Saturday, 31 October 2015

Winding Up Petition CP 143/2015 before Madras High Court - Synopsis until 26/10/2015

A winding up petition is filed by a creditor of the company to whom the company has not made payment of outstanding dues. It is filed under provisions of law of the Companies Act after issuing a statutory winding up notice on the company. If the company is unable to pay the dues, the Court has the power to close the company or have it taken over so that assets can be liquidated to meet payment obligations. This is one of the mechanisms for recovering money due under unpaid fixed deposits.

Three investors out of Chennai filed the said Winding Up Petition in Madras High Court in 2015 for recovery of their fixed deposit principal and interest amounts.

The same came up for hearing in June 2015 where Helios and Matheson expressed that they should be given a chance to repay rather than shut down the company. The Madras High Court issued a temporary order dated 04/06/2015 where:
- Helios and Matheson was permitted to propose a scheme for repayment
- Helios and Matheson officials were given temporary freedom from arrest which had been carried out by EOW covered in this post.
- All other judicial proceedings against Helios and Matheson were stayed because of the omnibus nature of the order.

Helios and Matheson proposed a scheme where:
- Rs. 48.50 crores was identified as the amount payable to depositors
- Repayment was proposed within 3 months to depositors from Tamil Nadu and within 2 years to depositors from outside Tamil Nadu

Scheme was advertised in national and local newspapers. Objections were invited.

A lot of objections were made to the Madras High Court and few investors including myself became part of the proceedings by impleading ourselves as third parties. Objections were mainly:
- Rs. 48.50 crores was incorrect figure and did not include many FD holders and did not include Promissory Note/Bill Discounting holders
- No verifiable list of FD holders was submitted which is prerequisite
- Repayment was proposed in discriminatory manner
- No sources of funds were identified
- No proper security was identified in case of default in repayment under the scheme

After many hearings Helios and Matheson submitted a list of FD holders (Approx Rs. 55 crores) and proposed a fresh scheme for repayment where discrimination between Tamil Nadu and out of Tamil Nadu depositors was removed. However Helios and Matheson did not identify proper sources of funds nor any security.

We moved immediate objections as under:
- List of depositors was incomplete and incorrect as we had information of over 10 crores worth of FDs not being part of the list.
- List did not cover PN/BD investors.
- Sources of funds were not identified. Security was not provided for.
- Helios and Matheson had accepted deposits after April 2014 which is illegal under Companies Act 2013 and which fact it was concealing from the Court and thereby guilt of perjury which is an offence.

Helios and Matheson has not answered the objections properly and is dragging the case. Meanwhile Helios and Matheson moved the Supreme Court in another proceeding covered here where it obtained an order preventing EOW action against Helios and Matheson. However the Supreme Court order specifies that such order will be enjoyed subject to Helios and Matheson depositing Rs. 10 crores as security before Madras High Court by 28/10/2015 and Rs. 38 crores by 1/10/2016.

Currently the case is pending for decision before the Madras High Court and as on date Helios and Matheson has also not complied with the Supreme Court order conditions.