2002 (3) TMI 823 - HC - Companies Law

Summary

Issues involved:
- Interpretation of lease agreement for machinery rental
- Default in payment of rentals by respondent-company
- Issuance of statutory notice for non-payment
- Respondent-company's objections based on arbitration clause in lease agreement
- Court's discretion to entertain company petition despite arbitration clause
- Determination of respondent-company's inability to pay debts

Interpretation of lease agreement for machinery rental:
The petitioner and respondent companies, both incorporated under the Companies Act, entered into a lease agreement for machinery rental. The agreement specified the amount payable by the respondent for using the machinery. Default in payment led to the petitioner sending multiple letters requesting payment, which were acknowledged by the respondent.

Default in payment of rentals by respondent-company:
Despite repeated requests, the respondent failed to pay the rentals due to the petitioner, leading to the issuance of a statutory notice by the petitioner demanding payment of a substantial amount, including service charges. The respondent replied denying the amount due and alleging threats from the petitioner.

Issuance of statutory notice for non-payment:
The statutory notice sent by the petitioner was received by the respondent, who responded denying the debt and alleging improper threats from the petitioner. The respondent also raised issues regarding third-party transactions affecting payment obligations.

Respondent-company's objections based on arbitration clause in lease agreement:
The respondent objected to the winding-up petition, citing an arbitration clause in the lease agreement. They argued that the existence of arbitration provisions should preclude the company petition and relied on court precedents to support their stance.

Court's discretion to entertain company petition despite arbitration clause:
The court considered the arguments presented and examined relevant judgments, concluding that the presence of an arbitration clause does not prevent the court from entertaining a winding-up petition if the respondent is unable to pay its debts. Precedents from Madras High Court and Punjab and Haryana High Court supported this view.

Determination of respondent-company's inability to pay debts:
After reviewing the lease agreement, responses to correspondence, and the statutory notice, the court found that the respondent, despite acknowledging its liability, was unable to pay the debts owed. The court exercised its discretion to admit and advertise the petition based on the respondent's inability to pay its debts within the specified time frame.

The court ordered the admission of the petition and directed the petitioner to publish notices in specified newspapers, setting the date for the hearing.