2009 (2) TMI 463 - HC - Companies Law

Winding up - Circumstances in which a company may be wound up - Held that - If the company deposits in this Court a sum of ₹ 3,50,00,000 on or before 31-3-2009, the same shall be invested in a nationalised bank initially for a period of one year and thereafter for like periods of one year each. In the event of the amount being so deposited and in the event of the petitioner filing a suit within twelve weeks from the date of the petitioner s advocate being informed of the same in writing, the amount shall stand transferred to the credit of that suit. In the event of the suit not being filed as aforesaid, the petition shall stand dismissed and the amount with interest thereon shall be refunded to the respondent-company. If the company fails to deposit the amount as aforesaid, the petition shall stand admitted and shall be advertised in the Free Press Journal, Maharashtra Times and Maharashtra Government Gazette. The petitioner to deposit an amount of ₹ 10,000 with prothonotary and senior master of this Court within four weeks from the date of default

Summary

Issues Involved:
1. Winding up of the company due to inability to pay debts.
2. Validity and existence of the leave and licence agreements.
3. Impact of non-registration of agreements under Section 55 of the Maharashtra Rent Control Act, 1999.
4. Mitigation of loss by the petitioner.
5. Bona fide defence and commercial insolvency.

Detailed Analysis:

1. Winding up of the company due to inability to pay debts:
The petitioner sought an order for winding up the company on the grounds that it was unable to pay its debts, specifically claiming an amount of Rs. 7,58,52,000. The court examined whether the company had a bona fide defence against this claim and whether the debt was undisputed.

2. Validity and existence of the leave and licence agreements:
The petitioner and the company entered into two identical leave and licence agreements on 3-4-2008. The company terminated these agreements through a letter dated 16-4-2008, before the commencement of the licence term. The court found that the agreements had indeed come into existence upon execution, and the termination before the start date did not negate their existence. It was emphasized that there is a clear distinction between an agreement coming into existence and the date for its performance.

3. Impact of non-registration of agreements under Section 55 of the Maharashtra Rent Control Act, 1999:
The company argued that the agreements were not registered, and thus, under Section 55(2) of the Maharashtra Rent Control Act, the company's contention that the agreements had not come into existence should prevail. The court rejected this argument, stating that the company cannot take advantage of its own wrong, especially since it terminated the agreements before the expiry of the registration period. Furthermore, the term "contention" in Section 55(2) refers to factual contentions, not legal interpretations. The court held that the agreements' terms were undisputed and that the company's interpretation was incorrect.

4. Mitigation of loss by the petitioner:
The company contended that the petitioner should have mitigated its loss by leasing the premises to other parties. The court found this argument unsubstantiated due to the lack of specific details about comparable agreements and potential licensees. It was noted that the nature of leave and licence agreements involves more than just price considerations; factors like the licensee's reputation and the specific terms of the agreement are crucial. The court concluded that it is not always possible or necessary for a licensor to mitigate loss in such cases. The petitioner had made efforts to invite offers but received none, and the company failed to establish that suitable offers were available.

5. Bona fide defence and commercial insolvency:
The company argued that it was financially capable of paying the debt, thus the petition for winding up should be dismissed as an abuse of process. The court disagreed, citing precedents that a winding-up order can be made if there is no bona fide dispute regarding the debt. The court referenced judgments that establish a creditor's right to a winding-up order if the debt is undisputed, regardless of the company's financial capability to pay. The court found no bona fide defence from the company and rejected the argument that the petition should be dismissed on the grounds of the company's ability to pay.

Conclusion:
The court ordered that if the company deposits Rs. 3,50,00,000 by 31-3-2009, the amount would be invested and potentially transferred to a suit filed by the petitioner. If no suit is filed, the petition would be dismissed, and the amount refunded to the company. If the company fails to deposit the amount, the petition would be admitted and advertised.