2003 (10) TMI 392 - HC - Companies Law

Issues Involved:
1. Petition for winding up the company under Sections 433, 434, and 439 of the Companies Act, 1956.
2. Preliminary objections regarding the competency of the petition and the limitation period.
3. Admission and advertisement of the company petitions.
4. Acknowledgment of debt and confirmation of loan.
5. Just and equitable grounds for winding up.
6. Distinction between civil suits for recovery and winding-up petitions.

Detailed Analysis:

1. Petition for Winding Up:
Both company petitions were filed under Sections 433, 434, and 439 of the Companies Act, 1956, seeking the winding up of Khaitan Overseas and Finance Ltd. The petitions requested the appointment of a liquidator to manage the company's assets and other reliefs.

2. Preliminary Objections:
The company raised three preliminary objections: the petition was not supported by a proper affidavit, it was not filed by a competent person, and the loan was time-barred. The first two objections were overruled on December 13, 2001. Regarding the third objection, the company's counsel did not press it after acknowledging that the loan was not time-barred following the petition's amendment.

3. Admission and Advertisement:
After resolving preliminary objections, the petitions were admitted and advertised as per Rule 24 of the Companies (Court) Rules, 1959. The advertisement was published in the Official Gazette of Uttar Pradesh and newspapers. No other objections or replies were filed by any other parties.

4. Acknowledgment of Debt and Confirmation of Loan:
In Company Petition No. 77 of 1999, the applicant-company advanced a loan of Rs. 25 lakhs on October 28, 1993. The debt, including interest and TDS, amounted to Rs. 43,15,818. The loan was confirmed in writing on February 7, 1995, and several cheques were issued towards payment. The company acknowledged the debt through various letters and deposited TDS, indicating acknowledgment of the loan. Similar facts were presented in Company Petition No. 78 of 1999.

The company, however, contested the authenticity of certain documents, alleging forgery and manipulation. Despite these claims, the court found that the debt was acknowledged within the limitation period through TDS deposits and confirmation letters.

5. Just and Equitable Grounds for Winding Up:
The company did not provide any audited balance sheets or details of its financial position. There were no pleadings or arguments suggesting that winding up was not just and equitable. The company admitted to taking the loan and failing to repay it, with a total liability exceeding Rs. 1 crore.

6. Distinction Between Civil Suits for Recovery and Winding-Up Petitions:
The court emphasized that the remedy of recovering money through a civil suit is distinct from winding up a company for non-payment of debt under Section 434 of the Companies Act. A winding-up order benefits all shareholders and is not barred by the filing of a civil suit.

Conclusion:
The court concluded that the company admitted the debt and failed to pay it. The debt was not barred by limitation when the petitions were filed. No valid objections or defenses were raised against winding up. Consequently, the court ordered the winding up of Khaitan Overseas and Finance Ltd. and appointed the official liquidator to manage the liquidation process.

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