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

THE Delhi High Court has ordered the winding up of Data Access (India) Ltd stating 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 in the last few months. Mr Justice A.K. Sikri passed the order on a petition filed by Pacific Convergence Corporation Ltd alleging that Data Access was unable to repay a loan of $10 million given in two instalments in 2000.

According to Data Access, the new investors, Cheran Holdings Pvt Ltd (CHPL) and KCP Associates Holdings (KCPH), purchased the shares from the promoter Mr 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, Odyssey Re of the US 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.

Plethora of evidence

In his judgment, Mr Justice Sikri said: "There is a plethora of evidence on record to show that $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 crore 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 crore 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, had disconnected the points of connection because of which the company was not in a position to undertake operations. 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, was embroiled in controversy and the new investor was showing reluctance to provide these funds.

Mr Justice Sikri held that the company was indebted not only to the petitioner but had huge liability towards other creditors too; 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 December 17, 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.