The Hindu : National : Delhi High Court orders winding up of Data Access

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Wednesday, Nov 23, 2005

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National

Delhi High Court orders winding up of Data Access

J. Venkatesan

``Company has liability to parties and is unable to operate''

New Delhi: The Delhi High Court has ordered the winding up of Data Access (India) Ltd. holding that it has huge liability of over Rs.530 crore to various parties and the company is not in a position to undertake its operations and carry on the business. The activities of the company had come to a halt for the last few months. Justice A.K. Sikri passed this order on a winding up petition filed by M/S Pacific Convergence Corporation Ltd. alleging that Data Access was unable to repay the loan of $10 million given in two instalments in 2000.

According to Data Access, the new investors, Cheran Holdings Pvt. Ltd (CHPL) and Ms KCP Associates Holdings (KCPH), purchased the shares from the promoter Sidhartha Ray and his group of companies and SPA Enterprises Pvt. Ltd. through a series of shareholders' agreements. As per these agreements, the new investors agreed to bring in additional funds of Rs.75 crore to tide over the cash crisis. Further, at the request of the new investors, M/S Odyssey Re of the United States agreed to lend funds to the company on certain conditions. However, Mr. Ray did not fulfil his obligations.

The petitioner refuted these allegations as not only factually incorrect but also irrelevant in the present context. In view of the admitted liability, the pleas taken by the company were totally extraneous and deserved to be dismissed.

In his judgment, Justice Sikri said: "There is a plethora of evidence on record to show that U.S. dollars 10 million was the liability of the company towards the petitioner. This liability has been acknowledged in various documents. This liability of other creditors to the tune of Rs.530 crores is also not disputed by the company. It was also stated at the bar [during arguments] that these liabilities have risen to more than Rs.700 crores which was not denied by the company."

The Judge also pointed out that the licence of the company was itself in jeopardy as the two service providers, MTNL and BSNL, have disconnected the points of connection because of which the company was not in a position to undertake operations.

Reluctance

The Judge said the company had not been able to show that it had sufficient assets to meet the existing liabilities. In fact, even Rs.75 crore, which the new management wanted to put in, had been embroiled in controversy and the new investor was showing reluctance to provide these funds. Justice Sikri held that the company was indebted not only to the petitioner but also had huge liability towards other creditors also; there were a spate of winding up petitions filed by these creditors who had refused to agree to the scheme of reconstruction proposed by the company. There were bleak chances of the company's revival, which had no business activity at present, and thus it had lost its substratum as well. Admitting the petition, the Judge said: "Let citations be published in The Statesman (English) and Jansatta (Hindi) for January 17, 2006." He directed the Official Liquidator who was appointed as Provisional Liquidator to take possession of all the assets and records of the company immediately and file his report by the next date of hearing.

In its application, ABN Amro Bank had brought to the notice of the court that Rs.78.45 crore was credited to the company on August 19, 2004, and on the same date it was transferred to CHPL account maintained with the bank. From this amount, CHPL transferred Rs.35.30 crore to Cheran Enterprises, Rs.25 crore to Sporting Pastime India Ltd. (SPIL) and Rs.18.05 crore to KCP Associates Holdings.

These parties as well as Data Access wanted the interim order, dated 17.12.2004 passed by the Court virtually staying the transferred money to the various parties by ABN Amro Bank, Chennai, vacated. These parties in their application made elaborate submissions more or less similar to each other.

The Judge after recording these submissions in detail in his order, however, confirmed the interim order and dismissed the applications of the various parties.

The court directed ABN Amro Bank to recover the monies transferred (Rs.78.45 crore) and remit all the monies to Canara Bank pending final orders to be passed in the company's petition at a later stage.

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