Judgment 1. This Company Petition is filed by the assignee of the debt owed by Dayaanand Mills Limited, formerly known as D.C. Kothari Textiles Limited to the ICICI Bank. The respondent herein executed a deed of corporate guarantee for the debt due from Dayaanand Mills Limited to ICICI Bank, Limited, the original creditor of M/s. Dayaanand Mills. Limited. 2. The case of the petitioner is that under the loan agreement dated 14.03.1996, Dayaanand Mills Limited, one of the petitioner group companies, availed foreign currency loan of USD 4,185,268 from the erstwhile Industrial Credit and Investment Corporation of India. The respondent company guaranteed the loans availed by Dayaanand Mills Limited, (now under liquidation) formerly known as D.C. Kothari Textiles Limited. The said Dayaanand Mills Limited committed default in payment of the dues. When the creditor Bank wanted to take action against the borrower company, the respondent here in approached the Bank for a one time settlement, the borrower company being a group company of the respondent herein. As per the one time settlement, of the loan account, the borrower company agreed to discharge the agreed loan amount in three instalments. The agreement also contemplated that in the event of default in compliance of the terms of the agreement, the settlement offer shall stand revoked and the Bank could proceed against the company. The borrower company also agreed to furnish an irrevocable and unconditional corporate guarantee from the respondent company to secure the payments as per the settlement schedule. It was agreed that in the event of default, the Bank shall proceed legally against the borrower company/guarantor for recovery of the dues. It was agreed that till the amount was paid in full, the loan and the security documents shall remain in full force: The respondent company also agreed to execute a corporate guarantee for the release of certain assets of the company, as agreed to between the parties: The respondent company executed a deed of corporate guarantee on 212. 2001 in favour of ICICI Bank Limited, which term included its successors/assigns. The liability of the respondent company under the corporate guarantee was restricted to Rs.6 crores. 3. Admittedly, the borrower company defaulted the payment of the amount borrowed, due and payable. In its letter dated 09.01.2004, the Bank however gave an opportunity to the borrower company for settlement of the outstanding amount with interest at 24% per annum. The liability of the respondent company under the corporate guarantee was restricted to Rs.6 crores. 3. Admittedly, the borrower company defaulted the payment of the amount borrowed, due and payable. In its letter dated 09.01.2004, the Bank however gave an opportunity to the borrower company for settlement of the outstanding amount with interest at 24% per annum. Since the defaulter company continued its default, the Bank invoked the default clause and demanded payment of the entire amount due, which, as on 05.02.2004, was to the tune of Rs.33,14,99,858/-.The Bank also issued notice dated 25. 2004 to the respondent company as a guarantor to pay the amount, restricting the guarantor‘s liability to Rs.6crores in terms of clause 18 of the guarantee agreement. The petitioner states that, as an assignee of the corporate guarantee, the respondent company is liable to pay the sum of Rs.6crores due and that the letter of undertaking is binding on them. The liability arising on account of the corporate guarantee was admitted in their balance sheet for the year ending 31.03.2005. A deed of confirmation dated 20.05.2005 was executed to that extent in favour of the petitioner. The petitioner maintains this petition for winding up tracing its right to the deed of sale and assignment executed by the then creditor bank ICICI Bank Limited. It is further stated that the petitioner had filed O.A.No 30 of 2005 before the Debts Recovery Tribunal against the borrower company and claimed Rs.6crores with interest at 24% per annum from the date of revocation of the guarantee, i.e., from 25.05.2004. It is further stated that on the sale of the properties belonging to the borrower company, the petitioner had recovered Rs.1crore, which was far less than the liability due and payable to the petitioner. Thus, having regard to the acknowledgment of the liability under the corporate guarantee in the balance sheet for the year ending 31.03.2005 and the fact that the respondent company has become commercially insolvent and hence unable to honour its commitment under the guarantee on the undisputed amount, the petitioner has filed this petition for winding up of the respondent company. 4. It is stated that the petitioner issued notice on 18.07.2006 and called upon the respondent to pay the sum of Rs.6crores within a period of three weeks of receipt of the notice. The respondent sent a reply dated 15.09.2006, questioning the very liability therein. 4. It is stated that the petitioner issued notice on 18.07.2006 and called upon the respondent to pay the sum of Rs.6crores within a period of three weeks of receipt of the notice. The respondent sent a reply dated 15.09.2006, questioning the very liability therein. The petitioner states that the defence of the respondent company to pay its debts, lacks bona fide. Considering the position that the debts of the respondent company exceeded the assets and the company consistently making loss and not in a position to meet the claims of the various creditors, the respondent company is liable to be wound up under section 433(e) and (f) of the companies Act, 1956. 5. On notice, the respondent has filed its counter contending that Dayaanand Mills Limited was wound up by this Court under order dated 26. 09. 2001. It is further stated that after negotiation, the officials of the ICICI Bank Limited and the respondent reached a one time settlement, under which, the respondent had undertaken to settle the debt; however, the personnel of the respondent company was coerced to sign the corporate guarantee. This was executed by one P.G. Daftary, who acted in excess of his authority, and hence ultra vires the Memorandum of the respondent company. The corporate guarantee, hence, is non-est in law and would not bind the respondent company. Secondly, the respondent took the stand that in the light of the winding up order passed by this Court and the Official Liquidator not made a party to the said one time settlement, the one time settlement is not valid in law. Consequently, the corporate guarantee executed in terms of the one time settlement is not valid and hp rights would flow therefrom. It is further stated that the respondent bad not admitted any liability under the alleged corporate guarantee. There is no legally subsisting debt in respect of which this company petition could be maintained against the respondent. 6. Denying the allegation that the respondent had admitted their liability in their balance sheet, the respondent contends that in any event, the contents of the annual report cannot be the basis of the winding up order. There is no legally subsisting debt in respect of which this company petition could be maintained against the respondent. 6. Denying the allegation that the respondent had admitted their liability in their balance sheet, the respondent contends that in any event, the contents of the annual report cannot be the basis of the winding up order. The respondent further submits that the petitioner’s claim is based on the deed of assignment, Which has not been produced before this court and that the validity of the claims of the petitioner and the right to proceed against the company for winding up could be considered only after perusal of the deed of assignment. The respondent took the stand in terms of the pendency of the proceedings before the Debt Recovery Tribunals; the company petition now filed before this court amounts to harassment to arm twist the respondent somehow to make the payment under a corporate guarantee Deed, which is null and void and non-est in the eye of law. Apart from this, the respondent further contended that they never admitted their liability or acknowledged their liability under the OTS. There was never a categorical admission of any amount due to the petitioner. Apart from this, they deny the petitioner’s allegation that the respondent had become commercially insolvent warranting winding up of the company. Consequently, the respondent prayed for dismissal of the company petition. 7. Mr. Arvind P. Datar, learned senior counsel appearing for the petitioner, submitted that as per the circular of the RBI of the year 2005, 110 non-performing assets including that of Dayaanand Mills Limited were auctioned by the ICICI Bank Limited. The petitioner herein was a successful purchaser of the same. As such, as an assignee of the ICICI Bank Limited, the petitioner is entitled to seek the relief against the respondent herein. Referring to the contention of the respondent that, the signatory, to the corporate guarantee was not an authorized person of the respondent company to guarantee the liabilities of Dayaanand Mills Limited, learned senior counsel pointed out to the corporate guarantee, which was executed by the Director of the respondent company; that Dayaanand Mills Limited was a part of the group companies of Kothari Industrial Corporation Limited. He further pointed out that under clauses 2, 3, 4 and 5 of the deed of guarantee, in the event of the borrower committing a default, the guarantor had under taken to make good the payment due to the borrower. He pointed out that by letter dated 28.02.2001, the respondent had undertaker to furnish the corporate guarantee to secure the loan availed by Dayaanand Mils Limited. The letter referred to the Board Meeting held on 23.02.2001, wherein the decision was taken to furnish the corporate guarantee for the amount as may be agreed under the OTS of the dues of Dayaanand Mills Limited, subject to the approval of the shareholders. The letter dated 28.02.2001 also carried a certified copy of the Board’s resolution dated 23.02.2001 8. Countering the submission of the respondent that there was no shareholder’s approval to this, learned senior counsel appearing for the petitioner pointed out that the respondent cannot take advantage of their own default in not convening the meeting of the shareholders. The fact remains that the respondent acknowledged the liability to the extent of Rs.6crores guaranteed by the respondent and they had executed the corporate guarantee. Referring to the decision in P.V. Damodara Reddy V. Indian National Agencies AIR 1946 Mad 35 : (1945) 2 MLJ 432 on the Doctrine of in-door management, learned senior counsel pointed out that even if the formal resolution had not been made by the share holders, yet, it stands to reason that when the respondent had bound itself by the corporate guarantee, the presumption is that the execution of the guarantee has been done in the manner required by law. If the shareholders have not approved the same, it is a risk which the respondent has to take. Hence, the petitioner sought for ordering advertisement, which alone would bring out the truth as to the state of affairs prevailing in the respondent company’s case. In the backdrop of these, he submitted that by not ordering the advertisement, the prejudice that would be caused to the creditors in general would be much more than the respondent by ordering such an advertisement. In the above circumstances, no exception could be taken to the plea of the petitioner for ordering winding up of the respondent company. 9. In the backdrop of these, he submitted that by not ordering the advertisement, the prejudice that would be caused to the creditors in general would be much more than the respondent by ordering such an advertisement. In the above circumstances, no exception could be taken to the plea of the petitioner for ordering winding up of the respondent company. 9. Learned senior counsel appearing for the respondent, however pointed out that in the absence of a resolution by the shareholders approving the resolution of the Board, the said course of conduct by itself will not sanctify the corporate guarantee given. Consequently, no liability could be fastened on the respondent company solely on the strength of the Board of Directors passing a resolution. He further pointed out that Dayaanand Mills Limited was not connected with the respondent in any manner. In none of the meetings held, the said subject figured in for a discussion and for voting by the shareholders. The original book recording the resolution passed by the respondent company would show the futility of the contention of the petitioner. Consequently, the petitioners cannot take advantage of the situation. Quite apart from this, the said Pradip D.Kothari had no authority to represent the respondent company in any manner to have a minding obligation on the company to meet any liability. He further pointed out that the OTS was long after the winding up of Dayaanand Mills Limited was ordered by this court. Hence, there cannot be a settlement out side the winding up and if any such steps were to be taken by the defaulter company, namely, Dayaanand Mills Limited, then the approval of this court should have been obtained. 10. Learned senior counsel appearing for the petitioner, however disputed the respondent’s submission that the Board could not have gone for a settlement of the creditors out side and during the pendency of the liquidation proceedings before this court and submitted that as a secured creditor, the Bank was entitled to stand outside the winding up proceedings. Learned senior counsel pointed out to the correspondence of Pradip D. Kothari acting as Managing Director representing the company and submitted that the petitioner was made to believe as to the authority of the said managing Director to represent the respondent company as well as to the fact that the guarantee was executed by following the procedure required under the law. Consequently, the contention now taken by the respondent as to the non-compliance of the procedure under law is too late in the day for them to come out of the liability. Referring to the OTS offer, learned senior counsel appearing for the petitioner pointed out that the balance sheet of the year 2007-2008 clearly shows the insolvency of the company; there are no materials placed before this court as to the profitability of the company; the consistent negative figures in the balance sheet certainly points out to the default committed to various agencies including the statutory dues, apart from raising serious doubt as to the capability of the company to meet its liabilities. He pointed out that even as per the admission of the respondent, the company has not been carrying on any business except for fertilizer purchased from outside for mixing and trading in the mixture. The contention that the company has made a profit in the current year is not borne out by any records. In any event, having regard to the fact that the company has not been carrying on any of the manufacturing activities and is only undertaking job works and the assets not meeting the losses, the possibility of revival and meeting the various creditors’ claims is very remote. 11. In these circumstances, learned senior counsel insisted that notice should be sent to the creditors and the publication be effected as to the winding up. He also referred to the disqualification of Pradip D. Kothari since 2001 as Director. However even in the balance sheet for the year 2007-2008, he was shown as the managing director. He pointed out that there is no change in the financial status of the respondent-company from the year 2001-2002 to 2007-2008 with the balance sheet of the year 2001-2002 and 2007-2008 showing consistent liabilities, which had not been cleared at any point of time. In fact, as evident from the balance sheet, the state of affairs, which prevailed in 2001-2002, has worsened. He made a specific reference to the report of the chartered Accountants that the company was not regular in repaying the principal amounts as stipulated and has not been regular in payment of interest. In fact, as evident from the balance sheet, the state of affairs, which prevailed in 2001-2002, has worsened. He made a specific reference to the report of the chartered Accountants that the company was not regular in repaying the principal amounts as stipulated and has not been regular in payment of interest. He also referred to the documents filed by the respondent, particularly the audit report of chartered Accountant for the year 2001-2002 that there is no Audit Committee functioning and that the Board had directly approved the accounts. He submitted that this is totally against sections 292 and 297 of the act. Referring to the Balance sheet of the year 2004-2005, particularly to Note 4, he pointed out to the acknowledgment of the guarantee given on behalf of all other companies. They also referred to the fact that the correctness as to the statement that the existence of the plant and machinery at the granite Division had been closed. In the background of pure and simple trading activity, it is clear that the company has not been serious in moving forward with the objects given under the Articles of Association. 12. In the course of the hearing, the respondent raised a preliminary objection as to the maintainability of the company petition contending that as the assignment deed had not been registered in Tamil Nadu, the petitioner has no locus standi to file this petition seeking winding up. Replying to this, learned senior counsel appearing for the petitioner pointed out that the petitioner had purchased the assets representing certain financial facilities granted by ICICI Bank which had become NPAs, one of which related to Dayaanand Mills Ltd. Learned senior counsel appearing for the petitioner, pointed out that since it was a slump sale, no individual value was assigned to any asset of any individual account declared as NPA. One has to go by the sale as one single block of asset, without any specific assignment of value to any one of the assets in the individual account to go for registration before the particular state where the asset in the account existed. As against the debts worth Rs.400 and odd crores, the petitioner purchased these assets to the value of Rs.64crores. He pointed out that the document was registered in Gujarat at the maximum rate of stamp duty. As against the debts worth Rs.400 and odd crores, the petitioner purchased these assets to the value of Rs.64crores. He pointed out that the document was registered in Gujarat at the maximum rate of stamp duty. Being a sale of bundle of rights with no individual assignment, the question of violation of the registration Act does not arise. He further pointed out that the assignment of the depths, created by deposit of title deeds does not call for registration under section 28 of the Act. In any event, none of the immovable assets of Dayanaand Mills Limited are in this state to go for registration. When the sale is as one claim covering a pool of assets, sections 64 and 65 of the Tamil Nadu Stamp Act loses its significance. He further contended that registration being a subject in the concurrent list in the constitution, by reason of Article 254 of the constitution of India, any repugnancy that existed in the state Act must yield in favour of the central Act. Hence, to that extent, section 28 of the state Act is repugnant to the central Act; it is only central Act which will prevail as per Article 254. He further pointed out that section 28 of the state Act cannot nullify a validly executed document merely on the score of the assignment deed not registered in the state. He pointed out that as far as the immovable property of Dayaanand Mills Limited is concerned, the same is located in Gujarat and there is not a single immovable property available Tamil Nadu to go for stamping and registration herein. Consequently, the question of evoking the Indian Stamp Act and the Registration Act, 1908 does not arise. In any a event, even assuming that the Indian Stamp Act and The Registration Act, 1908 applied, when the sale is in respect of a bundle of non-performing accounts without any individual value on the securities given, assigning a value on the sale consideration for any property is not possible hence, the charge has to fail. Hence, the non-registration under the Tamil Nadu Provisions cannot defeat the claim of the petitioner herein. Hence, the non-registration under the Tamil Nadu Provisions cannot defeat the claim of the petitioner herein. He also referred to section 28 of the Tamil Nadu Registration Act along with section 3 and 19(A) and (B) of Indian the stamp act only to submit that the corporate guarantee being an intangible asset, having no situs, the provisions of The Registration Act, 1908 cannot be pressed into service while considering the claim of the petitioner under the Assignment Deed. 13. In this connection, Learned senior counsel referred to the decisions in R.S.D.V. Finance Co. Pvt. Ltd. Vs. Shree Vallabh Glass Works Ltd. AIR 1993 SC 2094 Para 20, smelting Co. of Australia, Limited v. Commr. of Inland Revenue (1897) 1 Queen’s Bench 175. He further referred to the decision of the Supreme Court in 20th Century Finance Corporation and Another State of Maharashtra AIR 2000 SC 2436 : (2000) 6 SCC 12 that corporate guarantee being one such intangible asset, the guarantee goes wherever the contract is signed. He pointed out that under the Assignment Deed, the dominant intention was sale and assignment of debt. Hence, the document as a whole has to be looked at and the plea of the respondent that the assignment deed not being registered in Tamil Nadu, hence, void cannot be countenanced. He also referred to the decision in PNB Finance Ltd., v. Commissioner of Income Tax-I, New Delhi (2008) TIOL 206 SC-IT that identification of the individual assets is not possible in a slump sale, the application of section 19-A and 19-B of Indian the Stamp Act would not arise. He pointed out that in any event the debt transferred to the petitioner still survives for recover. In this background, learned senior counsel appearing for the petitioner submitted that for the purposes of Section 433 of the Companies Act, 1956, this Court has to advert its attention to the phrases “inability to pay debt.” The consistent liabilities in the balance sheet clearly show the commercial, insolvency of the company justify an order of winding up. To the contention that after the appointment of the official Liquidator there cannot be an OTS, he pointed out that the Board of Directors, while passing the OTS, are well aware of the winding up and with their (sic) knowledge alone, the settlement terms were finalized. To the contention that after the appointment of the official Liquidator there cannot be an OTS, he pointed out that the Board of Directors, while passing the OTS, are well aware of the winding up and with their (sic) knowledge alone, the settlement terms were finalized. In this background, when the respondent has consciously committed a breach, they should not be permitted to take advantage of their own misdeeds. He further pointed out at that considering the status of the company today not able to meet its liabilities, early winding up would benefit the interest of various creditors. The notice issued under Securitisation and Reconstruction of Financial Assets and Enforcement of security Interest Act, 2002 is a prima facie evidence that the company is unable to make the payment. 14. Per contra, Mr. P.S. Raman, learned senior counsel appearing for the respondent, took the stand that the respondent had settled the dues to IDBI and the creditors under securitisation and Reconstruction of financial Assets and Enforcement of Security Interest Act, 2002 have stood outside the Company Court; hence, the petitioner is not justified in referring to these facts. Referring to the provisions of the Indian Stamp Act and The Registration Act, 1908, he submitted that improper stamping of the assignment deed and the non-registration would make the document void and hence, the petitioner has no locus standi to maintain this petition. He Pointed out that in this, the respondent has raised a valid defence both on the substantive aspect of the maintainability of the petition, apart from the very liability. Considering the substantial nature of the defence taken, the petition is not maintainable. Referring to the unreported decision of the Division Bench of this Court in C.R.P. (PD) No.1953 of 2008 dated 15.07.2008, Kotak Mahindra Bank Ltd., Egmore, Chennai v. Kothari Industrial Corporation Ltd., Chennai he submitted that the question of assignment was remitted to the Debt Recovery Tribunal for its consideration. When that beings so, this Court cannot entertain the petition to give its decision on the validity of assignment. He insisted that the debtors company had been carrying on business without a break; there are 50,000 shareholders and 400 workers and it is a listed company. He further contended that once the Official Liquidators is appointed, there cannot be a OTS. 15. Mr. He insisted that the debtors company had been carrying on business without a break; there are 50,000 shareholders and 400 workers and it is a listed company. He further contended that once the Official Liquidators is appointed, there cannot be a OTS. 15. Mr. T. K. Bhaskar, learned counsel for the respondent, made further submission that Section 3 of the Transfer of Property Act defines “actionable claim.” What had been transferred to the petitioner under the deed of assignment is a right of recovery, which is an actionable claim. Hence, going by Section 130 of the Transfer of Property Act, the transaction certainly calls for stamping and registering in his state. He pointed put that this decisions of the Apex Court in the case of 20th Century finance Corporation and Another v. State of Maharashtra (supra) stands on a different footing and that they have no relevance to the issue herein. So, too the decision in PNB Finance Ltd., v. Commissioner of Income Tax-I, New Delhi (supra) relied on as to the treatment on slump sale under the Income Tax Act 1961. Referring to the requirements, on stamping the assignment deed and registration as per the Tamil Nadu provision, he submitted that if the documents are to form a basis for proceeding before this Court herein, the assignment deed had to be stamped and registered in Tamil Nadu on the differential amount as required under the respective State enactment. He submitted that the decision in Imperial Bank of India v. Bengal National Bank Limited (in liquidation) AIR 1931 privy Council 245 related to assignment of the floating charge and hence, is not applicable to the facts of the case. He referred to Section 28, 49and 64 of the Indian Stamp Act that when there is no conflict between Section 28 and 64 of the Indian Stamp Act, in the absence of any valid assignment, the petitioner has no locus standi to proceed with this case. Consequently, He pleaded for the dismissal of the said petition. Except for relying on the corporate guarantee, the petitioner has not made out a case for ordering winding up. He further submitted that the petitioner has settled the claims of a substantial number of creditors. Consequently, He pleaded for the dismissal of the said petition. Except for relying on the corporate guarantee, the petitioner has not made out a case for ordering winding up. He further submitted that the petitioner has settled the claims of a substantial number of creditors. In these circumstances, when the affidavit does not disclose any material to form an opinion that the company had reached the stage of insolvency, this Court will not order winding up herein. Consequently, he prayed for dismissal of the petition. 16. After the close of the argument before delivering the judgment in this case, learned counsel for the respondent circulated the Division Bench decision of the Gujarat High Court in the case of Kotak Mahindra v. Official Liquidator dated 12.01.2009, where in, the issue was raised on the assignment of the NPAs and the authority of the Bank to sell and assign the NPAs, apart from the registration of the same under the Registration Act. The Gujarat High Court held that the provisions of the Banking Regulation Act do not give any right to a lending Bank to deal in securities, acquired at the time of grant of loan. The concept of trading in debts is abhorrent to the concept of banking in any form; that the sale and the assignment of the NPAs is speculative in character, and not a form of banking business; that the recovery of loan can only be by the lender assignor Bank from the borrower and the sale of NPAs terminated the contract of the customer with the assignor Bank and once, as the assignee Bank had not entered into any contract with the borrower, by reason of the innovation of the contract, the assignee had no legal basis for making the claim. This was answered by the petitioner placing reliance on the decision of the Delhi High Court in the case Of Haryana Steel and Alloys Ltd. V.IFCI Ltd., and Another dated 012. 2006, dealing with the scope of the sale of the NPAs under the RBI guidelines dated 12.07.2005 and the orders of the Apex Court dated 02.03.2007 dismissing the Special Leave petition by the debtor company following the decision in Transcore v. Union of India (2007) 1 MLJ 929: (2006) 12 SCALE 585 . 2006, dealing with the scope of the sale of the NPAs under the RBI guidelines dated 12.07.2005 and the orders of the Apex Court dated 02.03.2007 dismissing the Special Leave petition by the debtor company following the decision in Transcore v. Union of India (2007) 1 MLJ 929: (2006) 12 SCALE 585 . Learned counsel for the petitioner also placed before their Court that the ICICI Bank has filed a special Leave Petition against the decision, of the Gujarat High Court; that notice was ordered in the Special Leave Petition in S.L.P. (C) 2254-2272 of 2009. By order dated 16.02.2009, the Apex Court directed that the assignee Bank is permitted to participated in the proceedings held by the Assets Sales Committee as also the proceedings before the Company Court with out prejudice to the rights of the parties. The Apex Court further pointed out” in the event of dismissal of these special leave petitions, the assignee banks will reverse the transaction which they enter into during the interim period within the period to be stipulated by this court at the final hearing of the matters. This order is required to be passed in order to see that the secured debts do not go unrepresented. Pending hearing and final disposal of the Special Leave Petitions, we further direct that any disbursement to secured creditors shall, where the debt stand is assigned, be made to the assignees. This order will not be construed as an acceptance of the assignments pending the present Special Leave Petitions. ” Thereafter, the counsel for the respective parties have filed their written arguments that the above decisions may be considered while passing the order on the argument already submitted. 17. Heard the learned counsel on both sides. 18. Three issues arise for consideration herein. (i) The availability of the corporate guarantee for enforcement in the wake of the winding up proceedings of the Dayaanand Mills Limited for whose liability the respondent executed the corporate guarantee. (ii) As to the authority of the petitioner to maintain the petition and (iii) On the merits of the claim for winding up. 19. The respondent does not deny the execution of the corporate guarantee as regards the dues of Dayaanand Mills Limited and that it is a continuing one. (ii) As to the authority of the petitioner to maintain the petition and (iii) On the merits of the claim for winding up. 19. The respondent does not deny the execution of the corporate guarantee as regards the dues of Dayaanand Mills Limited and that it is a continuing one. The objection of the respondent is that Dayaanand Mills Limited was wound up by this Court by order dated 26.09.2001 in C.P. NO.277 of 1998. It was argued that, when the company had already been brought under the winding up proceedings, the one time settlement of Dayaanand Mills Limited proposed on 20.12.2001 by the Ex-Directors without the involvement of the Official Liquidator is totally unsustainable. It is further contended that the deed of guarantee was signed on 212. 2001 by P.G. Daftary, who had no authority to sign, the decision was not placed for approval before the shareholders’ meet in terms of the resolution of the Board. Hence the respondent pleaded that the petition is not maintainable. 20. It is seen that Dayaanand Mills Limited (formerly known as D.C. Kothari Textiles Limited) entered into loan agreement with ICICI Bank Limited under agreement dated 14.03.1996 for which the borrower company gave all the borrower’s immovable properties, movable assets, present and future, by way of first mortgage and charge in favour ICICI Bank. The borrower company committed default in the repayment of the dues. The one time settlement was reached immediately after the winding up of Dayaanand Mills Limited on 26.01.2001 in C.P. No.277 of 1998. The respondent and Dayaanand Mills Limited which were one among the respondent Group of Companies, consciously and deliberately entered into the One time settlement and there are hardly any material to show that the respondent had put ICICI Bank Limited on notice of the winding up proceedings at the time when it went in for a one time settlement talk with the Bank. On a OTS scheme arrived at between the borrower and the lender bank, as one of the terms of OTS also, it was agreed that the borrower company shall procure and furnish an irrevocable and unconditional corporate guarantee, from Kothari Industrial Corporation Limited to secure the payment as per the proposed settlement schedule in a form and manner satisfactory to ICICI Bank. It was agreed that in the event of default and non-compliance of any of the terms of the OTS, the offer for settlement shall stand revoked and the ICICI Bank could proceed against the guarantor for the recovery of its due. In its letter dated 212. 2001, addressed to the respondent herein, the ICICI Bank Limited expressed its willingness to release the charge on the assets pertaining to the waterfall Estate Division belonging to the borrower company subject to the respondent herein, Kothari Industrial Corporation Limited, executing an “irrevocable and unconditional corporate guarantee in on favour of ICICI to secure the payment towards balance dues of Dayaanand Mills Limited to ICICI in a form and manner satisfactory to ICICI.’’ 21. By instrument dated 212. 2001, the respondent herein executed a deed of guarantee, which expression is stated to include “successors and assigns” in favour of ICICI, the Lenders which expression include “the successors and assigns.” The document referred to the borrowing by Dayaanand Mills Limited and the default committed by the borrower in payment of the principal amount and the interest; that at the request of the borrower and the guarantors the lenders agreed not to initiate any legal proceedings against the borrower as well as to a one time settlement (OTS) of the dues of the borrower. The Deed recites that “the guarantor unconditionally, absolutely and irrevocably guaranteed that the borrower Dayaanand Mills Limited shall duly and punctually repay the amounts in accordance with the OTS agreed to by the Lenders and comply with the terms conditions and covenants contained in the scheme of OTS.” Sub-Clause (2) Contains a default clause that in the event of default in repayment of the money or any payment or to perform any of the terms and conditions and covenants contained in the scheme of OTS, the guarantor shall forthwith pay to the Lenders without demur all the amounts payable by the borrower in terms of OTS.’ It also states that the guarantor shall indemnify and keep the Lenders indemnified against all Losses, damages, costs, claims and expenses whatsoever which the Lenders may suffer, pay or incur by reason of or in connection with any such default on the part of the borrower including legal proceedings taken against the borrower and/or the guarantors for recovery of the moneys referred to in Clause 2 above. 22. 22. Clause 4 recites that without the concurrence of the guarantors, the borrower and the lenders were at liberty to vary, alter the terms and conditions of the OTS and of the security documents executed by the borrower and that the guarantor shall not be affected in any manner. It was also agreed that the guarantee shall be enforceable notwithstanding the securities executed by the borrower in favour of the lender. 23. Under Clause 7, it is stated that the guarantors agreed and consented to the “sale, mortgage on prior, pari passu or second charge basis, release etc., of any of the assets by the borrower from time to time as may be approved by the Lenders or the transfer of any of the assets of the borrower from one unit to the other or to the release or lease out by the Lenders any or whole of the assets charged to the lenders on such terms and conditions as the Lenders may deem fit and this may be treated as a standing and continuing consent for each and every individual act of-transfer, mortgage, release or lease of any of such assets of the borrower. The guarantors hereby declare and agree that no separate consent for each such transfer, mortgage, release or lease any of such assets would be necessary in future.” 24. Clause 10 specifies that, to give effect to the guarantee, the lender may act as though the guarantors were the principal debtors to the lender. 25. Under Clause 16, it is stated that the liability of the guarantors under the guarantee shall not be affected by any change in the constitution of the lenders. It is also stated that the absence or deficiency of powers on the part of the guarantors to give guarantees and/or indemnities or any irregularity in the exercise of such powers shall not affect the corporate guarantee. Clause 17 sites that the guarantee shall be a continuing one and shall remain in full force and effect till such time the borrower repays in full the amounts stipulated under the OTS. As per Clause 18, the liability of the guarantors is restricted to the sum of Rs.6crores payable by the borrower to the Lender under the OTS. The said guarantee was signed by the Director of the company. It also records the resolution of the Board of Directors passed in that behalf on 210. As per Clause 18, the liability of the guarantors is restricted to the sum of Rs.6crores payable by the borrower to the Lender under the OTS. The said guarantee was signed by the Director of the company. It also records the resolution of the Board of Directors passed in that behalf on 210. 2001 in the presence of P.G. Daftary, Director, who has signed the deed of guarantee and countersigned by A. Rubandhas, Secretary/authorized person. 26. On 09.01.2004, ICICI Bank Limited wrote a letter to the Dayaanand Mills Limited with a copy to the Chairman, Pradip D. Kothari, pointing out to the default in payment of the amount due under the OTS. ICICI Bank Limited called upon the defaulter company Dayaanand Mills Limited to make the payment with interest at 24% per annum within a period of seven days. The copy was marked to the respondent herein and notice was again issued on 06.02.2004 with a copy marked to the respondent. By letter dated 25.05.2004, ICICI Bank Limited invoked the guarantee executed by the respondent and called upon the respondent company to pay the amount of Rs.6Crores as undertaken. 27. By letter dated 06.02.2004, the lender Bank called upon the borrower to pay forthwith a sum of Rs.33, 14, 99, 859/- with future interest, failing which, the Bank informed the borrower of its intention to enforce the securities and realize the due. A copy of the letter was marked to the respondent herein. By letter dated 25.05.2004, the Bank invoked the corporate guarantee furnished by the respondent and called upon the respondent to pay the sum of Rs.6crores. On the failure of the respondent to honour its commitment and considering the financial status of the respondent company, the present petition for winding up is filed before this Court. 28. A reading of the various clauses in the agreement leaves no manner of doubt that the respondent had bound itself by the guarantee give, irrespective of any change in the constitution or winding up of the borrower. Going by Clause 16 of the guarantee agreement, “any change in the constitution or winding up to the borrower or any absorption, merger or amalgamation of the borrower with any other company, corporation or concern”, hence, has no impact on the validity of the corporate guarantee or on its enforceability, given the necessary circumstances warranting the invoking of the same. Going by Clause 16 of the guarantee agreement, “any change in the constitution or winding up to the borrower or any absorption, merger or amalgamation of the borrower with any other company, corporation or concern”, hence, has no impact on the validity of the corporate guarantee or on its enforceability, given the necessary circumstances warranting the invoking of the same. As already seen, given the fact that the guarantee offered is an unconditional, absolute and a continuing guarantee, undertaking to indemnify the lender, namely, the Bank against all losses, and going by the assurance under the guarantee agreement, it stands to reason that irrespective of the winding up proceedings of Dayaanand Mills Limited, the respondent is bound by the corporate guarantee; that the winding up proceedings of Dayaanand Mills Limited does not act as a shield for the respondent to contend that the guarantee offered had no validity. In the circumstances, I agree with the petitioner’s contention that given the terms of the guarantee agreement, the respondent, are bound to honour its commitment under the corporate guarantee. 29. It is no doubt true that the guarantee agreement comes immediately on the OTS. However, a reading of the various clauses in the guarantee agreement shows that the agreement fully supports the plea of the petitioner that the liability of the guarantor is in no way affected, by any winding up proceedings of the borrower and that the guarantee is a continuing one. Given the fact that what was guaranteed in the agreement was the repayment of the loan by the borrower in accordance with the terms of the OTS and in the event of default, the guarantor agreeing to pay all the amount to the creditor, without any demur and that the liability of the guarantor under the guarantee was in any event limited to the extent of Rs.6crores, clearly shows that the winding up of the borrower company has little effect on the enforceability of the guarantee given by the respondent. It may also be noted that the borrowing of Dayaanand Mills Limited was supported by a security; hence, ICICI as a secured creditor, remaining outside the winding up proceedings, entered into the settlement scheme with the borrower. I do not find any illegality in such a course of action taken by ICICI as secured creditor to stand outside the winding up. 30. I do not find any illegality in such a course of action taken by ICICI as secured creditor to stand outside the winding up. 30. In this connection, the reliance placed by the learned senior counsel appearing for the petitioner on the decision in Rishabh Agro Industries Ltd. v. P.N.B. Capital Services Ltd. AIR 2000 SC 1583 : (2000) 5 SCC 515 , deserves to be noted. Although the said decision is with reference to a sick undertaking and the effect of Section 22 on winding up proceedings, the Apex Court pointed but: “Despite appointment of the Official Liquidator, the Board of Directors continue to hold all residuary powers for the benefit of the company which includes the power to take steps for its rehabilitation. The Board of Directors in the instant case were not in any way by any judicial order debarred from taking recourse to the provisions of the Act for the purposes of rehabilitation of the Company. If there existed a power, its exercise cannot be termed to be mala fide only because it was initiated after availing the opportunity to make the payment of the amounts due and passing of the order of winding up of the Company. 11. It may also be noticed that winding-up order passed under the Companies Act is not the culmination of the proceedings pending before the Company Judge but is in effect the commencement of the process. The ultimate order to be passed in such a petition is the dissolution of the company in terms of Section 481 of the Companies Act. The words “shall be deemed to commence” in Section 441 of the Companies Act clearly show the intention of the legislature that although the winding up of a petition does not in fact commence at the time of presentation of the petition itself but it shall be presumed to commence from that stage. The word “deemed” used in the Section would thus mean, “supposed’, “considered”, “construed”, “though”. “ taken to be ” or “presumed.” 31. In the face of this categorical decision off the Apex Court, pending the winding up petition on Dayaanand Mills Limited, the Steps taken by the defaulter company, Dayaanand Mills Limited, to reach the one time settlement with the secured creditor/lender Bank and the respondent initiating one time settlement offering a corporate guarantee cannot, in any manner, be taken exception to. 32. 32. It may also be noted that Dayaanand Mills Limited is one in the Kothari Group of Companies. The guarantee itself was made consequent on a resolution passed by the Board of Directors releasing the personal; guarantee originally given by Pradip D. Kothari, who was the Managing Director of Dayaanand Mills Limited. Since 20.12.2001, the said Pradip D. Kothari had no authority to sign the OTS, in its letter dated 212. 2001, the respondent addressed a letter to ICICI Bank Limited and sought for the return of the personal guarantee executed by Pradip D. Kothari; that in substitution of the personal guarantee dated 02.07.1997 executed by Pradip D. Kothari, they enclosed the copy of the Board resolution dated 210. 2001 and offered the corporate guarantee from the respondent company. A reading of the resolution shows that the corporate guarantee was subject to the approval of the shareholders of the company. It also reads that Pradip D. Kothari, as Chairman and Managing Director and P.G. Daftary, Director were authorised to execute necessary corporate guarantee and such other documents in favour of ICICI Bank in connection with the dues to Dayaanand Mills Limited under the OTS scheme, under the common seal in the presence of one of the Directors, who shall sign the same and counter signed by the Executive Director or Vice President-Finance or Vice President & Company Secretary. Having regard to the terms under which the corporate guarantee was given and the consideration of execution of the corporate guarantee, particularly, with reference to the release of Waterfall Estate and certain other assets, I do not find any justification in the contention of the respondent that the guarantee executed after the winding up proceedings cannot be sustained. If the respondent had gone ahead with the furnishing of the corporate guarantee with full consciousness as to the winding up proceedings of Dayaanand Mills Limited, who is not a third party for the respondent to plead ignorance as to the fact of winding up and without disclosing the winding up proceedings of Dayaanand Mills Limited to the secured creditor, it stands to reason that the intention of the respondent was to have a settlement outside the winding up proceedings supported by a corporate guarantee. The respondent is bound by the course of conduct adopted to negotiate and reach a one time settlement with the creditor Bank for which the respondent offered the corporate guarantee. In any event, as already stated, ICICI Bank Limited, being a secured Creditor, is entitled to have their settlement outside the winding up proceedings and in terms of the above-referred Supreme Court decision, I do not find, any impediment In the debtor company approaching the secured Creditor for a settlement and in the respondent negotiating the same by offering a corporate guarantee. The stand now taken by the respondent does not speak well of the conduct of the respondent, particularly when the furnishing of the corporate guarantee itself was part of the OTS for getting the release of the waterfall estate, which they sold thereafter, as evidenced by the balance sheet, apart from getting the release of the personal guarantee of the Managing Director, Pradip D. Kothari. 33. As regards the corporate guarantee, learned counsel, for the respondent submitted that the resolution of the Board was not placed before the shareholders and it was only subject to the shareholders’ approval, that the corporate guarantee was given. Hence, as of today, if the records disclosed that there was no such approval from the share holders, the enforceability of the guarantee is no longer there for the petitioner to lay its claim. 34. As far as this aspect is concerned, in the decision Siva Sankara Panicker v. Kerala Financial Corporation, 50 Company Cases 817; Official Liquidator, Supreme Bank Ltd. v. P.A. Tendolkar (Dead) by Lrs., 43 Company Cases 382, M.R. Prata Atul v. M. Muthukrishnan, ITO 47 Company cases 815, In re Atul Drug House Limited, 41 company Cases 352, it was pointed out that, the fact that the resolution of the Board of Directors is not placed before the shareholders meet cannot defeat the claims of the petitioning Creditor, considering the fact that it is a well settled principle of law, Ex turpi causa non oritur actio, which means that a person cannot take advantage of its own wrong or to its failure in not placing the resolution before the shareholders meet, thereby, nullifying the effect of the guarantee given. In these circumstances, going by the Doctrine of In-Door Management, the respondent is bound by the guarantee issued and the company having executed its guarantee cannot now seek shelter under the fact that the resolution of the Board was not approved by the shareholders. The other party is entitled to presume that the Directors are lawfully acting in accordance with law. The reliance placed on the decision of this Court in P.V. Damodara Reddy v. Indian National Agencies Ltd. (supra), hence, covers the stand taken by the petitioner in this regard. 35. Hence, the terms of the guarantee executed and the correspondence between the parties, where in no mentioning was made as to the winding up of Dayaanand Mills Limited or a denial in their counter that the shareholders have not approval of the corporate guarantee or approval was not obtained at any point of time, clearly shows that the respondent never denied their liability under the corporate guarantee executed, nor as to the want of authority to execute the same. 36. Even in this regard, it may be noted that the approval by the shareholders is required only where the requirements of Section 372-A (1)(b) of the Companies Act is to be complied with; it may be seen that Section 372-A of the Companies Act, 1956, regulates inter-corporate loans and/or investments made to any body corporate or security provided or guarantee given to in connection with the loan given to any body-corporate. It states that the Board of Directors are permitted to make inter-corporate loans and investments to give guarantee or provide security, provided the aggregate of the guarantee does not exceed 60% of its paid up share capital and free reserves or 100% of its free reserves, whichever is more. This is subject to the resolution passed to the above effect at a meeting of the Board of Directors with the consent of all the Directors present (vide Section 372-A (2). For loans beyond this ceiling would require the previous approval of the shareholders by a special resolution obtained in the general meeting vide Section 372-A (1) proviso. The Section further carries a proviso that if there existed exceptional circumstances, without being previously authorized by a special resolution, a resolution can be passed in the meeting of the Board authorizing to give guarantee in accordance with the provision of the Section. The Section further carries a proviso that if there existed exceptional circumstances, without being previously authorized by a special resolution, a resolution can be passed in the meeting of the Board authorizing to give guarantee in accordance with the provision of the Section. However, the resolution of the Board has to be confirmed within 12months by a special resolution in a general meeting of the company or the Annual General Meeting held immediately after passing of the Board resolution, whichever is earlier. Sub-section (5) speaks about maintenance of register showing the details of the guarantee given or a loan made or security provided by a company. Sub-section (9) states that if any default is made in complying with the provision of the Section other than Sub-section (5), the company and every officer of the company in default shall be punishable with imprisonment which may extent to two years or with fine which may extent to Rs.50,000/-. The second proviso to sub-section (9) states all persons who are knowingly parties to any such contravention: shall be liable jointly and severally to the company for the repayment of the loan or for making good the same which the company may have been called upon to pay by virtue of the guarantee given or the securities provided, by such company. 37. In the decision in Nellai Metal Rolling Mills P. Ltd. V. Southern India Central Benefit Fund P. Ltd. (1986) 1 MLJ 370 , this Court held that a stranger dealing with the company, had the right to assume, as against the company, that all the requirements of internal management had been complied with. This Court further held “Assuming that the Directors of a company have indulged in borrowing or raising money without authorization by means of the requisite resolution, yet, the company cannot escape its liability to repay, if in fact, the benefit of the transaction reached the company as such.“ Pointing out to Section 292(1) (c) of the Act, this Court held that “Section 292(1)(c) of the Act when it contemplates that the power to borrow moneys otherwise that on debentures shall be done only by means of a resolution passed at the meeting of the Board of Directors. But, if it is found that the benefit of the suit transaction, did reach the defendant company and the defendant company was benefited by it and further made payments in acknowledgement of its liability, then it cannot absolve itself from its obligations to honour its liability under the suit transaction by projecting this technical plea that the suit transaction lacked the authorization in the form of a resolution, as contemplated under Section 292(1) (c) of the Act. This is very sound principle which has found countenance in the general field of contract and I find no acceptable reason to take it out of the field, merely because the party who stood benefited by the transaction happens to be a company within the meaning of the Act. I am of the view that this principle must govern wherever a company received and enjoyed the benefit of a transaction, even though it suffered certain infirmities in the eye of law, as contended in the present case. Persons, who, bona fide contract with the company in a manner authorized by the articles are not affected by the irregularity in the internal management of the company of which they have no notice. It is not denied by the respondent that corporate guarantee furnished was not more than 60% of the asset value of the paid up share capital and free reserves or 100% of free reserves, which ever is more, as given under Section 372-A of the Act, to result in the provisions of Section 372-A being violated. Given the fact that the guarantee itself was given to the tune of Rs.6crores and the fact that the respondent has paid admittedly to the tune of Rs.2.5crores in terms of the guarantee, thus acted on the guarantee given, the respondent’s stand denying its liability under the guarantee agreement, by reason of the resolution of the Board not approved by the shareholders meet cannot be countenanced by any standards. As rightly pointed out by the learned senior counsel for the petitioner, the release of the Waterfall Estate was itself for the benefit of payment of part sum to ICICI towards its liability as well as to settle the other creditors. 38. In the above circumstances, the validity of the corporate guarantee subsists and the respondent is bound by the terms of the guarantee given. 38. In the above circumstances, the validity of the corporate guarantee subsists and the respondent is bound by the terms of the guarantee given. Consequently, reject the plea of the respondent on the availability of the corporate guarantee to make the petitioner a creditor herein. 39. In terms of Section 126 of the Indian Contract Act, the liability being an existing one, the respondent is bound to honour its commitments, when invoked by the Bank or its assignee. The terms of the guarantee deed clearly binds the respondent to honour its commitment therein. 40. This takes us to the second question as to the authority of the petitioner to maintain the petition under the assignment deed executed in favour of the petitioner by the ICICI. 41. In the course of hearing, the petitioner produced before this Court, the deed of assignment executed by the ICICI Bank Limited in favour of the petitioner Kotak Mahindra Bank Ltd. Dated 31.03.2005. A reading of the same shows that the assignor, ICICI Bank Limited, has granted various type of credit facilities to various borrowers. In respect of the credit facilities extended to several companies, ICICI is the beneficial owner of financial instruments and receivables there under to the tune of Rs.4,341.20 million. The petitioner herein has agreed to purchase and acquire these debts with security intact from the ICICI in “as is where is “and “as is what is “basis for a consideration of Rs.60crores. The assignment here in is a basket of NPAs of several of the customers of the Bank who had borrowed money on the strength of securities offered to ICICI. As far as the present case is concerned, on the sale of various non-Performing debts secured by immovable property by ICICI in favour of the petitioner herein, there was an execution of a sale deed with assignment properly stamped and registered in Gujarat. The sale and the assignment were executed at Ahmedabad on 31.03.2005. It must be noted herein that none of the properties of Dayaanand Mills Limited offered as security to ICICI are situate anywhere in Tamil Nadu. In the context of the execution of the deed registered in Gujarat, the contentions of the respondent as regards the validity of the said document for the purposes of the present proceedings need to be considered. 42. The assignment deed defines “security interest” as follows: “1. In the context of the execution of the deed registered in Gujarat, the contentions of the respondent as regards the validity of the said document for the purposes of the present proceedings need to be considered. 42. The assignment deed defines “security interest” as follows: “1. 6: “Security Interest” means an interest by way of security created by Clients and including a third party security/guarantee in favour of the Assignor (including that of erstwhile Industrial Credit and Investments Corporation Limited now merged with ICICI Bank Limited) and /or its trustee/s (if any), as provided in the relevant Financial Instruments as mentioned in the Annexure “A” hereof and other documents as “executed by such client/s and /or such guarantor/security provided for payment, of the Debt with payment of interest therein and other charges as provided in the Financial Instruments”. 43. Clause 2 relates to consideration and assignment. The petitioner has assigned of the assignor’s (ICICI) right, title, interest and benefit in and to the debts together with security interest and the assignee is recognized as legal owner entitled to receive the repayment of the debt. 44. Annexure A-20 gives the details of the loan account of Dayaanand Mills Limited. The details given refers the corporate guarantee of the respondent herein dated 212. 2001 as well as the details of the properties subject to 1st mortgage and movable assets. It is further seen that the deed of assignment and sale was registered before the Office of the Sub-Registrar, Narol, Ahmedabad, attracting maximum stamp duty of Rs.1,40,200/-, paying a registration fee of Rs.52,200/-. 45. A reading of the sale and assignment deed shows that the said deed contemplates transfer of receivable of ICICI to the petitioner herein by assignment of all its rights over several of the debtors’ accounts. In this, there is a single sale of the financial asset of the Bank which is its claim on various NPAs. There are not as many sales as there are numbers of non-performing accounts, securities and debts. The price paid is not apportioned among the various non-performing assets, but is a one single price without assigning any prorate to any particular single asset or the account. 46. There are not as many sales as there are numbers of non-performing accounts, securities and debts. The price paid is not apportioned among the various non-performing assets, but is a one single price without assigning any prorate to any particular single asset or the account. 46. In considering the rival contentions of the parties herein and in the context of the strong reliance placed by the respondent on the decision of the Gujarat High Court referred to above, we need to look into some of the salient features of the two Acts, viz., Banking Regulation Act and the Non-Performing Assets Act. 47. The Banking Regulation Act, 1949, is a special legislation concerned about regularizing banking business in the country. Section 2 of the Act states that the provisions of this Act shall be in addition to and unless expressed or provided, not in derogation of the Companies Act and any other law for the time being in force. Section 5(b) and (c) of the Act defines “Banking” and “Banking company.” Part II of the Act deals with the term of business in which Banking Companies may engage. Section 6 of the Act enumerates the various forms of business in which the banking company may engage. The Section also contains an omnibus clause under sub Clause (n) “doing all such other things as are incidental or conducive to the promotion or advancement of the business of the company.” Section 8 contains the prohibition of trading. It starts with a non-obstinate clause that notwithstanding anything contained in Section 6 or in any contract, no banking company shall directly or indirectly deal in the buying or selling or trade in goods, except in connection with the realization of security given to or held by it, or engage in any trade for others in connection with bills of exchange received for collection or negotiations or with such of its business as is referred to in Section 6. Explanation to Section 8 gives the meaning to the word “goods”, as, every kind of movable property, other than actionable claims, stocks, shares, money bullion and specie and all instruments referred to in Section 6(1) (a) of the Act. 48. Section 21 deals with power of the Reserve Bank of India to control advances by banking companies. Explanation to Section 8 gives the meaning to the word “goods”, as, every kind of movable property, other than actionable claims, stocks, shares, money bullion and specie and all instruments referred to in Section 6(1) (a) of the Act. 48. Section 21 deals with power of the Reserve Bank of India to control advances by banking companies. Section 35-A deals with the power of the Reserve Bank of India to give direction generally as it deems fit from-time to time in public interest in the interest of the banking policy or of any banking company. The banking companies or the banking company, as the case may be, shall be bound to comply with such directions. Section 36 deals further with the power and function of the Reserve Bank of India. Section 36(1)(a) states that the Reserve Bank of India may caution or prohibit banking companies generally or any banking company in particular against entering into any particular transaction or class of transactions and generally give advice to any banking company. 49. In the decision in Central Bank of India v. Ravindra AIR 2001 SC 3095 : (2002) 1 SCC 367 : (2002) 1 MLJ 109 the Supreme Court considered the effect of the circular issued by the Reserve Bank of India under the Banking Regulation Act under Section 35-A/21. Dealing with the powers of the RBI and the scope of Section 35-A/21, referring to the case D.S. Gowda v. Corporation Bank AIR 1983 Kant 143, the Supreme Court pointed out that the directions issued by the Reserve Bank India have ‘statutory favour’. In the Central Bank of India v. Ravindra (supra), the Supreme Court held as follows: “The power conferred by Section 21 and 35-A of the Banking Regulation Act, 1935 is coupled, with duty to act. Reserve Bank of India is prime banking institution of the country entrusted with a supervisory role over banking institution of the country entrusted with a supervisory role over banking and conferred with the authority of issuing binding directions, having statutory force, in the interest of public in general and preventing banking affairs from deterioration and prejudice as also to secure the proper management of any banking company generally. Reserve Bank of India is one of the watchdogs of finance and economy of the nation. Reserve Bank of India is one of the watchdogs of finance and economy of the nation. It is, and it ought to be, aware of all relevant factors, including credit conditions as prevailing, which would invite its policy decisions. RBI has been issuing directions/circulars from time to time which, inter alia, deal with rate of interest which, can be changed and the periods at the end of which rests can be struck down, interest calculated thereon and charged and capitalised. It should continue to issue such directives. Its circulars shall bind those who fall within the net of such directives.” 50. Closely linked to the existence of Banking Regulation Act is the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (NPA Act 2002). Dealing with the background of the enactment of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, in the decision in Mardia Chemicals Ltd., v. Union of India, (2004) 4 SCC 311 @ 338 the Apex Court Pointed out to the factors leading to the enactment of Recovery of Debt due to the Banks and Financial Institutions Act 1993, which reads as follows: “Some facts which need be taken note of are that the banks and the financial institutions have heavily financed the petitioners and other industries. It is also a fact that a large sum of amount remains un-recovered. Normal process of recovery of debts through Courts is lengthy and time taken is not suited for recovery of such dues. For financial assistance rendered to the industries by the financial institutions, financial liquidity is essential failing which there is a blockade of large sums of amounts creating circumstances which retard the economic progress followed by a large number of other consequential ill effects. Considering: all these circumstances, the Recovery of Debts Due to Banks and Financial Institutions Act was enacted in 1993 but as the figures show, it also did not bring the desired results. Though it is submitted on behalf of the petitioners that it so happened “due to, inaction on the part of the governments in creating Debt Recovery Tribunals and appointing Presiding Officers, for a long time. Even after leaving that margin, it is to be noted that things in the concerned spheres are desired to move faster. Though it is submitted on behalf of the petitioners that it so happened “due to, inaction on the part of the governments in creating Debt Recovery Tribunals and appointing Presiding Officers, for a long time. Even after leaving that margin, it is to be noted that things in the concerned spheres are desired to move faster. In the present day global economy it may be difficult to stick to old and conventional methods of financing and recovery of dues. Hence, in our view, it cannot be said that a step taken towards Securitization of the debts and to evolve means for faster recovery of the NPAs was not called for or that it was superimposition of undesired law since one legislation was already operating in the field namely the Recovery of Debts due to Banks and Financial Institutions Act.” 51. Referring to the recommendations of the Narasimhan Committee that the difficulties faced by the Banks and Financial Institutions in recovery of dues from the clients and the enforcement of security charged to them thus leading to significant portion of the funds of these institution blocked in unproductive assets which are deteriorating in value and hence the need to vest the financial institution through special enactment, the power of sale of the assets without the intervention of the Court and for recovery of assets, the Apex Court pointed out as follows at page 340: “It is again to be noted that after the report of the Narasirnham Committee, yet another committee was constituted headed by Mr. Andhyarujina for bringing about the needed steps within the legal frame work. We are therefore, unable to find much substance in the submission made on behalf of the petitioners that while the Recovery of debts due to Banks and Financial Institutions Act was in operation it was uncalled for to have, yet another legislation for the recovery of the mounting dues. Considering the totality of circumstances the financial climate world over, if it was thought as a matter of policy, to have yet speedier legal method to recover the dues, such a policy decision cannot be faulted with nor it is a matter to be gone into by the Courts to test the legitimacy of such a measure relating to financial policy.” 52. Thus the Non-Performing Assets Act, 2002, was enacted to enable the Banks and Financial Institutions to realise their long term assets, manage the problem of liquidity, asset liability mismatches and improve recovery by exercising powers to take person of securities, sell them and reduce NPA by adopting measures for recovery and reconstruction statement of objections of hearing. Outlining the various circumstances leading to the enactment of the statute, the objects and reasons read as follows: The Act thus enables the Banks to take possession of securities given for the financial assistance given, sell the security interest as defined under the Act, take measures to reduce the NPAs by adopting measures for recovery/reconstruction. The classification of the account of the borrower as NPA has to be done in accordance with the guidelines of the RBI from time-to-time. Section 2(f) defines a “borrower” to mean any person who is given financial assistance by any Bank or financial institution or who has given guarantee or created any mortgage or pledge as security for the financial assistance granted by the Bank. It includes a borrower of a securitisation company or reconstruction company consequent on the acquisition of Court of any right or interest of any Bank or financial institution in relation to such financial assistance. 53. Section 5 of the Act contains provisions relating to acquisition of right or interest in financial assets. The Section begins with a non-obstante clause that notwithstanding anything contained in any agreement or any other law, any securitisation company or reconstruction company may acquire financial assistance of any Bank or financial institution by issue of debentures, shares etc. sub-section (2) states that if the Bank or the financial institution is a lender in relation to any financial asset acquired by the securitisation company/reconstruction company, then such securitisation company shall be deemed to be the lender and all the right of the Bank/financial institution shall rest in the reconstruction company. 54. Dealing with the various provisions of the. Act, in the decision Unique Engineering Works v. Union of India, dated 112. 2003, the Uttaranchal High Court pointed out to RBI circular dated 04.07.2002 on asset classification as NPA vis-à-vis a performing asset. 54. Dealing with the various provisions of the. Act, in the decision Unique Engineering Works v. Union of India, dated 112. 2003, the Uttaranchal High Court pointed out to RBI circular dated 04.07.2002 on asset classification as NPA vis-à-vis a performing asset. Under this circular, if the interest charged for the specified period is not secured within 180 days and when the securities offered on the advances fail to match the amount due from the borrower or that the security, by reason of the default, ceases to match the liability, the asset becomes a loss asset and Banks are directed to classify an account as NPA. Section 13 of the Act provides that a secured creditor may enforce any security interest in accordance with the provisions of the Securitisation Act without the intervention of the Court irrespective Section 69 or 69-A of the transfer of Property Act. Section 13(2) states where any borrower under a liability commits default in payment of the secured debt and his account is classified as NPA, then the Bank/financial institution may call upon the borrower to discharge his liability to the secured creditor within 60 days, failing which, the Banks/financial institutions shall be entitled to execute the power under Section 13(4) of the Act. Where the borrower fails to respond to the notice and discharge the liability in full within 60 days’ notice period, the secured creditor may take one of the steps contemplated by Section 13(4), viz., it can take possession of the secured assets; it can take over the management of the secured asset; it can appoint a Receiver to manage the secured assets. Under Section 13 (6), any transfer of the secured asset on taking possession or/management shall vest in the transferee all rights in the secured asset. It the borrower pays the dues of the secured creditors before the date of transfer or sale, the secured asset shall not be sold. The Act provides for a right of appeal to the Debts Recovery Tribunal (Section17). Thus the value of the security is directly linked to the advance made by the Bank and hence, directly linked with the performance/non-performance of asset. 55. The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, gives the definition of various terms, of which we need to note the definition of “financial asset”, “non-performing asset” and “property.” 56. 55. The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, gives the definition of various terms, of which we need to note the definition of “financial asset”, “non-performing asset” and “property.” 56. Section 2(1)(1) defines “Financial Assets”, as follows: (i) a claim to any debt or receivables or part thereof, whether secured or unsecured; or (ii) any debt or receivables secured by, mortgage of, or charge on, immovable property; or (iii) a mortgage, charge, hypothecation or pledge of movable property; or (i) any right or interest in the security, whether full or part underlying such debt or receivables; or (ii) any beneficial interest in the security, whether movable or immovable, or in such debt, receivables, whether such interest is existing, future, accruing, conditional or contingent; or (vi) any financial assistance; Section 2(0) defines “non-performing as- set” as follows: “non-performing asset” means an asset or account of a borrower which has been classified by a bank or financial institution as sub-standard, doubtful or loss assets, (a) in case such bank or financial institution is administered regulated by any authority or body established, constituted or appointed by any law for the time being in force, in accordance with the directions or guidelines relating to assets classifications issued by such authority or body; (b) in any case, in accordance with the directions or guidelines relating to assets classifications issued by the Reserve Bank.” Section 2(t) defines ”property”, as follows: “Property” means— (i) immovable property; (ii) movable property (iii) any debt or any right to receive payment of money, whether secured or unsecured; (iv) receivables, whether existing or future; (v) intangible assets, being know-how, pattern, copyright, trademark, license, franchise or any other business or commercial right of similar nature.” 57. Going by the objects of the Act, it is clear that the assets of the defaulter company can be transferred by a secured creditor to the securitisation company like any other asset. 58. In tune with the guidelines issued by the Reserve Bank of India regulating the sale/purchase of the non-performing financial assets, Banks sell/buy as one homogeneous pool, the non-performing assets as one single asset. The pool of assets is treated as one single asset in the books of accounts of the selling Bank as well as by the purchasing Bank. 58. In tune with the guidelines issued by the Reserve Bank of India regulating the sale/purchase of the non-performing financial assets, Banks sell/buy as one homogeneous pool, the non-performing assets as one single asset. The pool of assets is treated as one single asset in the books of accounts of the selling Bank as well as by the purchasing Bank. This means, there is one single sale of a number of non-performing financial assets in the pool and going by the definition of “non-performing asset” under Section 2(o) of the Act, it represents the account of the defaulters, which may be secured by assets, movable or immovable; hence, each one of the defaulting company, irrespective of the number of assets owned by it, represent the non-performing asset as such and the lender Bank can gather the number of non-performing assets as a single asset for the purposes of sale. The guidelines issued by the Reserve Bank of India show that an account is classified as NPA only if the interest/principal amount is not paid for 180 days to the Bank, thus, resulting in the account going out of order. When the Bank sells its non-performing assets to other Banks, on transfer, the same is moved from the books of the transferor bank. Where the sale is for a value higher than the net book value, the excess provision is not reversed, but utilized to meet the shortfall/loss on account of the sale of other non-performing assets. The Reserve Bank guidelines clearly give the directions as to the sale/purchase of the non-performing assets as one single item figuring in as a financial asset in the books of accounts of the creditor Bank. The Security Interest Enforcement Rules, 2002, regulates the taking over possession and sale of security. While upholding the validity of the Act and rejecting the contention that the Act had made Sick Industrial Companies Act redundant, in the decision Unique Engineering Works v. Union India (supra), dated 112. 2003, the High Court of Uttaranchal pointed out as follows: “Just as any immovable property can be come a subject matter of security interest so also an Account Receivable can be transferred, assigned or sold. In other words, there can be an assignment of Account Receivable as a Security interest (See CORPUS JURIS SECUNDUM Vol.79). 2003, the High Court of Uttaranchal pointed out as follows: “Just as any immovable property can be come a subject matter of security interest so also an Account Receivable can be transferred, assigned or sold. In other words, there can be an assignment of Account Receivable as a Security interest (See CORPUS JURIS SECUNDUM Vol.79). This point is very important as Section 5 and Section 9 of the impugned NPA Act 2002 is based on this concept. When the account receivable in the books of the bank/financial institution goes out of order, the bank is empowered to give notice under Section 13(2) of the borrower. When the account receivable does not fetch (sic) interest income for the bank that account receivables becomes non-performing asset. Opportunity is, therefore given to the borrower to make such account regular by repaying the interest and principle amount. If the borrower fails to regularize the account receivables then the consequence under Section 13(4) follows. Basically, non-performing assets are account receivables which have gone out of order. Under Section 2(1) a financial asset is defined to mean a ‘debt or receivable’. As stated above security, interest has no existence dehors the obligation to repay. The account receivable is a financial asset for the bank/financial institution. If the borrower does not regularize the account receivable, The bank/financial institutions cannot allow that account become/a loss asset. Under banking Regulation Act such account recievables constitute an asset of bank/financial institution. Therefore, if the borrower despite opportunity fails to regularize the account receivable then under Section 5 read with Section 9 such Account Receivables which constitute security interest could be assigned to the Securitisation Company or Reconstruction Company. Therefore, Section 5 of the impugned NPA Act, 2002 contemplates assignment of the Account Receivable by the Bank/financial institution to the Securitisation Company/Reconstruction company when such account receivable becomes, a non-performing asset as that a transferee company can take measures provided for under Section 9 to reconstruct such financial assets of the Bank/financial institutions which have become non-performing assets. Even under Section 9(e) there are adequate safeguards. Even if at that stage the borrower settles his dues with the Bank/financial institution his property will not be sold. Even under Section 9(e) there are adequate safeguards. Even if at that stage the borrower settles his dues with the Bank/financial institution his property will not be sold. Similarly, under Section 11 of the Act, 2002 if any dispute, relating to securisation/reconstruction arises then the parties are at liberty to settle such disputes by conciliation or by arbitration under the provisions of Arbitration Act, 1996. Lastly, under Section 12 of the impugned NPA Act, 2002 Reserve Bank of India is given powers to issue directions from time-to-time in public interest in the matter of constitution of reconstruction Company or Securitisation company. Under Section 12, reserve Bank of India is given authority to issue directions in the matter of take over of financial assets of the Bank/financial institutions. Further, Reserve Bank of India is authorized to give directions in the matter of income recognition, accounting standards, capital adequacy, etc.” 59. The circular of RBI dated 13.07.2005 gives the guidelines to purchase/sale of NPA as well as on the valuation of the assets for the purpose of bringing them for sale. 60. I am in entire agreement with the view expressed in the decision of the Uttaranchal High Court in the case of Unique Engineering Works v. Union of India (supra), dated 112. 2003. The reliance placed by the respondent in the decision of the Gujarat High Court, dated 12.01.2009, hence, merits to be rejected. 61. In this connection, the view expressed by the Gujarat High court in its decision dated 12.01.2009 needs to be seen. There, Kotak Mahindra Bank filed an application before the Company Court seeking substitution of its name as an assignee transferred in the place of ICICI. The assignee claimed its right as in the case before this Court under a deed of assignment dated 31.03.2006. On behalf of the Company in liquidation, the Official Liquidator took a preliminary objection for substitution. The Company Court held that the assignee had not acquired its right through the procedure known to law; hence, could not be permitted to bee substituted in the place of the secured creditor. Learned single Judge, however observed that the rights have to be adjudicated before the appropriate forum. The Company Court held that the assignee had not acquired its right through the procedure known to law; hence, could not be permitted to bee substituted in the place of the secured creditor. Learned single Judge, however observed that the rights have to be adjudicated before the appropriate forum. On appeal by the assignee, the Division Bench referred to the provisions of the Banking Regulation Act, particularly to Section 6(1)(g) of the Banking Regulation Act, to hold that the concept “trading in debt” is “by its very nature abhorrent to the concept of banking in any form.” Hence, when the transaction of sale and assignment consisted of a basket of debt and that the assignor bank is not in a position to specify the amount for which the particular debt falls in the basket for apportioning the consideration, the entire activity is a speculative form of transaction. The Gujarat High Court felt that going by the legislation scheme envisaged by Sections 5(b), 6(1)(2) and 8, a Banking company is not entitled to engage in any form of business other than those specified in Section 5(b) and 6(1). Hence, there cannot be a recourse to general law. In paragraph 48 of the judgment, the Division Bench summarized its conclusion. 62. Going by the objects and reasons for enacting the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 and the decision of the Apex Court in Mardia Chemicals Ltd v. Union of India (supra) and the decision of the Apex Court as to the binding nature of the RBI circular under Section 35-A, in a Central Bank of India v. Ravindra (supra), I express my inability to subscribe to the view of the Gujarat High Court. Considering the scope of the special enactment in the context of Section 2(f) of the securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, I find it difficult to subscribe to the view expressed based on Section 6(1)(g) of the Banking Regulation Act. It must be remembered that prior to the enforcement of the Act, under the Transfer of Property Act, the enforcement of security interest was subject to the intervention of the Court/Tribunal in view of Section 69/69-A of the Transfer of Property Act. It must be remembered that prior to the enforcement of the Act, under the Transfer of Property Act, the enforcement of security interest was subject to the intervention of the Court/Tribunal in view of Section 69/69-A of the Transfer of Property Act. However, notwithstanding the principles of Section 69/69-A of the Transfer of Property Act, in the background of Section 13, any security interest created in favour of any secured creditor will be enforced without the intervention of the Court/Tribunal in accordance with the principles of the Act. The special enactment enacted with g specific purpose and an object to be met has to be given its due weightage. Hence, the reliance placed by the respondent on the decision of the Gujarat High Court stand is rejected. 63. As to the contention of the respondent that their claims area “actionable claims”, as per Section 3 of the Transfer of Property Act, even going by the definition ‘actionable claim’ under the Transfer of debt assigned is secured by immovable property, these are excluded from being considered as actionable claims. A definition of “actionable claim” under Section 3 of the Transfer of Property Act in this regard needs td be noted. “actionable claim” means a claim to any debt, other than a debt secured by mortgage of immovable property or by hypothecation or pledge of movable property, or to any beneficial interest in movable property not in the possession, either actual or constructive, of the claimant, which the Civil Courts recognize as affording grounds for relief, whether such debt or beneficial interest be existent, accruing, conditional or contingent.” 64. Section 130 of the Transfer of Property Act states that the debt secured by the mortgage of the immovable property or by a pledge or by a movable property are excluded from the definition. 65. This takes us to yet another facet of the argument of the respondent relating to the assignment deed not properly stamped and registered in this State to have any legal effect to maintain this petition. Few of the provisions of the Registration Act and the India Stamp Act require to be noted herein to consider the issues raised. 66. The Indian Stamp Act is a fiscal enactment providing for levy of stamp duties on certain classes of instruments. Being a taxing enactment, the provision regarding charge, levy etc. are to be strictly construed. 67. Few of the provisions of the Registration Act and the India Stamp Act require to be noted herein to consider the issues raised. 66. The Indian Stamp Act is a fiscal enactment providing for levy of stamp duties on certain classes of instruments. Being a taxing enactment, the provision regarding charge, levy etc. are to be strictly construed. 67. Section 3 of the Indian Stamp Act deals with instruments chargeable with duty. Subject to the provisions of the Act and the exemption specified in the Act, it specifies that the instruments chargeable to duty will attract the levy as specified in the schedule. Thereby, by reference, instruments not mentioned therein, are by inference, not chargeable with duty. 68. Section 35 of the Indian Stamp Act states that unless an instrument is duly stamped, an instrument chargeable with duty shall not be admitted in evidence for any purpose by any person having by law or consent of the parties and authority to receive evidence. Schedule 1 of the Act prescribe stamp duty on instruments. Article 23(a) of the First Schedule, deals with Conveyance as defined by Section 2(10). Section 2(10), reads as follows: “Conveyance” includes a conveyance on sale and every instrument by which property, whether movable or immovable is transferred inter vivos and which is not otherwise specifically provided for by Schedule I. 69. Courts have held that the duty payable in the instrument is determined by referring to substance of the document and not to the nomenclature of the form of the instrument. The substance of the transaction is to be determined as disclosed in the instrument itself. 70. In the decision in Maturi Pullaiah v. Maturi Narasimaham AIR 1966 SC 1836 , the Apex Court pointed out that a document not creating an interest in any immovable property does not require registration. 71. In the decision in Chief Controlling Revenue Authority, Board of Revenue, Madras v. M. Hamid Sultan AIR 197S Mad 161, a Full Bench of this Court held that when a question arises under which Article a document is chargeable, the first thing to be looked into, is the document itself. 72. 71. In the decision in Chief Controlling Revenue Authority, Board of Revenue, Madras v. M. Hamid Sultan AIR 197S Mad 161, a Full Bench of this Court held that when a question arises under which Article a document is chargeable, the first thing to be looked into, is the document itself. 72. In the decision in Chief Controlling Revenue Authority, Madras v. Sudarsanam Picture, Madras AIR 1968 Mad 319 , a Full Bench of this Court considered the question as to the character of an instrument under which the prints of films were to be delivered to the distributors with right of exhibition. The question was whether the document was to be treated as a transfer creating a right in such property at the time of execution of the document attracting the duty under the stamp Act. This Court held that the instrument was not a mortgage deed as defined in Section 2(17) chargeable with duty under Article 40(a) and (b) of the I Schedule to the Act and that was only an agreement. This Court pointed out that “for the purpose of Stamp Act, the effect of the instrument has to be examined at the time of execution. The Full Bench referred to the decision of the Apex Court in Jugal Kishore Saraf v. Raw Cotton Company Limited AIR 1955 SC 376 , where in, it was held “under the Transfer of Property Act, there can be no transfer of property which is not in existence at the date of transfer. If there can be no transfer in present (sic) of property not in existence, it stand is to reason and follows that there can be no creation of a right over, or in respect of such property. In our view, the principles that govern the word ‘transfer’ in relation to property under the Transfer of Property Act, would equally apply to the transfer or creation of right provided under the definition ”mortgage deed” in Section 2(17) of the Stamp Act.” 73. In the decision in Chief Controller, Revenue Authority v. Madras Fertilizers Ltd. AIR 1975 Mad 360 , the Full Bench of this Court considered the character of a document securing 51/2% bearer debentures 1973 and 51/2% bearer debentures 1981 to be executed by the company in favour of the First National City Bank. In the decision in Chief Controller, Revenue Authority v. Madras Fertilizers Ltd. AIR 1975 Mad 360 , the Full Bench of this Court considered the character of a document securing 51/2% bearer debentures 1973 and 51/2% bearer debentures 1981 to be executed by the company in favour of the First National City Bank. The Collector held that the document was chargeable to duty under Article 40(b) of Schedule I of the Act as a mortgage deed where possession is not given or agreed to be given. The deed created a floating charge and the deed contained a clause to the effect that security constituted would become enforceable on the happening of any event of default in the loan and purchase agreement. On a reference under the Indian Stamp Act, the Full Bench of this Court held ”what the Trust deed created was a floating charge, which means that, though it is intended to create a security, it is not a charge which involves any transfer of an interest in any specified property or creation of a right in any specified property. When the floating charge crystallizes on the specified event, it becomes a charge, with the result that a right is created in or over or in respect of the specified property, so that a receiver at the stage can take possession of the property, manage the same and deal with it for enforcement of the security for payment to the debenture-holders.” This Court pointed out, that unlike in a mortgage, which contemplated a transfer in present of an interest in specified property, or creation of a right in or over or in respect of a specified property, a floating charge, “is something like Damocle’s sword which hangs and drops down, on a specified event on properties then available for the Receiver to take charge on behalf of debenture holders or for the trustee in this case.” 74. In the decision in Imperial Bank of India v. Bengal National Bank Limited in liquidation AIR 1931 Privy Council 238: (1931)2 MLJ 589 (PC), the Privy Council considered the claim as to the creation of floating charge. The facts therein were that, Bengal National Bank Limited (in liquidation) borrowed from Imperial Bank of India. In the decision in Imperial Bank of India v. Bengal National Bank Limited in liquidation AIR 1931 Privy Council 238: (1931)2 MLJ 589 (PC), the Privy Council considered the claim as to the creation of floating charge. The facts therein were that, Bengal National Bank Limited (in liquidation) borrowed from Imperial Bank of India. They executed a debenture to Imperial Bank creating a floating charge on the whole undertaking, properties, assets and interests present and future of the Bank in liquidation as security for the loan. One more similar debenture was also executed creating floating charge as security for further loan taken. The bank in liquidation had advanced money in the ordinary course of business to its customer on a security of title deeds. The question was whether the two debentures held by the Imperial Bank gave them any interest in the amounts due to the Bank in liquidation from its customer and in the property given as security. The Liquidator of the Bank in liquidation contended that the debenture’s insofar as they sought to charge the debts secured on deposit of title deeds fell within Section 17 of The Registration Act, 1908 and not being registered, the unregistered document could not be read as evidence of any transaction affecting such property in terms of Section 49 of the Act. Hence, “the result of the non-registration is, as they contend, not only to deprive the Imperial Bank of any right to the property comprised in the title-deeds but also of any right over the sums so secured.” On appeal, the Privy Council held that by the debentures, Imperial Bank acquired no right, title or interest in the immovable property comprised in the title deeds. In other words, the title deeds are not available to them as security for any of the debts, so that they could control such securities, or their disposition, or take steps to enforce them either in their own name or in the name of the respondent Bank. 75. In other words, the title deeds are not available to them as security for any of the debts, so that they could control such securities, or their disposition, or take steps to enforce them either in their own name or in the name of the respondent Bank. 75. These decisions only go to show that when a surety or a guarantor undertakes to secure a claim without any specific charge or a specified property, create, in present, of a right in or over or in specified property, that there is no creation of interest to serve as a present charge binding on the person assuming the compliance of the obligation, then it is only a floating charge. This crystallizes as a transfer of interest, or creation of a right over a specified property only on the happening of a specified event. 76. It is seen that ICICI Bank executed the deed of assignment dated 20.04.2005, in favour of Kotak Mahindra Bank Limited, whereby ICICI Bank assigned the financial instruments evidencing various financial assistance provided by ICICI Bank to their clients together with the securities enumerated in Annexure A to the document. The deed of assignment states that in the course of the business, ICICII Bank, the assignor, has granted various credit facilities to the borrowers. The various instruments executed by the clients or the respective guarantors/security provider in respect thereof collectively referred to as ‘financial instruments’ are also given in Annexure A to the document. Under these, a sum of Rs.4,341.20 million being the principle amount was an outstanding amount due and payable to the assignor by the NPAs. Annexure ‘B’ gives the details as to the NPAs and the amount outstanding and the security given. In terms of this amount outstanding, ICICI Bank has agreed to sell and assign to the assignee, the debts with security interest on “as is where is “and “as is what is basis. “ Given the fact that the petitioner herein is an assignee of the debts of ICICI Bank, the present proceedings are initiated invoking the corporate guarantee given by the respondent herein. 77. It may be noted that what has been the subject matter of transfer and assignment under the deed of assignment is inclusive of the respective securities as well as the guarantee guaranteeing the repayment of the loan limiting the guarantee to pay a sum of Rs.6crores. 77. It may be noted that what has been the subject matter of transfer and assignment under the deed of assignment is inclusive of the respective securities as well as the guarantee guaranteeing the repayment of the loan limiting the guarantee to pay a sum of Rs.6crores. As rightly pointed out by the learned senior counsel appearing for the petitioner and as evident from the deed of guarantee, all that it creates is a floating charge with no fixed asset referred to therein attracting a charging provision for registration of the assignment under the Registration Act, 1908. As already seen from the corporate guarantee, the respondent has bound itself to honour its commitment to ICICI Bank Limited which term includes” its Successors and assigns.” Given the nature of guarantee, it being an under taking given by the respondent, to pay over Rs.6crores by the Bank, a question arises, as to whether the assignment requires a registration within the State. There is no fixed property secured under the guarantee agreement to remain specific and particularised in the sense, it ambulates and shifts on the company’s asset. Except for specifying the extent of the guarantee, the nature of guarantee has no fixed operational area and the right itself comes to the fore, only when the assured bank exercises its right under the corporate guarantee agreement. As evident from the under taking given in the letter by the respondent that it would not, in any manner, deal with its property till such time the debtor company satisfied the undertaking given under the OTS or in the event of the debtor company defaulting in payment of the amount that the guarantee could be invoked, the corporate guarantee is a part of a package in the OTS. 78. In the background of these decisions and on the admitted fact that the properties of Dayaanand Mills Limited are not situate any where in this State and that the corporate guarantee furnished was to an extent of Rs.6crores; that in the event of a default committed by Dayaanand Mills, the corporate guarantee could be invoked, the claim of the respondent based on Section 17 of the Registration Act, 1908 and the provisions of the Indian Stamp Act that for want of registration of the assignment deed, the petition could not be maintained, deserves to be rejected. In the circumstances, the question of payment of differential duty also does not arise for consideration. 79. The objection of the respondent is that when document of sale and assignment were not stamped and registered before this State, any claim based on the sale deed not registered before this State, hence, cannot give rise to a cause. Given the fact that each State has its own different value by way of Stamp Duty, Section 19-A deals with a situation where an instrument duly stamped in one State is brought into another State, which invites higher stamp duty. Section 19-A of the Tamil Nadu Amendment Act prescribes the following provisions: “19-A Payment of duty on certain instruments liable to increased duty under Section3-Where any instrument has become chargeable in any part of India other than the State of Tamil Nadu with duty under the stamp law in force in that part and thereafter becomes chargeable with a higher rate of duty in the said State under Section 3- (i) notwithstanding anything contained in section 3, the amount of duty chargeable on such instrument shall be the amounts chargeable on it under schedule I less the amount of duty, if any, already paid on it in that part; (ii) in addition to the stamps, if any, already affixed thereto, such instrument shall be stamped with the stamps necessary for the payment of the amount of duty chargeable on it under clause (i) in the same manner and at the same time and by the same persons as though such instrument were an instrument received in India for the first time at the time when it became chargeable with the higher duty; and (iii) the provisions contained in clause (b) or clause (c) as the case may be, of the proviso to sub-section (3) of section 32 shall, with the necessary modifications, apply to such instrument, but the provisions contained in clause (a) of the said proviso shall not apply”. 80. 80. As per Section 19-A of the Indian Stamp Act, when an instrument duly stamped in a State other than Tamil Nadu is brought into this State, where the instrument attracts higher stamp duty, the copy of the instrument, when received in State of Tamil Nadu, is liable to be charged in addition to the stamps already affixed and the instrument shall be stamped with the necessary duty chargeable on it under Schedule I. The difference of duty shall be calculated, having regard to the extent of the property situate in the State of Tamil Nadu and the proportionate consideration or value, or market value of such extent of property. The party liable to pay duty has, to pay the difference in duty within the time allowed by such registering officer. Schedule 5 deals with Stamp Duty on agreement or Memorandum of Agreement relating to sale under Tamil Nadu Amendment Act under Clause I. It deals with land situated within the cities of Madurai, Madras, Coimbatore Corporation and Municipal Towns of Salem and Trichy. 81. We have already noted that the Deed of sale and assignment was executed in the State of Gujarat duly registered therein. Learned senior counsel appearing for the petitioner referred to the decision in 20th Centry Finance Corporation and Another v. State of Maharastra (supra) that considering the nature of the transaction, irrespective of where the securities attached to the debt are situate, the place of execution has to be taken as a criteria for determining the place of registration. Although the said decision deals with Article 366(29-A)(d) of the Constitution with reference to the power of the State to levy sales tax on the transaction of deemed sale, yet the observation of the Apex Court at Para 25 at page 40 is of relevance herein. The said decision is of relevance only to reinforce the contention of the petitioner that irrespective of the location of the NPAs, the State where the transfer and assignment takes place would be the competent State for levy of Stamp Duty and registration and insofar as these Acts do not contemplate any such situation under any of the provisions attracting the charge, the claim of the petitioner merits acceptance. Consequently, the contention of the respondent placing reliance on Section 17 of the Registration Act, 1908 and Section 3 of the Indian Stamp Act, fails. Consequently, the contention of the respondent placing reliance on Section 17 of the Registration Act, 1908 and Section 3 of the Indian Stamp Act, fails. So, too the argument based on Section 120 of the Transfer of Property Act. 82. The contention of the petitioner herein is that the subject matter of a sale and assignment of NPA comprises of several of the loan accounts of different borrowers. The sale and assignment of the NPAs as one single sale had taken place in Gujarat and attracted the necessary stamp duty therein. Considering the peculiar character of these transaction, the value hot apportionable to the NPAs, rightly the duty was charged as per the provisions prevailing therein. 83. As for the contention of the respondent that the deed of assignment had not been charged to duty under the Tamil Nadu Act and registered herein, he pointed out the admitted fact that none of the properties of Dayaanand Mills Ltd. are within the State. The only document executed by the respondent was the corporate guarantee which is merely and undertaking and not related to any part of the property, nor is there a transfer of property to go for registration. Hence, the reliance of the respondent on Section 29 of the Registration Act, 1908 is misplaced. Quite apart, Sections 64 and 65 also have no relevance to the present facts.’ 84. Learned senior counsel appearing for the petitioner referred to the constitution provisions, particularly Entry 44 in List III of 7th Schedule to the Constitution. It provides for power to legislate on “Stamp Duty other than the duties or fees collected by means of judicial stamps, but not including rates of stamp duty.” Read with Article 246 of the Constitution, State can levy stamp duty under Entry 44 in List III of the 7th Schedule of the Constitution and prescribes rates of stamp duty vide Entry 63 in List III of the 7th Schedule to the Constitution. When the security attached to the property of the debtor company are not situate in the State, the guarantee being a floating charge and not attached or charged to any property, the question of attracting duty under the Acts do not arise. 85. For the purpose of considering the issue before this Court, I do not think it is necessary herein to get into the above said submission. 85. For the purpose of considering the issue before this Court, I do not think it is necessary herein to get into the above said submission. It may be noted that as far as the corporate guarantee is concerned, it is not linked to any particular movable or immovable property and it is only a solemn undertaking given by the respondent company to assure payment by the defaulting company and under the stated circumstances, to indemnify the creditor bank in the event of any loss or damage caused by the defaulter and to limit the corporate guarantee to the tune of Rs.6crores, which is a portion of the amount repayable by the borrower to the lender company. It is not the case of the respondent herein that corporate guarantee is identifiable with reference to any of the immovable properties owned by the respondent herein. It is equally not the case of the respondent herein that corporate guarantee is identifiable with reference to any of the immovable properties owned by the respondent herein. It is equally not the case of the respondent that any of the assets of the Dayaanand Mills Limited, which are the subject matter of charge, are located inside the State. In the face of the peculiar nature of this transaction; what was transferred was a financial asset comprising of a number of non-performing assets which in itself contain number of securities. The stamping of the document and the registration, hence, has to go by the place where the document is executed. By the pooling of homogeneous ill liquid assets, the secured creditor transfers the financial assets in favour of a securitisation company, a situation which is not contemplated or provided under any of the Entries in the Schedule to the Indian Stamp Act and the Registration Act, 1908. The sale of financial asset consisting of the number of non-performing assets is for a price which cannot be distributed among the various non-performing assets by any principle of valuation. As already pointed out, the Indian Stamp Act, being a fiscal legislation, has to be construed strictly. If the charge fails to cover a situation and the procedure as regards the assigning of the value, the question of payment of duty does not arise. Consequently, on facts and going by the charging provision of the Act, the contention of the respondent on this aspect fails. If the charge fails to cover a situation and the procedure as regards the assigning of the value, the question of payment of duty does not arise. Consequently, on facts and going by the charging provision of the Act, the contention of the respondent on this aspect fails. This is the situation which the legislature alone can cure and the omission cannot be supplied by the Court. One has to go only by the scope of the charging provision’s as it exists today. Consequently, it is difficult to accept the plea of the respondent that the petitioner has no locus standi to come before this Court to invoke this Court’s jurisdiction. 86. As already pointed out, the guarantee executed by the respondent is a continuing guarantee. The guarantee subsists irrespective of a sale or a mortgage of any of the assets by the borrow from one unit to the other and it is also agreed in the deed of guarantee that no separate consent for each such transfer, release or mortgage of such assets would be necessary in future. The deed of guarantee further undertakes, that the guarantors would be treated as principal debtors to the Lenders in order to give effect to this guarantee. The guarantee thus not fixed to any particular assets, really creates a floating charge as far as the assets of the company are concerned. A corporate guarantee not registered earlier but properly stamped, hence, ensures to the benefit of the assignee of the same right as that of the assignor under the guarantee agreement. Hence, I do not agree with the respondent that for want of registration, the deed of guarantee could not give rise to any cause of action before this Court. As already pointed out, the sale and assignment by ICICI Bank in favour of the petitioner is of fixed assets, which is in the form of finance facilities given to its various customers supported by various financial instruments. In effecting sale of the assignor has assigned his rights over the debt and the securities. In this process, rightly, the document was registered in Gujarat by paying the maximum duty thereon. 87. The deed of guarantee is essentially one which makes the petitioner an unsecured creditor. No specific immovable property referred to therein is offered as a supportive security. In effecting sale of the assignor has assigned his rights over the debt and the securities. In this process, rightly, the document was registered in Gujarat by paying the maximum duty thereon. 87. The deed of guarantee is essentially one which makes the petitioner an unsecured creditor. No specific immovable property referred to therein is offered as a supportive security. Going by the terms of the guarantee agreement, I would only say that the petitioner, as an assignee of the corporate guarantee, is entitled to maintain this petition for winding up. I do not find any impediment in the petition seeking winding up of the respondent company herein. The question of going into section 28 of the Act, or for that matter, Section 19-A of the Indian Stamp Act or Section 17 of the Registration Act, 1908 hence, does not arise at all. Hence, I agree with the petitioner’s stand on the preliminary objection taken by the respondent as to the maintainability of the petition and I hold that the winding up petition is maintainable. 88. Learned counsel for the respondent referred to the Division Bench decision of this Court in C.R.P. (PD) No.1953 of 2008 dated 15.07.2008, Kotak Mahindra Bank Ltd., Egmore, Chennai v. Kothari Industrial Corportion Ltd., Chennai (supra), and submitted that the dispute now raised is a substantial one; the issue has to be gone into by the Debts Recovery Tribunal concerned; and the defence being a substantial one, the winding up petition is not maintainable in law. 89. I do not agree with this submission. It is no doubt true that the Division Bench, of this Court directed, in similar circumstances, the Debt Recovery Tribunal, to decide the question of assignment of the debt in favour of the petitioner herein. However, the said decision does not act as an embargo on this Court’s jurisdiction to consider a question in a petition under Section 433(e) of the Companies Act for winding up. It is seen from the unreported decision ‘that the petitioner herein obtained an assignment deed herein from ICICI Bank in respect of various credit facilities availed by Kothari Industrial Corporation Limited, the borrower. It is seen from the unreported decision ‘that the petitioner herein obtained an assignment deed herein from ICICI Bank in respect of various credit facilities availed by Kothari Industrial Corporation Limited, the borrower. The borrower made a challenge to the assignment deed executed in favour of Kotak Mahindra Bank by ICICI Bank Ltd., It was pointed out that without deciding the interlocutory application, an order was passed by the Appellate Tribunal to dispose of the Original Application within a stipulated period. This Court pointed out that the question of transfer of the mortgaged property by the borrower in violation of the status quo order was not determined by the Debts Recovery Tribunal. At the same time, the issue of substitution of Kotak Mahindra Bank in the place of ICICI Bank was also not decided and that the transfer question can be decided only after deciding the issue on claims of Kotak Mahindra Bank in the place of the original Lender. In the circumstance, this Court sets aside the appellate order passed and remitted the matter for fresh determination regarding the substitution of Kotak Mahindra Bank in the place of ICICI Bank and thereafter to decide the legality and propriety of the transfer of the mortgaged property. 90. As far the company is concerned, the only question that we need to look in a winding up petition is as to whether there exists any debt due and payable by the debtor company and if so, whether the defence raised by the respondent company in the petition is a bona fide one apart from it being a substantial one or not. 91. In considering the maintainability of the petition under Section 43 of the Companies Act, this Court is bound to go into the question of assignment deed and sale relating to the right of the petitioner. Once this Court holds that the petition is maintainable, then arises the question as to the merits of the petition under Section 433 of the Act. Therefore, the question posed before this Court involves two stages, one as to the validity of the assignment deed; secondly the claim for winding up. The substantial character of a defence as an issue for consideration relates to the second part viz., the merits of Section 433(e) petition. Therefore, the question posed before this Court involves two stages, one as to the validity of the assignment deed; secondly the claim for winding up. The substantial character of a defence as an issue for consideration relates to the second part viz., the merits of Section 433(e) petition. Hence, the jurisdiction, as such, has to be considered as to the very maintainability of the petition and not by way of a defence that a debtor can take in the proceedings under Section 433 of the Act. I have already considered the right of the petitioner to maintain a petition as an assignee under the deed of corporate guarantee. Under the corporate guarantee, when the respondent had parted with money in partial satisfaction of the claim made by the creditor bank, thereby admitted its liability, I do not find any impediment in this Court going into the question of maintainability of the petition by an assignee, as a creditor, by reason of the right of a creditor assigned under the corporate guarantee agreement. The decisions cited by the learned counsel for the respondent, hence, do not stand in the way of this Court considering the question of assignment and it is not necessary for this Court to wait for a decision from the Debts Recovery Tribunal. The Division Bench decision of this Court, hence, has to be seen in the background of the facts projected there in and does not tie the hands of this Court from rendering a decision on this. 92. In the light of the view thus expressed, I hold that the winding up proceedings are maintainable both by reason of assignment as well as independent of the same, by the very terms of the corporate guarantee agreement executed by the respondent. 93. Learned senior counsel appearing for the petitioner relied on a decision in Maharashtra State Electricity board v. Official Liquidator, High Court, Ernakulam 53 Company Cases 248 on the effect of an unconditional bank guarantee given on behalf of the company in a winding up proceedings, wherein, the Supreme Court held that the liability of the guarantor Bank to pay on demand is an independent transaction and that the company Court cannot prohibit realization of the guarantee amount. Learned counsel also referred to the decisions In re U.P. Roofing Co. Learned counsel also referred to the decisions In re U.P. Roofing Co. Ltd. (in liquidation 91 company cases 831; United Bank of India v. Modern Stores (India) Ltd. 69 Company Cases 697 apart from B.O.I. Finance Ltd., v. Custodian AIR 1997 Sc 1952 as to the severability of the contract to show the independent character of the guarantee agreement to maintain the winding up proceedings. I agree with the submission of the learned senior counsel on this issue that going by the very terms of the guarantee agreement, the present petition is maintainable by the petitioner. 94. For the reasons already referred to in the preceding paragraphs as to the right of the petitioner under the terms of the agreement, it is not necessary for me to go into the details of these decision, since the principle given therein are already taken note of while coming to the conclusion. 95. This takes us to the merits of the contention as to the main Company Petition. Learned counsel for the respondent pointed out that considering the fact that the guarantee itself is not backed up by necessary sanction from the shareholders, the guarantee given is void. Consequently, the allegation as to the inability to make the payment is totally unsustainable. Producing the minutes of the meeting of the shareholders, learned senior counsel pointed out that the said topic corporate guarantee was never placed before the shareholders for their approval. Consequently, when there is no approval as required under the provisions of the companies Act under Section 265, the corporate guarantee executed under the resolution of the directors by the company will not bind the company. Consequently, the petition is not maintainable. 96. I do not agree with the line of reasoning of the respondent. If, for reasons best known to the Directors of the Company, the guarantee executed by the company as per the resolution of the Board was not placed before the shareholders, the Director privy to the decision cannot now seek shelter under this lapse to save their skin. 97. It may be seen that in the letter dated 20.12.2001 addressed by ICICI to the respondent herein, ICICI agreed for the sale of Waterfall Estates subject to the company paying Rs.25 million to ICICI as part payment towards the dues of Dayaanand Mills before 312. 97. It may be seen that in the letter dated 20.12.2001 addressed by ICICI to the respondent herein, ICICI agreed for the sale of Waterfall Estates subject to the company paying Rs.25 million to ICICI as part payment towards the dues of Dayaanand Mills before 312. 2001 and the respondent executing an unconditional corporate guarantee to secure the payment of the balance dues of Dayaanand Mills Ltd. to ICICI in the form and manner satisfactory to ICICI. The letter also stipulates that the respondent shall undertake not to sell or create any mortgage/security in respect of assets pertaining to Glendale Estate, Brooklands Estate, Adderley Estate, till the settlement of Dayaanand Mills Ltd.’s dues. The corporate guarantee was executed on 212. 2001. 98. The person in key management is stated to be Pradip D. Kothari. It is seen from the Board Resolution dated 210. 2001 of the respondent that Pradip D. Kothari, Chairman and Managing Director and P.G. Daftary, Director were authorised to furnish necessary corporate guarantee in favour of ICICI Bank in connection with the dues to Dayaanand Mills Limited under the OTS Scheme and the common seal of the company wherever to be affixed to the corporate guarantee and other documents required to be executed under the common seal. It also reads that the document shall be countersigned by the Executive Director or Vice President-Finance or Vice President & Company Secretary. A series of documents produced before this court shows that there was an application of mind while passing is resolution authorising the Managing Director and the Director to execute the corporate guarantee carrying the seal of the company. 99. The letter written by the company dated 212. 2001 refers to the execution of the corporate guarantee and sought for the return of the personal guarantee of the Managing Director Pradip D. Kothari. In the letter written on 20.01.2001, the respondent company stated: “We hereby agree and undertake to issue the said Corporate Guarantee in your favour on or before 28.02.2001 in a form and manner satisfactory to you. In the letter written on 20.01.2001, the respondent company stated: “We hereby agree and undertake to issue the said Corporate Guarantee in your favour on or before 28.02.2001 in a form and manner satisfactory to you. We further agree that we shall not request for release of title deeds other than Waterfall Estates, which are deposited with you as security for the Various financial assistance availed by the company from you, pending our furnishing the Corporate Guarantee to secure the Loan availed by the Borrower.” This is followed by a letter dated 28.02.2001 excluding the Board resolution dated 23.02.2001. The resolution copy dated 210. 2001 reads as follows: “Resolved to furnish necessary Corporate Guarantee to ICICI Limited, subject to the approval of the share holders of the company for the sum as may be agreed to. by ICICI Ltd., tender the One Time Settlement (OTS) now being negotiated with them by Messrs Dayaanarid Mills Ltd., (DML) for the financial assistance availed by DML.” “Resolved Further That Mr. Pradip D. Kothari, Chairman and Managing Director and Mr. P.G. Daftary, Director be and are hereby severally authorized to agree to furnish necessary Corporate Guarantee for such sum as may be mutually agreed to and that Mr. Pradip D. Kothari, Chairman and Managing Director and Mr. P.G. Daftary, Director be and are hereby severally authorized to execute the Corporate Guarantee and such other documents in favour of ICICI as may be required in connection with the dues of DML under the OTS and that the Common Seal of the Company, wherever required be affixed in the Corporate Guarantee and such other documents as are required to be executed under the Common Seal, in the presence of any one of the aforesaid Directors who shall sign the same and the same be countersigned by Mr. S. Ramabadran, Executive Director or Mr. S. Sundaresan, Vice-President-Finance or Mr. A. Rubandhas, Vice President & Company Secretary”. “Resolved further that a certified copy of the foregoing resolution be furnished to ICICI Ltd., for their records.” On 212. 2001, the respondent company further reiterated this resolution and executed the corporate guarantee. 100. The 32nd Annual Report of the Directors referred to the sale of certain assets as part of the restructuring exercise to mop up resources, the notes on the account pertaining to 31.03.2002 refers to the disposal of the Waterfall Tea Estate. 2001, the respondent company further reiterated this resolution and executed the corporate guarantee. 100. The 32nd Annual Report of the Directors referred to the sale of certain assets as part of the restructuring exercise to mop up resources, the notes on the account pertaining to 31.03.2002 refers to the disposal of the Waterfall Tea Estate. The respondent also refers to Dayaanand Mills Ltd., the associate company with whom transactions had taken place during the year. 101. The audit note on the balance sheet for the year ending 31.03.2005 also refers to the outstanding guarantee given on behalf of the other company at Rs.820lakhs. It is relevant to note herein that Pradip D. Kothari was disqualified as on 33. 2002 from being reappointed as a Director in terms of Section 274(1)(g) of the Companies Act. Yet, the balance sheets produced, reveal the name of Pradip D. Kothari as the Chairman and Managing Director. 102. The balance Sheet of the year ending 33. 2002, refers to the financial position not being improved even after carrying out certain re-construction exercise. The report on corporate governance shows that even though the audit committee was constituted in the year 1988 to review the financial statements and pre-publication announcement before submission to the Board, yet, as evident from the balance sheet as on 33. 2002, the same had been passed by the Board even without the audit committee. In fact, it status that in the absence of the audit committee, accounts have been directly approved by the Board. Even in the note relating to 2001-2002, the report of the Auditors referred to the absence of the Auditors referred to the absence of the Audit Committee. The audit note refers to the outstanding guarantee including the guarantee given on behalf of a subsidiary to the extent of Rs.100lakhs. The total guaranteed amount as on 33. 2001 was Rs.599.06lakhs and on 33. 2002, at Rs.501.45 lakhs. 103. The balance sheet of the year ending 2005-06 shows a huge loss and the balance sheet for this year was placed before the 36th Annual General Body Meeting scheduled to be held on 24. 2008. This is long after the filing of the petition. 2001 was Rs.599.06lakhs and on 33. 2002, at Rs.501.45 lakhs. 103. The balance sheet of the year ending 2005-06 shows a huge loss and the balance sheet for this year was placed before the 36th Annual General Body Meeting scheduled to be held on 24. 2008. This is long after the filing of the petition. The report of the Auditors shows that the company has not complied with most of the requirements of Clause 49 of the SEBI Regulations and the Companies Act as to the timely preparation and publication of the quarterly /final accounts. The company has not given effect to some of the decrees obtained regarding disputed share allotment. The company has not submitted the corporate governance report and management discussion and analysis report. The Annexure to the report also shows that the company has not deposited or regularly deposited with appropriate authorities, the undisputed statutory dues, including Provident fund, investor education and protection fund, employees’ state insurance, Income Tax, sales tax, wealth tax. Customs duty excisse duty, cess and other Statutory dues applicable to it. The company has not complied with the provision of Section 58-AA of the Companies Act and Companies (Acceptance of Deposit) Rules, 1975 with regard to the deposits accepted from the public in prior years and matured deposits of Rs.74.31lakhs remain unpaid. There was no internal audit system commensurate with the size and nature of business, including the Granite Division. 104. The balance sheet of the year 2006-07 is also stated to have been placed before the Annual General Meeting held on 24. 2008. Here too, the report of the Auditors is no different. The defaults maintained in the earlier year continues here too, the report of the Auditors is no different. The defaults maintained in the earlier year continues here too. The liabilities as on 33. 2007 is nearly Rs.4526.29lakhs. It also records that the fertilizer factory was not functioning and there was no production during the year. 105. The latest 38th Annual Report 2007-2008 shows that the company has not complied with most of the requirements of SEBI Regulations and Companies Act. The company has not paid its loans to the financial institution and Banks and even the matured fixed deposits for a period exceeding three years. The position remains the same right from 2001-2002. The default on the deposit of remittances of the statutory dues continues even during the period. The company has not paid its loans to the financial institution and Banks and even the matured fixed deposits for a period exceeding three years. The position remains the same right from 2001-2002. The default on the deposit of remittances of the statutory dues continues even during the period. The company has not complied with the provision of the SICA Act. The Chartered Accountants also observed that the accumulated losses are more that the accumulated looses are more than its met worth as t the end of the financial year. The balance sheet was signed by Pradip D. Kothari, Chairman and Managing Director, who was disqualified even earlier. In the note, the Chartered Accountant also refers to the outstanding guarantee given on behalf of the other companies at Rs.377lakhs as on 33. 2008 as against Rs.487lakhs as on 33. 2007. It is relevant to point out that although this Court sought for the details of the guarantees given, as seen from the balance sheet of the year 2002 to the latest one, no details are furnished before this Court in support of the contentions taken by the respondent as regards the binding character of the corporate guarantee. 106. Leaned senior counsel appearing for the respondent pointed out that the allegation as to the inability to pay the debts as of today is falsified by the fact that the company is making profit these years, and in fact, is doing business. Consequently, the allegation as to commercial insolvency cannot be sustained. 107. I had already considered the issue of Indoor Management in the preceding paragraph. Hence, having acted on the corporate guarantee given and the fact that the guarantee is given in accordance with the provisions of the Act and Its Article, it is not possible to accept the plea of the respondent that it is a valid defence and a issue which has to be tested only in a Civil Court in a proper trial. It is also relevant to note that furnishing of corporate guarantee has already been reflected in the balance sheet of the respondent company of the year 2004-05. It is also relevant of note that the accounts of the company for the financial years 2002-03 and 2003-04 had not yet been adopted, even as on the date of preparation of the balance sheet for the year 2004-05 by the shareholders of the company. It is also relevant of note that the accounts of the company for the financial years 2002-03 and 2003-04 had not yet been adopted, even as on the date of preparation of the balance sheet for the year 2004-05 by the shareholders of the company. It is also not denied by the respondent company as to the above-said facts. The report of the Chartered Accountants dated 03.09.2005 is apparently placed before the 35th Annual General Meeting of the company. 108. I had already considered the issue of the Doctrine of Indoor Management and the conduct of the company in the preceding paragraphs. The respondent is bound by the guarantee issued and the company having executed its guarantee cannot now wriggle out of its responsibilities on the defence, which is not substantial that the resolution of the Board was not approved by the shareholders. 109. Learned counsel appearing for the respondent pointed out that when the petitioner has already recovered round Rs.25lakhs under the winding up proceedings of Dayaanand Mills Limited, it is not now open to them to Come before this Court by way of winding up of the respondent pointed out that once the OTS Scheme failed, it is not open to the petitioner to enforce the claim under the corporate guarantee given. 110. As already pointed out, the terms of/the guarantee agreement stipulates that irrespective of any winding up winding up proceedings as against the principal borrower, the petitioner is entitled to proceed against the guarantee furnished by the respondent. Incidentally, it may be noted-that after the release of title deeds relating to Water Falls Estate, ICICI Bank agreed for sale of the same subject to payment of Rs.25lakhs on an irrevocable and unconditional corporate guarantee to ICICI Bank to secure payment of the balance due from Dayaanand Mills Limited to ICICI Bank. It was also stipulated that the company should undertake not to seek release of mortgage of the remaining assets including the assets belonging to Glendale Estate, Brooklands Estate and Adderley Estate, which were transferred to the subsidiary companies, This is in violation of the undertaking sought for earlier. It is also seen from the letter dated 212. 2001 that the corporate guarantee was executed in substitution of the personal guarantee dated 02.07.1997 executed by; Pradip D. Kothari. It is also seen from the letter dated 212. 2001 that the corporate guarantee was executed in substitution of the personal guarantee dated 02.07.1997 executed by; Pradip D. Kothari. The said letter addressed by the respondent also contained a copy of the resolution passed at the meeting of the Board of Directors held on 210. 2001. They sought for return of the personal guarantee given by Pradip D. Kothari dated 02.07.1987. 111. Learned senior counsel appearing for the petitioner pointed out that the embargo on the Said Pradip D. Kothari from acting as a Managing Director continues; yet, the name a Pradip D. Kothari as Chairman and Managing Director continues to be disclosed so in to disclosed so in the notes for the year ending 31.03.2002. In the face of the irregularities committed and the huge losses, learned senior counsel appearing for the petitioner pointed out that it is clear that the company has no wherewithal to make any payment or to meet the claims of any of its creditors. 112. The respondent took an objection that Dayaanand Mills Ltd. was wound up by/this Court on 26.09.2001 in C.P. No.277 of 1998. Hence, any OTS entered into by the defaulting company is bad in law. Consequently, the guarantee executed by the respondent company has no legal sanction. I do not agree with this submission considering the fact that the respondent company as well as Dayaanand Mills, the group concern of the respondent company are well aware of the winding up proceedings, yet, de hors the winding up proceedings, if the debtor company had chose to reach a settlement with the creditor in respect of which the respondent had given a guarantee assuring compliance of the settlement, and further if the terms of the guarantee executed by the respondent cover a situation of a winding up of the debtor company, the defence now taken is totally incorrect and is only an attempt in desperation to wriggle out of its commitment. The stand of the respondent company that the guarantee was signed by a person without authority also cannot be accepted, going by the various letters written by the signatory to the guarantee agreement. Having thus received the benefit of releasing the personal guarantee of the Director and the properties of the company, it is now too late for the respondent to take shelter under the abovesaid defences which are not available. Having thus received the benefit of releasing the personal guarantee of the Director and the properties of the company, it is now too late for the respondent to take shelter under the abovesaid defences which are not available. The conduct of the respondent company in this regard clearly shows the anxiety of the respondent company to come out of its liability. Consequently, I reject the submission of the respondent and hold that the guarantee furnished is binding on the respondent and is legally enforceable by the petitioner. 113. In reply, learned senior counsel appearing for the respondent pointed out that already they have entered into a series of discussions and arrangement with other creditors that in the face of the proceedings now initiated to settle the various other creditor, the present proceedings would only cause serious prejudice to the number of shareholders, who are there throughout the country. He further pointed out that there are quite a number of/workers whose livelihood would be offended by the winding up proceedings. Learned senior counsel appearing for the respondent pointed out that the allegation as to the inability to pay the debts as of today is falsified by the fact that the company is making profit these years and in fact, is doing business. Consequently, the allegation as to the commercial insolvency cannot be sustained. Hence, keeping in mind the prejudice that are likely to be caused to the respondent by a notification, learned counsel pointed out that the winding up proceedings ought not to be ordered herein. 114. As rightly pointed out by the learned senior counsel appearing for the petitioner, a perusal of the balance sheets, right from 2001-2002 to the latest produced before this Court for the year 2007-08 show that the company has been facing huge loss throughout these years with no reduction so far seen. The assets do not go anywhere near the liabilities. Contrary to the constitution of the company, as of today, admittedly, no manufacturing activity is there. Except for some trading activity by missing the fertilizer and selling the same, the respondent is not making any profit to meet its liabilities as of today. The assets do not go anywhere near the liabilities. Contrary to the constitution of the company, as of today, admittedly, no manufacturing activity is there. Except for some trading activity by missing the fertilizer and selling the same, the respondent is not making any profit to meet its liabilities as of today. The claim that the process of settlement of the various claims of the creditors is on the run also cannot be accepted, considering the notice issued under Section 13(2) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, in the notice dated 14.09.2008 from Bank of Baroda. A perusal of the loan amount due as of today speaks about the financial status of the company and its ability to meet the demands. In the background of these facts, the question of winding up under just and equitable clause arises for consideration. 115. The scope of Section 433(e) and (f) has come up for consideration before the Honourable Supreme Court in a number of cases. In the decision in Madhusudan Gordhandas Co. v. Madhu woolen Industries (p) Ltd, 42 company Cases 125, the Apex Court considered the parameters to be considered while dealing with the petition on winding up of a company. Interpreting the phrase “unable to pay its creditor” found in Section 433(e) of the Companies Act, the Supreme Court, in the said decision, pointed out: “Two rules are well settled. First, if the debt is bona fide disputed and the defence is a substantial one, the Court will not wind up the company……… 21. Where the debt is undisputed the Court will not act upon a defence that the company has the ability to pay the debt but the company chooses not to pay that particular debt, see Re.A Company. Where however there is no doubt that the company owes the creditor a debt entitling him to a winding up order but the exact amount of the debt is disputed the Court will make a winding up order without requiring the creditor to quantify the debt precisely. Where however there is no doubt that the company owes the creditor a debt entitling him to a winding up order but the exact amount of the debt is disputed the Court will make a winding up order without requiring the creditor to quantify the debt precisely. See Re Tweeds Garages Ltd. The Principles on which the Court acts are first that the defence of the company is in good faith and one of substance, secondly, the defence is likely to succeed in point of law and thirdly the company adduces Prima facie proof of the fact on which the defence depends. 22. Another rule which the Court follows is that if there is opposition to the making of the winding up order by the creditors the Court will consider their wishes and may decline to make the winding up order. Under Section 557 of the Companies Act, 1956 in all matters relating to the winding up of the company the Court may ascertain the wishes of the creditors. The wishes of the shareholders are also considered though perhaps the Court may attach greater weight to the views of the creditors. The law on this point is stated in Palmer’s Company Law 21st Edn. P. 742 as follows: “This right to a winding up order is, however, qualified by another rule Viz. that the Court will regard the wishes of the majority in value of the creditors, and if, for some good reason, they object to a winding up order, the Court in its discretion may refuse the order”. The wishes of the creditors will however be tested by the court on the grounds as to whether there are matter which should be inquired into and investigated if a winding up order is made. It is also well settled that a winding up order will not be made on a creditor’s petition if it would not benefit him or the company’s creditors generally. The grounds furnished by the creditors opposing the winding up will have an important bearing on the reasonableness of the case, See Re P. and J. Wacrae Ltd.” 116. In the decision Tata Iron & Steel Co. v. Micro Forge (India) Ltd. (2001) 104 CC 533, the Gujarat High Court listed various aspects exhaustively which need to be kept in mind while considering the petition for winding up. The Gujarat High Court pointed but: “20. In the decision Tata Iron & Steel Co. v. Micro Forge (India) Ltd. (2001) 104 CC 533, the Gujarat High Court listed various aspects exhaustively which need to be kept in mind while considering the petition for winding up. The Gujarat High Court pointed but: “20. Certain important chronicles and contours to be kept in the mental radar, before reaching the conclusion in a winding up petition can be articulated as under: (1) The remedy under Section 433 in general and under clause (e) in particular is not a matter of right; as such, and it is the discretion of the company Court. It does not confer any right on any person to seek order that the company should be wounded up. It is a provision empowering the Court by a statutory provision to pass an order of winding up in an appropriate case. (2) Merely because any one of the circumstances enumerated in Section 433 of the Companies Act exists, the court is not bound to order winding up of the company. Nobody can aspire to wind up the company as a matter of course. The court has wide power and discretion. In this connection, inability to pay debts is required to be judged from various sets of facts and circumstances. It may also be stated that inability to pay debts in all cases ipso facto could not be construed as an appropriate case for winding up. (3) A debt is money which is payable or will be payable in future by reason of a person’s obligation. The expression “debt” would refer to liability to pay and it rests on certain contingencies, conditions and causalities. Even if the debt is proved and even if the inability to pay the debt is also shown, it is not a launching pad, in all cases, for a successful winding up order. Inability may arise for a variety of reasons and the Court is obliged to consider whether the inability is the outcome of any deliberate or designed action or mere temporary shock and effect of economy and market. Inability may arise for a variety of reasons and the Court is obliged to consider whether the inability is the outcome of any deliberate or designed action or mere temporary shock and effect of economy and market. In a given case, it may happen that a party may become unable to pay its debts for a while, but that itself is not a criterion for exercise the power to wind up, ipso facto (4) It is necessary for the company Court to consider the financial status, strength and substratum of the company, in the overall context. It is possible, at times, that there may be cash crunch. It may be also, possible, at times, that there is temporary cash crisis despite high sales and heavy turnover and, therefore, in such a situation, mere disability or only on the ground of inability to pay would not constitute a ground empowering the Court to wind up the company. (5) If the company is an ongoing concern having regular business and employment of employees, the Court cannot remain oblivious to this aspect. The effect of winding up would be of putting an end to the business or an industry or an entrepreneurship and, in-turn, resulting in loss employment to several employees and loss of production and effect on the larger interest of the society. (6) Even dividend declared by the company regularly and having profit in the light of the profit and loss account, though temporarily, there may be inability to pay the debt or in the case of any eventuality, the company is unable to make the payment of dues and that by itself could not be construed as a ground to wind it up. (7) Winding up of a company, as such, is noting but a commercial death or insolvency and, therefore, the company Court is obliged to take into consideration not only the temporary inability, or disability to make the payment of debts, by the entire status and position of the company in the market. (8) When ground on which the winding up order can be denied, up an evaluation of the facts of the case, after admission, exist from the record already placed before the Court, it would be a sound exercise of discretion to reject the petition instead of admitting it. This view is very much celebrated. (8) When ground on which the winding up order can be denied, up an evaluation of the facts of the case, after admission, exist from the record already placed before the Court, it would be a sound exercise of discretion to reject the petition instead of admitting it. This view is very much celebrated. (9) Inability to pay debts in terms of Section 433(e) read the with Section 434(1)(a), demand of the debt would raise a presumption as to inability to pay its debts. But such a presumption is rebuttable. Such a presumption may be rebutted on existing material and that evidence is sufficient depends on the facts and circumstances of the case. (10) If the company has shown considerable growth in a reasonable span and is a growth oriented enterprises, even in a case of temporary inability would not be sufficient to drive it to winding up. (11) Though, ordinarily, an unpaid creditor may aspire for an order of winding up, the “ex debito justitiae” rule is not of inflexible mandate, but is, as such as matter of discretion of the Court. (12) Section 433 is also indicative of the fact that even if one or more grounds mentioned in Section 433 exist, it is not obligatory for the Court to make an order of winding up. The Court has discretionary power. The Court must in each case exercise its discretion in deciding whether in the circumstances of the case, it would be in the interest of justice to wind up the company. It is a well known rule of prudence that even in a case where indebtedness to the petitioning person an order for winding up where it is satisfied that it would not be in the larger interest of justice to wind up the Company. (13) It is also well settled that a winding up order shall not be made on a creditor’s petition, if it would not benefit him or the company’s creditors in general. (14) The Court is also obliged to consider that it would be in the interest of justice to give the company some time to come out of the momentary financial crisis or any other temporary difficulty as winding up is a measure of last resort. (15) Winding up course cannot be adopted as a recourse to recovery of the debt. (14) The Court is also obliged to consider that it would be in the interest of justice to give the company some time to come out of the momentary financial crisis or any other temporary difficulty as winding up is a measure of last resort. (15) Winding up course cannot be adopted as a recourse to recovery of the debt. (16) The Court must bear in mind one more celebrate principle and consider whether the company has reached a stage where it is curiously and primly and commercially insolvent, that is to say, that assets are such and its existing liabilities are such as to make the Court feel clearly satisfied that current assets would be insufficient to meet the current liabilities, along with other principles.7 (17) It is also necessary to consider whether the respondent-company has become defunct or has closed its business, for quite some time, whether it is commercially insolvent. For the purpose of finding commercial insolvency, a mere look into the financial data is relevant to examine about its soundness. In all matters relating to winding up, the Court may have regard to the wishes of the creditors and contributories and may, if necessary, ascertain their wishes appropriately. If the company is solvent, the wishes of the contributories would carry more weight as they are persons, mainly, interested in the assets. (18) The element of public policy in regard to commercial morality has, likewise, to be taken into account before determining the winding up issue. The Court has also to consider the purpose and policy behind Sections 443 and 557 of the Companies Act (19) Winding up is the last thing the Court would do and not the first thing to do having regard to its impact and consequences. The Court has also to consider the purpose and policy behind Sections 443 and 557 of the Companies Act (19) Winding up is the last thing the Court would do and not the first thing to do having regard to its impact and consequences. Winding up of a company would ensue: (a) closing down of a company which is engaged in production or manufacture or which provides some services; (b) it would throw out of employment numerous persons and result in gross hardship to the members of families of the employees; (c) loss of revenue to the State by way of collection of taxes which otherwise should have been collected, on account of customs, excise duties, sale tax, income-tax, etc.; (d) scarcity of goods and diminishing employment opportunities; (20) A winding up petition has to be subjected in the prescribed form highlighting the facts and emphasising the inability the company to pay its debts. The form subscribed under the companies (Court) Rules, clearly, indicates that the petitioner should, provide all the necessary materials particulars. The petitioner is obliged show that the financial status or the monetary substratum or the commercial viability of the company has gone so low and down that winding up is obviously and evidence unavoidable. (21) It is a settled proposition of law that winding up petition is not a legitimate means of seeking to enforce the payment a debt which is disputed by the company bone fide. A winding up petition ought not to be aimed at pressurising the company pay the money. Such an attempt would nothing but tantamount to blackmailing stigmatizing the concerned company abusing the process of the Court. (22) A winding up petition is not an appropriate mode enforcing bona fide disputes debts and it is nothing but misuse and abuse of the process of the Court. (23) A winding up petition is not an alternative form for resolving the debt dispute. It certain cases disputes are such that they are fit for resolving through the civil Court rather than through the company Court. (24) What is bona fide and what is not is a question of fact. The expression “bona fide” would mean genuine, in good faith and when a dispute is based on substantial grounds or when a defence is probable and with some substance, it is a bona fide dispute. (24) What is bona fide and what is not is a question of fact. The expression “bona fide” would mean genuine, in good faith and when a dispute is based on substantial grounds or when a defence is probable and with some substance, it is a bona fide dispute. It must be strictly noted that a winding up petition is not an alternative to a civil suit.” 117. The decision relied on by the respondent, in the circumstances, do not advance their case any further to reject the plea of the petitioner herein. Going by the balance sheet, it is clear the company is plainly and commercially insolvent. The assets of the company are so decomposed that considering the number of creditors remaining unpaid, which includes the statutory liabilities under the various enactments and having regard to the conduct of business restricted to mere trading, I do not and any merit in the contention of the respondent that the case does not call for winding up. 118. It is no doubt true that the entries in the balance sheet indicating losses, by itself, may not be taken as an indication of the financial sickness of the company; yet, the consistent performance as recorded in the balance sheet yearly indicates that the company’s substratum is lost as of today; the profit whatever earned and the trading activity, does not go anywhere near to satisfy the claim of the various creditors, which are long overdue. The respondent has not given any material to show that the company has assets or ability to come out of the financial strain. Admittedly, the trading activity is the only source of business. Even if the object clause of the company authorizes it to carry on many activities but the company carries on business acting to only one of its objects, stoppage of business, amount to failure vide Nagavarpu Krishna Prasad and Another v. Andhra Bank Ltd., 53 Company Cases 73. 119. The respondent: company has not disputed the liability on any prior occasion. The plea is set up for the first time in the counter, which is clearly an after-thought and the defence cannot be held as a bona fide one. In the circumstance, going by the conduct of the respondent and the terms of the corporate guarantee, executed, I do not find the defence a bona fide one, to reject the claim of the petitioner. In the circumstance, going by the conduct of the respondent and the terms of the corporate guarantee, executed, I do not find the defence a bona fide one, to reject the claim of the petitioner. 120. Having regard to the above, I hold the winding up petition is maintainable in terms of the corporate guarantee given by the respondent herein and the assignment and sale in favour of the petitioner herein is legally valid; and in the wake of the terms of the guarantee indicating the respondent undertaking the liability and having regard to the contents of the balance sheet indicating the affairs of the respondent company, and this Court further holding the defence taken by the respondent company cannot be taken as a bona fide defence. In these circumstances, I have no hesitation in ordering winding up of the respondent company by ordering publication. Accordingly, the respondent company is directed to be wound up. (i) Notice on the Court Notice Board. (ii) Notice to the Registrar of Companies, Madras. (iii) Affixure of notice at the premises of the Registered Office of respondent company. (iv) the petitioner is director to publish the order of winding up in one issue of Tamil Daily “Dinamani” and two issues of English Daily “Indian Express” & “The Times of India” (All India Edition) and in the Tamil Nadu Government Gazette. (v) The Official Liquidator, High Court, Madras is appointed to take charge of the assets of the respondent company. The Ex-Directors of the respondent company are directed to file their statement of affairs before the Official Liquidator within a period of 21 days. The petitioner company shall deposit a sum of Rs.20,000/- (Rupees Twenty thousand only) towards initial expenses before the Official Liquidator in this matter. Consequently, all the connected company applications are closed.