1994 (12) TMI 275 - HC - Companies Law

Summary

Issues:
1. Petition seeking winding up of a company and appointment of official liquidator.
2. Claim by unsecured creditors against the company following a merger scheme.
3. Dispute over payment obligations post-merger and interpretation of scheme viability.
4. Consideration of provisions under Companies Act, 1956 for winding up.
5. Application of Sick Industrial Companies (Special Provisions) Act, 1985 to legal proceedings.
6. Interpretation of the definition of an "industrial company" under the Sick Industrial Companies Act.

Analysis:
The petitioners, unsecured creditors of a company, sought winding up and appointment of a liquidator due to unpaid debts post a merger scheme. The scheme involved amalgamating the sick company with another entity. The petitioners claimed that liabilities were transferred to the new company as per the scheme, demanding payment. However, the new company argued that the debts were to be settled over a period as part of a package deal, challenging the right of the petitioners to demand immediate payment. The court analyzed the viability clause of the scheme, which projected clearing unsecured creditors' liabilities by 1997-98, emphasizing the need to follow the scheme terms for payment obligations.

The court referred to the Companies Act, 1956, which allows winding up if a company is unable to pay its debts or if it is just and equitable to do so. The respondent company contended that honoring immediate payments to unsecured creditors would disrupt the scheme's implementation, which required gradual payments. The court highlighted that the scheme's viability was based on a package deal approach, necessitating adherence to the specified timeline for debt settlement. The petitioners failed to demonstrate the company's inability to pay debts, especially considering the scheme's structured payment plan.

Regarding the application of the Sick Industrial Companies Act, the court clarified that legal proceedings should be suspended during scheme implementation, but this provision did not apply to the respondent company post-merger. The court dismissed the petition, stating that the petitioners had not proven the company's inability to pay debts and that the liabilities were to be settled as per the scheme's terms over time. Therefore, the court found the petition for winding up not maintainable and ruled in favor of the respondent company, dismissing the petition.