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Company & Directors' Information:- INTERNATIONAL COMMERCE LIMITED [Active] CIN = U10100WB1980PLC204139

Company & Directors' Information:- INTERNATIONAL CREDIT CORPORATION LIMITED [Active] CIN = U74899DL1984PLC019667

Company & Directors' Information:- THE INDIA COMPANY PRIVATE LIMITED [Active] CIN = U74999TN1919PTC000911

Company & Directors' Information:- J P INDIA LTD [Active] CIN = U51909AS1983PLC002014

Company & Directors' Information:- INTERNATIONAL OVERSEAS CORPN LTD [Strike Off] CIN = U51900WB1948PLC016909

Company & Directors' Information:- INDIA CORPORATION PRIVATE LIMITED [Active] CIN = U65990MH1941PTC003461

    Company Petition 389 Of 1991

    Decided On, 12 November 1993

    At, High Court of Judicature at Bombay


    For the Appearing Parties: Ambalal F.Patel, Anup Shah, Bachubhai Munim, Crawford Bailey, D.P.Desai, Dave Girish, Dhruva Liladhar, G.M.Dave, I.M.Chagla, J.Avaria, Janak Dwarkadas, Manilal Kher Ambalal, Nitin Thakkar, R.A.Dada, R.M.Andhi, S.H.Doctor, Shrikant Doijode, T.R.Ahdyaruajina, Advocates.

Judgment Text

( 1 ) THE Reserve Bank of India, which is a Central Bank in this country (i. e. India) and which controls the banking companies and banking in this country is the petitioner in this petition. The petition has been filed under S. 38 (3) of the Banking regulation Act, 1949 (Act X of 1949) (in short Banking Act) read with Ss. 582, 583 and 584 of the Companies Act, 1956 (1 of 1956) (hereinafter for brevity sake referred to as 'the Companies Act') for winding up of the Bank of Credit and Commerce International (Overseas) Limited, an unregistered company having its branch at Bombay. (For brevity sake hereinafter said Bank is referred to as BCCI (O) ). Principal reliefs claimed and as incorporated in prayers (a), (b) and (c), inter alia, are as under :" (A) That the Bank of Credit and Commerce International (Overseas) Limited, Bombay be wound up by and under the direction of this Hon'ble Court under the provisions of the Banking Regulation Act, 1949 read with Companies Act, I of 1956; (b) That the State Bank of India, Central Office, Bombay be appointed as Liquidator of the Bank of Credit and Commerce International (Overseas) Limited, Bombay with all necessary powers under the provisions of the Banking Regulation Act, 1949 read with Companies Act, 1956; (c) That pending the hearing and final disposal of this petition, the State Bank of India be appointed as provisional Liquidator of the said Bank, of Credit and Commerce International (Overseas) Limited, Bombay, with all necessary powers under the provisions of the Banking Regulation Act, 1949 read with Companies Act, 1956. "

( 2 ) IT would be noticed from the abovementioned reliefs that the petitioner, while seeking winding up has also sought the appointment of the State Bank of India (in short SBI) as a Liquidator of the BCCI (O ).

( 3 ) CERTAIN details about the said BCCI (O) would be necessary to advert. (A) The said BCCI (O) Ltd. is a Foreign Company incorporated in Grand Cayman Islands in or about the year 1975 and holds a licence to carry on banking business under the Laws of Cayman Islands, viz. Companies Law, 1960 Which permits it to carry on banking business in any country in the worlds (b) The said BCCI (O) applied for licence to carry on banking business in this country i. e. in India under Section 22 of the Banking Act which the petitioner granted on 18-2-1983 and BCCI (O) opened its office in Bombay on 31-3-1983; (c) It appears that the petitioner granted the necessary licence to said BCCI (O) on their qualifying and satisfying the conditions and complying with the relevant provisions as contained in Section 5 (d) of the Banking Act and part of Chapter IX of the Companies Act. It is undisputed position that the said BCCI (O) opened its branch in Bombay city which is the only branch in this country.

( 4 ) FACTS and circumstances sequel to the institution of the petition herein are stated hereunder. (A) The Governor of the Cayman Islands, having formed an opinion that BCCI (O) was likely to be unable to meet its obligations and that it was carrying on business in a manner detrimental to the interest of its depositors and its other creditors, by an order dated 5/07/1991, appointed Mr. Ian Wight to assume control with powers of Receiver under Section 18 of the Bankruptcy Law as applicable in the Cayman Islands. The said order also directed and authorised the said Receiver to take charge of the properties of the BCCI (O) wherever situated. (b) On 6/07/1991 the Manager-in-charge of BCCI (O) in Bombay was informed by fax message of the said order dated 5/07/1991 about suspension of all payments and other banking transactions. (c) On 6/07/1991 the copy of the said order dated 5/07/1991 with fax message received by the Manager-in-charge in Bombay was forwarded to the petitioner herein. Petitioner by the same time also received messages from the Provisional Liquidators of the U. K. Branches of BCCI (O) (S. A.) appointing Joint Provisional Liquidators of the BCCI (S. A.) by the Courts in U. K. The petitioner also gathered information in respect of banking business activities of BCCI (O) from various other sources. (d) The petitioner immediately swung into action on receipt of the information and issued certain orders and directives to BCCI (O) to safeguard the interest of the depositors and after careful scrutiny and examination of the situation filed the petition herein in this Court on 15/07/1991 for the reliefs as indicated hereinabove. (e) On 15/07/1991 itself, i. e. on the date of institution of the petition, on 'the petitioner's application this Court appointed, as an ad interim arrangement, State Bank of India (in short SBI) as Provisional Liquidators in respect of the assets of BCCI (O) in Bombay, which order came to be confirmed on 22/01/1992. (f) It may be stated that on or about the same time, i. e. on 14/01/1992, the Grant Court of the Cayman Islands confirmed its ad interim order dated 5/07/1991 appointing Receiver and appointed Mr. Ian Wight and two others as Official Liquidators of BCCI (O ).

( 5 ) I would now advert to certain course of events and developments after the institution and admission of this petition as the same have considerable relevance and bearing at the stage of its final disposal as this Court is so seized of. (A) As stated earlier on 15/07/1991 by an order SBI was appointed as Provisional Liquidator in respect of assets of BCCI (O) Bombay. By the said order Mr. S. M. Parande, the then Chief General Manager and now Deputy General Managing Director of SBI was appointed as the Authorised Officer to perform the functions of the Provisional Liquidator. (b) On 22/01/1992, after hearing the concerned parties, including the Joint Provisional Liquidators of BCCI (O) appointed by the Court of Cayman Islands, who appeared by filing affidavit in reply dated 23/10/1991, opposing the admission of this petition, admitted the petition and confirmed ad interim order dated 15/07/1991 appointing SBI Central Office as Provisional Liquidators of BCCI (O) Bombay branch. Consequently all the business activities of BCCI (O) Bombay branch came to be suspended. (c) On 16/01/1992 a Memorandum of Understanding (for short MOU) was entered into by and between the said Official Liquidator and the petitioner for disposal of the Bombay branch of BCCI (O) whereunder it was agreed that BCCI (O) Bombay branch be sold to one of the buyers to be appointed by the petitioner on the terms and conditions stipulated therein. The salient feature of the said MOU was that the purchaser was, inter alia, required to assume full responsibility for meeting 100% dues of the depositors and creditors, including the liabilities of the staff, so also all other existing as also future liabilities of BCCI (O) Bombay branch. The another important stipulation in the said MOU provided that the business and undertaking of the BCCI (O) of Bombay branch be sold to the SBI and/or its subsidiary to be constituted in accordance with the provisions of law. (d) This Court was approached for according sanction to the arrangement as recorded in the said MOU dated 16th Jan. 1992 and the then Company Judge my brother Judge Dhanuka, after hearing the counsel for the SBI (i. e. Provisional Liquidators) Joint Provisional Liquidator and the petitioner accorded, approval by order dated 22nd Feb. , 1992 on condition, material being : " (i) This Court grants its provisional approval to the agreement dated 16/01/1992 on the condition that all effective steps to be taken hereafter shall be taken by the Reserve Bank of India with concurrence of State Bank of India. The Reserve Bank of India and State Bank of India shall take necessary steps towards implementation of the agreement jointly. This Court must be kept informed of important steps to be taken in the matter in relation to implementation of the agreement. (ii) No legal right shall accrue in favour of the proposed buyer or any other party unless the transaction is approved by this Court after the details of the proposed transaction are made available to this Court by a specific order. " it is significant to note that the Joint Official Liquidator, BCCI (O), Cayman Islands, who as stated, initially opposed even the admission of this petition, also extended their consent to the terms and conditions for sale as provided in said MOU. It is further to be noted that even now before this Court, they have reaffirmed and reiterated their said approval. (e) The petitioner after approval by this Court as above, held negotiations with all concerned including Official Liquidators, Cayman Islands. The Joint Official Liquidators invited offers for sale of the undertaking of the Bombay branch of BCCI to which SBI responded and submitted its offer. In turn Official Liquidators, Cayman Islands also considered the said offer of SBI and term of the Draft agreement and they i. e. Official Liquidator also got the approval from the Court of Grand Cayman for the sale as approved by this Court on 14th Feb. , 1992 and so comminuted to the petitioner by their fax dated 24th Feb. 1993. (Refer Ex. 'f' to the petition No. 123 of 1993 ). (f) The petitioner on careful examination and consideration opined that the offer of the SBI was in the interest of the depositors, creditors and employees of the BCCI (O) Bombay branch and further the purchaser i. e. SBI was capable of fulfilling its obligations under the proposed agreement as it had sufficient assets. The petitioner then moved this Court in filing Company Petition No. 123 of 1993 seeking approval of this Court for the offer of SBI and for issuance of further directions to the Provisional Liquidator to take necessary steps in the completion of the sale as per offer. (g) The said Company Petition No. 123 of 1993 was heard by then Company Judge, my brother Judge Jhunjhunwala, who by his detailed Judgment and order passed on 3/08/1993 accepted the offer of SBI for the purchase of BCCI (O) Bombay branch as a going concern the said order also contains various directions for safeguarding the interest and claims of all concerned, including that of M/s. Vaz Forwarding. Ltd. (in short M/s. Vaz) who have filed a petition in this Court being Petition No. 357 of 1992. I will have to say something more as far as the said petition of M/s. Vaz is concerned, which will be done hereinbelow.

( 6 ) IT is in these circumstances as mentioned hereinabove, the petition herein has been listed on the board of this Court for final hearing and disposal. All the parties before the Court, including the Official Liquidators, Cayman Islands are supporting the grant of reliefs of the petition except M/s. Vaz who have certain reservations as would be pointed out later on.

( 7 ) AS would be noticed from the narration of course of events after the institution of the petition, the final order in the terms of the reliefs of the petition more or less, has become an obvious outcome in view of various orders passed earlier, in particular orders dated 14th Feb. , 1992 and 3rd of Aug. , 1993, as mentioned above. However, that does not mean that the Court mechanically accords its approval.

( 8 ) I would refer to certain relevant provisions under which the reliefs of this petition are sought. Section 38 of the Banking Regulation Act, relevant provisions whereof read as under :"38. Winding up by High Court - (1) Notwithstanding anything contained in Sec. 391, Sec. 392, Sec. 433 and Sec. 583 of the Companies Act, 1956 (1 of 1956), but without prejudice to its power under sub-section (1) of Sec. 37 of this Act, the High Court shall order the winding up of a banking company - (a) if the banking company is unable to pay its debts;"

( 9 ) BY reading the said provisions it will be noticed that the Reserve Bank of India the controlling and governing organisation of this country in Banking business has been given powers to approach the Court for reliefs as claimed in the present petition. Furthermore, the validity and efficacy of the said power as contained under Section 38 of the Act was for consideration before the Supreme Court in the case of Vellukummel v. Reserve Bank of India, reported in AIR 1962 SC 1371 and the Apex Court has upheld the said provisions as constitutional and further elaborated that in the given situation such powers are absolutely necessary, observing :"in the instant case, in view of the history of the establishment of the Reserve Bank as Central Bank for India, its position as a Bankers' Bank, its control over banking companies and banking in India, its position as the issuing bank, its power to license banking companies and cancel their licences and the numerous other powers, it is unanswerable that between the Court and the Reserve Bank, the momentous decision to wind up a tottering or unsafe banking company in the interests of the depositors may reasonably be left to the Reserve Bank. No doubt, the Court can also to given the time perform this task. But the decision has to be taken without delay, and the Reserve Bank already knows intimately the affairs of banking companies and has had access to their books and accounts. If the Court were called upon to take immediate action, it would almost always be guided by the opinion of the Reserve Bank. It would be impossible for the Court to reach a conclusion unguided by the Reserve Bank if immediate action was demanded. The law which gives the same position to the opinion of the Reserve Bank cannot be challenged as, unreasonable. "

( 10 ) THEREFORE as far as law on this point is concerned there is no doubt that the reliefs as claimed in the present petition can be sought at the behest of the Reserve Bank of India.

( 11 ) THE petitioner in this petition has, as noticed earlier, stated the reasons for its intervention in seeking the reliefs. It is not in dispute that all the banking operational activities of the said BCCI (O) have come to standstill from 5-7-91. After filing of the petition various orders have also been passed by the Courts in foreign countries whereunder the assets of the BCCI (O) have been seized and taken charge of by the Official Liquidator or the Receiver. Similar is the position as far as the banking activities of the said bank in this country are concerned. That the said BCCI (O) is unable to pay its debts is amply demonstrated from the fact that even Joint Official Liquidators, Cayman Islands, who earlier opposed admission of this petition, have been now supporting the grant of reliefs in the petition and who have also approved the arrangement arrived at.

( 12 ) WHAT is more, even the said M/s. Vaz in their petition in paras 7 and 8 admit that the activities of the said BCCI (O) are detrimental and prejudicial to the public interest and the interest of the depositors and creditors. It is in these circumstances that the petitioner-Reserve Bank of India has approached this Court seeking relief in this petition.

( 13 ) IT is necessary to mention one more relevant aspect in the context of the arrangement in respect of offer of sale of the SBI. The said SBI has now constituted separate company incorporated under the provisions of Companies Act, 1956, in the name of M/s. SBI Commercial and International Bank Ltd. , as its subsidiary which has been duly incorporated and Registrar of Companies has on 7/10/1993 and 18/10/1993 issued Certificate of Incorporation and Certificate of Commencement of Business respectively to the said subsidiary company. Article IIIA (1) as contained in its Memorandum and Articles of Association provides :"iii. The objects for which the Company is established are :- a. MAIN OBJECTS TO BE PURSUED BY THE COMPANY ON ITS INCORPORATION ARE : 1. To acquire by purchase or otherwise business and undertaking of the Bombay Branch (under provisional liquidation) of Bank of Credit and Commerce International (Overseas) Ltd. (in liquidation) as a going concern together with assets and liabilities for such consideration and on such terms and conditions as may be agreed upon for acquisition thereof and to carry on business of banking thereat subject to the provisions of the Banking Regulation Act, 1949 and consents and approvals required to be obtained therefor. "needless to add that these steps have been taken in accordance with the arrangement as agreed upon by the SBI and as sanctioned by this Court.

( 14 ) I shall now deal with the say of the said M/s. Vaz. Said M/s. Vaz are stated to be the owners/landlords of the premises described as 'atlanta' premises situated at 4, Nariman Point, Bombay, who have somewhere in the year 1978, upon permission from the Controller of Accommodation of the State Government, leased out the said premises to said BCCI (O) Bombay Branch which lease was renewed from time to time and said BCCI (O) Bombay Branch continued to occupy till 5/07/1991 and after filing of this petition Provisional Liquidator appointed has taken over the same. By notice dated 24/11/1991 said M/s. Vaz have terminated the lease and requested for return of the said premises. Said M/s. Vaz in their Petition No. 357 of 1992 have mentioned the correspondence exchanged. In the said petition they i. e. M/s. Vaz have claimed return of the said premises. It is unnecessary to make detailed reference to the pleadings and counter pleadings filed by the parties in the said petition in this judgment. The said petition is pending on the file of this Court and this Court is granting leave to M/s. Vaz for its continuation and disposal on merits, clarifying and making distinctly clear that the grant of reliefs in the petition herein i. e. in Petition No. 389 of 1991 would not affect the merits of the said petition of M/s. Vaz.

( 15 ) FURTHER, my brother Judge Mr. Jhunjhunwala, the then Company Judge in his order and judgment dated 3/08/1993, while granting approval to the sale of BCCI (O) Bombay by SBI, made it distinctly clear vide clauses (e) and (f) of the operative part, which inter alia, read :" (E) ordered that the rights and claims of M/s. Vaz Forwarding Ltd. in the Atlanta Premises including those taken in the Company Petition No. 357 of 1992 and in the affidavit of Mario Vaz affirmed on 11/03/1993 and filed in this petition as also the question of the power of the Provisional Liquidator of Bombay Branch of BCCI to assign the Atlanta premises and the validity of the assignment are not and will not be affected by this Order or any steps taken pursuant thereto and that the same will be determined in the Company Petition No. 357 of 1992 pending in this Court; (f) ordered that any New Company to be formed by the SBI as per the terms and condition's contained in the draft agreement Ex. 'g' to this petition will also be bound by the undertakings given by the SBI and the SBI through their Counsel as recorded hereinabove and accepted by this Court and the orders passed herein. "

( 16 ) APART therefrom, the purchasing company, as recorded in the agreement incorporating terms and conditions of the sale has undertaken to discharge and meet all the liabilities of the BCCI (O) Bombay Branch and meet the claims against said BCCI (O) Bombay Branch. It clearly implies that such undertaking includes and covers existing as also future liabilities. Across the Bar, the learned counsel appearing for SBI and its subsidiary have reaffirmed and reiterated the undertakings before this Court given before my brother Judge Jhunjhunwala and as recorded by him in the Judgment and order dated 3/08/1993 which undertaking, it is clarified, this Court also records and accepts to hold good. This is clarified with a view to remove any doubt or apprehension as entertained and expressed by and on behalf of said M/s. Vaz.

( 17 ) I would conclude that the arrangement as reached and arrived at, as mentioned earlier and as recorded in the agreement between the parties and as sanctioned by this Court, is by and large in the best interest of the creditors and depositors of the BCCI (O) Bombay Branch. It is noteworthy that 100% claims of such creditors and depositors are secured. The interest of the public at large is and should be a paramount consideration before the Court which should override the claim and the interest of any individual as in the case of M/s. Vaz whose interest, if any, has been safeguarded as indicated hereinabove. The pendency of the petition of said M/s. Vaz by itself, in the circumstances, where facts and circumstances and the law justify the grant of reliefs as claimed, would not justify the Court in withholding the same. The delay would result in great prejudice to the creditors and depositors of the said - BCCI (O) Bombay Branch. It would also adversely affect the SBI and its subsidiar

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y new company who have, in accordance with the approved arrangements, proceeded to take various steps and have complied with various formalities, such as incorporation of the subsidiary company. As per order dated 3/08/1993, this Court has set February 1994 as a deadline for the completion. ( 18 ) IN the circumstances following order is passed :i) Petition granted in terms of prayers (a) and (b) which read as under :-" (a) That the Bank of Credit and Commerce International (Overseas) Limited, Bombay, be wound up by and under the direction of this Hon'ble Court under the provisions of the Banking Regulation Act, 1949 read with Companies Act I of 1956; (b) That the State Bank of India, Central Office, Bombay be appointed as Liquidator of the Bank of Credit and Commerce International (Overseas) Limited, Bombay with all necessary powers under the provisions of the Banking Regulation Act, 1949 read with Companies Act, 1956. " ii) State Bank of India-Official Liquidator is ordered and directed to take all further necessary steps required pursuant to the order passed herein as provided under the Rule 114 of the Companies (Court) Rules), 1956 and the petitioners are directed to take all necessary steps for advertisement of the Order under Rules 112 and 113 of the Companies (Court) Rules, 1956; iii) State Bank of India-Official Liquidator to take steps for the execution of conveyance as per agreement and as per order of this Court dated 3-8-1993 ensuring that all the directions and guidelines contained in the said order are followed and complied with in every respect. iv) The undertaking given by and on behalf of the parties concerned and as recorded in the order and Judgment dated 3-8-1993 and also reiterated in the Judgment herein are accepted and recorded and parties concerned to ensure strict adherence and compliance thereof. v) Leave is granted to the petitioners in Company Petition No. 357 of 1992 i. e. M/s. Vaz Forwarding Ltd. to continue the said petition for being disposed of on merits. vi) Petitioners to advertise in newspapers like Times of India, Free Press Journal, Janmabhoomi within 30 days. vii) The Official Liquidator to stand discharged only after compliance of the order and directions as above. No order as to costs. Issuance of C. C. expedited. Petition allowed.