2009 (3) TMI 569 - HC - Companies Law

Winding up - Circumstances in which a company may be wound up - Held that - It is clear that the defence put up by the company about there being an agreement between three groups is an afterthought and has rightly been discarded by the learned Single Judge. This aspect of the matter has been considered in detail by the learned Single Judge. After having heard the learned counsel for both sides at length and after having perused the record we find no reason to disagree with the findings recorded by the learned Single Judge on this aspect of the matter. Also the contention on behalf of the Appellant-company that the learned Single Judge should not have entertained the petitions, because the Petitioners have suppressed joint venture agreement and had not disclosed that agreement in the petitions was rightly rejected by learned Single Judge. The joint venture agreement which according to the Appellant has been suppressed by the Petitioners is not signed by the Petitioners. It was contended that one Mr. Ramesh Thadani had signed that agreement and that both the Petitioners in the company petitions are his nominees. Both the Petitioners have denied this allegation. There is nothing on record except bare statement made on behalf of the Appellant-company supporting such allegation. Therefore, by no stretch of imagination the Petitioners in company petitions can be said to be guilty of suppressing material fact. Appeal dismissed.

Issues Involved:
1. Winding up of the Appellant-company on the grounds of inability to pay debts and just and equitable grounds.
2. Admission of liability by the Appellant-company.
3. Allegations of suppression of facts and mala fide intentions.
4. Financial difficulties and management issues of the Appellant-company.
5. Procedural aspects and the role of affidavits in the judgment.

Detailed Analysis:

1. Winding Up on Grounds of Inability to Pay Debts and Just and Equitable Grounds:
The judgment primarily revolves around the winding up of the Appellant-company due to its inability to pay debts and on just and equitable grounds. The Appellant-company was unable to repay substantial loans and interest to the Petitioners. Despite receiving amounts from the Petitioners, the company failed to honor its repayment obligations, leading to petitions for its winding up. The court found that the company had not made any substantial business progress and its sole asset, the Worli property, had unresolved title issues, making it unable to develop the property or repay the loans. The court held that the company's substratum had disappeared, justifying winding up on just and equitable grounds.

2. Admission of Liability by the Appellant-Company:
The Appellant-company had acknowledged its liability to the Petitioners through various documents and communications. Letters dated 7-6-1994 and 27-3-1996, among others, explicitly mentioned the amounts as loans and interest payable. The balance sheets also reflected these amounts under "unsecured loans." The court found no credible explanation from the company for these admissions, reinforcing the conclusion that the amounts were indeed loans, not contributions for profit-sharing as claimed by the company.

3. Allegations of Suppression of Facts and Mala Fide Intentions:
The Appellant-company contended that the petitions were mala fide and that the Petitioners had suppressed material facts, including a joint venture agreement. However, the court found no merit in these allegations. The purported joint venture agreement was not signed by the Petitioners, and there was no substantial evidence to support the claim that the Petitioners were nominees of Mr. Ramesh Thadani. The court concluded that the Petitioners had not suppressed any material facts.

4. Financial Difficulties and Management Issues of the Appellant-Company:
The judgment highlighted the financial difficulties and mismanagement within the Appellant-company. The company's failure to develop the Worli property, its inability to repay loans, and the maintenance of false records indicated severe management issues. The court noted the variance in the company's stand over time and the discrepancies in its balance sheets, which showed fabricated records. The managing director's admissions in affidavits further undermined the company's credibility, leading to the conclusion that winding up was justified.

5. Procedural Aspects and Role of Affidavits:
The court addressed the procedural aspects, particularly the role of affidavits in the judgment. The Appellant's counsel argued that the learned Single Judge should have restricted consideration to the averments in the petitions. However, the court emphasized that in winding up petitions on just and equitable grounds, it is essential to consider the entire material on record. The court found that the affidavits provided relevant information and that the company had ample opportunity to present its point of view. The learned Single Judge was justified in considering all material, including affidavits, to reach a comprehensive decision.

Conclusion:
The appeals were dismissed, and the order for winding up the Appellant-company was upheld. The court found that the company's inability to pay its debts, coupled with just and equitable grounds, warranted its winding up. The company's admissions of liability, financial difficulties, and management issues further supported this conclusion. The court also dismissed allegations of suppression of facts and mala fide intentions against the Petitioners.

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