The Scottish Court of Session considers the interaction of Indian insolvency proceedings for three Scottish Companies that had also been placed into Administration in Scotland.
The Victoria Jute Company Limited ("Victoria"), The Samnuggur Jute Factory Limited ("Samnuggur") and Titaghur plc ("Titaghur") were all incorporated in Scotland, but had been carrying out their business in India.
Upon failing to pay pension contributions required under their employers' pension schemes, each of the three companies became subject to an order issued by the (Indian) Employee's Provident Fund, the effect of which was to seize the companies' entire assets. In addition, various orders were made by the High Court of Kolkata prohibiting Victoria and Samnuggur from dealing with or granting charges over their assets. Titaghur became subject to liquidation proceedings in India, whilst a winding up petition in India is pending against Samnuggur.
Administrators were appointed in respect of Victoria and Samnuggur on 24 October 2011, and in respect of Titaghur on 16 March 2012, on the application of Hooley Limited ("Hooley") as the holder of floating charges.
Shortly after the companies had entered into administration, Hooley agreed to purchase the business and assets of all three companies from the administrator, and entered into various agreements to this effect. Hooley then made an application to the court seeking declaratory orders confirming the dispositions by the Administrators were valid.
However, a creditor of the company opposed Hooley's application for declaratory orders and also attempted to dispute the validity of the floating charges and by consequence the appointment of the Administrators.
Issues for debate
The Court had to consider:
The reason that this third question arose for debate is because of the concept of "modified universalism", the idea that the court has common law power to assist foreign winding up proceedings so far as it properly can. The creditor's argument was that this assistance should extend to refraining from taking any action which might hinder the progress of insolvency proceedings abroad.
In relation to the three points, it was held: