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Issues:
Winding up petition under sections 433(e) and 434 of the Companies Act, 1956 by Syndicate Bank against a company with disputed debts and possession taken over by Karnataka State Financial Corporation. Analysis: The petition filed by Syndicate Bank sought the winding up of the respondent company under sections 433(e) and 434 of the Companies Act, 1956, due to the company's alleged default on loans amounting to Rs. 45,82,566.84. The bank claimed that despite demands and statutory notices, the company failed to repay the outstanding amount. The company's directors were also named as respondents in the petition, with some being served and represented while others remained absent and unrepresented, leading to an ex parte order against them. The respondent company, in its statement of objections, admitted to receiving loan facilities from the bank but disputed the accuracy of the claimed amount. It argued that the company's financial troubles were a result of mismanagement by one of its directors, leading to defaults in payments since May 1982. The company also highlighted that its factory and business premises had been taken over by the Karnataka State Financial Corporation under the State Financial Corporations Act, 1951. The court considered the respondent company's objections but noted that the company's inability to pay its debts was evident from the possession taken over by the Financial Corporation. The court observed that the company lacked the means to pursue its business objectives and had not denied facing legal actions from other creditors. It was established that the respondent company had ceased its business operations and was unable to revive its activities. Regarding the application by the Karnataka State Financial Corporation, the court clarified that the Corporation's possession of assets did not make it a supporting creditor in the winding up proceedings. The court emphasized that the Corporation's rights under the State Financial Corporations Act would be addressed separately. Ultimately, the court ordered the winding up of the respondent company, appointing the official liquidator as the liquidator to take charge of the company's assets not already possessed by the Financial Corporation. The directors' legal rights and obligations, if they had ceased to be directors, would be examined at a later stage. In conclusion, the court directed the petitioner to advertise the winding up order, serve a copy to the Registrar of Companies in Karnataka, and appointed the official liquidator to oversee the winding up process, emphasizing the cooperation required from all accountable officers of the company.
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