2003 (10) TMI 394 - 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 competence of the petitioner and the time-barred nature of the debt.
3. Admission and advertisement of the company petitions.
4. Acknowledgment of debt and its enforceability.
5. Financial position and just and equitable clause under section 433 of the Companies Act.
6. Legal precedents and their application to the case.
7. Distinction between remedies of recovery of money through civil suits and winding up petitions.
8. Court's discretion to refuse winding up on just and equitable grounds.
9. Final judgment and order for winding up the company.

Detailed Analysis:

1. Petition for Winding Up the Company:
The petitions were filed under sections 433, 434, and 439 of the Companies Act, 1956, requesting the winding up of Khaitan Overseas and Finance Limited and the appointment of a Liquidator to take charge of the company's assets.

2. Preliminary Objections:
The preliminary objections raised included the competence of the petitioner and the allegation that the debt was time-barred. These objections were overruled, with the court noting that the debt was not time-barred after considering the amendments to the petition and the documents filed.

3. Admission and Advertisement of Company Petitions:
After the preliminary objections were addressed, the petitions were admitted and directed to be advertised in accordance with Rule 24 of the Companies (Court) Rules, 1959. The advertisements were carried out in the Official Gazette of Uttar Pradesh and in newspapers.

4. Acknowledgment of Debt:
The debt was acknowledged through various documents, including cheques, confirmation letters, and TDS certificates. The company admitted the receipt of the loan and the issuance of cheques but disputed certain letters and claimed some documents were forged. However, the court found sufficient acknowledgment of the debt within the limitation period.

5. Financial Position and Just and Equitable Clause:
The company did not provide audited balance sheets or any information regarding its financial position. There were no averments or arguments regarding the just and equitable clause under section 433 of the Companies Act.

6. Legal Precedents:
The court relied on decisions from the Karnataka High Court and Delhi High Court, which held that acknowledgment of debt in the balance sheet prevents the debt from being time-barred. Additionally, the Supreme Court's decision in Madhusudan Gordhandas & Co. v. Madhu Woollen Industries (P.) Ltd. was cited, emphasizing that undisputed debts warrant winding up unless a bona fide defense is presented.

7. Distinction Between Remedies:
The court clarified that the remedy of recovering money through a civil suit is distinct from filing a winding-up petition for non-payment of debt under section 434 of the Companies Act. The purpose of each remedy is different, and filing a civil suit does not preclude a creditor from seeking winding up.

8. Court's Discretion to Refuse Winding Up:
The court may refuse to wind up a company if it is just and equitable to do so. However, the company did not disclose its financial position or present any defense that would justify refusing the winding-up petition.

9. Final Judgment:
The court found that the company had admitted the debt and failed to pay it. The debt was not time-barred, and no valid objections or defenses were presented. Consequently, the court ordered the winding up of Khaitan Overseas and Finance Limited and appointed the Official Liquidator to proceed with the liquidation in accordance with the law.

Conclusion:
The petitions for winding up Khaitan Overseas and Finance Limited were allowed, and the company was ordered to be wound up with the Official Liquidator appointed to manage the liquidation process.

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