2010 (7) TMI 278 - HC - Companies Law

Winding up - Circumstances in which a company may be wound up - Held that - A debt cannot be said to be barred by limitation upon expiry of three years in terms of Article 137 of the Limitation Act, 1963. Such decree debts are executable under section 136 of the Limitation Act, 1963. Therefore, a winding up petition on the basis of decree would be maintainable within the period of execution of decree. In view of the above, the petition for winding up is ordered to be admitted. The factum of admission be published in Indian Express, Chandigarh Edition, Dainik Bhaskar and Official Gazette of the Punjab Government.

Issues Involved:
1. Petition for winding up of the respondent-company.
2. Recovery of decreed amount.
3. Respondent-company's financial incapacity and insolvency.
4. Disputed facts regarding the quality and return of supplied material.
5. Limitation period for filing the winding-up petition.

Issue-wise Detailed Analysis:

1. Petition for Winding Up of Respondent-Company:
The petitioner, a Government of India Undertaking, filed a petition for winding up the respondent-company, originally incorporated as SGN Cable Industries (P.) Ltd. and later renamed SGN Telecom Limited. The petitioner sought to enforce a decree dated 11-3-2005 for the recovery of Rs. 16,52,957 with interest at 20.25% per annum.

2. Recovery of Decreed Amount:
The decree was passed ex parte against the respondent-company, which failed to pay for the supplied E.C. Grade wire rods. Despite repeated requests and communications from 1992 to 1994, the respondent did not clear the dues. The petitioner served a statutory notice on 2-2-2008, followed by negotiations, but the respondent's offer of Rs. 4,47,586 as full settlement was not accepted, leading to the winding-up petition.

3. Respondent-Company's Financial Incapacity and Insolvency:
The petitioner argued that the respondent-company is commercially insolvent, unable to pay its admitted debt, and its assets are heavily encumbered. The respondent's property is mortgaged to Punjab Finance Corporation and Punjab National Bank, preventing the petitioner from executing the decree.

4. Disputed Facts Regarding the Quality and Return of Supplied Material:
The respondent claimed that the supplied material was export-rejected and partially returned via the transporter, East India Transport Agency. However, the petitioner provided numerous communications showing no mention of material rejection or return until 2008. The court found the respondent's defense of defective material and return to be a made-up ground to avoid liability, lacking bona fide.

5. Limitation Period for Filing the Winding-Up Petition:
The respondent argued that the winding-up petition, filed in May 2009, was barred by limitation as it was beyond three years from the decree date. However, the court cited a larger Bench of the Calcutta High Court, which held that the limitation period for a money decree is 12 years under Article 136 of the Limitation Act, 1963, not three years under Article 137. Thus, the petition was within the permissible period.

Conclusion:
The court concluded that the respondent-company is unable to pay its debt, and the defense of defective material was untenable. The petition for winding up was admitted, and the factum of admission was ordered to be published in specified newspapers and the Official Gazette of the Punjab Government.

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