Bombay HC free to continue winding up proceedings against Zenith, rules SC

Written by Indu Bhan | Indu Bhan | New Delhi | Updated: Oct 3 2013, 07:36am hrs
With the Supreme Court on Monday rejecting Mumbai-based software firm Zenith Infotechs appeal, the Bombay High Court can go ahead with the publication of a winding-up notification. The Bombay HC has appointed an administrator to take possession of the companys property, books of accounts, and other documents.

Asset management and securities services provider The Bank of New York Mellon, London (BNY Mellon), the trustee holding the bonds in trust for the bondholders, had initiated winding-up proceedings after the company defaulted on payment of $83 million. A bench headed by Justice RM Lodha dismissed as withdrawn the software firms appeal after BNY Mellon rejected Zeniths proposal to clear the outstanding dues to the FCCB bond holders in instalments.

Challenging the appointment of an administrator, Zenith argued that the HC in a winding-up petition can appoint a provisional liquidator, but not an administrator.

It contended that an administrator should not have been appointed as Zenith is not a sick firm but is commercially viable with one thousand employees on its roll.

Zenith Infotech had offered convertible bonds worth $33 million at 3% coupon rate in September 2006, due for repayment or redemption in September 2011. In August 2007, Zenith offered another tranche of convertible bonds worth $50 million at the same coupon rate, due for repayment or redemption in August. As Zenith Infotech defaulted on payment, the bank filed a suit for the recovery of the outstanding dues under the two series of bonds and also a winding-up petition in the HC.

Earlier the HC had restrained Zenith from disposing of, alienating, or transferring its interests in its Cloud Computing Business and other property in Mumbai, pending a suit filed by BNY Mellon for payment on convertible bonds of $33 million and $50 million.