1993 (9) TMI 304 - HC - Companies Law

Issues Involved:
1. Admission of liability by the respondent-company.
2. Default in payment as per consent terms.
3. Application for enlargement of time for payment.
4. Opposition to the application by the petitioners and other creditors.
5. Legal power of the court to enlarge time under Rule 7 of the Companies (Court) Rules, 1959.

Issue-wise Detailed Analysis:

1. Admission of Liability by the Respondent-Company:
The respondent-company, Maegaware Computers Ltd., admitted its liability of Rs. 1,37,18,313 plus balance lease rentals and other charges payable under four lease agreements. This admission was documented in the consent terms filed on March 22, 1993. The company acknowledged the correctness of the petitioners' claims and its liability as on the date of each petition.

2. Default in Payment as per Consent Terms:
The company failed to make any payments as per the agreed consent terms, which stipulated installment payments on specific due dates. Consequently, the petitioners published advertisements in various newspapers, as provided in clause 6 of the consent terms, to bring the petitions before the court for further hearing.

3. Application for Enlargement of Time for Payment:
The respondent-company applied for an extension of time for payment until May 1994, citing recession in the computer industry and ongoing efforts to secure finance to meet its debt liability. The company highlighted a new business deal with a master franchisor for the Middle East sector, valued at USD 1 million, as a potential source to liquidate its liabilities.

4. Opposition to the Application by the Petitioners and Other Creditors:
The petitioners and two other creditors opposed the application on several grounds:
- The default committed by the company was clear proof of its liability.
- The application lacked bona fides, as it was made only after the publication of advertisements and when the petitions appeared before the court.
- The company had undertaken not to apply for an extension of time for payment as per clause 5(vi) of the consent terms.
- The consent order dated March 22, 1993, could not be varied.
- No clear evidence was provided regarding the new business deal.
- The court had no power to enlarge the time, and no case had been made out for the same.
- The company had been using the leased appliances without any payment.

5. Legal Power of the Court to Enlarge Time under Rule 7 of the Companies (Court) Rules, 1959:
Rule 7 empowers the court to extend or abridge the time appointed by these rules or fixed by an order of the court for doing any act, even if the application is made after the expiry of the stipulated time. The court considered various circumstances and factors, including the consequences of any order passed, and concluded that the company should be given one more chance to pay its debts, provided adequate safeguards were put in place for the petitioners' leased assets.

Court's Order:
1. Judge's summons made absolute in terms of prayers (a), (b), and (c):
- (a) Delay in taking out the present application is condoned.
- (b) Time for making payments of the petitioners' dues under the consent terms extended to May 1994.
- (c) Hearing and final disposal of the petition stayed pending the application.
2. The reliefs are subject to the following conditions:
- The terms in the consent terms dated March 22, 1993, remain unaffected except for the extension of time for payment.
- Safeguards for the computer equipment remain unaltered.
- The company shall pay lease rentals as per the contracts for the extended period.
3. The company shall deposit Rs. 1 lakh in court for advertisement expenses within a week.
4. The order does not affect the independent remedies of other creditors.
5. The respondent-company shall pay the costs of the application to the petitioners.
6. The respondent-company's advocate to get the judge's summons registered.
7. Issuance of a certified copy is expedited.

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