IN THE HIGH COURT OF KARNATAKA AT BANGALORE PRESENT THE HON'BLE MR. JUSTICE N. KUMAR AND THE HON BLE MRS. JUSTICE RATHNAKALA

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1 1 IN THE HIGH COURT OF KARNATAKA AT BANGALORE DATED THIS THE 16 th DAY OF DECEMBER 2013 BETWEEN; PRESENT THE HON'BLE MR. JUSTICE N. KUMAR AND THE HON BLE MRS. JUSTICE RATHNAKALA OSA No.52 OF 2013 In COMPANY PETITION NO.248/2012 United Breweries (Holdings) Limited A Public Limited Company incorporated Under the provisions of the Companies Act, 1956 and having its registered office at UB Tower, Level 12 UB City, NO.24, Vittal Mallya Road Bangalore APPELLANT (By Sri.Harish N. Salve, Senior Counsel for M/s.Holla and Holla, Advocates) AND: BNP Paribas A Company incorporated under the Laws of the Republic of France, Having its Registered Office at 16 Boulevard des Italiens, 75009, Paris, France.... RESPONDENT (By Smt. Farishte Sethna and Sri.Prashanth G., Advocates for caveator/respondent)

2 2 This OSA is filed under Section 483 of the Companies Act, 1956 read with Section 4 of the Karnataka High Court Act, 1961, (1)to call for the records pertaining to Co.P.No.248 of 2012; (2) to set aside the impugned order dated passed by the learned Company Judge in Co.P.No.248 of 2012 and all actions, if any, taken in pursuance thereof, (3)to dismiss the company petition Co.P.No.248/12. This appeal coming on for admission this day, N. KUMAR, J. delivered the following:- JUDGMENT This appeal is preferred against the order passed by the learned Company Judge admitting the company petition and directing advertisement of the petition in the news paper. 2. For the purpose of convenience, the parties are referred as they are referred to in the company petition. 3. The petitioner-bnp Paribas, is a company incorporated under the Laws of the Republic of France. The respondent-united Breweries(Holdings) Limited(for short herein referred to as UBHL ) is a public limited company incorporated under the Companies Act, 1956

3 3 and carrying on business as a trading, real estate development and investment holding company. It holds 24.46% promoter group stake in Kingfisher Airlines Limited(for short hereinafter referred to as Kingfisher ), which at the material time was its subsidiary. The case of the petitioner is, as a pre-condition to financing the acquisition of three aircraft, the Kingfisher secured guarantees from the respondent. Upon default committed by Kingfisher, the petitioner became entitled to invoke the guarantees issued by the respondent. Therefore, when the Kingfisher committed default in payment of the amounts due, a statutory notice was issued calling upon the respondent to pay a sum of US$.2,66,34,728/- within 21 days from the date of receipt of the same and the notice was duly served. However, no reply was sent. Therefore, the petitioner preferred a petition under Section 439(1)(b) read with Sections 433(e), 344(f), 434 and 450 of the Companies Act, 1956, for winding up of the company and other consequential reliefs. Notice was ordered.

4 4 The respondent entered appearance and filed a detailed statement of objections contesting the claim and denying the liability to pay any money to the petitioner on the ground that the assignment of All Party Agreement is not communicated to the respondent; secondly, permission which was a pre-requisite for approval of the assignment deed, was not granted by the RBI and therefore, there is no previty of contract and liability to pay the amount claimed in the petition. By virtue of the orders passed in the company petition shares of United Spirits Limited have been sold and roughly around Rs.400 Crores is in deposit, whereas the amount due to the petitioner is hardly around Rs.200 Crores. This clearly establishes the solvency of the respondent company. Therefore the respondent sought for dismissal of the company petition. 4. The learned company Judge after hearing both the parties was of the view that the respondent failed to send a reply to the statutory notice issued on behalf of the petitioner, which prima-facie shows that

5 5 the respondent is unable to pay the debts. The defence that RBI s permission was a pre requisite is an afterthought. After referring to the permission, the learned Company Judge has held that there is no indication that the RBI had refused permission insofar as the Guarantees being assigned. This was never an issue except that the respondent has now chosen to raise the same as a defence to deny its liability. Even assuming that such a permission from the RBI was required, it remained the duty of the respondent to obtain the same. According to the learned Company Judge this contention was not tenable on the face of it. Therefore, the learned Company Judge was of the view that, prima-facie necessary ingredients to admit the petition has been made out. Therefore, he admitted the petition and ordered for advertisement. Aggrieved by the said order, the respondent has come in appeal. 5. The learned Senior Counsel Sri. Harish Salve, appearing for the respondent assailing the impugned order passed by the learned Company Judge

6 6 contended that, as is clear from the Deed of Assignment dated , a obligation was cast on the petitioner in terms of Clause(2), to notify the respondent in writing and only from the date of notifying the assignment, an obligation under the Assignment deed commences. In the absence of any such notice being issued in terms of Clause(2), the assignment deed has not come into effect at all. Secondly, it was contended that though RBI s permission was sought enclosing the draft Guarantee by the respondent to KF Aero and its successors and assigns, the RBI has granted permission only to the corporate guarantee in favour of lessor K.F. Aero for payment of obligations by Kingfisher and accordingly, permission is not granted in favour of assigns or successors in interest. The said permission being a condition precedent, the said Guarantee deed has no value. Lastly, it was contended that though elaborately in the statement of objections it was set out that the respondent is commercially solvent and arguments were addressed, the learned Company Judge

7 7 has failed to consider the solvency of the respondent before admitting the petition. Therefore, he submits that the impugned order suffers from aforesaid infirmities and requires to be set aside. 6. Per contra, the learned counsel Smt. Farishte Sethna appearing for the petitioner submitted that the agreement dated was entered into between KF Aero and BNP Paribas as ECA facility agent, under which it is the petitioner who financed KF Aero who in turn paid the money to Kingfisher for the purpose of taking three ATRs on lease. Subsequently, an All Party Agreement came to be entered into between Kingfisher, KF Aero and BNP Paribas under which the Kingfisher agreed to make the payment to the lessee i.e. K.F. Aero and agreed to execute a valid charge over the Trust Account in favour of the ECA Facility agent and perfect the same by registering it with the relevant Indian authorities and apply to the RBI for approval for remitting the amounts due and payable in accordance with the provisions of the Transaction Document to the

8 8 ECA Facility Agent as specified in Clause 6.7 of the lease. A provision is also made for payment of the amount in Indian currency in the event of RBI not granting the requisite permission. Subsequently, KF Aero assigned the said agreement in favour of BNP Paribas and duly notified the respondent-guarantor. It was pointed out that the execution and delivery of the guarantee was a condition precedent to the lessor leasing the aircraft to the lessee pursuant to the lease. The said agreement came to be executed on and that the Guarantee is now assigned in favour of BNP Paribas, the petitioner. Thereafter all the rentals and payments were made to the petitioner. It is the petitioner who was issuing demand notices whenever there was arrears and in the last seven years, the respondent did not raise any objections nor contended that they are not liable to pay any amount for want of notice of assignment or for want of permission from the RBI. In fact, several documents came into existence on for which all of them are signatories. Even

9 9 when a legal notice was issued there was no reply. For the first time when the company petition is filed, this objection is raised only to avoid the liability. Therefore, she contends that, prima-facie when the borrowing is not in dispute; the quantum of borrowing is not in dispute and when the amounts are paid for the last several years, it is too late in the day for the respondent to contend that there was no liability at all. She also pointed out that the permission granted by the RBI and the assignment deed enures to the benefit of the petitioner. At any rate the respondent is estopped from contending to the contrary. Lastly, she submitted that even before the admission of the company petition, on an application by the respondent company, the learned Company Judge permitted the respondent to sell the shares of United Spirits Limited and out of the sale proceeds, the amounts due to a particular set of creditors have been paid and it is the balance amount which is in the Court deposit. The company petition is filed for the benefit of all the creditors and the assets of

10 10 the company should be utilized for payment of dues in accordance with Section 529-A of the Companies Act where employees and secured creditors stand out first and thereafter the unsecured creditors have to be paid and therefore, even if Rs. 700 crores is lying in the Court that cannot be used to pay the petitioner alone. The total liability of the respondent company is around 10,000 crores and on the admitted facts, in this case, the total assets worth only about 5,000 crores. From this it is clear that the company is commercially not solvent and therefore, the learned Company Judge rightly admitted the petition and ordered for advertisement so that all the creditors could appear before the Court and thereafter appropriate orders could be passed. She also submits that this is not the only company petition filed by the respondent company. Number of company petitions are filed, heard together and may be in this case, an order of admission is passed. In fact, last Friday, another company petition is admitted and other company petitions are being heard

11 11 and this only shows that a number of creditors are already before the Court trying to enforce their claims as the company is unable to pay its debts and seeking for winding up. Therefore, the order of the learned Company Judge cannot be found fault with and that the appeal is liable to be dismissed. 7. In the light of the aforesaid facts and rival contentions, the point that arises for our consideration in this appeal is:- Whether the petitioner has made out a prima-facie case for admission of the company petition and the learned Company Judge was justified in admitting the petition and ordering for its advertisement? 8. The law on the point is well settled. The Apex Court in a recent judgment in the case of IBA HEALTH(INDIA) PRIVATE LIMITED.VS. INFO-DRIVE SYSTEMS SDN. BHD. [(2010) 10 SCC 553)] dealing with what could be a substantial dispute, which is a

12 12 condition precedent for admission of a company petition, at Paragraph 20, has held as follows:- The question that arises for consideration is that when there is a substantial dispute as to liability, can a creditor prefer an application for winding up for discharge of that liability? In such a situation, is there not a duty on the Company Court to examine whether the company has a genuine dispute to the claimed debt? A dispute would be substantial and genuine if it is bona fide and not spurious, speculative, illusory or misconceived. The Company Court, at that stage, is not expected to hold a full trial of the matter. It must decide whether the grounds appear to be substantial. The grounds of dispute, of course, must not consist of some ingenious mask invented to deprive a creditor of a just and honest entitlement and must not be a mere wrangle. It is settled law that if the creditor's debt is bona fide disputed on substantial

13 13 grounds, the court should dismiss the petition and leave the creditor first to establish his claim in an action, lest there is danger of abuse of winding up procedure. The Company Court always retains the discretion, but a party to a dispute should not be allowed to use the threat of winding up petition as a means of forcing the company to pay a bona fide disputed debt. The Apex Court in the case of Amalgamated Commercial Traders (P) Ltd. v. A.C.K. Krishnaswami and another (1965) 35 Company Cases 456 (SC), in which this Court held that:- "It is well-settled that 'a winding up petition is not a legitimate means of seeking to enforce payment of the debt which is bona fide disputed by the company. A petition presented ostensibly for a winding up order but really to exercise pressure will be dismissed, and under circumstances may be stigmatized as a scandalous abuse of the process of the court."

14 14 9. Dealing with the question of Commercial Solvency in the aforesaid judgment, the Apex Court has held, at Paragraph 24, as under:- The Appellant company raised a contention that it is commercially solvent and, in such a situation, the question may arise that the factum of commercial solvency, as such, would be sufficient to reject the petition for winding up, unless substantial grounds for its rejection are made out. A determination of examination of the company's insolvency may be a useful aid in deciding whether the refusal to pay is a result of the bona fide dispute as to liability or whether it reflects an inability to pay, in such a situation, solvency is relevant not as a separate ground. If there is no dispute as to the company's liability, the solvency of the company might not constitute a stand alone ground for setting aside a notice under Section 434 (1)(a), meaning thereby, if a debt is undisputedly owing, then it has to be paid. If the company refuses to

15 15 pay on no genuine and substantial grounds, it should not be able to avoid the statutory demand. The law should be allowed to proceed and if demand is not met and an application for liquidation is filed under Section 439 in reliance of the presumption under Section 434(1)(a) that the company is unable to pay it debts, the law should take its own course and the company of course will have an opportunity on the liquidation application to rebut that presumption. At Paragraph 25 it is held as under:- 25. An examination of the company's solvency may be a useful aid in determining whether the refusal to pay debt is a result of a bona fide dispute as to the liability or whether it reflects an inability to pay. Of course, if there is no dispute as to the company's liability, it is difficult to hold that the company should be able to pay the debt merely by proving that it is able to pay the debts. If the debt is an

16 16 undisputedly owing, then it should be paid. If the company refuses to pay, without good reason, it should not be able to avoid the statutory demand by proving, at the statutory demand stage, that it is solvent. In other words, commercial solvency can be seen as relevant as to whether there was a dispute as to the debt, not as a ground in itself, that means it cannot be characterized as a stand alone ground. At Paragraph 30 it is held that a company petition cannot be pursued in respect of contingent debt unless the contingency has happened and it has become actually due. 10. The Division Bench of this Court in the case of Airwings Private Limited.Vs. Viktoria Air Cargo Gmbh Langer Kornweg [AIR 1995 KARNATAKA 69] dealing with the question what should weigh in the mind of the Court at he time of admission of a company petition has held as under:-

17 17 At the stage of admission of the petition, the Court prima facie finds after hearing the Company that its defence is not valid or prima facie is shown to be a mooshine and that the ascertained sum of money is due from the company to the petitioning creditor and is within time of limitation, that will only result in admission of the petition and advertisement. It is well settled these proceedings are not in the nature of proceedings to prove Company's dues to the petitioning-creditor and to get a decree thereon. But they are representative in nature and they are a type of class litigation. Any finding reached prima facie for taking further action in such class litigation cannot be held to be binding to such an extent on main contestants as would foreclose them at the, stage of trial of such classlitigation from putting foward their respective cases finally on all these aspects. It must, therefore, be held that at the stage of summary enquiry which

18 18 the Company Court may hold prior to admission and advertisement of the Company, petition by hearing the petitioner and the respondent Company on notice stage the Court is called upon to satisfy itself that it is a case for admission and advertisement and nothing more. For arriving at that conclusion the Court necessarily will have to prima facie find out whether any fixed amount of debt or ascertained amount of debt is due by the Company to the petitioning-creditor, whether the debt is within limitation and whether the defence put forward by Company for not paying the debt to the petitioning-creditor is a valid one or is a mere moonshine and also to find out whether the Company appears to be commercially insolvent. Meaning thereby, it is unable to pay all its debts and not necessarily debts of petitioningcreditor alone.

19 19 It is in this background we have to look into the facts of the case and then find out whether the learned Company Judge was justified in admitting the petition. 11. The undisputed facts which emerge from the material on record in this case are on June 2006, KF Aero as borrower entered into an agreement with the petitioner as ECA facility agent as well as secured trustee. Under the said agreement the petitioner made available the requisite funds to KF Aero for purchase of 3 ATRs for the purpose of leasing it to Kingfisher. On the same day, an All party agreement came to be entered into between Kingfisher as lessee, KF Aero as borrower and lessor and various financial institutions as Original ECA lenders and BNP Paribas as ECA facility agent and Security Trustees. On the same day i.e. on , Air Craft agreement came to be entered into between KF Aero as lessor and Kingfisher as lessee. On , the respondent entered into a Guarantee deed in favour of KF Aero. The said deed recites that by an aircraft lease agreement dated between the

20 20 lessor and Kingfisher Airlines Limited, the lessor has agreed to lease and the lessee has agreed to take on lease ATR aircraft upon the terms and conditions provided therein. It was subsequently made clear that the execution and delivery of this Guarantee is a condition precedent to the lessor leasing the Aircraft to the lessee pursuant to the lease. It was also specifically recited in the Guarantee that unless the context otherwise requires or unless otherwise defined in this Guarantee, words and expressions defined in the All Party Agreement and used in this Guarantee shall have the same meaning when used in this Guarantee. The Guaranteed liabilities was defined to mean all moneys, obligations and liabilities expressed to be guaranteed by the Guarantor in Clause 2.1 which contains covenant to pay and provides that, in consideration of the lessor agreeing to lease the Aircraft to the lessee pursuant to the lease, the Guarantor unconditionally and irrevocably guarantees, as a principle obligator and not merely as a surety, to pay to the lessor, its successors

21 21 and assigns all monies or any part thereof expressed to be due and payable by the lessee to the lessor under or pursuant to the lessee (including, without limitation, the Rent, the Required Insurance Value, the Final ECA Loan Termination amount and indemnify payments), within 15 days of the first written demand by lessor on the Guarantor that the same shall have become due for payment provided that in no event shall the payment by the Guarantor or any such monies be greater than the payment obligations and/or liabilities of lessee under the lessee documents. 12. Clause 4.1 dealing with Representations and warranties, clearly discloses that the respondent had the power to execute the Guarantee. Clause 5.1 of the said agreement speaks about the consents and licences and Clause 6.1 deals with the benefit and burden. It provides that the Guarantee shall be binding upon the Guarantor and its successors in title and shall enure for the benefit of the Lessor and its successors in title and its assignees and transferees. After the execution of the

22 22 said Guarantee by the respondent in favour of KF Aero, KF Aero assigned the said Guarantee in favour of the petitioner on , under a document titled security assignments. The execution of these documents are not in dispute. It is also not in dispute that it is only on execution of the guarantee deed and assignment of the said deed money was released to the KF Aero who in turn leased the Aircrafts to Kingfisher. Earlier to these transactions on a letter was addressed to the RBI for approval for furnishing corporate guarantee for United Breweries(Holdings) Limited as RBI s permission was a condition precedent along with other documents referred to in the said letter. A request was made for grant of approval to the respondent to execute the Guarantees in favour of KF Aero(the Lessor) and its successors and assigns for guaranteeing the payment obligations of Kingfisher under the Lessee documents executed by Kingfisher in respect of each of four aircrafts(msn 699, 728, 729 and 730). On receipt of the said letter, the RBI on

23 23 replied saying that they have no objection from FEMA angle to the issuance of corporate guarantee by M/s. United Breweries(Holdings) Limited, Bangalore in favour of lessor M/s.KF Aero GIE for payment obligations by M/s.Kingfisher Airlines Limited towards acquiring four aircrafts ATR A bearing manufacturing Nos.699, 728, 729 and 730 on financial lease. In fact the learned Company Judge has extracted both the letters in its extirety. 13. It is only on getting approval, the transaction was completed, money was release and aircrafts were leased. The letter dated showing the remittances made in terms of the contract was made available to us at the time of hearing and the same reads as under:- Axis Bank Ltd April 30, 2010 Atlanta, Nariman Point Branch Mumbai Attn :-Mr.Naresh

24 24 Dear Sir, Ref :-ECB A/c Registration Number: for MSN 728 Sub: Remittance of funds-bnp Paribas Paris Please find enclosed herewith the following documents for transfer of a sum of US $ 9,68, (US Dollars Nine Lacs Sixty Eight Thousand Seven Hundred Twenty Seven & Cent Eighty Six Only) towards Rent paid for period to for MSN 728. List of Documents: 1) Certified copy of Invoice 2) Form A2 3) Undertaking from Company (Annexure A ) 4) Certificate from Chartered Accountant (Form 15CB forward you as soon as receive from CA) Payment Instructions: Beneficiary : BNPAFRPP Bank Name & : BNP Paribas, New York Branch, 499 Park Address Avenue, New York, NY Swift : BNPAUS3N Fed ABA : Account No. : Reference : Kingfisher MSN 728 Attention : BOCI Mrs Bourumeau Please note that we have already submitted Certificate from Government of India Ministry of Civil Aviation for import of Aircraft ATR MSN 728, Certified True Copy of Reserve Bank of India for Approval for the Loan Transaction to you vide our letter dated (Ref: 173ARIM060039). We request to remit the amount to the above account and debit our Current account no along with bank charges. Thanking you, Yours faithfully, For Kingfisher Airlines Limited Authorized Signatories

25 A reading of the above letter shows, the subject is remittance of funds to BNP Paribas Paris i.e. the petitioner. BNPAFRPP is shown as the beneficiary, the bank name and address is shown as BNP Paribas, New York Branch, 499 Park Avenue, New York, NY. The contents of the letter shows that for transfer of a sum of 9,68, US dollars towards rent paid for the period from to for MSN 728. They have enclosed four documents. When such remittances were not made it is the petitioner who has issued the demand notices. Those demand notices were issued because of the assignment of the Guarantee in their favour and it is also because it is they who lent the money to the KF Aero who in turn has utilized the said funds to lease the aircrafts to the respondent. The transaction is of the year 2006 and till the dispute arose an year ago, payments were made promptly. It is only when default was made in payment, legal notice came to be issued and it was duly served on the respondent. Admittedly no reply was sent. It is only when the petition is filed

26 26 for winding up, the defence that the assignment is not communicated as required in terms of Clause 2; RBI s permission was not obtained and therefore, the respondent is not under any obligation to pay any amount to the petitioner is taken in the objection statement. 15. The assignment deed is dated reads as under:- NOTICE OF ASSIGNMENT TO THE GUARANTOR AND ACKNOWLEDGEMENT Relating to one ATR A aircraft having manufacturer s serial number 699 (the Aircraft ) 1. KF ABRO (the Assignor ) and BNP Paribas (the Assignee ) hereby give notice to United Brewerles (Holdings) Limited (the Guarantor ) that, pursuant to the terms of a security assignment dated 21 June 2006 made between (1) the Assignor and (2) the Assignee (the Security Assignment ), the Assignor has assigned by way of security to the Assignee all its right, title and interest in and to the guarantee dated 17 June 2006 made between (1) the Assignor and (2) the Guarantor (the Guarantee ). 2. You shall owe your obligations under the Guarantee exclusively in favour of the Assigner unless the Assignee notifies you in writing otherwise, from

27 27 which time your obligations under the Guarantee falling due for performance after such notice shall be owed to the Assignee. The Guarantor shall be able to rely on any such written notice without further enquiry. Discharge by you of such obligation in favour of the Assignee shall be deemed to be due performance of such obligations owed to the Assignor. 3. This Notice and its Ackowledgement shall be governed by and construed in accordance with the laws of England. 4. Save as aforesaid this Notice and its Acknowledgement shall not affect the rights and obligations of the Assignor and the Guarantor contained in the Guarantee. Dated this 21 day of June Relying on Clause 2, it was contended that after the execution of the assignment deed, the assignee has to notify the guarantor in writing and only from that date, the obligation of the guarantor to the assignee arises. Since, no such notice is given, there is no obligation. In Annexure-X at Page 634, both on behalf of KF Aero and BNP Paribas signatures are affixed. However, no signature is affixed in the place meant for

28 28 the respondent and this only shows that the respondent has not affixed his signature, taking note of the said notice of assignment. According to them, the Assignment comes into effect only when the assignee issues a notice in writing bringing to their notice, the said assignment. That is the reason why on the hind page the signature of the respondent is taken on the same day. Therefore, the document has come into existence on and on the very day it has been duly notified by the assignee to the respondent, as such in terms of the said document, obligation starts from that day. We, therefore, do not see any substance in the above contention. 17. Insofar as RBI s permission is concerned, in the draft Guarantee which was furnished to the RBI it is clearly mentioned that the guarantor is liable to pay not only to KF Aero but also to its assigns or successors. Their request was to grant approval for respondent to execute the Guarantee in favour of KF Aero and its successors and assigns. The RBI has granted the

29 29 permission sought for on the basis of the said draft agreement in favour of the lessor M/s.KF Aero GIE. Placing reliance on the following:- In this connection, we have no objection from FEMA angle to issuance of corporate guarantee by M/s.United Breweries(Holdings) Ltd., Bangalore, in favour of lessor M/s.KF Aero GIE for payment obligations by M/s.Kingfisher Airlines Ltd., towards acquiring four aircrafts ATR A bearing manufacturing Nos.669, 728, 729 and 730 on financial lease. It was contended that when expressly the permission is not granted by the RBI, it cannot be said that permission is granted to the assigns and successors, 18. Reliance is also placed on Section 3 of the Foreign Exchange Management Act, 1999, that reads as under:- 3.Dealing in foreign exchange, etc.-save as otherwise provided in this Act, rules or regulations made

30 30 thereunder, or with the general or special permission of the Reserve Bank, no person shall- (a)deal in or transfer any foreign exchange or foreign security to any person not being an authorized person; (b)make any payment to or for the credit of any person resident outside Indian in any manner; (c)receive otherwise through an authorized person, any payment by order or on behalf of any person resident outside India in any manner. It is because of this provision, a request was made to the RBI along with a copy of draft Guarantee where it is specifically mentioned that the Guarantee is given not only to KF Aero but also to its assigns and successors; and in the request made to the RBI too these words are repeated. Therefore, prima-facie the aforesaid provision has been complied with. It does not provide how the RBI has to issue permission and whether the

31 31 permission issued in favour of KF Aero also enures to the benefit of assigns and successors. 19. Prima-facie it appears, as rightly held by the learned Company Judge, that there is no prohibition in the normal circumstances that the parties have disclosed their intention and reduced it to writing, made a written request and on consideration of the same the permission is granted. It is possible to contend and also to hold that the permission granted would enure to the benefit of the successor or assigns. Anyhow that is a matter to be gone into in detail at the time of hearing after trial. The finding of the learned Company Judge, therefore, cannot be found fault with in the light of the admitted material on record. 20. Insofar as the contention that the learned Company Judge has not gone into the commercial solvency is concerned, at the stage of admission, the Court has to be satisfied whether the debt claimed is a genuine one, the dispute raised is genuine or is it a

32 32 moonshine. If the claim is bonafide and the dispute is genuine, a case for admission is made out. At that stage, it is not necessary for the Court to hold a mini trial calling upon the parties to produce evidence. The material on record shows that this is not the only company petition against the respondent pending before the Company Court; eight more company petitions are pending. One such company petition is filed by State Bank of India where the amount claimed is roughly 6,000 crores. In fact, in the appeal arising out of the interim order, this Court had an occasion to look into that claim. The claim made by the SBI is as a representative of 14 nationalised banks. 21. If we take into consideration the total liability of the company approximately it comes to 9,000 to 10,000 crores whereas net worth of the company is only Rs.4,500 Crores. In fact, even before admission, permission is sought to sell the shares of U.S.L. held by the company to discharge its debts to select creditors. This only shows that the company is in debt, unable to

33 33 pay the same and therefore, wants to dispose off its assets to discharge the debts, as it has no alternative. 22. Having regard to the book value, available on record, and the assets which the respondent company owns, prima-facie we are not satisfied that they will be able to discharge the entire liability. At any rate, we are convinced that there is an attempt on the part of the respondent to deny the liability by taking up all possible, technical defence only to wriggle out of the situation. It is settled law that the company petition is not in the nature of proceedings to prove the company s dues to the petitioning-creditor and to get a decree thereon. It is representative in nature and is a type of class litigation. Therefore, the Court cannot look into the claim of the petitioner alone. 23. When several company petitions are pending and more so when company petition is filed by a nationalized bank representing 14 nationalised banks and where public money to an extent of 6,000 crores is

34 34 involved, the Court has to be circumspect and has to protect the interest of class of creditors as a whole and in the present case the public money too. In that view of the matter, the learned Company Judge committed no illegality or irregularity in admitting the petition and ordering for advertisement of the petition so that all creditors could appear and put forth their claim, so that in the presence of all creditors, the rights of the parties, the commercial solvency of the respondent and defence set up by the respondent could be gone into and appropriate orders could be passed. In that view of the matter, we do not see any merit in this appeal. 24. Accordingly, the appeal is dismissed. 25. The learned counsel for the appellant sought for postponement of advertisement by four weeks on the ground that advertisement would have serious consequences. In our order we have already set out the facts of the case, the amount which the respondent company is due to the creditors, in particular, the

35 35 nationalized banks. Therefore, in the interest of public, we are of the opinion that the proceedings of the company petition should be expedited. If an order of stay is granted at this stage, it would only give an impression that the Courts are coming in the way of recovery of public money. Therefore, the request is rejected. Sd/- JUDGE. Sd/- JUDGE. *alb/-.