2009 (4) TMI 446 - HC - Companies Law

Winding up - Circumstances in which company may be wound up - Held that - As the respondent-company is clearly unable to pay the debt of the petitioner in a sum of ₹ 3,57,000. Noticing this very feature, this court, by order dated March 18, 2006, while admitting this petition has granted four weeks time to the respondent-company to pay up the amount of debt due to the petitioner herein. The respondent-company, in spite of providing such a wonderful opportunity, has failed to discharge the debt due to the petitioner. Thus, it is demonstratively clear that the respondent-company is unable to discharge its debts. Therefore, it is appropriate that the company should be wound up. Accordingly, the respondent-company M/s. Lotus Aluminium P. Ltd., is directed to be wound up and the Official Liquidator attached to this court is appointed as its Liquidator, in terms of section 449 of the Companies Act. The petitioner is directed to lodge a certified copy of this order with the Registrar of Companies within 30 days from the date it is made available by the registry of this court to enable an appropriate minute to be recorded in terms of section 445 of the Act. The petitioner is also directed to publish the same in Deccan Chronicle and Andhra Jyothi newspapers.

Issues Involved:
1. Liability of the respondent-company to pay the petitioner Rs. 3,57,000.
2. Inability of the respondent-company to pay its debts, warranting its winding up.
3. Admissibility of evidence by the power of attorney holder.
4. Alleged suppression of material facts by the petitioner.

Issue-wise Detailed Analysis:

1. Liability of the Respondent-Company to Pay the Petitioner Rs. 3,57,000:
The petitioner asserted that she paid Rs. 3,57,000 to the respondent-company for share allotment, which was neither allotted nor refunded. A cheque issued by the respondent-company for this amount was dishonored. The respondent-company contested, claiming that the petitioner's husband, a former director, misappropriated funds and that the money due to the petitioner was included in a settlement paid to him. However, the court found that the amount was indeed received by the company and was reflected in its ledger. The cheque issued to the petitioner was not signed by her husband but by other directors, indicating an intention to refund. The court concluded that the debt to the petitioner had not been discharged.

2. Inability of the Respondent-Company to Pay Its Debts, Warranting Its Winding Up:
The petitioner claimed that the respondent-company's net worth was eroded, and it had not commenced commercial production. The respondent-company admitted to negative current assets and failed to prove its viability. The court found that the respondent-company was unable to discharge its debts and had not utilized the opportunity provided by the court to pay the petitioner. Consequently, the court directed the winding up of the company and appointed the Official Liquidator.

3. Admissibility of Evidence by the Power of Attorney Holder:
The respondent challenged the admissibility of evidence provided by the petitioner's husband, who held a power of attorney. The court examined the legal framework and precedents, concluding that while a power of attorney holder cannot plead in court, they can lead evidence and settle pleadings. The court found that the petitioner's husband was entitled to depose on her behalf and his evidence was admissible.

4. Alleged Suppression of Material Facts by the Petitioner:
The respondent argued that the petitioner suppressed the fact that her husband was a former managing director of the company. The court held that the relationship of the petitioner's husband with the company was not material to the issue of refunding the money due to the petitioner. Therefore, the non-disclosure did not warrant dismissal of the petition.

Conclusion:
The court found that the respondent-company was unable to pay its debt to the petitioner and directed its winding up. The Official Liquidator was appointed, and the petitioner was instructed to comply with statutory requirements for winding up. The petition was allowed, and no costs were awarded.

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