2008 (7) TMI 580 - HC - Companies Law

Winding up - injunction issued by the learned Single Judge restraining the appellant company from transferring, alienating, encumbering or dealing with any of its movable and immovable assets, bank accounts and other securities - Held that - The challenge to the merits of the order under appeal having been withdrawn by the appellant, the order passed by the learned Company Court admitting the petition and issuing consequential directions upheld and the appeal to that extent dismissed. Two weeks time granted by the Company Court for payment of the outstanding amount is, however, extended to 30-9-2008 subject to the condition that the appellant shall, during this period, pay a sum of US 15000 by the 30-7-2008, another sum of US 15000 by the end of August, 2008 and the balance amount of US 7284 with interest at the rate of 12 per cent p.a. on the sum of US 37284 calculated at the rate of 12 per cent with effect from 6-9-2006 till the date of actual payment by the 30-9-2008. We make it clear that the extension hereby granted would cease to be effective and the order passed by the Company Court shall become operative with immediate effect no sooner there is a default in the making of the payment as per the above schedule. The grant of extension of time till 30-9-2008, as indicated above, is also subject to the appellant through its principal officer filing an undertaking to this court to the effect that it shall abide by the time schedule now fixed for payment of the outstanding amount. The undertaking shall be filed within two weeks from today, failing which the direction regarding extension of time shall stand vacated. We make it clear that the injunction issued by the learned Single Judge restraining the appellant company from transferring, alienating, encumbering or dealing with any of its movable and immovable assets, bank accounts and other securities, except for the purpose and to the extent it is necessary to meet the liabilities which it owes to the respondent creditor and to meet the day-to-day expenses shall remain intact and effective notwithstanding the extension of time granted by this court.

Summary

Issues:
- Admission of winding up petition against the appellant company
- Appointment of official liquidator as provisional liquidator
- Restraining appellant from dealing with assets
- Extension of time for payment of outstanding debts
- Failure of appellant to pay outstanding debts
- Consideration of final opportunity for appellant to pay outstanding liability
- Impact on workers due to winding up proceedings

Admission of Winding Up Petition:
The High Court upheld the order admitting the winding up petition against the appellant company and appointing the official liquidator as the provisional liquidator. The court restrained the appellant from transferring any assets except to meet liabilities owed to the respondent and day-to-day expenses.

Extension of Time for Payment:
The appellant sought an extension to pay outstanding debts in three monthly installments. Despite previous failures to pay, the court granted a final opportunity for the appellant to liquidate the outstanding liability by a specified date, considering the impact on workers if winding up proceedings continued.

Failure to Pay Outstanding Debts:
The respondent argued against granting further indulgence to the appellant, citing past failures to pay despite extensions and undertakings. The Company Court initiated contempt proceedings due to breach of undertakings, leading to the admission of the winding up petition.

Final Opportunity for Payment:
The High Court granted an extension for payment of outstanding debts until a specified date, subject to the appellant making timely payments as proposed. The appellant's readiness to pay and the undertaking to abide by the new schedule influenced the court's decision.

Impact on Workers:
Considering the potential adverse effects on approximately 300 workers employed by the appellant company, the court weighed this factor in granting the extension for payment of outstanding debts.

In conclusion, the High Court dismissed the challenge to the order admitting the petition, upheld the consequential directions, and extended the time for payment of outstanding debts subject to specified conditions and undertakings by the appellant. The court emphasized that failure to comply with the payment schedule would render the Company Court's order immediately operative.