2008 (9) TMI 570 - HC - Companies Law

Winding up Circumstances in which company may be wound up by Tribunal - Inherent Power of court - Held that - Winding up order cannot be passed by this court, if the court is of the opinion that the company is in a position to pay off its debts and no other creditor has come up in support of the winding up. In the present case, both the secured creditors have supported the winding up and have vehemently opposed the revival of the company in the absence of any revival proposal. There is a1so no proposal by the ex-management of the company or the applicant-promoter as to how the company will be revived, the source of finances, the method and mode of resurrection or resuscitative measures initiated for survival of the company. In the absence of any such proposal or step, mere desire does not inspire confidence to stay or stall winding up and jeopardise the interest of secured creditors (public sector banks) and eventually the public interests.

Issues Involved:
1. Winding up of M/s. Mangla Kotex Limited.
2. Confirmation of sale of assets.
3. Setting aside ex parte order dated March 23, 2006.
4. Recalling winding up order dated January 16, 2004.
5. Substitution of Canara Bank as petitioner-creditor.
6. Objections by official liquidator and secured creditors.
7. Jurisdiction and powers of the company court.
8. Bona fide disputed debt and revival of the company.

Issue-wise Detailed Analysis:

1. Winding up of M/s. Mangla Kotex Limited:
The winding up of M/s. Mangla Kotex Limited was ordered on January 16, 2004, under sections 433 and 434 of the Companies Act, 1956. The official liquidator was appointed to take over the assets and properties of the company. The winding up petition was initially filed by M/s. Winsome Textiles Industries Ltd. due to a disputed claim.

2. Confirmation of Sale of Assets:
Subsequent to the winding up order, the assets and properties of the company were put up for sale through an advertisement published on April 22, 2006. Two applications (C.A. Nos. 449 and 498 of 2006) were filed for the confirmation of the sale.

3. Setting Aside Ex Parte Order Dated March 23, 2006:
Ashwani Kumar, a promoter and shareholder of the company, filed C.A. No. 387 of 2006 under Order 9, Rule 13 of the Code of Civil Procedure to set aside the ex parte order dated March 23, 2006, which ordered the sale of the company's assets. The applicant claimed no prior knowledge of the winding up proceedings until the sale notice was published.

4. Recalling Winding Up Order Dated January 16, 2004:
Two applications (C.A. Nos. 815 of 2007 and 682 of 2007) were filed to recall the winding up order. The applicant argued that the company was a potentially viable but sick unit and had settled the claims of the original petitioner and paid liquidation expenses. The secured creditors, however, opposed the recall, citing unpaid debts and ongoing recovery proceedings before the DRT.

5. Substitution of Canara Bank as Petitioner-Creditor:
Canara Bank, one of the secured creditors, filed C.A. No. 650 of 2006 for substitution as petitioner-creditor in the winding up petition. The court directed the transposition of Canara Bank as the petitioner in C.P. No. 416 of 2002, allowing it to continue the winding up petition initially filed by Winsome Textiles Industries Ltd.

6. Objections by Official Liquidator and Secured Creditors:
The official liquidator and secured creditors (IDBI through SASF and Canara Bank) opposed the petition for recalling the winding up order. They argued that the company owed substantial debts and that the applications were an attempt to delay the liquidation proceedings.

7. Jurisdiction and Powers of the Company Court:
The court examined its jurisdiction and powers under rules 6 and 9 of the Companies (Court) Rules, 1959, and relevant case law. It was established that the company court has the inherent power to recall a winding up order if the company is in a position to pay its debts and no other creditors support the winding up.

8. Bona Fide Disputed Debt and Revival of the Company:
The court considered whether the debt was bona fide disputed and if there were prospects of revival. The applicant argued that the company had settled the original petitioner's claims and was disputing the secured creditors' claims before the DRT. The court noted that the liability towards secured creditors was substantial and unresolved, and there was no viable revival proposal from the ex-management.

Conclusion:
The court dismissed the applications for setting aside the ex parte order and recalling the winding up order. It held that the applicant failed to establish valid grounds for recall and that the company could only be revived under sections 391 and 394 of the Companies Act. The secured creditors' claims and the lack of a concrete revival proposal weighed against recalling the winding up order.

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