| The Tax Publishers 2020 TaxPub(CL) 1433 (Del-HC) COMPANIES ACT, 2013
Section 71 Section 9
Where company had borrowed funds by issuance of secured/unsecured non-convertible debentures and later defaulted in repayment on final redemption date of debentures, in view of fact that company had acknowledged its failure to pay outstanding amounts in various communications with debenture trustee and subscribers and substantial part of pledged shares of company were already disposed of, debenture trustee could not be restrained from taking any steps against company under debenture trust deeds.
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Debentures - Default in repayment of amount to debenture holders on redemption date - Acknowledgement of liability by company - Debenture trustee whether can be restrained from taking action against company
The petitioner-company was in need of finances, therefore, the Board of Directors of company decided to borrow funds by issuance of secured/unsecured non-convertible debentures on private placement basis to debenture holders. 'V' was appointed as a debenture-trustee. Company created a charge over its designated bank accounts as a security against this transaction and pledged scrips of its two group entities. Later, petitioner defaulted in repayment of outstanding amount on final redemption date of debentures. Thus, V started to sell pledged shares of group entities. Company filed petition under section 9 of the Arbitration Act for restraining V and its officers, agents, etc., from selling shares of its group entities and taking any steps against it under debenture trust deeds. Held: It was observed that petitioner-company had acknowledged its failure to pay outstanding amounts in various communications with debenture trustee and subscribers, further, substantial part of pledged shares of company were already disposed of, therefore, debenture trustee could take any steps against company under debenture trust deeds. Moreover, reliefs sought by company could be granted only on ground of an emergent necessity, which was not established by company. Hence, petition under section 9 was dismissed.
Relied:Khoobsurat Infra (P.) Ltd. v. IDBI Trusteeship Services Ltd. OMP (I) (OMM) No. 135 of 2020, dt. 3-7-2020, Tindrel Financial Services (P.) Ltd. v. Nemedy Leasing & Finance Ltd. I.A. No. 13721 of 2006, dt. 3-4-2018 and Mardia Chemicals Ltd. v. UOI (2004) 51 SCL 513.
REFERRED : Rajagopala Pandarathar v. Thirupathi Pillai AIR 1923 Mad. 511, CIT v. Maulana Tea Co. (2000) 244 ITR 589 (Ker.) : 2000 TaxPub(DT) 1001 (Ker-HC), K.V. Mathew v. District Manager Telephones AIR 1984 Ker 40, Bombay Municipal Corpn. v. Daily Taj (P.) Ltd. AIR 2001 Bom. 263, Bank of Maharashtra v. M.V. River Oghese AIR 1990 Bom. 107, Ramniklal N. Bhutta v. State of Maharashtra (1997) 1 SCC 134, Raunaq International Ltd. v. I.V.R. Construction Ltd. (1999) 1 SCC 492, Sundaram Finance Ltd. v. NEPC India Ltd. (1999) 2 SCC 479, Adhunik Steel Ltd. v. Orissa Manganese & Minerals (P.) Ltd. (2007) 7 SCC 125, Channel Tunnel Group Ltd. v. Balfour Beatty Construction Ltd. 1993 AC 334 : (1993) 2 WLR 262 : (1993) 1 All ER 664 (HL), Arvind Constructions Ltd. v. Kalinga Mining Corpn. (2007) 6 SCC 798, Firm Ashok Traders v. Gurmukh Das Saluja (2004) 3 SCC 155 and Olex Facas (P.) Ltd. v. Skoda Export Co. Ltd. AIR 2000 Del. 161.
FAVOUR : Against the petitioner.
A.Y. : 14 August, 2020
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