2004 (7) TMI 358 - HC - Companies Law

Summary

Issues Involved:
1. Application for winding up of the respondent company under Sections 433(e), 434, and 439 of the Companies Act, 1956.
2. Settlement and subsequent default by the respondent.
3. Appointment of Provisional Liquidator.
4. Repayment schedule and compliance.
5. Application for recall of Provisional Liquidator's appointment.
6. Payment disputes and fraudulent preference under Section 531 of the Companies Act.

Issue-wise Detailed Analysis:

1. Application for Winding Up:
The petitioner filed Company Petition No. 357/99 under Sections 433(e), 434, and 439 of the Companies Act, 1956, read with Rule 9 of the Companies (Court) Rules, 1959, seeking the winding up of the respondent company, M/s. DSS Mobile Communications Ltd. The petition was based on the claim that the respondent owed Rs. 9,83,78,310, including principal and interest, and failed to pay despite notices served under Section 433(e) and 434 of the Act.

2. Settlement and Subsequent Default:
After the respondent appeared in court, a settlement was reached, and some payments were made by the respondent. However, the respondent failed to adhere to the settlement terms. Clause 12 of the consent terms allowed the petitioner to seek restoration of the petition upon default. Consequently, the petitioner filed for restoration, which was allowed, and a Provisional Liquidator was appointed.

3. Appointment of Provisional Liquidator:
The court appointed the Official Liquidator as the Provisional Liquidator and directed the publication of the petition in newspapers and the Delhi Gazette. The respondent's appeal against this order was dismissed by the Division Bench, which remanded the case back to the Single Judge for appropriate orders.

4. Repayment Schedule and Compliance:
The respondent proposed various repayment schedules, all of which were rejected by the petitioner. The court fixed a repayment schedule in its order dated 28th May 2003, noting the respondent's inability to meet its liabilities and the company's accumulated losses. The court provided a detailed repayment schedule, including upfront and monthly instalments, and required an undertaking from a promoter director of the respondent.

5. Application for Recall of Provisional Liquidator's Appointment:
The respondent's application for recalling the Provisional Liquidator's appointment was rejected by the court, which found the original order justified. The court emphasized the respondent's failure to adhere to previous repayment schedules and attempts to delay payments.

6. Payment Disputes and Fraudulent Preference:
The respondent filed an application (CA No. 1393/2003) seeking the deposit of Rs. 5.24 crores paid to the petitioner during the pendency of the petition, arguing that such payments should form part of the common creditors' pool. The court discussed the provisions of Sections 447 and 441(2) of the Companies Act, which relate to the commencement of winding up and the benefit to all creditors. The court also considered the concept of 'fraudulent preference' under Section 531 of the Act, which invalidates certain transactions made before the winding-up order. The court ultimately dismissed the respondent's application, holding that the payments made to the petitioner did not constitute 'fraudulent preference' and did not need to be returned unless proven otherwise in appropriate proceedings.

Conclusion:
The court appointed the Official Liquidator as the Provisional Liquidator and directed the publication of the winding-up petition. It rejected the respondent's application to recall the Provisional Liquidator's appointment and dismissed the application seeking the deposit of payments made to the petitioner. The court emphasized the importance of adhering to the repayment schedule and the provisions of the Companies Act regarding winding up and fraudulent preference.