2008 (9) TMI 566 - HC - Companies Law

Winding up - Circumstances in which a company may be wound up - Held that - In light of the various principles enunciated by the decisions cited by both the sides, it becomes apparent that the present is not a case where prima facie one can say that a frivolous petition has been presented and entertained. In fact, on facts the impugned order made by the Company Court is in consonance with requirements of law and does not require to be interfered with. In the result, the appeal is dismissed. Interim relief granted in Civil Application No. 13 of 2007 vide order dated 17-1-2007 shall stand vacated. The Company Court shall proceed with hearing of the Company Petition from the stage at which the impugned order was under challenge.

Issues Involved:
1. Maintainability of the petition.
2. Statutory notice and its compliance.
3. Financial status and ability to pay debts.
4. Alleged disputes regarding the debt.
5. Compliance with statutory rules and prescribed form.
6. Change in the status of the respondent company.

Detailed Analysis:

1. Maintainability of the Petition:
The respondent company contended that the petition was not maintainable as the statutory notice was issued to Geeta Prints Private Limited, while the petition was filed against Geeta Prints Limited, a Public Company. The court found this defense unconvincing, noting that the registration number of the company remained the same and the change in name did not alter the company's identity.

2. Statutory Notice and Its Compliance:
The petitioner issued a statutory notice under sections 433 and 434(1)(a) of the Companies Act, 1956, which the respondent company failed to reply to within the prescribed period of 21 days. This failure gave rise to a statutory presumption that the respondent company was unable to pay its debts. The court emphasized that the presumption was rebuttable, but the respondent company did not provide sufficient evidence to rebut it.

3. Financial Status and Ability to Pay Debts:
The respondent company argued that it was in a good financial position and that winding-up proceedings were not the correct remedy. However, the court noted that the company did not provide adequate evidence of its financial health, such as details of contingent and prospective liabilities. The court concluded that the mere figures of turnover and expenses were insufficient to ascertain the company's financial status.

4. Alleged Disputes Regarding the Debt:
The respondent company claimed that there were disputes regarding the debt, as indicated in a communication dated 24-5-2004. However, the court found that this communication only sought reconciliation of accounts and did not raise any substantial dispute about the debt. The court observed that the respondent company's defense lacked credibility, especially since no such defense was raised in response to the statutory notice.

5. Compliance with Statutory Rules and Prescribed Form:
The respondent company contended that the petition did not comply with the prescribed form (Form No. 46 read with Rule 95 of the Company Court Rules). The court dismissed this contention, noting that the petition met the statutory requirements and the prescribed form.

6. Change in the Status of the Respondent Company:
The respondent company argued that its status had changed from a private to a public company, and thus the petition was not maintainable. The court rejected this argument, stating that the change in status did not affect the company's identity or its obligations.

Conclusion:
The court dismissed the appeal, upholding the order for the admission of the petition and the publication of the advertisement. The court found that the statutory presumption of the company's inability to pay its debts was not rebutted, and the defenses raised by the respondent company were unconvincing. The court also noted that the petition complied with the statutory requirements and that the change in the company's status did not affect the maintainability of the petition. The interim relief granted earlier was vacated, and the Company Court was directed to proceed with the hearing of the Company Petition.

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