2002 (5) TMI 703 - HC - Companies Law

Summary

Issues Involved:
1. Maintainability of the winding-up petition.
2. Service of statutory notice.
3. Alleged indebtedness and inability of the company to pay its debts.
4. Admission and advertisement of the winding-up petition.

Detailed Analysis:

1. Maintainability of the Winding-Up Petition:
The winding-up petition was filed under sections 433, 434, and 439 of the Companies Act, 1956, by a creditor alleging the company's commercial insolvency due to its failure to pay a debt of Rs. 5 lakhs with interest. The company contested the maintainability, arguing that no statutory notice was served at its registered office, citing precedents like Vysya Bank Ltd. v. Randhir Steel & Alloys (P.) Ltd. and N.L. Mehta Cinema Enterprises (P.) Ltd. v. Pravinchandra P. Mehta. The petitioner countered, relying on cases such as Luxmi Industrial Gases (P.) Ltd. v. Punjab Chemi Plant International Ltd., asserting substantial compliance through service on a director.

2. Service of Statutory Notice:
The company argued that the statutory notice was neither legal nor valid, nor served at the registered office. The petitioner demonstrated service attempts at multiple addresses, including a director's address. The court noted the company's admission that its registered office had been moved to Purnea, Bihar, without proper resolution or registrar notification, suggesting an attempt to evade legal proceedings. The court referenced Order 29, Rule 2 of the CPC and cases like Shalimar Rope Works Ltd. v. Abdul Hussain H.M. Hasan Bhai Rassiwala, concluding that service on a director was sufficient given the registered office's non-functionality.

3. Alleged Indebtedness and Inability to Pay Debts:
The petitioner detailed the loan transaction, interest accrual, and failed repayment attempts, including the issuance of a statutory notice. The company's affidavit mentioned an oral guarantee and payments related to third-party transactions, which the court found unsupported by evidence. The court emphasized that the company's failure to address the statutory notice and the absence of a legitimate dispute indicated its inability to pay debts.

4. Admission and Advertisement of the Winding-Up Petition:
The court examined the petition's allegations, noting the absence of specific claims under sections 433(e) and 434(1)(c). Despite this, the court opted not to dismiss the petition on technical grounds, recognizing the merit in the petitioner's claim. The court cited precedents like Fortune Copper Mining Co. and Madan & Co. v. Wazir Jaivir Chand to support its decision on service sufficiency. The court admitted the petition, directing the petitioner to advertise it in specified newspapers and allowing the company a grace period to settle the debt to avoid further proceedings.

Conclusion:
The court admitted the winding-up petition, finding substantial compliance with statutory notice requirements and recognizing the company's inability to pay its debts. The petitioner was instructed to advertise the petition unless the company settled the debt within four weeks, including an additional Rs. 10,000 for costs.