2010 (9) TMI 235 - HC - Companies Law

Petition filed under section 433(e) and (f) of the Companies Act, 1956 the petitioner is praying for an order to wind up the respondent-company Held that - The petition is hereby allowed. The respondent-company is hereby ordered to be wound up. The Official Liquidator is appointed as Liquidator of the respondent-company. Petitioner-company shall deposit a sum of ₹ 25,000 with the Official Liquidator to meet the initial winding up expenses. Petitioner-company to take out advertisement of this order in one edition of VIJAY TIMES English Newspaper and SANJEVANI Kannada Newspaper within fourteen days from the date of receipt of copy of this order. Petitioner-company to serve certified copy of this order with the Registrar of Companies within thirty days from the date of receipt of copy of this order. Ordered accordingly.

Issues:
Petition filed under section 433(e) and (f) of the Companies Act, 1956 for winding up the respondent-company based on lease agreement and security deposit. Dispute over the termination of lease post-sale of premises and furniture by secured creditor. Validity of respondent-company's defense regarding the lease termination and refund of security deposit. Financial instability of the respondent-company leading to the order for winding up.

Analysis:
The petitioner-company sought winding up of the respondent-company under section 433(e) and (f) of the Companies Act, 1956, based on a lease agreement and security deposit. The petitioner leased premises and furniture from the respondent under agreements dated 24-12-2004. However, the respondent's secured creditor sold the leased assets in a public auction, which led to the termination of the lease. The petitioner demanded a refund of the security deposit, but the respondent denied liability, claiming the lease was not terminated as furniture was not returned. The Court found that the lease was terminated by operation of law post the sale of assets, as confirmed in an earlier order dated 7-10-2009, admitting the petition.

The respondent argued that only the premises, not the furniture, were mortgaged to the secured creditor. However, a floating charge on movables was established, allowing the creditor to sell the assets. Citing a Division Bench judgment, the Court agreed that a floating charge remains dormant until a future event triggers enforcement. The sale of assets to the petitioner was lawful, and the respondent's defense was deemed invalid. Additionally, the respondent's financial instability, with significant losses and outstanding debts to other secured creditors, indicated an inability to pay the debt owed to the petitioner.

Consequently, the Court allowed the petition, ordering the winding up of the respondent-company. The Official Liquidator was appointed as the Liquidator, and the petitioner was directed to deposit funds for initial winding up expenses. Moreover, the petitioner was instructed to publish the order in specified newspapers and serve a copy to the Registrar of Companies within stipulated timelines. The judgment was comprehensive, addressing legal aspects of lease termination, security deposit refund, financial viability, and winding up procedures under the Companies Act, 1956.

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