1996 (5) TMI 358 - HC - Companies Law

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

Summary

Issues Involved:
1. Whether the winding-up petition is maintainable due to the statutory notice under section 434(1)(a) not being served on the registered office of the company.
2. Whether the statutory notice served at the branch office fulfills the requirements of section 434(1)(a).
3. Whether the petitioner can rely on section 433(e) and section 434(1)(c) of the Companies Act, 1956, to prove the company's inability to pay its debts despite the defective notice.

Issue-wise Detailed Analysis:

1. Maintainability of the Winding-up Petition:
The primary issue is whether the winding-up petition is maintainable given that the statutory notice under section 434(1)(a) was not served on the registered office of the company at Kanpur. The court examined the facts and determined that the statutory notice was addressed to and served at the branch office in Calcutta, not the registered office in Kanpur. The court held that the statutory fiction under section 434 must be strictly construed and that non-compliance with the requirement to serve the notice at the registered office renders the petition not maintainable.

2. Validity of Notice Served at Branch Office:
The petitioner argued that the lease agreement and subsequent transactions occurred in Calcutta, and the respondent-company had replied to the notice and made part payments, thus fulfilling the object of the notice. However, the court emphasized that section 434(1)(a) explicitly requires the notice to be served at the registered office. The court cited various precedents, including Bukhtiarpur Bihar Light Railway Company Ltd. v. Union of India, Dytron (India) Limited, and others, affirming that service at any place other than the registered office does not comply with the statutory requirements. The court concluded that the notice served at the branch office does not meet the mandatory requirements of section 434(1)(a).

3. Reliance on Section 433(e) and Section 434(1)(c):
The petitioner contended that even if the notice under section 434(1)(a) was invalid, the petition could still be maintained under section 433(e) and section 434(1)(c) by proving the company's inability to pay its debts. The court acknowledged that these provisions are disjunctive and that a creditor can prove the company's inability to pay its debts through other evidence. However, the court noted that the petition lacked the requisite pleadings to substantiate claims under section 433(e) or section 434(1)(c). The court emphasized that the petition primarily relied on the presumption under section 434(1)(a) and did not provide sufficient facts to establish commercial insolvency or the loss of the company's substratum.

Conclusion:
The court found merit in the preliminary objection raised by the respondent-company and held that the winding-up petition is not maintainable due to the failure to serve the statutory notice at the registered office. The petitioner is allowed to serve the required notice afresh at the registered office if so advised. The observations made in this judgment are specific to the present case and do not preclude the petitioner from filing another petition on the merits. Each party is to bear its own costs.