raised by

two separate intervening bond holders viz., Syndicate Bank and Sun

Pharma. Allegations contained in para 8 are against Sun Pharma

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pointing out that its a trade rival and in para 11 allegations are made

that one Syndicate Bank is signatory to the CDR mechanism and it is

bound by it and, therefore, precluded from filing any application or

petition winding up the company. Thus, the basis of the allegations in

this sur-rejoinder is the alleged backing out of the petitioner and the

intervening bond holders. Further, reasons are set out as to why the

respondent cannot accept the proposal contained in the letter dated 3rd

December 2010 addressed by the Advocates for the petitioner. The

affidavit also highlights the CDR scheme and how under various

options prescribed therein, it would be beneficial for the petitioner to

become part of the said CDR scheme. It is pointed out that the

settlement has been arrived at with creditors worth Rs.1363 Crores.

The amount that is settled is approximately Rs.362 Crores. Certain

other claims have also been settled. The sacrifice under the scheme is,

therefore, not of such a degree as would raise doubts about the

genuineness thereof and the intentions of the respondent company to

repay the creditors. For these reasons it is submitted that the

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petitioners cannot seek winding up of the respondent and that the

petition be dismissed.

19] On 5th January 2011 directions were issued by the Court with

regard to filing of pleadings/ affidavits. The parties having abided by

the same and therefore the petition was listed for admission. It is on

this entire material that I have heard the submissions of the learned

Senior Counsel appearing for parties.

20] Mr.Dwarkadas, learned Senior Counsel appearing for petitioner

submitted that the petitioner has filed this petition in its capacity as a

Trustee for the bond holders and in discharge of its obligation as a

Trustee. He submits that the respondent is indebted to the petitioner

in the aggregate sum of Rs.142,214,060 as on 12th October 2009 with

future interest on the early redemption amount. Mr.Dwarkadas

submits that the bonds came to be issued in the manner set out in the

petition and the petitioner acts as a Trustee under the Trust deed dated

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24th October 2004. Mr.Dwarkadas submits that the bonds were issued

at 100% of the principal amount and they were redeemable at

128.57 % of the principal amount on maturity date i.e. 25th October

2009. He submits that document at Annexure C (page 230 Vol.II) is

the Trust deed under which the petitioner was to act as Trustee for the

holders of the bond. Inviting my attention to clause 2.2 thereof,

Mr.Dwarkadas submits that in terms of this clause and clauses 9.3,

9.4, 9.8, 9.8.1 to 9.8.3 and 11.13 would show that it is for the

petitioner to determine whether or not the event of default or potential

event of default has occurred and whether it is capable of being

remedied. That determination is conclusive and binding on the

respondent company and the bond holders. Mr.Dwarkadas invited my

attention to the terms and conditions of the bond and particularly

condition No.10.1 and submitted that the petitioner became aware that

the financial condition of the respondent is deteriorating. It is the

respondent who proposed restructuring of its debts and/or for

composition or arrangement with creditors. That is how, the email

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and other communications have been exchanged.

21] Mr.Dwarkadas submits that the defence of the company that the

petitioner has no right or authority to issue notice of acceleration of

bonds dated 23rd June 2009 is not correct because the bond holders

have directed the petitioner to file the present petition. The present

proceedings is one for enforcement of the claim under the terms and

conditions of the bonds. Assuming and without admitting that even if

the bondholders had not directed the petitioner to file the present

petition, in its own right the present petition can be filed and

maintained by the petitioner. He invites my attention to certain

clauses in the Trust Deed in this behalf and relies upon section 439(1)

(b) and 439(2) of the Companies Act. Mr.Dwarkadas submits that as

a trustee of bondholders, the petitioner has duty of care and is required

to act in the interest of the bond holders or else it could be held liable

for breach of duty of care. Thus, the statutory notice is based on the

fact that the petitioner has discretion to accelerate redemption of

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bonds, where event of default has occurred. Therefore, it is false to

suggest that the petitioner has no authority to file this winding up

petition or that the statutory notice is not valid. Mr.Dwarkadas

submits that after issuance of the statutory notice dated 12th October

2009 the bonds matured for payment on 25th October 2009 and the

present petition came to be filed on 5th November 2009. Thus,

notwithstanding the issuance of notice of acceleration seeking early

redemption, even going by the maturity date the respondent company

has failed to pay the bond holders the maturity amount or any part

thereof. Thus, the petition is maintainable even otherwise.

Mr.Dwarkadas submits that the company's reliance upon FEMA

Regulations 2000 is totally misplaced as it has been pointed out that

the FEMA Regulations referred by the company in its affidavit in

reply are not applicable. Early redemption of FCCB is permissible

with prior approval of RBI which is required for payment of early

redemption amount. He submits that the company has not stated that

early repayment of bond amounts to call option. Therefore, the

cp971-09.sxw31

question of applicability of FEMA Regulations does not arise. The

early redemption of Foreign Currency Convertible Bonds is

permissible with prior approval of RBI. Thus, there is no violation of

FEMA Regulations and the statements made in the affidavit in reply

in that behalf are nothing but an attempt to mislead the Court.

Mr.Dwarkadas submits that the defence that offering circular contains

risk factor is a plea which will support the petitioner's case. The risk

factor and the contents of the offering circular in that behalf would

show that repayment due to acceleration is permissible but pre-

payment would require prior approval of RBI. The respondent has not

paid or even taken steps towards payment of early redemption

amount. The risk will arise only after an application is made to RBI.

Therefore no reliance can be placed on the clause relating to risk

factor.

22] Mr.Dwarkadas then submitted that the pleas raised with regard

to the CDR scheme, cannot constitute a bonafide defence.

cp971-09.sxw32

Mr.Dwarkadas submits that implicit in the reliance placed on CDR is

the fact that the respondent company acknowledges its liability not

only to pay the amount as claimed by the petitioner but several other

creditors. That some of the intervenors have thought it fit to join CDR

scheme, does not mean that the CDR scheme and its pendency itself is

a defence. He submits that there are several flaws in the scheme.

They are pointed out without prejudice to the rights and contentions of

the petitioners. Mr.Dwarkadas submits that some creditors may have

accepted some terms of the CDR but it has been pointed out as to how

the scheme framed is not as per the guidelines of the RBI. There is a

fresh master circular issued by the RBI on 1st July 2001. The CDR

provides for setting up of the Assets Sale Committee. The proceeds

are to be utilised to repay the secured creditors. ICICI has been

appointed as a monitoring institution and is being paid one time fee of

Rs.1 Crore for allegedly preparing restructuring package and for

which, fee of Rs.22.50 lakhs for functioning of the monitoring

institution is paid. Mr.Dwarkadas submits that apart from the own

cp971-09.sxw33

interest of ICICI, it has been pointed out as to how CDR mechanism

is non statutory/ voluntary. The CDR mechanism proposes to assume

contractual basis through Inter Creditor Agreement and Debtor

Creditor Agreement as and when entered into. The Inter Creditor

Agreement is binding agreement between creditors who have joined

the CDR scheme. Thus, by certain percentage of CDR creditors

joining and willing to accept a restructuring package of the existing

debts, the same is stated to be binding on remaining CDR creditors.

The lenders in foreign currency outside the country are not part of

CDR system. Further, Mr.Dwarkadas submits that the petitioner and

the bond holders who are not members of the CDR scheme are not

bound by the same. The CDR cell has requested the company to

approach non CDR lenders for their approval for restructuring. The

petitioners and bond holders having been deliberately excluded from

the process of formulation of terms of the purported CDR package,

have never agreed to the same. Mr.Dwarkadas submits that the

restructuring package purports to operate against outstanding

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liabilities of the company to the petitioner or the bondholders and

purports to bind the company to pay less than 35 Cents for every

dollar owed to the petitioner. This clearly constitutes an admission

by the Company to each of such creditors of the company who are the

members of the CDR scheme, that the company is undisputedly

indebted to the petitioner. It is also clear that the company and each

of such creditors who are members of CDR are attempting to deny the

amount owed by it and discriminate against the petitioner to their

benefit and that of the company's promoters and shareholders.

Mr.Dwarkadas has gone into the merits of the CDR restructuring

package and pointed out that the same is not acceptable to the

petitioners because the options for FCCB therein requires them to

wait for considerably long period. They will have to wait till the

company is able to over-come its present crisis. He submits that the

FCCB will in addition to being converted from creditor to

shareholder, petitioner's chance of being repaid will be conditional on

not only profits in a given year and proceeds of fresh issuance of

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shares allotted to others and required to be redeemed before those that

may be allotted to the bondholders, are actually redeemed. Thus,

apart from long wait, Option 1 and 2 under the scheme are not viable

at all. He submits that it has been pointed out in details as to how

CDR is unreasonable, arbitrary and discriminatory.

23] Further the petitioners have never been invited to any discussion

or meeting of this CDR. Therefore, when they are in dark, have no

adequate particulars of the scheme, which in any event is no defence

to the claim, then all the more, the petition deserves to be admitted.

Lastly, Mr.Dwarkadas submits that the claims of unsecured creditors

like petitioners cannot be brushed aside. Ultimately, winding up

petitions can be filed by any creditor. Inviting my attention to section

439 of the Companies Act, it is submitted by Mr.Dwarkadas that any

application for winding up of a company can be presented by any

creditor or creditors, including any contingent or prospective creditor

and, therefore, it cannot be said that the claim of unsecured creditors

cp971-09.sxw36

should be ignored, when, statutorily they are permitted to seek

winding up. He submits that by virtue of section 439 (1)(b) read with

section 439 (2), a secured creditor, holder of any debenture including

debenture stock, whether or not any trustee or trustees have been

appointed in respect of such and other like debentures, and the trustee

for the holders of debentures are by deeming fiction termed as

creditors for the purpose of clause (b) of sub-section 1 of section 439

of the Companies Act. Therefore, to state that the petition for winding

up cannot be filed by the petitioner is a plea which goes contrary to

the statutory scheme. For all these reasons, this petition deserves to be

admitted. Mr.Dwarkadas relied upon the following decisions in

support of his afore-set out contentions:-

(1) (2010) 10 SCC 553 - (IBA Health (India) Pvt Ltd Vs.

Info-Drive Systems Sdn.Bhd);

(2) Company Petition No.960 of 2009 – (Sublime Agro Ltd

Vs. Indage Vintners Ltd) decided on 19th March 2010;

cp971-09.sxw37

(3) (1906) 2 Ch.327 – (Crigglestone Coal Co Ltd, Re);

(4) Company Cases Vol.III 2002 - (Gramercy Emerging

Market Fund Vs. Essar Steel Ltd);

(5) Company Cases Vol.116 248 – (Essar Steel Ltd Vs.

Gramercy Emerging Market Fund);

(6) Company Cases Vol.XXXVI Pg.426 – (Harinagar Sugar

Mills Co Ltd Vs. M.W.Pradhan (now G.V.Dalvi), Court

Receiver, High Court Bombay);

(7) 2002 (1) Mh.L.J. 785 – (In Re: Nilesh Lalit Parekh);

(8) (1997) 1 SCC 326 – (State of Tamil Nadu Vs. Arooran

Sugars Ltd).

24] Mr.Dwarkadas has been supported in his submissions by

Mr.Behramkamdin who appears for the Syndicate Bank in Company

Application No.356 of 2010. He submits that for the reasons

mentioned in the affidavit in support of this company application and

as an intervenor, who presently holds Zero Coupon FCCBs

cp971-09.sxw38

(ISINXSO201687570) with a face value of U.S.$ 3,927,000

(U.S.Dollars Three Million and Nine Hundred and Twenty Seven

Thousand) and redemption value of U.S. $ 5,088,528.06 (U.S.Dollars

Five Million Eighty Eight Thousand Five Hundred and Twenty Eight

and six Cents), this petition should be admitted.

25] He submits that the intervenor as a FCCB holder was never part

of the CDR process and cannot be bound by the package. The

intervenor, therefore, declined to accept the options provided to FCCB

holder as part of CDR package. He relies upon the correspondence

between the applicant/ intervenor and the respondent post a meeting

held in November 2009. He submits that it clarified that CDR

package was not binding on the Syndicate bank. He submits that the

affidavit clarifies as to how the process was handled transparently by

the applicants. He submits that if the Companies Act and particularly

section 557 thereof gives discretion to the Court to have regard to the

wishes of the creditors or contributories of the company, then, all the

cp971-09.sxw39

more, considering the claim of the applicant/ intervenor, the winding

up petition should be admitted. He submits that the contents of the

affidavit in reply to this company petition would also demonstrate as

to how the applicants/intervenors have been opposing any consent

terms which jeopardise the interest of the applicant/ intervenors and

similarly placed creditors. Therefore, the petition may be admitted.

26] On the other hand, Mr.Kapadia, learned Senior Counsel

appearing on behalf of the respondent company firstly submits that

the respondent is in a temporary financial crisis and, therefore, it is

not proper to wind up the same or admit the winding up petition

against the respondent company, in public interest. He invites my

attention to the fact that the respondent has strong financial base. It is

one of the leaders in Pharmaceutical products. It has about 6000

employees. The interest of the shareholders and creditors so also the

employees warrant that this Court should not admit the present

winding up petition.

cp971-09.sxw40

27] Mr.Kapadia submits that in any event, this winding up petition

cannot be admitted because the petitioner has no locus to file it. The

petitioner cannot file the present petition. He submits that only a

individual bond holder can file it. Inviting my attention to section 439

of the Companies Act, 1956 it is submitted by Mr.Kapadia that the

Trust deed must be read as a whole. He submits that even the

conditions on which the bonds have been issued would clarify that

there is no question of any entrustment to the petitioner. The

petitioner does not have any right in law as the bondholder is the

owner of the bond. The scheme is that a global certificate for the total

amount of the bond is issued and a portion thereof is given to

individual holder. Inviting my attention to the objections raised by the

petitioner he submits that there is a specific plea raised to the

maintainability of this petition and the right of the petitioner to present

it in law. It is false to suggest that in the affidavit in reply no

objection has been taken and there is no plea raised in this behalf.

cp971-09.sxw41

Inviting my attention to para 28 page 12 of the petition to which reply

has been given at page 428 and 469 of the paperbook, Mr.Kapadia

submits that the principles underlying the Indian Trusts Act, 1882

would apply. Mr.Kapadia submits that the definition of the term

“Trust” in section 3 of the Indian Trusts Act, 1882 would demonstrate

that a Trust is an obligation annexed to the ownership of property and

arising out of confidence reposed in and accepted by the owner or

declared and accepted by him for the benefit of another or of another

and the owner. Mr.Kapadia submits that the person who accepts the

confidence is called a “Trustee” and the person for whose benefit the

confidence is accepted is called a “beneficiary”. Ultimately, the

subject matter of a trust is called trust property. Therefore, it is the

beneficiary who is the owner. The petitioner though styling itself as a

Trustee is not the owner. He submits that the petitioner has a limited

right and, therefore, by virtue of collective method of suing for

recovery of monies from the respondent, the petitioner cannot present

the petition. In any event, the agreement between the petitioner and

cp971-09.sxw42

the bond holders cannot over-ride the Statute and particularly the

powers conferred in the Trustee by Indian Trusts Act. Further, that

power is coupled with a duty as is clear from sections 12 to 18 of the

Indian Trusts Act.

28] Mr.Kapadia invites my attention to the terms and conditions of

the bonds and particularly clauses 2, 3, 6, 6.1.1, 7, 8.1, 10, 11.26, 13

and 16.2 in support of his submission that for the purpose of section

439(1)(b) and sub-section 2 thereof to apply, a person must be a

trustee under else the deeming provision will not apply. He submits

that the definition of the term Trust and Trustee under the Indian Trust

Act would show that the judgement of the learned Single Judge of the

Gujarat High Court which is reported in III Company Cases 2002

(Gramercy Emerging Market Fund Vs. Esser Steel Ltd) delivered by

the Hon'ble the Chief Justice of this Court Mohit Shah J, who at the

relevant time was a Judge of the Gujarat High Court will not apply.

cp971-09.sxw43

29] Mr.Kapadia submits that in any event, the petitioner is not a

debenture trustee. The petitioner is only holding bonds. No property

of the company vests in the petitioner. If the petition is held to be

maintainable, then, a right will be conferred on a person who is not a

trustee. The petitioner is merely a facilitator. Tomorrow, a right will

be conferred on a mere facilitator to present a winding up petition if

the construction of the subject provisions, as suggested by

Mr.Dwarkadas, is accepted. Once this position in law is understood,

then, this petition deserves to be dismissed only on this ground.

30] Alternatively and assuming without admitting that there is a

right in the petitioner to file a winding up petition, even then, in

absence of the consent of bond holders who are sought to be

represented, even if one bond holder has no right to present a petition,

it must fail. The petitioner seeks to represent all bond holders.

However, in the affidavit in reply it has been pointed out that two

bondholders viz., Syndicate Bank and Sun Pharma supported the CDR

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scheme. They have about 25% bonds approximately. In these

circumstances, when two constituents constituting total group of

bondholders, have suspect motives and are not acting in good faith,

then, the petition must fail. Mr.Kapadia submits that Sun Pharma is

competitor of the respondent in the pharmaceutical market. In such

circumstances, when the CDR scheme evolves a package which is in

the interest of all the creditors and shareholders, then, it must be

allowed to be implemented fully.

31] Mr.Kapadia was at pains to explain the mechanism of the CDR.

He submits that there is a monitoring agency which will supervise the

implementation of CDR. He submits that there are working capital

loans and some amounts would be fused in. ICICI has already put in

a substantial sum of Rs.220 Crores. There are some internal

concessions and moratoriums. The working capital once infused in

this manner would improve the financial condition of the respondent

enabling it to tide over the temporary crisis. In such circumstances,

cp971-09.sxw45

this court should allow the respondent to come out of the present

situation by not admitting the winding up petition. A case has been

made out for not exercising the discretionary jurisdiction of this Court

in favour of the petitioner but that of the respondent. Mr.Kapadia

submits that the attack and criticism on the CDR scheme is totally

unjustified. Mr.Kapadia invites my attention to the letter dated 30th

June 2009 at page 341 of paperbook and pages 379, 380 and 469 and

470 of the paperbook to submit that no one was kept in dark about the

CDR scheme and proposals. Everybody concerned was taken into

confidence. He submits that respondent's letter dated 9th July 2009

page 343 of the paperbook and page 345 would demonstrate as to how

the CDR scheme is beneficial and feasible. The salient features have

been pointed out. Instead, there was no response from the petitioner

and, therefore, the argument that the petitioner was not taken into

confidence is false and must be rejected outright. Mr.Kapadia has

invited my attention to the further affidavit of the respondent and

Annexure A to the same. In this behalf, he invites my attention to

cp971-09.sxw46

pages 686, 692 and 670 of the paperbook and contends that the

petitioner cannot take advantage of the scheme/ CDR through some

bondholder and financial institution (Syndicate bank for example) and

still pursue a winding up petition. The CDR involves active

participation of the banks and now it has reached a advanced stage,

when more funds have been put in. Thus, temporary set back to the

company is being taken care of.

32] Mr.Kapadia submits that the criticism that the CDR

contemplates fraudulent preference and indefinite wait for creditors is

unfounded. Mere long wait beyond anything more by itself is not a

ground for holding that the alleged preferences are fraudulent.

Mr.Kapadia submits that this argument is based on the fact that the

respondent has settled some claims whereas it decided to contest some

others including the present petition. The petitioner is a unsecured

creditor. By pressing the winding up petition, it cannot stop business

of respondent which is the very purpose of filing the petition.

cp971-09.sxw47

Therefore, there is no fraud and merely because consent terms have

been filed in some petitions by and between the respondent and the

creditors concerned therein, is no ground to entertain this petition. He

submits that the options under the CDR scheme have been properly

explained and, therefore, even the workers are supporting the

respondent and the CDR scheme. Those options being exercised does

not mean that legal rights have been completely given up or that the

claims would be held in abeyance endlessly. For all these reasons, he

submits that this petition should not be admitted.

33] In support of his submissions, he relies upon the following

judgements:

(1) (2003) 6 C.L.J 538 (Guj) – (Gramercy Emerging Market

Fund & Ors);

(2) AIR 1937 Bom 374 – (Shivramdas & Ors Vs.

B.V.Nerurkar & Ors);

cp971-09.sxw48

(3) AIR 1919 Madras 555 – (Alagappa Chettiar Vs.

Lakshmanan Chettiar & Ors);

(4) 2004 Company Cases Vol.118 Pg.356 – (Krishna

Filaments Ltd Vs. Industrial Development Bank of India &

Ors);

(5) AIR 1971 Supreme Court 2600 – (M/s.Madhusudan

Gordhandas & Co Vs. Madhu Woolen Industries Pvt Ltd);

(6) 1994 Company Cases 835 – (Pradeshiya Industrial &

Investment Corporation of Uttar Pradesh Vs. North India Petro

Chemical Ltd & Anr);

(7) 1999 Company Cases 841 – (American Express Bank Ltd

Vs. Core Health Care Ltd);

(8) 1990 BCLC 324 – (Re MC Bacon Ltd);

(9) AIR 1988 Karanataka 1 – (Chief Controlling Revenue

Authority in Karnataka Vs. The Manager-Advances, State Bank

of Mysore, Bangalore & Ors);

(10) AIR 1996 Supreme Court 719 – (Commissioner of

cp971-09.sxw49

Income Tax Bombay City II Vs. Shakuntala & Ors)

34] Mr.Kapadia has been supported by Mr.Swanand Ganoo who

appears for the applicants/intervenors in Company Application No.37

of 2011. He submits that the President of the Wockhardt Employees

Union, who has filed the affidavit in support of this application, has

pointed out that the petitioner should not be allowed to disrupt the

functioning of the respondent company for good reason viz., under the

CDR package, CDR lenders/ banks have consented to restructure the

facilities and the petitioner would be recognised as a secured creditor

viz-a-viz the respondent and the company would start repaying the

amount due from July 15, 2010. He submits that the livelihood of the

workers depends upon the company. The company has a large

networth, net sales of the company have grown up considerably. The

company is a viable entity and is facing temporary financial crunch

due to adverse market conditions. If petition is admitted, there is

likelihood that the workers may lose their only source of livelihood as

cp971-09.sxw50

their jobs would be at risk. Therefore, this Court by following the

principle laid down in the decision of the Supreme Court (National

Textiles Workers Union and Ors. Vs. P.R.Ramakrishna 1983 (1) SCC

28, should not admit this winding up petition. Workers' rights have

been recognised in this decision, according to Mr.Ganoo and,

therefore, even their wishes must be respected and taken into

consideration.

35] The other applications/ intervenors who have supported

Mr.Kapadia is ICICI bank. Mr.Madon, learned Senior Counsel

appearing for ICICI bank has submitted that the ICICI Bank has by

filing a detailed affidavit pointed out as to how the admission of

winding up petition would not be in the interest of anybody. The

applicant is representative of member Banks under the Corporate Debt

Restructuring (CDR) Mechanism of the Reserve Bank of India in

terms of the letter issued by the CDR Cell dated 30th October 2009

and November 25, 2009. It has intervened because the corporate debt

cp971-09.sxw51

restructuring mechanism is in the interest of all. In these

circumstances, any order admitting the winding up petition would

endanger the claims of the members of the mechanism. Their total

outstanding is Rs.1775.57 Crores. The CDR cell has faith and

confidence in the management of the respondent. The chances of

revival of the respondent are bright. The applicant ICICI has already

put in Rs.220 Crores in the scheme. The CDR has gone forward and

the liability being to the extent of Rs.2000 Crores, this Court may not

pass any order admitting this winding up petition. That would mean

that the CDR scheme and the package cannot be carried forward any

longer. In these circumstances and when even the petitioner will have

no chance of receiving the amount due, the CDR mechanism should

be permitted to operate as envisaged by all. The petition, therefore, be

dismissed is the submission.

36] In rejoinder Mr.Dwarkadas has submitted that the objections

raised by Mr.Kapadia that the petitioners are not the trustees is not on

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affidavit. If it was raised on affidavit the petitioners would have met

it by pointing out as to how it is entitled to file and maintain the

present petition. Such pleas when not raised on affidavit have a result

of, parties like the petitioner, being taken by surprise. Mr.Dwarkadas

submits that it is no longer open to the respondents to raise such a

technical objection because it is a party to the Trust Deed. He submits

that deeming fiction in Section 439 (2) must be given its full effect.

The intention of the Legislature is to allow any creditor to present a

winding up petition and, therefore, the intention is to enlarge the

scope of the provisions enabling filing up of a winding up petition.

He submits that reliance on the decision of the Division Bench of

Gujarat High Court in the case of Essar Steel Ltd. Vs. Gramercy

Emerging Market Fund, reported in 2003 (Vol.116) Company Cases

248) is misplaced because there clause 13 was differently worded.

Relying on a decision of Division Bench of this Court reported in

2002 (1) Mh.L.J. 785 ( In re: Nilesh Lalit Parekh), Mr.Dwarkadas

submits that the winding up is recognised as a equitable mode of

cp971-09.sxw53

execution and enforcement of claims of creditors. Therefore, the

objection raised to the locus of the petitioner is contrary to law and

would defeat sub-section 2 of Section 439 of the Companies Act,

1956. Mr.Dwarkadas then submits that the conduct of two

bondholders is not relevant at all. Once the petitioner represents bond

holders as a class and there is a contract with the respondent, then, the

petitioner's right to file a winding up petition can never be taken to be

lost if some bond holders do not wish to join the petitioner earlier.

However, now even the Syndicate bank is supporting the petition.

Mr.Dwarkadas submits that if some financial institutions think it fit to

accept the terms in the CDR package and implementation of that

package is pending is by itself no ground to refuse to admit this

petition. There is no bar in law. Once the petitioner's debt is

acknowledged and admitted, when company is unable to pay it and

when its defence is not bonafide, then all the more this petition should

be admitted. It should be admitted because no steps have been taken

by the respondent to satisfy the claim of the petitioner or to secure it

cp971-09.sxw54

otherwise. Mr.Dwarkadas has invited my attention to the pleading

particularly paras 21 and 23 of the petition. He has also invited my

attention to some of the relevant annexures to the petition and a letter

dated 4th July 2009. He also argued that the promoters of the

respondent are enriching themselves endlessly. They are not putting

anything personal at stake. They ensured that their shareholding is

intact and undisturbed, even if the company goes in red. Therefore,

when the CDR scheme does not prevent the promoters from

continuing to hold on to their shares nor does it require them to

contribute anything, then, petitioner cannot be told that it should not

go ahead with this petition. This is one more reason why the petition

should be admitted.

37] With the able assistance of the learned Senior Counsel

appearing for parties, I have perused the company petition and its

annexures and some of the affidavits together with their

accompaniments. I have also perused the relevant statutory

cp971-09.sxw55

provisions and decisions brought to my notice.

38] Since heavy reliance is placed on the decisions of the Supreme

Court outlining the principles enabling the Company Court to exercise

its discretion to wind up a company, it would be worthwhile to refer to

some of the provisions of the Companies Act and, thereafter the

relevant decisions.

39] Part VII in the Companies Act, 1956 is entitled “Winding up”.

Chapter I thereof is entitled “Preliminary”. Below that there is a sub-

heading “ “modes of winding up”. Section 425(1) of the Act provides

that the winding up of company may be either by the Court or

voluntary. Sub-section (2) of section 425 clarifies that provisions of

Companies Act with respect to winding up apply unless contrary

appears, to the winding up of a company in any of those modes.

40] Section 426 deals with contributories and their obligation and

cp971-09.sxw56

duties. The term contributory is defined in section 428. Then comes

Chapter II under this Part which is entitled “winding up by the Court”.

Section 433 which falls in this chapter is entitled “Circumstances in

which the company may be wound up by the Court”. A company may

be wound up by the Court if the company is unable to pay its debts.

Company is deemed unable to pay its debts if a creditor, by

assignment or otherwise to whom the company is indebted in the sum

specified in Section 434(1) (a) has served on the company by causing

it to be delivered at its registered office by registered post or

otherwise, a demand notice under his hand requiring the company to

pay the sum so due and the company has for three weeks thereafter

neglected to pay the sum, or to secure or compound for it to the

reasonable satisfaction of the creditor. Clauses (b) and (c) of section

434(1) state that a company shall be deemed to be unable to pay its

debts if execution or other process issued on a decree or order of any

court in favour of the creditor of the company is returned unsatisfied

in whole or in part or if it is proved to the satisfaction of the Court that

cp971-09.sxw57

the company is unable to pay its debts and, in determining whether a

company is unable to pay its debts, the Court shall take into account

the contingent and prospective liabilities of the company.

41] Section 439(1) and (2) read thus:-

“439(1) An application to the Court for the winding up of a company shall be by petition presented, subject to the provisions of this section -

(a) by the company; or(b) by any creditor or creditors, including any

contingent or prospective creditor or creditors; or

(c) by any contributory or contributories; or(d) by all or any of the parties specified in

clauses (a), (b) and (c), whether together or separately; or

(e) by the Registrar; or(f) in a case falling under section 243, by any

person authorised by the Central Government in that behalf; or

(g) In a case falling under clause (h) of section 433, by the Central Government or a State Government”

(2) A secured creditor, the holder of any debentures

cp971-09.sxw58

(including debenture stock) whether or not any trustee or trustees have been appointed in respect of such and other like debentures, and the trustee for the holders of debentures, shall be deemed to be creditors within the meaning of clause (b) of sub-section (1).”

42] In a recent judgement of the Supreme Court, reported in 2010

(10) SCC 553, (IBA Health (India) Private Limited Vs. Infro-Drive

Systems SDN, BHD), the Supreme Court reiterated the settled

principles. The facts are set out in para 8 onwards and in para 20, the

Supreme Court set out the question that arose for consideration in that

case, viz., when there is a substantial dispute as to liability, can a

creditor prefer an application for winding up for discharge of that

liability. The Supreme Court held that a dispute would be substantial

and genuine, if it is bonafide and not spurious, speculative, illusory or

misconceived. In paras 20 to 23 of the judgement, the Supreme Court

reiterated the principle that winding up petition is not a legitimate

means of seeking to enforce payment of debt which is bonafide

cp971-09.sxw59

disputed by the company. It cannot be a means to exercise pressure

on the company. Even an admission of winding up petition has

serious consequences. There may not be neglect to pay and if there is

no neglect, the deeming provision viz, section 434(1) does not come

in to play. Once the debt is substantially disputed, then, there is no

neglect to pay. In para 24, 25 and 29 the Supreme Court also

reiterated that if the company is commercially solvent, then, it should

not be called upon to pay the debt and liability which is bonafide

disputed by it. In such cases, winding up petition will have an adverse

impact and at times, a disastrous effect on the business prospects of

the company. All this has been observed in the context of a disputed

debt and which dispute is found to be bonafide and substantial. There

cannot be any quarrel with these principles and they are binding upon

me. I have applied these very principles to the facts of the present

case as I am obliged to. I am also aware of the seriousness of the

proceedings and that any order during the course of such proceedings

would affect the respondent company.

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43] From the record of this petition, it is apparent that the petition is

presented by the petitioner BNY Corporate Trustee Services Ltd. It

has pointed out that the claim as stated in the petition arises out of the

early redemption of Zero Coupon Convertible Bonds. It has been

pointed out vide Annexure B that the respondent which is

incorporated in India as a Public company with limited liability, has

issued U.S.$ 110,000,000 Zero Coupon Convertible bonds. These

bonds are convertible at any time on or after 24th November 2004 or

such earlier date as is notified to the bidders of the bond up to close of

business hours on 25th September 2009 by holders, into fully paid up

equity shares with voting rights with a par value of Rs.5 each of the

share of the company. The offer circular Annexure B has been

annexed as observed above and under the same, bonds were issued at

100% of the principal amount on 25th October 2004, the maturity date

being 25th October 2009. Unless previously redeemed, converted or

purchased and cancelled, the company had agreed to redeem each of

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the bonds. It is stated that on 25th October 2004, the issuer of the

bonds entered into a Trust Deed with the petitioner for the holders of

the bond. Annexure C is a copy of the Trust Deed. With the

assistance of both Senior Counsel, I have perused the Trust Deed. The

Trust Deed stipulates that the bond holder will be paid the sums in

terms thereof and clause 2.2 is relied upon in this behalf.

44] The definition of the term bondholder means a person in whose

name the bond is registered in the Register of Bondholders and the

persons indicated in the definition. The terms “bonds” and

“certificate” are defined and the term “Global Certificate” and

“outstanding” are also elaborately defined. The term “potential event

of default” is defined to mean an event or circumstance which would

with the giving of notice and/or the lapse of time and/or the issuing of

a certificate become an Event of Default. Clause 2.2. reads thus:-

“2.2 Covenant to pay: The Company will on any

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date when the Bonds or any of them become due to be redeemed in accordance with the Conditions unconditionally pay or procure to be paid to or to the order of the trustee in New York City in U.S.Dollars in immediately available funds the principal amount of the Bonds becoming due for redemption or repayment on that date (to be received by 10.00 a.m. New York City time) together with any applicable premium and will (subject to the conditions) until such payment (both before and after judgement) unconditionally so pay to or to the order of the trustee interest in U.S. Dollars on the principal amount of the Bonds outstanding as set out in the Conditions provided that (a)every payment of any sum due in respect of the bonds made to or to the order of the Principal Agent as provided in the Agency Agreement shall, to that extent, satisfy such obligation except to the extent that there is failure in its subsequent payment to the relevant Bondholders under the conditions and (b) a payment made after the due date or pursuant to condition 10 will be deemed to have been made on the business day in New York City after the full amount due (including interest accrued) has been received by the Principal Agent or the Trustee and notice to that effect has been given to the Bondholders (if required under Clause 9.11) except (if payment is made to the Principal Agent) to the extent that there is failure in the subsequent payment to the relevant Bondholders under the conditions. The trustee will hold the benefit of the covenants in this clause 2.2 on trust for the Bondholders.”

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45] Clause 2.4 stipulates as to what “payment after the default”

contemplates and includes. As far as the petitioner is concerned, it

states that it is a trustee. It is apparent from the reading of this

definition and the substantive clauses that relationship between the

petitioner and the respondent is contemplated or else, the term trustee

would not be appearing in the Trust Deed itself. The petitioner's

predecessor is termed as Trustee and the Trustees have agreed to act

as such on the terms and conditions set out in the deed. Therefore, it

would be of relevance to note the clauses 2.2, 2.4, 3.1, 3.6, 8.1 and

9.3, falling under the caption “General Covenant”. Clauses11.13 and

11.19 read thus:-

“11.13: Events of Default:- The Trustee may determine whether or not an Event of Default or Potential Event of Default is in its opinion capable of remedy and/or materially prejudicial to the interests of the Bondholders. Any such determination will be conclusive and binding on the company and the Bondholders.”

“11.19: Action by the Trustee: Notwithstanding anything else contained in this Trust Deed the Trustee shall

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not be required to take any action prior to making any declaration under Condition 10 that the Bonds are immediately due and payable (save that it will procure notice to be given to the bondholders of any event of default of which it has actual knowledge or express notice) if such action would require the Trustee to incur any expenditure or other financial liability or risk its own funds (including obtaining any advice which it might otherwise have thought appropriate to obtain). The trustee shall not be under any obligation to take proceedings against the Company to enforce payment of the Bonds after the Bonds have become due and payable unless it shall have been indemnified and/or provided with security to its satisfaction.”

Clause 11.26 is also of some importance so also clauses 12 and 16.2.

As far as the terms and conditions of the bonds themselves are

concerned, they are at page 280 of the paperbook. A bare perusal of

the same would indicate that these terms convey as to when the title to

the bonds will pass, when transfers of bonds would be permissible and

how it is to be effected, whether conversion is permitted or not. Even

there, clause 8 at page 299 entitled “redemption, purchase and

cancellation” and particularly clause 8.1 therein are material and is

reproduced hereinbelow.

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“8.1 Unless previously redeemed, converted or purchased and cancelled as provided herein, the issuer will redeem each bond at 129.578 per cent of its principal amount on 25th October 2009 (the maturity date). The issuer may not redeem the bonds at its option prior to that date except as provided in condition 8.2 or condition 8.3 below (but without prejudice to condition 10).”

Clause 13 has been emphasised by both sides and it deals with

enforcement.

46] Thus, the claim of the petitioner is founded on the allegation

that on or about 31st March 2009, the petitioner learnt that the

company proposes restructuring of its debt and/or composition or

arrangement with creditors. It applied to the Corporate Debt

Restructuring Cell in India. That is how the email was sent. A copy

of this email is at page 329 and the petitioner stated that there may be

a potential event of default on the issue. As per clause 9.8 of the

attached Trust Deed, the petitioners stated that the company should

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provide with a compliance certificate within next fourteen days,

setting out as to how it has complied with clause 9.8. The company

replied to this letter on 15th April 2009 and has stated as under:-

“After the repayment of these loans, the company had raised short term loans which are falling due in 2009 and the company is finding it difficult to roll over these loans in the liquidity constraints and high debt burden, the company is seeking help in financial restructuring of the debts and interest from various lenders in India of various forms through the CDR mechanism.”

47] However, the petitioner persisted with the request of calling

upon the company to comply with clause 9.8 of the Trust Deed and

the petitioner received a reply dated 23rd April 2009 from the

respondent stating that the company has approached CDR cell with a

view to take advantage of the initiative of RBI to assist creditworthy

companies to tide over temporary liquidity crunch for a possible

restructuring of its loans. The company replied that it would keep the

petitioners notified with regard to compliance with clause 9.8 of the

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Trust Deed. Since the company did not revert back, even after time

being allowed, the petitioner addressed a letter dated 6th May 2009

with the following:-

“.. In view of the aforementioned and in accordance with our powers set out in clause 9.3 and 9.4 of the Trust Deed, we hereby urgently request you in your capacity as Issuer of the Bonds to produce a certificate of compliance and no event of default or potential event of default within five calendar days hereof.

“Note that the certificate should make reference to the Trust Deed and the notes and should be issued in compliance with the terms of the Trust Deed.”

“Please provide the said certificate as a matter of urgency and in any event, no later than 5 pm (London time) on 11th May 2009.”

“Should you have any queries, please contact Zaira Jehangir on +44 207 964 4981.”

“The Trustee hereby reserves all of its rights and the rights of the Bondholders under the Trust Deed, the conditions, any other documents relating to the Bonds and at law.”

48] To this, reply was received on 11th May 2009 (Annexure I –

page 336) which reads thus:-

“We refer to the trust deed dated 25th October 2004

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made between Wockhardt Limited (the company) and BNY Corporate Trustee Services Ltd. (formerly J.P.Morgan Corporate Trustee Service Limited) as trustee (the Trust Deed) relating to the Bonds. We also refer to your letter dated 6th May 2009 requesting a certificate from the company pursuant to clauses 9.3 and 9.4 of the Trust Deed.”

“As mentioned in our letter of 23rd April 2009, an application has been made by ICICI Bank as the lead institution on behalf of the company for Corporate Debt Restructuring (CDR) for a possible restructuring of certain of the company's loans.”

“We have now been advised that the application for CDR is an event falling within condition 10.1.4 of the Bonds and, for this reason, the company is not in a position to provide you with a certificate confirming that no event of default in respect of the Bonds has occurred.”

49] In these circumstances, the petitioner states that it addressed a

notice of event of default dated 19th May 2009 confirming occurrence

of event of default. Thereafter, the petitioner addressed a notice of

acceleration of bonds dated 23rd June 2009 declaring the bonds as

immediately due and payable at their early redemption amount. As a

result of occurrence of event of default, the petitioner contemplated

payment of early redemption amount by the company in immediately

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available funds.

50] To this, a reply was received from the respondents dated 30th

June 2009. It is stated in this reply that the proposal to CDR Cell was

taken up in the meeting of the empowered group on 25th June 2009

and the company expected to receive formal intimation of the terms of

debt restructuring as approved in the meeting within four to five

working days. Various aspects of CDR proposals were pointed out in

this letter with a view to justify that the cell has invited participation

of some banks and the petitioner was requested not to precipitate any

action which will delay the debt restructuring process. On the other

hand, the petitioner was requested to furnish the details of the current

bondholders in order to enable the company to explain the proposal to

them.

51] Subsequently, a letter dated 9th July 2009 was also addressed

forwarding therewith the letters of allotment dated 4th July 2009 to the

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CDR Cell.

52] Petitioner also received a letter dated 9th October 2009

purporting to reply to their letters dated 23rd, 30th June and 9th July

2009. Once again the company outlined the CDR proposal with its

details and stated as under:

“In view of the above, we once again request your co-operation and request a meeting with you and the representatives of the Bondholders, wherein we can, discuss with you the salient features of the CDR package and a way forward for repayment of the FCCB Bonds in a manner that is not prejudicial to any other class of creditors.”

53] Petitioners were not satisfied with this response and addressed

the statutory notice in reply to which respondent's advocate in their

letter dated 30th October 2009, firstly questioning the authorisation of

the petitioner, who represents the bondholders, then, stated that the

bondholders to the extent of 40% have consented to and joined the

scheme. It is pertinent to note that the petitioners locus was

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questioned, but, at the same time both the petitioner as well as

bondholders have been accused of not acting bonafide and

pressurising the company.

54] Paragraphs 3, 4 and 5 of the reply then made various proposals

to the bondholders and particularly to join the CDR mechanism for

the benefit of all creditors, according to the company. At the same

time, there is an admission that the company is facing liquidity issue.

The general economic condition was stated to be responsible to all

this. The petitioner replied to the same and whilst stating that it is

under no obligation to substantiate its authorisation, pointed out that

the trustees have acted bonafide and it was for the company to have

involved the bondholders in the CDR scheme by placing the proposal

for their consent as group by convening the meeting, which was never

done. It is pointed out that the company has admitted the event of

default.

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55] To my mind, it is not open to the respondent to urge that the

petitioners have no authority to file the winding up petition. The

argument in that behalf clearly overlooks the trust deed. In the trust

deed it has been stated very clearly that the trustee will hold the

benefits of covenants in trust for the bondholders. If clause 2.2 as

referred to above is perused, it is clear that the payment has to be

made to the order of the trustee instead in US $. The fact that it is a

trust deed and it has been executed by the respondent and the

predecessor in title of the petitioner, goes to show that the payment is

to be made to the order of the trustee. Merely because a bondholder is

to be treated as an absolute owner of the bond (clause 3.6) does not

mean that the petitioner has no authority to file winding up petition.

In this behalf, reliance is rightly placed by the petitioner on clause 8.1

of the Trust Deed together with other clauses, which would go to

show that the Trustee has a definite role to play and can initiate

actions. Clause 11.19 of the Trust Deed which is already reproduced

above.

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56] A bare perusal of the same would make it clear that the trustee

shall not be required to take any action prior to making any

declaration under condition 10 that the bonds are immediately due and

payable, if such an action would require the trustee to incur

expenditure of another liability to risk its own funds. It will act on

the basis that it is satisfied as required from further clauses and

particularly clauses 11.20 to 11.35. In this behalf, clause 11.26 is also

relevant. Clause 12 also would be indicative of the fact that the

Trustee has the power and it is not as if the trustee is a vague concept

but it is in consonance with the principles of trust and that is how

clause 12 is worded. The wide powers that are given to the trustees

would go to show that there is no substance in the contentions that the

petitioner has no authority to file this petition. Once the law

recognises the right of any creditor to present a winding up petition

and the petitioner is admitted to be a unsecured creditor of the

company, then, all arguments about the lack of authority of the

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petitioner must fail on this ground alone. If the terms and conditions

of the bond read with the clauses of the Trust Deed are considered,

then, atleast the right of the petitioner to receive payment under the

bonds is admitted. If the petitioner allegedly has a limited right and

that is to resort to various modes of recovery of money, which is not

disputed by the respondent, then, despite being a party to the Trust

Deed granting such a right, the respondent cannot question the locus

of the petitioner. Really speaking, the argument to this effect

overlooks the fact that the petitioner is treated as a unsecured creditor

by the company throughout. Once it treats it as such then strictly

speaking it is not necessary to decide any wider controversy.

57] As far as the contention that the petitioners does not satisfy the

requirement of section 439(2) of the Companies Act is concerned, it is

clear that a perusal of the same would reveal that the Trustee is

capable of presenting a winding up petition. It is not as if the

debenture holder has to file a winding up petition. The argument that

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the Division Bench of Gujarat High Court would suggest that

individual bond holders alone have to file a winding up petition, is not

accurate because a reading of the judgement and particularly the

following paragraphs would indicate that the observations made were

in the context of considering over-ruling the objection to the

maintainability of the petition. The Court does not suggest that a

trustee cannot file a winding up petition under any circumstances.

“19.3 Even if it is assumed that it was the Trustee who was required to present the winding up petition, the Trustee clearly was not wanting to do so on the ground that it was not its job under the terms of the Trust Deed to file a winding up proceeding. The trustee was bound to show a degree of care and diligence required of it as a Trustee as per clause 10 of the deed. The Trustee could not have waived the default unless in its own opinion, the interest of the noteholder was not to be materially prejudiced, as contemplated in clause 11(1) of the deed. This is why, the Trustee refused to agrree in its letter of 2nd May 2001 to the company's request that the notice of default from the trustee should be teated as of no effect and insisted that the notes were properly called due and payable. The trustee in its letter dated 19th February, 2002 has taken a stand that it is not the creditor and that the winding up proceeding is a matter between the company and the noteholders.

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Therefore, the noteholders were perfectly within their rights as creditors to present the winding up proceedings in which, according to the trstee, it had no voice having regard to the nature of such proceedings which were not merely for enforcement of the Trust Deed and the Notes.”

“19.4 The nature of a winding up proceeding under section 439 of the said Act is obviously different from mere enforcement of payment of the dues under the note or the Trust Deed. Clause 13 of the conditions of the Notes does not contain my specific reference to winding up proceedings which some Trust Deeds or notes may contain and, rightly so, because, in the context of section 9 of the said Act, such a condition against the provisions of the Act by which the creditors are enabled to present a winding up proceeding would be void. Clause 13 only refers to the discretion of the Trustee to institute such proceedings against the Issuer as it may think fit “to enforce the terms of the Trust Deeds and the Notes.”. The subject of winding up of the Issuer company could not have depended on the conditions of the Trust Deed or the Notes. In fact, winding up was not a term or condition of the Trust Deed or Notes. The nature of the proceedings contemplated by the enforcement clause 13 of the conditions of Notes was obviously proceedings in personam for recovery of the dues from the Issuer company under the Trust deed and Notes which would be principal and interest and remunerations, expenses and indemnities for the beneficial owners or the Trustee, as the case may be. The winding up proceedings under section 439 are not proceedings for recovery of dues, but are proceedings in rem based on statutory grounds on which a company may be wound up by the Court such as, a company being unable to pay its debts or if the Court is of

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the opinion that it is just and equitable that it should be wound up as contemplated by clauses (e) and (f) of Section 433 of the said Act. The jurisdiction of the Company Court does not extend to mere enforcement of the terms of the contract of the parties to satisfy a claim of a creditor made under it. The function of a court in a winding up proceeding is not to decide matters of recovery of a particular debt owed by the company to any person, but to examine whether there exists any circumstances on the basis of which the company is liable to be wound up. The reliefs granted by a Court in a winding up petition are different from the reliefs in an inter-partes enforcement action. Therefore, ability to give a valid discharge test cannot be applied to a creditor beneficiary who is a creditor within the meaning of section 439(1)(b) and can knock at the door of the Company Court to draw its attention to the circumstances that warrant winding up of the company. The inquiry in the present case will be, whether there is inability on the part of the company to pay its debt and/or whether it would be just and equitable to wind up that company. That has noting to do with the question of creditor's ability to give a valid discharge, because, a creditor who moves the Court may ultimately be offered nothing.”

“20. Above all, no term of agreement can prevail over the statutory provision enabling the creditor to present winding up petition. This clearly follows from the provision of section 9(b) of the Act which inter alia, provides that, save as otherwise expressly provided in the Act, any provision contained in the agreement of dissolution of the company shall to the extent to which it is repugnant to the provisions of the Act, become or be void,

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as the case may be. The Trustee is appointed by the company is remunerated and indemnified by it sna d can even be replaced as per the terms of the deed. The Trustee has to safeguard the interest of the beneficiarire and it was justified in not acting as a puppet of the company. In view of what we have said hereinabove, we hold that the winding up petitions are maintainable at the instance of the petitioner. Noteholders who are beneficial owners and, since the interests of other note holders may also be involved, the Trustee would be a proper party to assist company court in the proceedings and it was, therefore, absolutely correct on the part of learned Single Judge to direct the Trustee to be impleaded as a party to these proceedings. As noted hereinabove, even the company, has in terms, pleaded that the Trustee was a necessary party, and, obviously, therefore, it cannot grudge against that direction. However, these petitions are maintainable even at the instance of the noteholders in their own capacity as creditors. It is not even the Trustee's stand, as is clear from the aforesaid correspondence that it did not take the proceedings because there was no requisite resolution passed by the Noteholders as contemplated by clause 13. The stand of the Trustee rightly is that the winding up proceedings are not contemplated by clause 13 and that the noteholders who are the creditors beneficiaries were free to initiate them since the notes had become due and payable by virtue of the Trustee having issued notices to the company demanding repayment as per the terms and conditions thereof. Thus, there is no substance in the preliminary objection that even if the petitioners are creditors they do not have an enforceable claim in view of clause 6 of the Trust Deed or Condition No.13 of the Notes.”

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I have reproduced the paras from the Division Bench judgement only

to demonstrate that the Division Bench affirmed the judgement of the

learned single Judge (As His Lordship the Hon'ble Chief Justice of

this Court, then was) of the Gujarat High Court in Gramercy

Emerging Market Fund v. Essar Steel Ltd delivered on 20th March

2002. The statement of the law in paras 27 and 28 of the judgement of

the learned single Judge has my respectful concurrence.

58] In such circumstances and even the general principles would

indicate that the bondholders could be represented by Trustee and a

deed executed in that behalf, which is binding on petitioner as also the

respondent, then, cannot be ignored. Once that deed does not go

contrary to the statutory principle recognised by section 439(2), then,

there is no substance in the contention that the petition is not

maintainable. In any event, it is conceded that the petitioner is an

unsecured “creditor”. It is defined to mean a person to whom the debt

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is payable. I do not see how by raising technical objections the

respondent can escape its liability to pay the sum due in terms of the

bonds and the Trust Deed.

59] Even a reading of clause 10.13 of the terms and conditions of

the bonds would indicate that the trustees' rights recognised by the

deed of trust are not affected or taken away in any manner. The

argument of Mr.Kapadia based upon reading of the Global certificate

and other clauses of both documents, to be accepted, would mean that

the documents should be seen in an isolated manner and not together.

If they are seen, considered and read together, then, the conclusion is

inevitable that the petitioner can present the instant petition.

60] As far as the maintainability of the petition is concerned, once

the objection raised in that behalf is found to be of no substance, then,

the other contentions need not detain me. The petitioner cannot be

forced to join the CDR scheme. The law does not postulates any such

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compulsion on the petitioner. Once section 433(e) and section 434(1)

(a) of the Companies Act, 1956 is applicable, then, the section does

not confer a right on a debtor but only gives him an opportunity to

discharge the debt in one or other of the ways mentioned therein. The

debtor could secure or compound for a debt only where the

circumstances under which the demand is made permit such a

discharge. It is not the respondent's case that CDR is a discharge. It

seeks the petitioner's approval to agree to postponement of payment to

a future date. However, once the petitioner does not agree to any such

course in law, it cannot be said that a winding up petition should not

be presented by it. There is no absolute right in a creditor and he

cannot insist on a winding up order being passed but the court cannot

refuse to entertain a petition merely because CDR scheme for

settlement of its debts is proposed by the Company. A scheme is

proposed and the creditors will have to wait for settlement of their

dues, by itself, cannot be a ground to refuse the admission of winding

up petition. Something more will have to be set out and proved in that

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behalf. In this case, there may be participation of some bond holders

in the scheme and they may choose to wait for settlement of their dues

but by that itself and without anything more, this Court cannot in the

garb of refusing to entertain the winding up petition, issue any

directive or require the petitioners to wait in queue for settlement of

their dues, if the petitioner does not choose to do so. Moreover, it is

not the case of respondent that the petitioner has accepted the CDR

scheme or has participated in the same. Merely because the company

finds that it is feasible and some other creditors may have agreed with

that view, does not mean that the petitioner can be directed to join the

said scheme or the petition at its instance can be dismissed

straightaway. The argument on feasibility of the scheme also need not

be gone into nor the objection that the scheme is being implemented

by giving preference to some creditors and such preference is

fraudulent in nature requires any answer. Once a view is taken that the

petition cannot be dismissed merely because the scheme is proposed

and is being implemented, then, all other contentions are of assistance

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to the Company and they need not detain me.

61] The other objection raised to the maintainability of the petition

is that some of the creditors have found the scheme feasible and have

pumped in funds. This is also cannot be a ground not to admit the

petition because there is no dispute about the liability, there is no

denial thereof and there is nothing which would indicate that the

respondent has a bonafide defence. The only defence seriously

pursued is on the maintainability of this petition. That defence has no

substance. There is no denial of the liability or any dispute raised in

that behalf. In fact, the liability to pay the amount is admitted

throughout. The company calls upon the petitioner to enter into a

package or scheme of compromise allegedly to secure the debt. That

package or scheme (CDR) has been rejected by the petitioner and it

proceeds to institute this petition. Once it rejects the proposal and the

conduct of the petitioner in trying to protect the interest of bond

holders cannot be termed as blameworthy or questionable, then, it

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must be held that the alternatives or options suggested to secure the

debt in this case do not constitute a substantial defence. The claim is

huge and the petitioner has filed the petition as a trustee. Therefore, it

would not be proper to hold in this case that the power to admit this

petition cannot be exercised at the instance of the petitioner. Similarly,

the conduct of some of the bond holders also is no ground to refuse

entertainment of the petition at the instance of petitioner.

62] Having dealt with these objections and finding that there is no

merit in it and prima facie the presumption under section 433 (e) can

be raised, then, this petition deserves admission. All the authorities

cited need not be considered as this is a stage of admission of the

petition. I am aware of the consequences of such an order, but having

adverted to the principles in the latest decision of the Supreme Court

reported in IBA Health (I) Pvt Ltd (supra) it would not be necessary to

refer to each and every judgment cited before me. Suffice it to note

that this judgment which is relied upon both by Mr.Dwarkadas and

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Mr.Kapadia reiterates the principles of entertaining a winding up

petition and I have proceeded on that basis itself. The Act does not

make any distinction between secured and unsecured creditor and,

therefore, all other judgments brought to my notice need not be dealt

with.

63] The judgments cited by Mr.Kapadia on the principles enshrined

in the Indian Trust Act also need not be referred to in details. Further,

these principles have been referred to in the judgement of the Hon'ble

Gujarat High Court and I have already referred to them in details and

concurred with the views expressed therein. As far as entertaining a

winding up petition is concerned, I have applied the very same

principles which have been set out in the judgments relied upon by

Mr.Kapadia. Therefore, these decisions also need not be referred

again. The Full Bench decision of Karnataka High Court reported in

AIR 1988 Karnataka Page 1 (Chief Controlling Revenue Authority

Vs. The Manager Advances, State Bank of Mysore & Ors) has been

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relied upon by both sides and though the observations made therein

are in the context of levy of stamp duty, they highlight the principles

that it is recognised in Indian law that a trustee can ensure repayment

of interest as well as principle and reliance on paras 13 to 16 of this

judgment by Mr.Dwarkadas is apposite. The argument of the

respondent that the petitioner is not a debenture trustee but represents

the bond holders and no property of the company vests in it overlooks

the wide definition of the term “Debenture” appearing in section 2(12)

of the Companies Act, 1956.

64] In the result the company petition is admitted. The same be

advertised in accordance with the Company Court Rules, 1959 within

a period of twelve weeks from today on petitioners depositing in this

Court the advertisement charges. The charges be deposited within four

weeks from today.

65] Company Application No.1213 of 2009 for appointment of

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official liquidator be placed before the regular Court. Mr.Dwarkadas,

learned senior counsel submits that vide this application the

petitioners have applied for appointment of provisional liquidator.

Liberty to apply for reliefs in terms of this application before the

regular Court.

66] As all interventions were permitted and those present were

heard, Company Application No.1279 of 2009 alongwith Company

Application No.10 of 2010 and Company Application No.356 of 2010

and Company Application No.36 of 2010 do not survive in view of

the order passed in Company Petition No.971 of 2009 and are

disposed off accordingly.

(S.C.DHARMADHIKARI, J)