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2010 DIGILAW 15 (MP)

SUNGRACE FINVEST PVT. LTD v. MAIKAAL FIBRES LTD

2010-01-06

SHANTANU KEMKAR

body2010
Judgment Shantanu Kemkar, J. ( 1. ) This order shall also govern disposal of Company Petition No. 12/2005 and Company Petition No. 15/2005. ( 2. ) This petition has been filed under Section 433 (e) of the Companies Act, 1956 (for short the Act) seeking winding up of the respondent Company. ( 3. ) In Company petition no.8/2005 averments have been made that the respondent Company is indebted to the petitioner Company for a sum of Rs.83,07,021/- which includes principal amount as on 31.03.2004 to the tune of Rs.68,80,085/- amount of tax deducted at source Rs.2,58,736/-, interest @ 20% from 01.04.2004 to 31.01.2005 to the tune of Rs.11,68,200/-. In Company Petition No. 12/2005 it has been averred that Rs.33,08,836/- is due to the petitioner Company from the respondent Company out of which towards principal amount due is Rs.27,48,125/- towards interest from 01.04.2005 to 15.02.2005 to the tune of Rs.66,349/- is due and towards further interest from 16.02.2005 till 30.07.2005 to the tune of Rs.1,94,362/- is due. In Company Petition No, 15/2005 the due amount to be recovered from the respondent Company by the petitioner Company is averred to be to the extent Rs.5,57,71,017/- with interest @ 15% per annum. ( 4. ) The Company Petition No.8/2005 being the first amongst all the three Company petitions, the order is being passed in Company Petition No. 8/2005 which will govern the other Company petitions. ( 5. ) It has been averred by the petitioner that the respondent Company has become commercially insolvent and is unable to pay its debts. A legal notice of demand was served upon the respondent Company but even after the expiry of statutory period the debts have not been paid. According to the petitioner the financial position of the respondent company is such that the company is unable to meet its current liabilities and pay its debts. The liabilities of the company far exceeds its assets. It has been averred that the company has lost its commercial substratum in view of Annual Reports of the respondent company for the period 2000 to 2004. ( 6. ) The respondent company has filed reply to the petition and denied the averments made in the petition. It has been stated that the prayer for seeking winding up is to exert pressure upon the company to enforce payment of debts. ( 6. ) The respondent company has filed reply to the petition and denied the averments made in the petition. It has been stated that the prayer for seeking winding up is to exert pressure upon the company to enforce payment of debts. In the additional reply filed by the respondent company, it has been stated that prior to the filing of the winding up petition talks and negotiations were going on between the petitioner and the respondent company regarding the actual quantum of the liability of respondent company, the mode of repayment and also about ways of sorting out the differences between the parties. It has also been stated that the respondent company has all the intentions to repay the undisputed amount of debts to its unsecured creditors in a phased manner. ( 7. ) Intervention application has been filed by Maikaal Fibres Shramik Sangathan, Bheelgaon in which it has been stated that the members of the intervenor Sangathan are employees of the company. They and the members of their family are dependent upon the company and if the company is wound they will starve as there are no prospect of employment in the neighbouring areas. ( 8. ) Heard learned counsel for the parties and perused the record. ( 9. ) It has been argued on behalf of the petitioner that the respondent company has not paid its dues in spite of demand being raised. Pointing out to the statement made by the respondent company in the additional reply that undisputed amount shall be paid to the petitioner company in a phased manner it has been argued that in spite of the said stand being taken in the additional reply till date no amount has been paid by the respondent company to the petitioner. In the circumstances, according to the learned counsel for the petitioner, the act of the respondent company clearly establishes that the respondent company is unable to pay its debts and as such the respondent company be ordered to be wound up invoking provision of Section 433 (e) of the Act. Reliance has been placed on the judgment of the Supreme Court in the case of M/s Madhusudan Gordhandas and Co. Vs. Madhu Woollen Industries Pvt. Ltd. [ AIR 1971 SC 2600 ]. ( 10. Reliance has been placed on the judgment of the Supreme Court in the case of M/s Madhusudan Gordhandas and Co. Vs. Madhu Woollen Industries Pvt. Ltd. [ AIR 1971 SC 2600 ]. ( 10. ) Shri P.B.S.Nair, learned counsel appearing for the respondent company did not dispute the liability of respondent company to pay debts of the petitioner. He however argued that the petitioner is having alternative remedy of approaching the Civil Court for realisation of its dues. According to him, the petition for winding up of the respondent Company is not a remedy which can be resorted to as of right. In support, he placed reliance on judgment of this Court in the case of Jagdamba Polymeres Ltd. Vs. Neo Sack Ltd. (2006) 129 Comp Cases 160 (MP) and judgments of the Supreme Court in the cases of Amalgamated Commercial Traders (P.) Ltd Vs. A.C.K.Krishnaswami and another (1965) 35 Comp. Cases 456, Kiran Sandhu and others Vs. Saraya Sugar Mills Ltd and others 1998 (91) Comp. Cases 146, S.Palaniappan and others Vs. Tirupur Cotton Spinning and Weaving Mills Ltd., 2003 (114) Comp. Cases 288 and National Textiles Workers Union Vs. P.R.Ramakrishnan and others 1983 (53) Comp. Cases 184. ( 11. ) In order to appreciate the controversy in its correct perspective it would be appropriate to firstly deal with the judgments on which reliance has been placed by the learned counsel for the parties. ( 12. ) In the case of M/s Madhusudan Gordhandas and Co. Vs. Madhu Woollen Industries Pvt. Ltd. (supra) the Supreme Court has observed that :- "Where the debt is undisputed the court will not act upon a defence that the company has the ability to pay the debt but the company chooses not to pay that particular debt. Where, however there is no doubt that the company owes the creditor a debt entitling him to a winding up order but the exact amount of the debt is disputed the court will make a winding up order without requiring the creditor to quantify the debt precisely. The principles on which the court acts are first that the defence of the company is in good faith and one of substance, secondly, the defence is likely to succeed in point of law, and thirdly, the company adduces prima facie proof of the facts on which the defence depends". In the case of Jagdamba Polymeres Ltd. Vs. The principles on which the court acts are first that the defence of the company is in good faith and one of substance, secondly, the defence is likely to succeed in point of law, and thirdly, the company adduces prima facie proof of the facts on which the defence depends". In the case of Jagdamba Polymeres Ltd. Vs. Neo Sack Ltd. (supra) it has been held by this Court that :- "A petition for winding up is not a remedy which can be resorted to as of right. In other words, it is always regarded as a discretionary remedy. The company court is not bound to entertain the petition for winding up once filed, nor is it bound to allow winding up even if a case to that effect on facts is made out; it being a settled principle of law relating to winding up that winding up is in the nature of death of a company and puts an end to all its activity for all time to come in future, the court is under legal obligation to see that no running company be pushed into a winding up for one or two defaults. In other words, the effort must be to save the company from being wound up, if the case to that effect is made out on the facts. It is for this purpose and keeping in view this objective, the legislature has enacted sub-section (2) of section 443 which empowers the company court to exercise powers while hearing a petition for winding up. Sub-Section (2) does empower the company court to refuse to make an order of winding up, if it is of an opinion that some other remedy is available to the petitioners and that they are acting unreasonably in seeking to have the company wound up instead of pursuing that other remedy." In Amalgamated Commercial Traders (P) Ltd. Vs. A.C.K. Krishnaswami and another the Supreme Court had held that it is well settled that a winding petition is not a legitimate means of seeking to enforce payment of a debt which is bona fide disputed by the Company. A petition presented ostensibly for a winding up order really to exercise pressure will be dismissed and under circumstances may be stigmatize abuse of the process of the Court. A petition presented ostensibly for a winding up order really to exercise pressure will be dismissed and under circumstances may be stigmatize abuse of the process of the Court. If a debt is bona fide disputed there cannot be neglected to pay within the meaning of Section 434 (1) (a) of the Companies Act, 1956. If there is no neglect the deeming provision does not come into play and the ground of winding up namely that the company is unable to pay its debt is not substantiated. In the case of Kiran Sandhu and others Vs. Saraya Sugar Mills Ltd and others (supra) it has been observed by the Allahabad High Court that a petition filed under Section 433 (f) of the Act has to be considered along with Section 443 (2). In S. Palaniappan and others Vs. Tirupur Cotton Spinning and Weaving Mills Ltd. (supra) the Supreme Court has held that a winding up petition is a remedy of last resort. In V.V. Projects and Investments P. Ltd. Vs. 21st Century Constructions P. Ltd. The Andhra Pradesh High Court has declined to order winding up of the respondent company on the ground that the petitioner had the alternative remedy of approaching the Company Law Board either under Section 397 and 398 or Section 235 for causing investigation by the Central Government. ( 13. ) On a close scrutiny of the law laid down in the aforesaid cases and after going through the pleadings raised by the parties I find in the present case the respondent company did not dispute its liability towards the petitioner to pay the debts. The defence of the Company in the additional reply is that it has all the intentions to repay the undisputed amount of debt to its unsecured creditors but in a phased manner. During the course of the arguments the learned counsel for the respondent fairly accepted the liability of the respondent Company to pay the debts of the petitioner but opposed the relief claimed in the petition on the ground of availability of the alternative remedy to the petitioner for recovery of debts by approaching the civil court. The respondent company has failed to demonstrate as to in what way the amount claimed by the petitioner is disputed. The respondent company has failed to demonstrate as to in what way the amount claimed by the petitioner is disputed. It is also worthwhile to mention that even after lapse of long time no payment of the undisputed amount has been made by the respondent company. In the circumstances I do not find any defence much less a substantial one has been taken by the respondent so that it can be said that it is likely to succeed in point of law. No prima facie proof in regard to the defence or dispute has been brought on record by the respondent company so as to say that the debt is bona fide disputed and the defence is a substantial one. In the circumstances when the petitioner has proved to the satisfaction of this Court that the respondent company is unable to pay its debts, the petitioner cannot be denied the order of winding up of the respondent company by directing it to avail alternative remedy. It is also worthwhile to mention that in other connected company petitions also the respondent company has not raised any defence except to make the payment in the phased manner and about availability of alternative remedy. Thus having regard to the financial position of the respondent company as is clear from the Annual reports and the amount of debts, I am of the view that the respondent Company is unable to pay its debts. ( 14. ) As regards the contention of the intervener in my considered view for the reasons stated by them in the intervention application the petitioners prayer for winding up of the Company cannot be rejected, more particularly when the interest of intervenors can be taken care of at the appropriate stage. ( 15. ) In this view of the matter in terms of the provision contained in Section 433 (e) and 434 of the Act and the law laid down by the Supreme Court in the case of M/s Madhusudan Gordhandas and Co. Vs. ( 15. ) In this view of the matter in terms of the provision contained in Section 433 (e) and 434 of the Act and the law laid down by the Supreme Court in the case of M/s Madhusudan Gordhandas and Co. Vs. Madhu Woollen Industries Pvt. Ltd. (supra) which squarely apply to the present case which is essentially under Section 433 (e) of the Companies Act, in my view it is not a fit case to refuse to make an order of winding up in exercise of powers under Section 443(2) of the Act which is applicable where the petition is presented on the ground that it is just and equitable that the company should be wound up. On the other hand I am of the view that it is a fit case to order winding up of the respondent Company. Accordingly, I order winding up of respondent company in accordance with the provisions of the Act read with Companies (Court) Rules, 1959 (for short the Rules). ( 16. ) Accordingly and with a view to enable this Court to pass a final winding up order as contemplated under Rule 282 of the Rules official liquidator of this Court who becomes a liquidator of the company by virtue of Section 449 of the Act is appointed as liquidator of the company. The Registrar of this Court to take steps as provided under Rule 109 of the Rules so that necessary orders as required under Rule 112 and onwards can be passed by this Court on the next date of hearing. ( 17. ) List on 3.2.2010. Order accordingly.