2004 (8) TMI 412 - HC - Companies Law

Issues Involved:
1. Validity of the winding-up petition under section 433(e) of the Companies Act, 1956.
2. Non-payment of the loan and interest by the respondent-company.
3. Dispute over the sale of pledged shares.
4. Allegations of contempt against the petitioner-company.
5. Settlement of dues and payment verification.

Detailed Analysis:

1. Validity of the Winding-Up Petition:
The petitioner filed a winding-up petition (CP No. 11/1999) against the respondent-company under section 433(e) of the Companies Act, 1956, alleging non-payment of a loan amounting to Rs. 2.5 crores. The respondent-company acknowledged the loan but cited financial difficulties as the reason for non-payment of the contractual interest rate.

2. Non-Payment of Loan and Interest:
The petitioner advanced Rs. 2.5 crores through two cheques dated 26th September 1997 and 3rd October 1997. The respondent-company issued promissory notes and pledged 7 lakh shares of DCM Daewoo Motors Ltd. as security. The respondent-company defaulted on the repayment, and despite issuing cheques, only Rs. 5 lakhs was paid. The petitioner demanded Rs. 3,15,02,226 as of 10th August 1998. The respondent-company admitted to the loan but failed to pay the agreed interest due to financial difficulties.

3. Dispute Over the Sale of Pledged Shares:
The Court ordered the conversion of larger denomination shares into smaller ones and appointed the Joint Registrar to oversee the sale. The petitioner sold the shares independently, realizing Rs. 34,50,903.43, which was later contested by the respondent-company as a violation of the Court's orders. The petitioner argued that the Joint Registrar's role was limited to conversion, not sale, and claimed the sale was conducted in good faith.

4. Allegations of Contempt Against the Petitioner-Company:
The respondent-company filed CA No. 346/2003, alleging contempt by the petitioner for selling the shares independently and not depositing the sale proceeds as directed by the Court. The petitioner defended its actions, stating the sale was conducted under a mistaken belief that it was permissible. The Court found the petitioner in violation but recognized mitigating circumstances, including the better price realized from the sale and the lack of clarity in the orders. The Court decided not to initiate contempt proceedings but directed the petitioner to deposit the sale proceeds.

5. Settlement of Dues and Payment Verification:
The respondent-company claimed to have settled the dues by paying Rs. 4.10 crores, which the petitioner disputed, alleging a substantial amount was still due. The Court noted the petitioner's claim of Rs. 3,44,79,390 and the respondent's payment of Rs. 4.10 crores, indicating unresolved issues regarding the interest component. The Court directed the petitioner to deposit the sale proceeds of Rs. 34,56,903.43 with the Registrar General and kept the amount in a fixed deposit until further orders.

Conclusion:
The Court disposed of both applications, acknowledging the petitioner's violation of the orders but considering mitigating factors. The petitioner was directed to deposit the sale proceeds, and further orders would be issued upon resolving the settlement allegations. The applications were disposed of with these observations.

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