2006 (5) TMI 184 - HC - Companies Law

Summary

Issues:
Admission of winding up petition, Company's liability to pay dues, Direction to provide bank guarantee, Jurisdiction of Company Court, Validity of order for bank guarantee, Modification of impugned order, Adjustment of deposited amount, Division Bench's direction, Satisfaction of creditor's dues, Cost implications.

Admission of Winding Up Petition:
The judgment involves an appeal by a company against the admission of a winding-up petition by a learned Single Judge. The respondent filed the petition claiming dues of Rs. 5,96,000, which the company admitted partially to the tune of Rs. 3,20,000. The trial Judge directed the company to pay the admitted amount in installments and provide a bank guarantee for the remaining disputed amount of Rs. 2,75,978, with a further directive for the respondent to seek remedy before the civil court.

Direction for Bank Guarantee and Jurisdiction of Company Court:
The company challenged the directive to provide a bank guarantee for the disputed amount, arguing that the Company Court lacked jurisdiction to pass such an order when the disputed claim was directed to be resolved in civil court. The respondent, however, supported the trial Judge's decision. The High Court found merit in the company's contention, stating that the Company Court overstepped its jurisdiction by ordering a bank guarantee for a disputed claim that was directed to be resolved in civil court.

Modification of Impugned Order and Adjustment of Deposited Amount:
The High Court modified the impugned order, setting aside the directive for the company to provide a bank guarantee for the disputed amount. The Court noted that the company had already deposited the admitted claim amount as per a Division Bench's direction, which was to be adjusted towards the respondent's claim. The respondent's advocate was permitted to utilize the deposited amount for satisfying the client's dues.

Satisfaction of Creditor's Dues and Costs Implications:
The appeal was allowed to the extent of setting aside the bank guarantee directive. The judgment concluded that the deposited amount by the company could be used to satisfy the respondent's claim. No costs were awarded in the circumstances. The second Judge on the bench concurred with the decision.