1989 (4) TMI 267 - HC - Companies Law

Winding up - Circumstances in which a company may be wound up, Company when deemed unable to pay its debts

Summary

Issues:
- Application for winding up of the opposite party company under section 439 of the Companies Act, 1956.
- Determination of advances claimed by the petitioners.
- Verification of any payments made by the opposite party.
- Assessment of the opposite party's ability to repay the advanced amounts.
- Consideration of whether winding up of the opposite party company is just and equitable under section 433(f) of the Act.

Analysis:

The petitioners, two companies engaged in the fish business, entered into agreements with the opposite party company for business facilitation and advanced substantial amounts. The opposite party later terminated the agreements, leading to demands for repayment by the petitioners. Despite attempts at settlement, the opposite party failed to refund the advances, prompting the petitioners to file for winding up under the Companies Act, 1956.

Verification of Advances:
- The managing director of the petitioners, PW-1, provided evidence of the advances through agreements and receipts, which remained unchallenged by the opposite party. The court found the statement of PW-1 credible and ruled in favor of the petitioners regarding the advances.

Payments Made by Opposite Party:
- The opposite party did not contest the claim of non-payment or present any evidence to refute the advances. Therefore, the court accepted the petitioners' assertion that the amounts remained unpaid, ruling in their favor on this issue as well.

Ability to Repay:
- The court considered the opposite party's refusal to process goods despite receiving advances, indicating liability for repayment. The lack of opposition or explanation from the opposite party led the court to conclude that the company was unable to pay the dues, justifying the grounds for winding up under section 433(e) of the Act.

Just and Equitable Winding Up:
- Citing legal precedents, the court emphasized the discretionary nature of winding up orders and the need to assess commercial solvency. Given the substantial and undisputed debt, coupled with the opposite party's inability to pay, the court deemed it just and equitable to wind up the company. However, a one-year stay was granted to allow the opposite party time to refund the amount before the winding-up order took effect.

In conclusion, the court allowed the petition for winding up the opposite party company, with a one-year stay on the order to provide an opportunity for repayment. No costs were awarded due to the absence of the opposite party during the proceedings.