2001 (3) TMI 897 - HC - Companies Law

Summary

Issues Involved:
1. Jurisdiction of the Company Court vs. Debt Recovery Tribunal (DRT) under the RDB Act.
2. Applicability of the Supreme Court judgment in Allahabad Bank v. Canara Bank.
3. Discretionary power of the Company Court in winding up petitions.
4. Impact of winding up on employees and the company's financial health.

Summary:

Jurisdiction of the Company Court vs. Debt Recovery Tribunal (DRT) under the RDB Act:
The appellant company contested the jurisdiction of the Company Court to entertain a winding-up petition u/s 433(e) of the Companies Act, 1956, arguing that the Debt Recovery Tribunal (DRT) under the RDB Act had exclusive jurisdiction for recovery of debts. The Court clarified that the jurisdiction of the DRT is limited to adjudicating and recovering debts due to banks and financial institutions. The DRT does not have the power to wind up a company, which remains within the exclusive jurisdiction of the Company Court u/s 433(e).

Applicability of the Supreme Court judgment in Allahabad Bank v. Canara Bank:
The appellant relied on the Supreme Court judgment in Allahabad Bank v. Canara Bank, arguing that once a bank moves the DRT, a winding-up petition is barred. The Court examined this contention and concluded that the judgment does not support the appellant's argument. The Supreme Court in Allahabad Bank's case held that the DRT has exclusive jurisdiction for adjudication and execution of debt recovery but did not bar the Company Court from entertaining a winding-up petition.

Discretionary power of the Company Court in winding up petitions:
The appellant argued that the Company Court should exercise its discretion to avoid winding up, considering the potential job losses and temporary financial difficulties. The Court noted that the statutory presumption of the company's inability to pay its debts u/s 434(1)(a) was not rebutted by any substantial evidence from the appellant. Therefore, the Company Court was justified in admitting the winding-up petition.

Impact of winding up on employees and the company's financial health:
The appellant contended that winding up would cause hardship to employees and that the company's financial difficulties were temporary. The Court found no material evidence to support this claim in the affidavit submitted by the appellant. The Court emphasized that the statutory presumption of insolvency was sufficient to admit the winding-up petition.

Conclusion:
The High Court upheld the order of the learned Company Judge admitting the winding-up petition. The appeal was dismissed, and the Court found no reason to interfere with the order. The Court extended the stay of the advertisement for six weeks to allow the appellant to approach the Supreme Court. The Notice of Motion No. 570 of 2001 was also dismissed as it had become infructuous.