1999 (8) TMI 865 - HC - Companies Law

Issues Involved:
1. Inability to pay debts.
2. Admission of liability.
3. Bona fide defense.
4. Suspension of proceedings under SICA.
5. Revival or rehabilitation scheme.
6. Appointment of provisional liquidator.
7. Financial status and mismanagement.
8. Winding up of the company.

Detailed Analysis:

1. Inability to Pay Debts:
The respondent-company, Altos India Ltd., faced a winding-up petition due to its inability to pay debts amounting to Rs. 2,18,74,578 with interest, despite statutory notice. The company's cheques were dishonored, leading to proceedings under section 138 of the Negotiable Instruments Act.

2. Admission of Liability:
The respondent-company admitted its liability multiple times, including in letters and during court proceedings. The company proposed a repayment schedule, which was not accepted by the petitioner-company. The court noted that the liability was admitted and not disputed.

3. Bona Fide Defense:
The respondent-company's defense lacked bona fides. The court observed that the company sought time to frustrate the proceedings and avoid repayment. The respondent's actions, such as failing to produce Rs. 10 lakhs as ordered, demonstrated a lack of genuine intent to settle the debts.

4. Suspension of Proceedings under SICA:
The respondent-company attempted to suspend proceedings by filing a reference to the BIFR under SICA. However, the court held that mere acknowledgment of the reference by BIFR did not automatically suspend other legal proceedings. The court emphasized that the reference must be registered and scrutinized by BIFR to suspend proceedings.

5. Revival or Rehabilitation Scheme:
The respondent-company proposed a revival scheme, which was evaluated by an Expert Finance Committee. The committee found the scheme unviable, noting that the company required significant financial assistance, which financial institutions were unwilling to provide. The court concluded that the company's revival was not feasible.

6. Appointment of Provisional Liquidator:
A provisional liquidator was appointed by the court on 11-6-1998. The respondent-company's appeal against this appointment was dismissed. The court directed the provisional liquidator to prepare inventories and explore the possibility of selling the company's assets.

7. Financial Status and Mismanagement:
The court noted the company's financial instability and mismanagement. The Expert Finance Committee reported that the company's liabilities exceeded Rs. 300 crores, and no financial institution was willing to invest further. The company's mismanagement contributed to its financial crisis.

8. Winding Up of the Company:
The court concluded that the respondent-company was unable to pay its debts and had no viable revival scheme. The company's financial institutions and creditors supported the winding-up petition. The court ordered the winding up of Altos India Ltd. under sections 433(e) and 433(i) of the Companies Act, appointing the provisional liquidator as the Official Liquidator.

Conclusion:
The court ordered the winding up of Altos India Ltd. due to its inability to pay admitted debts, lack of bona fide defense, and unfeasible revival scheme. The provisional liquidator was directed to take charge of the company's assets and proceed with the winding-up process. The order was to be published in specified newspapers and the Official Gazette of Haryana.

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