1982 (11) TMI 135 - HC - Companies Law

Issues Involved:
1. Petition for winding up under sections 433(e) and (f) and section 434 of the Companies Act, 1956.
2. Indebtedness of the respondent company.
3. Commercial insolvency of the respondent company.
4. Bona fide dispute regarding the liability.
5. Appointment of provisional liquidator.
6. Rehabilitation efforts and viability of the respondent company.
7. Various creditors' claims and their standings.
8. Final decision on winding up the respondent company.

Detailed Analysis:

1. Petition for Winding Up:
The petitioner, M/s. Mukand Iron and Steel Works Ltd., filed a petition under sections 433(e) and (f) and section 434 of the Companies Act, 1956, seeking an order to wind up the respondent company, Karnataka Steel and Wire Products Ltd. The petition was filed on December 15, 1978, and numbered as Company Petition No. 8 of 1979.

2. Indebtedness of the Respondent Company:
It was alleged that the respondent company owed the petitioner Rs. 25,87,532.38 as of June 30, 1978, for the supply of wire rods. The petitioner claimed interest at the rate of 20% per annum from July 1, 1978. The respondent company admitted in correspondence that certain amounts were due, but disputed the exact figures and interest rates.

3. Commercial Insolvency:
The petitioner argued that the respondent company was commercially insolvent, having lost its entire share capital and admitted a loss of Rs. 2,14,81,135.69 as per the balance sheet for the accounting year 1975-76. The respondent company ceased production in June 1975 and failed to pay its debts to secured and unsecured creditors.

4. Bona Fide Dispute:
The respondent company contended that there was a bona fide dispute regarding the liability and that the matter required an elaborate inquiry, which should be conducted in a civil court. However, the court found no tenable defense from the respondent company, as it failed to provide specific evidence disputing the amounts due.

5. Appointment of Provisional Liquidator:
The petitioner filed an application for the appointment of a provisional liquidator. The court appointed the official liquidator as the provisional liquidator on November 28, 1980, with directions to take charge of the company's assets. The provisional liquidator submitted a detailed report, indicating the potential for rehabilitation.

6. Rehabilitation Efforts:
The court explored rehabilitation options by inviting proposals from entrepreneurs. Two feasible schemes were presented but failed to achieve reasonable terms with secured creditors. The respondent company's counsel argued against winding up, citing the company's viability, but the court found no substantial evidence of rehabilitation efforts.

7. Creditors' Claims:
Several creditors, including the State Bank of Mysore, Dena Bank, and the Karnataka State Financial Corporation, filed statements disclosing significant amounts due from the respondent company. Former employees also supported the winding-up petition, claiming arrears of salary under awards from the Labour Court.

8. Final Decision:
The court concluded that the respondent company was unable to pay its debts and was commercially insolvent. Despite opportunities for settlement and rehabilitation, the respondent company failed to utilize them. Consequently, the court directed the winding up of the respondent company and appointed the provisional liquidator as the official liquidator. The court also issued directions for the filing of the statement of affairs and publication of the winding-up order.

Separate Orders:
- Company Application No. 382 of 1982, filed by a director seeking condonation of delay in filing the statement of affairs, was allowed.
- C.A. No. 1764 of 1981, filed by Karnataka Light Metal Industries Ltd., was disposed of separately.

The petitioner was directed to advertise the winding-up order in specified newspapers and file a certified copy with the Registrar of Companies.

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