w w w . L a w y e r S e r v i c e s . i n

The Bank of New York Mellon v/s Cranes Software International Limited

Company & Directors' Information:- R S SOFTWARE (INDIA) LTD. [Active] CIN = L72200WB1987PLC043375

Company & Directors' Information:- CRANES SOFTWARE INTERNATIONAL LIMITED [Under Liquidation] CIN = L05190KA1984PLC031621

Company & Directors' Information:- CRANES SOFTWARE INTERNATIONAL LIMITED [Amalgamated] CIN = U00367KA1994PLC015495

Company & Directors' Information:- C K SOFTWARE PRIVATE LIMITED [Active] CIN = U72501DL2000PTC106184

Company & Directors' Information:- INTERNATIONAL SOFTWARE INDIA LIMITED [Strike Off] CIN = U33111TN1986PLC012957

Company & Directors' Information:- K K SOFTWARE PRIVATE LIMITED [Active] CIN = U72900DL2009PTC193030

Company & Directors' Information:- S R B SOFTWARE INTERNATIONAL PRIVATE LIMITED [Strike Off] CIN = U72200PB1997PTC019786

Company & Directors' Information:- A K C SOFTWARE PRIVATE LIMITED [Active] CIN = U72200DL2004PTC128462

Company & Directors' Information:- YORK INDIA LTD. [Not available for efiling] CIN = U99999DL1901PLC003613

Company & Directors' Information:- A P CRANES PRIVATE LIMITED [Active] CIN = U29309RJ2011PTC035526

Company & Directors' Information:- P AND P SOFTWARE PRIVATE LIMITED [Active] CIN = U74899DL1994PTC057212

Company & Directors' Information:- SOFTWARE INDIA PRIVATE LIMITED [Active] CIN = U72200GJ1995PTC025791

Company & Directors' Information:- CRANES PRIVATE LIMITED [Strike Off] CIN = U74900KA1982PTC004663

Company & Directors' Information:- N E CRANES PRIVATE LIMITED [Active] CIN = U29248TN2012PTC085038

Company & Directors' Information:- N. D. SOFTWARE PRIVATE LIMITED [Strike Off] CIN = U72200TG1998PTC029778

Company & Directors' Information:- H N CRANES PRIVATE LIMITED [Under Liquidation] CIN = U29150DL1997PTC084314

Company & Directors' Information:- T AND H SOFTWARE PRIVATE LIMITED [Active] CIN = U72200UP2000PTC025638

Company & Directors' Information:- M S SOFTWARE PRIVATE LIMITED [Active] CIN = U72200DL2005PTC133997

Company & Directors' Information:- G A S SOFTWARE PRIVATE LIMITED [Active] CIN = U72200DL2004PTC127546

Company & Directors' Information:- B B SOFTWARE LTD [Strike Off] CIN = L30009WB1995PLC072361

Company & Directors' Information:- B J CRANES PVT LTD [Strike Off] CIN = U29130WB1996PTC077654

Company & Directors' Information:- H K SOFTWARE PRIVATE LIMITED [Strike Off] CIN = U72200WB2001PTC093967

Company & Directors' Information:- J SOFTWARE PRIVATE LIMITED [Strike Off] CIN = U72200TZ2000PTC009229

Company & Directors' Information:- K S M SOFTWARE PRIVATE LIMITED [Active] CIN = U72200DL2004PTC128463

Company & Directors' Information:- R B SOFTWARE PRIVATE LIMITED [Active] CIN = U72200DL2005PTC140322

Company & Directors' Information:- SOFTWARE INDIA PRIVATE LIMITED [Active] CIN = U72200RJ1995PTC010577

Company & Directors' Information:- V. N. CRANES PRIVATE LIMITED [Active] CIN = U51909DL2007PTC161016

Company & Directors' Information:- R J SOFTWARE PRIVATE LIMITED [Active] CIN = U72200DL2005PTC133815

Company & Directors' Information:- H J SOFTWARE PRIVATE LIMITED [Active] CIN = U72200TG2007PTC056351

Company & Directors' Information:- MELLON INDIA PRIVATE LIMITED [Strike Off] CIN = U72900MH2004PTC146688

Company & Directors' Information:- I & I SOFTWARE INDIA PRIVATE LIMITED [Strike Off] CIN = U72200TN2005PTC056262

Company & Directors' Information:- D F SOFTWARE INDIA PRIVATE LIMITED [Strike Off] CIN = U72200TZ2003PTC010629

Company & Directors' Information:- E. C. SOFTWARE INDIA PRIVATE LIMITED [Active] CIN = U72900TN2007PTC063486

Company & Directors' Information:- Q 3 INDIA SOFTWARE PRIVATE LIMITED [Active] CIN = U72900TN2007PTC065786

Company & Directors' Information:- K Y SOFTWARE PRIVATE LIMITED [Strike Off] CIN = U72200DL2005PTC136072

Company & Directors' Information:- T M I SOFTWARE PRIVATE LIMITED [Strike Off] CIN = U72200KA2005PTC036299

Company & Directors' Information:- BANK OF NEW INDIA LIMITED [Strike Off] CIN = U65110KL1999PLC000132

Company & Directors' Information:- B C L SOFTWARE (INDIA) PRIVATE LIMITED [Strike Off] CIN = U30007MH1999PTC117922

Company & Directors' Information:- C C M SOFTWARE PRIVATE LIMITED [Strike Off] CIN = U72200TG2000PTC034002

Company & Directors' Information:- M I S SOFTWARE PRIVATE LIMITED [Active] CIN = U72200TN2008PTC068694

Company & Directors' Information:- A. T. SOFTWARE PRIVATE LIMITED [Active] CIN = U72200TG1996PTC023841

Company & Directors' Information:- J A K SOFTWARE PVT LTD [Active] CIN = U72200DL2001PTC111929

Company & Directors' Information:- R R SOFTWARE PVT LTD [Under Process of Striking Off] CIN = U72200KL1991PTC006051

Company & Directors' Information:- A M H SOFTWARE PRIVATE LIMITED [Strike Off] CIN = U72200DL2005PTC132410

Company & Directors' Information:- P D A SOFTWARE PRIVATE LIMITED [Strike Off] CIN = U72900DL2003PTC123465

Company & Directors' Information:- K C SOFTWARE PRIVATE LIMITED [Active] CIN = U74899DL1989PTC036923

Company & Directors' Information:- I SOFTWARE PRIVATE LIMITED [Strike Off] CIN = U72300MH2012PTC225903

Company & Directors' Information:- V M SOFTWARE PRIVATE LIMITED [Strike Off] CIN = U72900PN2010PTC136847

Company & Directors' Information:- H M SOFTWARE PRIVATE LIMITED [Strike Off] CIN = U72200HP2011PTC031756

Company & Directors' Information:- S N R SOFTWARE PRIVATE LIMITED [Strike Off] CIN = U72900DL2012PTC243073

Company & Directors' Information:- K A V SOFTWARE PRIVATE LIMITED [Active] CIN = U72200DL2005PTC144121

Company & Directors' Information:- R R CRANES PRIVATE LIMITED [Active] CIN = U51109DL2003PTC122120

Company & Directors' Information:- C M S SOFTWARE PRIVATE LIMITED [Active] CIN = U74899DL2005PTC142352

Company & Directors' Information:- S M I T SOFTWARE COMPANY PRIVATE LIMITED [Strike Off] CIN = U74899DL2006PTC144816

Company & Directors' Information:- R K CRANES PRIVATE LIMITED [Active] CIN = U71210HR2011PTC043887

Company & Directors' Information:- A D SOFTWARE PRIVATE LIMITED [Strike Off] CIN = U72200KA2002PTC030722

Company & Directors' Information:- H. A. N. R. E. J SOFTWARE PRIVATE LIMITED [Strike Off] CIN = U72200TG2008PTC062044

Company & Directors' Information:- NEW INDIA BANK LIMITED [Dissolved] CIN = U65191KL1929PLC000774

    Company Petition No. 203 of 2010

    Decided On, 04 March 2014

    At, High Court of Karnataka


    For the Appearing Parties: Udava Holla, K.G. Raghavan, Senior Advocate, Suraj Govindaraj, Pradeep Nayak, Aditya Narayan, Ajay J.N., Advocates.

Judgment Text

(Prayer: This Company Petition filed under Seciion 433(e) and (f) read with Section 434(i) (a) and Section 439(1 )(b) of the Companies Act, 1956 praying to wind up the respondent - Cranes Software international Limited having its registered office at No.29, 7th Cross, 14th Main, Vasanthinagar, Bangalore - 560 052, Karnataka, India under the directions of this Honourable Court under the provisions of the Companies Act, 1956 and etc;)

1. The petitioner is said to be a branch at London, of the Bank of New York, a company incorporated in the State of New York under the laws of that State in the United States of America. The petitioner is said to be engaged, inter-alia, in the business of providing trusteeship, agency and other securities related services. 

The respondent is said to be a company incorporated under the Companies Act, 1956 (Hereinafter referred to as the 'Act", for brevity).

2. The present petition is filed seeking the winding-up of the respondent owing to its alleged inability to pay its debts. It is the petitioner's case that it had entered into a trust deed dated 17.3.2006 with lbs respondent, whereby the petitioner was appointed as the trustee to the Euro 42 million 2.50% Foreign Currency Convertible Bonds, issued by the respondent to various investors in the international capital markets . It is the petitioner's contention that the terms of the Trust deed enable the petitioner to enforce its conditions against the respondent, in its capacity as the trustee. More particularly, Condition no. 13 of the Conditions of contract, it is claimed, provides that at any time after the Bonds become due and payable, the Trustee may at its discretion and shall, if requested in writing by the bond holders of not less than 25% in principal amount of the Bonds then outstanding, institute proceedings against the respondent to enforce repayment of the Bonds. It is claimed that all amounts outstanding under the Bonds have become immediately due and payable by the respondent as the respondent had committed default under the terms of the Bonds by failing to make payment of interest in respect of the Bonds, which fell due on September 18, 2009. And the default being a continuing one, the present petition is said to be filed.

The said Bonds are foreign currency denominated debt instruments issued by an Indian company to raise funds from the international capital markets, and are repayable on maturity with a premium over the principal amount, unless redeemed or converted previously. There is an option available to the investor to convert the Bonds into equity shares of the issuer in accordance with the terms prescribed. Unless so converted, the bonds remain outstanding debt instruments of the Issuer.

It is claimed that the Bond holders had not exercised the option to convert the bonds into equity shares. The Bonds carried an interest component that was required to be paid by the respondent to the bondholders. It was payable as per Condition no.5, at the rate of 2.5% on the principal value of the bonds, semiannually, on March 18th and September 18th of each year. Though payments towards interest was said to have been made, during the periods 2006 to March 2009, there was said to be a default in respect of the payment due in September 2009.

It is stated that there were several exchanges of communication in respect of the default aforesaid, by way of e-mails, over a sustained period. It is stated that though there were assurances of payment, it was not complied with and hence the petitioner is said to have issued a notice of default, dated 22.12.2009, in terms of Condition no. 10. The respondent having failed to comply with the said notice, the petitioner is said to have issued a further notice dated 10.2.2010, calling upon the respondent to pay a total sum of €47,037,998.16 (Euro Forty Seven Million Thirty Seven Thousand Nine Hundred and Ninety Eight and Sixteen Cents only). Upon receipt of the notice, there was said to have been a video conference call by the representatives of the respondent with that of the petitioner but there was no compliance with the demand. On 31.3.2010, the respondent is said to have made a "restructuring proposal", which was dismissed by the petitioner as a mere request, only to make delayed payments. It is on 12.8.2010 that the petitioner had issued a notice under Sections 433 and 434 of the Act, demanding the interest due and payable from 18'h September 2009 to 18th March 2010, the accreted principal amount under the Bonds and accrued interest on the principal amoum of the Bonds at the rate of interest of 2.50% per annum as provided for in Condition no.5 of the Conditions, in all totaling to € 48,141,850.14 (Euro Forty Eight Million One Hundred and Forty-one Thousand Eight Hundred and Fifty and Fourteen Cents only).

The said notice dated 12.8.2010 was said to have been acknowledged and the failure to make payments confirmed, by way of a reply dated 1.9.2010, while pleading several reasons resulting in a severe cash flow problem. 

It is thus stated that the respondent ought to be deemed to be unable to pay its creditors amounts owed to them and hence it would be just and equitable that the respondent be wound up.

3. The respondent, by way of reply, nas contended that the petitioner is not a creditor and therefore is not entitled to present a petition for winding up under Section 433 of the Act. It is asserted that the petitioner is neither a bond bolder nor a beneficial owner of the Bonds. It is pointed out that the petitioner has not chosen to call itself a creditor in the petition. The petitioner is merely an agent. That the petitioner is not a trustee under any declaration of trust, declared in writing by the author. Nor does the petitioner claim that the ownership of any property is transferred to the petitioner as the trustee, and it is hence contended that the petitioner cannot claim to be acting as a trustee under the Trust Deed relating to the Bonds. As the bond holders are not parties to the Trust Deed and though the petitioner has styled itself as the trustee, it is not one, as understood in law. 

It is contended that the Bond documents, including the Trust Deed are governed by the English law as stated therein, hence the present petition is an effort to convert this court into a debt collecting agency, by usirg its process to bring pressure on the respondent to pay any amount under the Bonds.

It is contended that under the 'Trust Deed', the petitioner may give notice of default to the respondent if, (a) so requested in writing by the holders of net less than 25% in principal amount of the Bonds then outstanding, or (b) so directed by an Extraordinary Resolution, and only if a valid notice of default is served, does the entire bond amount become due and payable. Although the petitioner has. in its notice, stated that it has been directed by the holders of the Bonds holding not less than 25% in aggregate principal amount of the Bonds then outstanding, the petitioner has not annexed any proof or evidence in support thereof. The petitioner is the only person who knows the pattern of holding of the bonds and has deliberately withheld this information. Moreover, since these bonds are freely transferable, even if the petitioner had received such written instructions (which is denied), it is not certain that those bondholders continue to hold the bonds as on date of the petitioner and would continue to do so. It is thus contended that the notice issued by the petitioner is invalid.

It is contended that the Bonds are not pure debt instruments. They are convertible instruments and on the petitioner's own showing at paragraph 7 of the Company petition, the FCCBs are treated as foreign direct investments by the Government of India under the Foreign Exchange Management (Transfer or issue of Security by a Person Resident outside India) Regulations, 2000 and the Consolidated FDI Policy dated October 1, 2010 issued by the Department of Industrial Policy and Promotion, Government of India. The holders of the Bonds have an option to convert their Bonds into GRDs (which are represented by equity shares) at any time during the term of the Bond. In a sense, the holders of the Bonds ought to be considered as contingent shareholders of the respondent. It is therefore, possible that some or all of the holders of the Bonds may exercise the right to acquire GDRs of the respondent and thereby become indirect equity shareholders, in which case some or all of the holders of the Bonds may not continue to be holders of the Bonds of the respondent and upon such conversion, the petitioner will cease to be the Trustee under the "Trust Deed". The outstanding amount of the Bonds cannot be termed as debt and the holders of the Bonds could at best be called contingent shareholders and not contingent creditors. The respondent farther states that any directions passed by this Court at this stage may in' fact affect the very interest of the holders of the Bonds as equity shareholders, if the respondent is sought to be wound up. The petitioner has exceeded its powers as the issuance of ibe statutory notice is ultra vires the "Trust Deed" as the petitioner could initiate proceedings only to enforce repayment of the Bonds and as it is a settled proposition of law that a winding up proceeding cannot be used as proceedings to enforce repayment of the Bonds, as is sought to be done in the instant case. 

It is contended that the respondent has not neglected to pay the interest but has sought additional time to make payment of the interest. The respondent further states that the other secured creditors have an outstanding, far larger than the amount due by the respondent to the holders of the Bonds and who are also secured creditors, have restructured their respective payment schedules. The respondent further states that some of the secured creditors are international banks of repute, such as HSBC and scheduled banks such as, J & Iv Bank and Public Sector Undertaking Banks such as State Bank of India and its Associates/Subsidiaries (State Bank of Travancore/State Bank of Mysore), Canara Bank, Allahabad Bank, Bank of India and IDBI Bank. The respondent further states that the employees of the respondent, who too are stake holders, have voluntarily agreed to take a nominal reduction in their salaries and in addition thereto, the promoters of the respondent have infused additional subordinated debt of approximately Rs.26 crore and have also offered some of their personal assets as additional collateral security for the benefit of some of the secured lenders, Jn effect, every stake holder (whether shareholders, secured creditors or employees) have in some form or the other extended co-operation to the respondent, keeping in v^ew the potential of the respondent to overcome the temporary phase of financial instability. However, the petitioner has preferred the winding up petition with the sheer intention to damage the creditworthiness of the Company, which will have undesred and avoidable economic and social ramifications, inasmuch as the secured creditors who have agreed to the restructuring proposal, may withdraw their revised terms and enforce the security interest.

It is contended that the respondent has not neglected to pay the sum demanded by the petitioner. The respondent has also not neglected to secure or compound the debt, in fact, the onus is on the lender to act reasonably. It is contended that the petitioner has acted unreasonably by summarily rejecting the various proposals forwarded by the respondent, when in fact the other secured creditors have accepted the restructuring proposal of the respondent. As such, the respondent cannot be deemed to be unable to pay its debts under the provisions of Section 434(1 )(a) It is hence contended that the grounds for seeking winding up under Section 433(e) are not made out and the winding up petition is not maintainable and deserves to be dismissed by this Court. That the petitioner has not established any reasons or grounds in support of its submission and has failed to make out any case thereof. It is asserted that the respondent has not lost its substratum, the respondent continues to employ 164 employees in India and, in addition, aboui 450 employees worldwide; the respondent, on a regular basis, pays its employees an aggregate salary of about Rs.l crore per month on a standalone basis and Rs.6 crores on a global basis; the respondent contributes to the national exchequer by direct and indirect tax contribution.

4. By way of a rejoinder, to the rejoinder of the petitioner, l." is contended by the respondent, that the petitioner for the first time, in the rejoinder seeks to describe itself as a debenture trustee, to overcome the fact that it is not a creditor. That the bonds issued by the respondent are not debentures under the provisions of the Companies Act and hence the petitioner cannot claim as a debenture trustee. That a convertible debenture is usually issued under Section 81(3)(b) of the Act. As the bonds issued were not debentures, the procedure set out under the above provision has not been followed. The bonds were said to have been issued under Section 81(1A). It is contended that debentures are a fiction of the Companies Act and are required to be stamped under the Indian Stamp Act. 1899, whereas the Bonds are not. Under the Securities and Exchange Board of India (Debenture Trustees) Regulations, 1993, the debenture trustee must be a scheduled bank, a public financial institution, an insurance company or a body corporate and must be registered with the SEBI to act as a debenture trustee. The petitioner does not qualify in the above respect.

It is reiterated that the petitioner merely has a right to enforce repayment of the Bonds and to enforce the provisions of the Trust Deed or the Conditions. However, winding up a company is not a manner to enforce repayment of the Bonds and the nature of a winding up petition is entirely different from an action to enforce the Terms and Conditions of the Trust Deed and the Bonds. The petitioner is r-oi a creditor, and therefore is not entitled to present a petition for winding up as it is an admitted position that the petitioner is authorised under the provisions of the Trust Deed only to initiate recovery proceedings. The respondent further repeats that in terms of Clause 11.14 of the Trust Deed read with Condition 14.1 of the Terms and Conditions of the Bonds, the request of the respondent to modify the interest payment date is a Reserved Matter and could have been passed or dissented only by an Extraordinary Resolution with 75% vote for or against such resolution. The petitioner neither considered the request of the respondent reasonably nor did the petitioner put to vote the resolution to the holders of the Bonds and in fact unilaterally took a decision and proceeded to declare the Bonds in default and issued the Event of Default ("EOD") notice ("EOD notice"). The respondent denies that it has acted in a brazen or offhand manner as alleged or that it has defaulted in repaying hundred of crores of rupees as alleged or at all The respondent further repeats that the Trust Deed imposes an obligation on the petitioner to determine whether or not an Even:. of Default or a Potential Event of default is, in its opinion, capable of remedy and/or materially prejudicial to the interest of the holders of the Bonds.

It is noticed that this petition has been addressed at length even at the stage of admission to file and there are several observations in the course of an order dated 19.3.2012. The pleadings have been supplemented thereafter and there were arguments canvassed at some length on facts and with reference to legal principles and provisions, at the final hearing. The findings in the present order if found to be in variance with any observations, in the nature of findings, made in the Order dated 19.3.2012, (which was as regards the maintainability of the petition), it is this order and the findings herein which shall prevail.

5. The points that would arise for consideration on the rival contentions are :

i. What is the nature of the contract between the parties ?

ii. Whether the petitioner, having chosen to confer exclusive jurisdiction on the English courts and having intended the application of the English law to the contract, is justified in seeking to invoke the jurisdiction of this court. ?

iii. Whether the petitioner has demonstrated that after the default, by the respondent under the contract, the conditions under the contract have been satisfied to enable the petitioner to prefer this petition ?

iv. Whether the respondent is to be ordered to be wound up ?

The first point requires consideration as there is much debate on the nature of the transaction and even the nomenclature that is adopted to describe documents involved. 

The respondent, which is incorporated as a public limited company in India with limited liability, had issued what were billed as the Euro 42, 000,000 - 2.50 per cent. Convertible Boncis due 2011. The Bonds carried an interest at the rate of 2.50% per annum. The interest was payable semi- annually, on 18 March and 18 September of each year. The first payment of interest was to be made on 18 September 2006, for the period commencing on 18 March 2006, which was the closing date for the issuance of the Bonds.

The Bonds were convertible by the Bond holders into newly issued equity shares of Rs.2 each of the respondent or into Global Deposit Receipts (GDR), each representing one share at an initial conversion price of Rs. 143.29 per share (at a fixed conversion rate of exchange of Rs. 52.68 = Euro 1.00)

The Bonds were to mature on 18 March 2011 at 112.83 % of their principal value.

The Offer was made entirely outside India. The Bonds were not offered or sold nor were to be offered or sold directly or indirectly in India or for the account or benefit of any resident of India. The Bonds and the GDRs are governed by and are to be construed in accordance with English law.

The Bonds were constituted by a trust deed, dated 17 March 2006 made between the respondent and the petitioner. The petitioner is the trustee for the holders of the Bonds. The Trust Deed and the Bonds and all matters arisine from or connected with the Trust Deed and the Bonds are governed by and shall be construed in accordance with the English law.

It is agreed by the respondent, for the benefit of the Bond holders and the Trustee, that the courts of England shall have exclusive jurisdiction to settle any dispute connected with the Bonds. However, it is also agreed that the Trustee or any of the Bond holders could take proceedings in any other court with jurisdiction.

Events of default were specified, the occurrence of which enabled the Trustee, at its discretion, to issue notice to the respondent that the Bonds had become repayable at their Accreted Principal value, with interest thereon, (without prejudice to the right of the Bond holders to exercise the right to convert the Bonds, as aforesaid). A default in making payment of any principal, premium or interest due in respect of the Bonds, was one of the possible 10 "events of default" that were listed. The Trustee was, however, bound to issue such a notice if requested in writing by the holders of not less than 25% in principal amount of the Bonds then outstanding.

Though there has been much debate between the parties as to the nature of the transaction, the several authorities are pretty much agreed upon the basic nature of a transaction such as the one above. It is hence useful to have a overview of the opinions expressed by some leading authorities.

a. A company may finance itself not only through the issuance of shares (of various classes) but also by taking loans i.e. by incurring debt. As with shares, the rights of the debtors against the company are essentially a matter of contract between the company and the lender. A debt security will normally have, unlike a share, an end-date, i.e. a point at which the amount still outstanding has to be repaid (its 'maturity date') which date can be set as the parties wish.

Because the debt instrument is simply a creature of contract and perhaps also because the relationship between debt- holder and company creates no particular conceptual puzzles - the relationship is simply the contractual relationship of debtor and creditor, coupled, if the debt is secured on some or all of the company's assets, with that of mortgagor and mortgagee - the terminology used in this area to refer to debt securities issued by a company is not settled, either in law or in the commercial practice, but is rather variable. The terms debentures, bonds and notes in particular, are common in this area. Of these, the rather old fashioned term 'debenture' is the only one noticed in the statute. (See: Principles of Modern Company Law - Gower and Davies, Eighth Edition.)

b. Debentures first appeared during the 1860's in the form closely resembling the bonds which companies had previously issued in order to raise loans. Their principal difference from bonds was that, in addition to containing a covenant by the company to repay the loan, they charged the company's property or undertaking with the repayment, thus creating a security which later became identified as a floating charge. Gradually the form of dentures changed from that of the bond, but like bonds they were still arranged in two parts. The main part contained the company's covenant for payment of principal and interest and a legal mortgage of its fixed assets and a floating charge over its other property ; the other part comprised the endorsed conditions which dealt with the detailed terms of the loan and conferred remedies on the lender for its recovery.

By the end of the 19th Century, public companies found that their issues of debentures were being subscribed for by so great a number of investors that it was inconvenient to employ the form of debenture then in use. If the company mortgaged its assets to a thousand persons, it had to get a thousand consents when it wished to sell an asset which was specifically mortgaged, or to depart in the smallest degree from the terms of its debentures. The problem was solved by the introduction of the trust dted by which the trustees were appointed to represent the interests of the debenture holders. The trustees were given a legal mortgage of the company's fixed assets and a floating charge over its other property, were empowered to consent on the debenture holders' behalf to minor departures by the company from the terms of the debentures, and were authorized to call meetings of debenture holders to decide whether the trustees should enforce the security given by the trust deed when a case arose for doing so, or whether the debenture holders should agree to a modification of their rights when the company was unable to meet its obligations in full.

By the 1980s, it was found that in debenture issues by public companies there was a diminution of the security given by the trust deed. Legal mortgages were rarely given, except by property companies, and sometimes there was not even a floating charge. If no security at all was given - the debentures were commonly known as unsecured loan stock or notes. It was usual for trust deeds covering such stock or notes to contain a 'negative pledge' clause, by which the company undertook not to mortgage its property, or not to mortgage it for more than a specified sum. This ensured that if the company became insolvent and did adhere to its undertaking, the loan stock holders would not find its assets consumed in paving secured creditors.

Thus, it is evident that the commercial meaning of the term debenture covers many different forms of investment. Chitty J, said : 'In my opinion a debenture means a document which either creates a debt or acknowledges it, and any document which fulfils either of these conditions is a "debentureI cannot find any precise legal definition of the term, it is not either in law or commerce a strictly technical term, or what is called a term of art.' (Levy v. Abercorris Slate and Slab Co.( 1887) 37 ChD 260) (See: Pennington's Company Law, Butterworths, Fourth Edition) 

c. If a debenture confers no charge, a debenture holder is an ordinary unsecured creditor. Thus, if there is default in the payment of principal or interest he may - ( a) sue for the principal or interest and after obtaining judgment, levy execution against the company, or (b) petition either for an administration order or for the winding up of the company by the court on the ground that the company is unable to pay its debts.

6. The winding up of a company under the English law is governed by the insolvency Act 1986. That Act is a consolidation of parts of the Companies Act 1985 (itself a consolidation) and the Insolvency Act 1985. A winding up may be by the court or voluntary. A third form of winding up subject to supervision of the court, was abolished by the Insolvency Act 1985. In practice the form was not used. Chapter VI of the Insolvency Act, 1986 provides for Winding up by the court. To obtain a winding up by the court, a petition must be presented to the court having the necessary jurisdiction. Section 117 of the said Act, provides that the courts having jurisdiction are the High Court, in the case of all companies registered in England; It is seen that the respondent is not a company registered, in England, it would however answer the description of an unregistered company as contemplated under Section 220 of the said Act.

"Meaning ol "unregistered company"

For the purposes of this Part "unregistered company" includes any association and any company, with the exception of a company registered under the Companies Act, 2006 in any part of the T Jnited Kingdom."

Winding up of unregistered companies is provided for under Section 221 of the Act. Clauses (b) & (c) of Sub-section (5) of Section 221 provide that an unregistered company may be wound up if it is unable to pay its debts or if the court is of opinion that it is just and equitable that the company should be wound up. 

It has been agreed between the parties, in so far as the governing law and jurisdiction are concerned, thus :

"20.1 Governing law

This Trust Deed and the Notes and all matters arising from or connected with them are governed by, and shall be construed in accordance with, English law

20.2 English c ourts

The courts of England have exclusive jurisdiction to settle any dispute (a "Dispute"), arising from or connected with tlis Trust Deed or the Bonds (including a dispute regarding the existence, validity or termination of this Trust deed or the Bonds) or the consequences of their nullity.

20.3 Appropriate forum

The parties agree that the courts of England are the most appropriate and convenient courts to settle any Dispute and, accordingly, that they will not argue to the contrary.

20.4 Rights of the trustee and Bondholders to take proceedings outside England

Clause 20.2 (English Courts) is for the benefit of the Trustee and the Bondholders only. As a result, nothing in this Clause 20 (Governing Law and Jurisdiction) prevents the Trustee or any of the Bondholders from taking proceedings relating to a Dispute ("Proceedings") in any other courts with jurisdiction. To the extent allowed by law, the Trustee or any of the Bondholders may take concurrent Proceedings in any number of jurisdictions."

Apart from the above, it is also seen that the following caveat is issued in the Offering of the Bonds thus :

"Furthermore, this offering is being made entirely outside Iudia. This Offering Circular may not be distriDuied directly or indirectly in India or to residents of India and the Bends are not being offered or sold and may not be offered or sold directly or indirectly in India or to, or for the account or benefit of, any resident of India or to any Ineligible Investor (as defined in "Definitions and Glossary"). This Offering Circulai will be filed with the Reserve Bank of India, the Securities and Exchange Board of India, the BSE, the NSE and the Registrar of Companies, Bangalore for information purposes only. The Registrar of Companies, Bangalore is located at II Floor, E-Wing, Kendriya Sadan, Koramangala, Bangalore - 560 034, India." 

The contract was not entered into in India and no part of it could be extended to any resident in India, directly or indirectly, as declared above.

It was the English courts alone which were conferred with the jurisdiction to decide on issues arising from or concerned with the contract. It is also seen that the English Courts can entertain a winding up petition against ihe respondent company, though it may be a company registered in India .

Even though the petitioner has reserved to itself the privilege of initiating proceedings relating to a dispute, in relation to the contract, in any other court or courts with jurisdiction , the declared forum of choice was the English court. This court would certainly have jurisdiction over the respondent company as it is a company registered within the jurisdiction of this court, if this be the reason for the petitioner to have instituted the petition before this court as stated at paragraph no. 16 of the petition, it was incumbent on the petitioner to have incidentally stated as to the reason for not having instituted the proceedings in the forum of choice, exclusively and expressly reserved. More importantly this court is called upon to try the case and determine the insolvency of the respondent and its inability to pay its debts - in relation to the payments due under the contract and with reference to the terms of the contract. The third point framed for consideration, as above , would in fact require this court to firstly decide whether an "event of default" had occuired and whether the

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petitioner had satisfied the conditions after such default by the respondent, in order to present the petition and thereafter to adjudicate on the dispute whether there was an irrefutable liability which the respondent is unable to satisfy etc., this would be inconsistent with the intention and the admitted position that the contract is declared to be governed by the English law. It would be appropriate if the petitioner should approach the competent English court in this regard. If once there are findings of fact arrived at with reference to the contract on the application of the English law, as to the liability and inability on the part of the respondent to pay its debts - such findings could possibly be the basis of a winding up petition before this court. Subject to this court also being satisfied that it would be just and equitable for the respondent to be wound up. In so far as the purported reservation of ai: option available to the petitioner, to approach courts other than the English courts can only be with reference to situations which would not require the said courts, with jurisdiction, to address a cause that does not require any adjudication on facts ihat require the application of the English law, unless the independent application of that law is also within that court's purview. It is certainly not within the purview of this court to ascertain and apply the English law in interpreting the working of the contract between the parties. On the other hand the said reservation of an option to approach courts with jurisdiction, in relation to the contract, can for instance, be under criminal or quasi criminal proceedings against the respondent and its men. Or for that matter it could even be with reference to winding up proceedings under the Companies Act, 1956, subject to the petitioner satisfying that there has been an adjudication and findings on the assertions as to the breach of contract, the liability thereof and the inability on the part of the respondent to pay its debts, with reference to the English law, by a competent court with jurisdiction - on which this court could act. It is pertinent to mention that i recent decision of the Apex Court, in the case of M/s Swastik Gases P.Ltd v. Indian Oil Corp. Ltd., (Civil Appeal no. 5085/2013. dated July 3, 2013) which is evidently a complete answer to the question as to what is the effect of the contractual term between the parties conferring exclusive jurisdiction on the English courts, albeit with the rider as aforesaid. In the light of the above, the second point for consideration, would have to be held against the petitioner. In that view of the matter, it would not be necessary to address the further questions that would be material in addressing the petition seeking winding up of the respondent. In the result, the petition is dismissed.  It is unnecessary to lengthen this order by reference to the plethora of cases referred to by the respective parties, A case that may appear close to the points under consideration may be the case of Intesa Sampaolo S.P.A. v. Videocon Industries Limited. However, it is necessary to take note of the fact that the petitioner in that case who was seeking winding up of the respondent company therein, was holdei of a foreign decree. That would certainly make a difference.