1992 (11) TMI 221 - HC - Companies Law

Summary

Issues Involved:
1. Petition for winding up under sections 433 and 434 of the Companies Act, 1956.
2. Confirmed debt and inability to pay.
3. Agreements and modifications between the parties.
4. Dishonour of cheques and subsequent agreements.
5. Alleged oral agreements and understandings.
6. Bona fide disputes and defences.
7. Commercial insolvency and financial difficulties of the company.
8. Legal principles governing winding up petitions.

Issue-wise Detailed Analysis:

1. Petition for winding up under sections 433 and 434 of the Companies Act, 1956:
The petitioners sought the winding up of Messrs. Rajaram Bandekar (Sirigao) Mines Private Limited on the grounds of insolvency and inability to pay debts. The petition was filed under sections 433 and 434 of the Companies Act, 1956.

2. Confirmed debt and inability to pay:
The petitioners claimed a confirmed debt of Rs. 66 lakhs with compound interest at 19.25% per annum. Despite notice under section 434(1)(a), the debt remained unpaid. The debt arose from financial assistance provided to Bandekar Sons, who failed to repay the loan and liquidated damages as agreed.

3. Agreements and modifications between the parties:
Several agreements were executed between the petitioners and Bandekar Sons, including the original agreement on August 4, 1987, and a modified agreement on August 18, 1987. These agreements involved extraction of iron ore and financial assistance. The agreements were further modified, leading to the confirmed debt of Rs. 66 lakhs.

4. Dishonour of cheques and subsequent agreements:
Cheques issued by Bandekar Sons and the company for repayment of the loan were dishonoured. An agreement dated August 14, 1989, was executed, wherein the company and its directors acknowledged joint and several liability for the debt. The cheques issued under this agreement were also dishonoured.

5. Alleged oral agreements and understandings:
The company contended that there were oral agreements and understandings between the parties, including an agreement to withhold the cheque for Rs. 66 lakhs until certain issues were settled. However, these claims were denied by the petitioners and M.S. Prabhu, an alleged intermediary.

6. Bona fide disputes and defences:
The company argued that the claim was bona fide disputed and that the winding up petition could not be maintained. They contended that the cheque was given as security and not for encashment, and that there were inter se transactions and credits to be adjusted. The court found these defences to lack bona fides and substance.

7. Commercial insolvency and financial difficulties of the company:
The petitioners argued that the company was commercially insolvent, with liabilities exceeding its assets. The court noted that there were several winding up petitions filed against the company, indicating financial difficulties. The company had not filed returns for certain periods, and its cash losses were significant.

8. Legal principles governing winding up petitions:
The court referred to the principles laid down in Madhusudan Gordhandas and Co. v. Madhu Woollen Industries Pvt. Ltd., which require that the defence of the company be in good faith, substantive, and likely to succeed in law. The court found that the company's defence did not meet these criteria and that the debt was undisputed and confirmed.

Conclusion:
The court admitted the petition and ordered the winding up of the company under the provisions of the Companies Act, 1956. The official liquidator was appointed to take charge of the company's property and effects, and advertisements were to follow. The court emphasized that the company's inability to pay the debt, without a bona fide defence, warranted the winding up order.