2009 (2) TMI 466 - HC - Companies Law

Winding up - Circumstances in which a company may be wound up - Held that - The income of the company has nosedived to a dismal figure of ₹ 20,204 in the year ended dated 31-3-2006, as compared to its income of ₹ 1,78,88,963 in the year ended 31-3-2002, i.e., within a span of four years. The balance-sheets of the company continues to show losses year after year and there is nothing shown to suggest any improvement in the coming years. In view of the law discussed above and by carefully analysing the facts and records relied upon by both counsel, it is just and equitable to wind up the company and allow this petition, under section 433(e), ( f) and (c) read with sections 434 and 439 of the Act.Accordingly, this petition admitted and direct that the respondent-company be wound up. The Official Liquidator attached to this court is appointed as the Liquidator in respect of the respondent-company. He shall forthwith takeover all the assets and records of the respondent-company and proceed according to law. Citation shall be published in The Statesman (English) and Jansatta (Hindi) for 16-3-2009. The petitioner may take steps accordingly.

Summary

Issues Involved:
1. Status of Petitioner No. 1 as a creditor of the company.
2. Allegations of misappropriation of company assets by the directors.
3. Non-compliance with statutory requirements under the Companies Act.
4. Suspension of business operations for over a year.

Issue-wise Detailed Analysis:

1. Status of Petitioner No. 1 as a Creditor of the Company:
The petitioners argued that the respondent-company owed Rs. 7,50,000 to Petitioner No. 1, supported by an acknowledgment of debt dated 31-3-2004, a statement of account, and the company's balance-sheet as of 31-3-2000. The respondents contended that the petitioner was not a creditor, alleging manipulation of accounts by the petitioner and the statutory auditor, who was the petitioner's brother. The court found the petitioner's claim credible, noting the company's balance-sheet signed by the managing director reflected the debt. The court also dismissed the respondents' claim that the petitioner sent waste paper instead of a demand notice, establishing a bona fide debt of Rs. 7,50,000.

2. Allegations of Misappropriation of Company Assets by the Directors:
The petitioners alleged that the directors misappropriated proceeds from the sale of company assets, including properties at Nangloi, Mundka, and Bahadurgarh. The court found discrepancies in the respondents' explanations about the sale and utilization of these properties. The respondents failed to produce original records or satisfactory explanations, leading the court to conclude that the directors had indeed misappropriated company assets. The court noted the manipulation and fraud were evident from the contradictory statements and lack of transparency in the company's transactions.

3. Non-compliance with Statutory Requirements under the Companies Act:
The petitioners highlighted the company's failure to hold annual general meetings, file balance-sheets, and comply with other statutory obligations. The court acknowledged these violations, noting the Registrar of Companies had already taken action against the company for non-compliance. The court found that the management's disregard for statutory requirements further justified the winding up of the company.

4. Suspension of Business Operations for Over a Year:
The petitioners argued that the company had suspended its business operations for over a year, making it liable for winding up under section 433(c) of the Companies Act. The court found that the company had indeed ceased operations, as evidenced by the disposal of essential assets and the directors' report stating no foreseeable breakthrough in operations. The court concluded that the company's business could not be sustained in its current financial state.

Conclusion:
The court concluded that the company should be wound up under sections 433(e), (f), and (c) read with sections 434 and 439 of the Companies Act. The Official Liquidator was appointed to take over the company's assets and records. The court directed that the winding-up citation be published in The Statesman and Jansatta for 16-3-2009.