1992 (1) TMI 272 - HC - Companies Law

Company when deemed unable to pay its debts, Winding up Appointment and powers of provisional liquidator

Issues Involved:
1. Petition for winding up under Section 433(e) and (f) of the Companies Act.
2. Application for deposit or bank guarantee of Rs. 57,39,464.
3. Application for revocation of the order of admission of the winding-up petition.

Issue-wise Detailed Analysis:

1. Petition for Winding Up under Section 433(e) and (f) of the Companies Act:
The petitioner, Sree Aravindh Steel Private Limited, filed Company Petition No. 69 of 1991 under Section 433(e) and (f) read with Sections 434(1)(a) and 439(b) of the Companies Act, 1956, seeking to wind up Trichy Steel Rolling Mills Limited (TSRM) and appoint an official liquidator. The petitioner claimed that TSRM owed Rs. 49,62,101 plus interest for materials supplied and had failed to pay despite statutory notice, resulting in a total claim of Rs. 57,39,464. The petition was admitted on August 2, 1991, and notice was issued to TSRM.

2. Application for Deposit or Bank Guarantee of Rs. 57,39,464:
Pending the main petition, the petitioner filed Company Application No. 1028 of 1991 seeking a court direction for TSRM to deposit Rs. 57,39,464 or furnish a bank guarantee, or alternatively, appoint a provisional liquidator. TSRM countered with Company Application No. 2266 of 1991 to revoke the admission order of the main petition, arguing a larger counter-claim against the petitioner.

3. Application for Revocation of the Order of Admission of the Winding-Up Petition:
TSRM contended that the winding-up petition was an abuse of process, citing a larger counter-claim and reliance on the Supreme Court decision in National Conduits (P.) Ltd. v. S. S. Arora, which outlines three stages of hearing a winding-up petition. TSRM argued the debt was not disputed but claimed a larger amount from the petitioner. The court examined the bona fide nature of TSRM's counter-claim and the alleged abuse of process in filing the winding-up petition.

Detailed Judgment Analysis:

Section 433(e) and (f) Petition:
The court observed that TSRM admitted the debt of Rs. 45,12,420.23 but raised a counter-claim. The court noted that the petitioner had not abused the process of court, and the winding-up petition was not filed with mala fide intentions. TSRM's counter-claim would be examined during the final hearing of the main petition.

Application for Deposit or Bank Guarantee:
The court dismissed the application for appointing a provisional liquidator, considering TSRM's operational status, profits, and employment of over 550 workers. The court found it inequitable to appoint a provisional liquidator, which could cause irreversible damage to TSRM. The court deferred advertisement and hearing of the winding-up petition if TSRM deposited Rs. 30 lakhs or furnished a bank guarantee within one month.

Revocation of Admission Order:
The court dismissed TSRM's application for revocation of the admission order, stating that a bona fide defence cannot be a ground for revoking the admission of a winding-up petition. The court emphasized that the bona fide nature of the counter-claim and other related issues would be decided at the final hearing of the main petition. The court found no abuse of process by the petitioner and upheld the admission of the winding-up petition.

Conclusion:
The court concluded that TSRM's counter-claim and the bona fide nature of disputes would be addressed during the final hearing. The application for revocation of the admission order was dismissed, and the application for appointing a provisional liquidator was also dismissed. The court set a date for the final hearing and provided conditions for deferring advertisement and hearing if TSRM complied with the deposit or bank guarantee requirement.

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