2009 (4) TMI 436 - HC - Companies Law

Winding up petition - failure to discharge liability to the tune of ₹ 1,24,39,306 due and payable to the petitioner - Held that - While considering the present petition for winding up of the respon-dent-company, the state of affairs of the respondent-company which ultimately led to the financial crunch which is of a permanent nature by now, cannot be lost sight of. This is also one of the additional reasons which weighs with the court to admit the present petition filed against the respondent-company and pass an order of advertisement. Having regard to the facts and circumstances of the case and looking to the totality of the reasons, the present petition is hereby admitted and the petitioner is hereby directed to issue public advertisement for admission and final hearing of the present company petition in the English Newspaper The New Indian Express and in Gujarati Newspaper Divya Bhaskar having circulation in Surat fixing the date of final hearing on 4-5-2009. Publication of the advertisement in Government Gazette is dispensed with.

Issues Involved:
1. Winding up petition under sections 433 and 434 of the Companies Act, 1956.
2. Non-reply to statutory notice.
3. Financial insolvency and liabilities of the respondent-company.
4. Dispute over the outstanding dues.
5. Maintainability of the winding up petition.
6. Status and operations of the respondent-company.
7. Admission and advertisement of the winding up petition.

Detailed Analysis:

1. Winding up petition under sections 433 and 434 of the Companies Act, 1956:
The petitioner filed the petition for winding up the respondent-company on the grounds of failure to discharge a liability amounting to Rs. 1,24,39,306. The petition was filed under sections 433 and 434 of the Companies Act, 1956.

2. Non-reply to statutory notice:
The petitioner argued that the respondent-company did not reply to the statutory notice, thus justifying the admission and advertisement of the petition. The petitioner cited precedents from the Bombay High Court, emphasizing that non-compliance with a statutory notice under section 434(1)(a) entitles the creditor to a winding-up order ex debito justitiae.

3. Financial insolvency and liabilities of the respondent-company:
The petitioner highlighted that the respondent-company's liabilities far exceeded its assets, with significant secured and unsecured loans. The petitioner also noted the respondent's failure to file accounts with the Registrar of Companies, suggesting an attempt to conceal its financial position.

4. Dispute over the outstanding dues:
The respondent contested the petition, arguing that the outstanding dues were time-barred, disputed, and not outstanding. The respondent claimed to be a going concern, regularly paying its employees and statutory dues. The respondent also alleged that the petitioner did not provide detailed accounts and made false statements regarding criminal complaints under the Negotiable Instruments Act, 1881.

5. Maintainability of the winding up petition:
The respondent argued that the petition was not maintainable, citing various judgments which held that a winding-up order is discretionary and should not be used merely as a means to realize debts. The respondent emphasized that the debt must be a determined or definite sum and that the company should be commercially insolvent.

6. Status and operations of the respondent-company:
The respondent claimed to be a functioning business with about 60 employees, sufficient current assets to meet liabilities, and ongoing payments to creditors. The respondent also argued that the petitioner continued to have business relations with the respondent even after filing the winding-up petition.

7. Admission and advertisement of the winding up petition:
The court, after considering the pleadings and submissions, concluded that the petition deserved to be admitted and advertised. The court noted that the respondent's financial position had worsened over the years and was not merely a temporary liquidity crunch. The court emphasized the importance of balancing the interests of employees, creditors, and financial institutions, and found sufficient material to support the petition's admission.

Conclusion:
The court admitted the winding-up petition and directed the petitioner to issue public advertisements in specified newspapers, setting the date for the final hearing. The court's decision was based on the respondent's inability to discharge its liabilities and the permanent nature of its financial difficulties.

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