1981 (1) TMI 202 - HC - Companies Law

Summary

Issues Involved:
1. Application for winding-up under Sections 433, 434, and 439 of the Companies Act, 1956.
2. Dispute over the validity and acknowledgment of the loan.
3. Allegation of the loan being fictitious and fraudulent.
4. Defense of limitation and bona fide dispute.
5. Change in management and its implications on the dispute.
6. Compliance with procedural requirements in the winding-up petition.

Issue-wise Detailed Analysis:

1. Application for Winding-Up under Sections 433, 434, and 439 of the Companies Act, 1956:
The petitioning creditor sought the winding-up of the company based on its inability to pay debts. The winding-up petition was presented on June 10, 1970, and admitted on June 16, 1970. The claim arose from a loan of Rs. 3,00,000, secured by a registered mortgage, with the outstanding amount being Rs. 3,99,936.09 inclusive of interest up to December 31, 1969. The company had acknowledged its liability in its balance sheets from 1961-67 and confirmed the debt in writing on June 21, 1968.

2. Dispute Over the Validity and Acknowledgment of the Loan:
The company disputed the loan, alleging no record of such a transaction. The petitioning creditor asserted the loan was a running account, duly reflected in the company's balance sheets. The dispute centered around the acknowledgment of the debt, with the company's director, who had signed the balance sheets, later denying the transaction. The balance sheets and a confirmation letter were presented as evidence of acknowledgment.

3. Allegation of the Loan Being Fictitious and Fraudulent:
The company claimed that the loan was fictitious, created by common directors of both companies under the same management. The petitioning creditor countered this by providing detailed particulars of the loan and repayments, denying any fraudulent creation of the loan. The mortgage deed dated March 17, 1951, was produced, showing the origin of the loan.

4. Defense of Limitation and Bona Fide Dispute:
The company argued that the claim was barred by limitation, as no specific dates of the loan were provided. The petitioning creditor contended that the acknowledgment in the balance sheets and the confirmation letter extended the limitation period. Previous judgments in related stay applications had already addressed and rejected the limitation defense, affirming the acknowledgment of the debt.

5. Change in Management and Its Implications on the Dispute:
The management of the company had changed hands multiple times, with the new management disputing the debt. The court noted that the acknowledgment of the debt in the balance sheets from 1951 to 1967 was unequivocal and binding, regardless of the change in management. The new management's attempt to dispute the debt was seen as unfounded and motivated.

6. Compliance with Procedural Requirements in the Winding-Up Petition:
The company raised technical objections regarding the form and particulars of the winding-up petition. The court held that the petition substantially complied with the required form and that the material facts were sufficiently stated. The court emphasized that the acknowledgment in the balance sheets and other documents provided a clear basis for the petition.

Conclusion:
The court concluded that the company was insolvent and unable to pay its debts. The disputes raised by the company were not bona fide and lacked substance. The acknowledgment of the debt in the balance sheets and the confirmation letter were sufficient to establish the liability. The court ordered the winding-up of the company, appointing the official liquidator to take possession of the company's assets and documents. The petitioning creditors were directed to assist the official liquidator. The request for a stay was refused.