1992 (3) TMI 300 - HC - Companies Law

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

Summary

Issues:
Winding up petition filed by Rajasthan Financial Corporation against Shree Guru Nanak Oils Private Limited.

Detailed Analysis:
The company petition was admitted and advertised, inviting objections regarding the winding up of Shree Guru Nanak Oils Private Limited. The Rajasthan Financial Corporation opposed the winding up, stating that the company failed to commence business after its incorporation. The auditors' report and profit and loss accounts confirmed the company's inactivity since formation. Legal proceedings were initiated against the directors under the Companies Act due to non-commencement of business. The company had taken a loan from the Rajasthan Financial Corporation, which took possession of the unit and auctioned the premises to recover dues. The petitioner, the sole remaining director, argued that the company should be wound up as per the Companies Act's provisions.

The Rajasthan Financial Corporation contended that the winding-up petition aimed to evade payment of the outstanding loan balance. The corporation highlighted the loan amount, auction proceeds, and the remaining sum due from the company. It argued that the petitioner, also a director, filed the petition to avoid the loan repayment responsibility. The Registrar of Companies supported winding up only if the company could not conduct business activities.

After reviewing the arguments and documents, the court found that the company failed to start operations within a year of incorporation, with business suspended for several years. The Rajasthan Financial Corporation had taken possession of the factory and auctioned it to recover part of the loan. The court dismissed the notion that the petition was filed to avoid loan payment, as efforts to recover the balance amount were not detailed by the corporation. The court deemed the objections baseless, including the contention on petition maintainability, as the petitioner, the sole director, had the right to file for winding up. Consequently, the court allowed the petition and ordered the winding up of Shree Guru Nanak Oils Private Limited, appointing the official liquidator as the liquidator of the company. The winding-up order was to be published as per legal requirements.