2010 (10) TMI 86 - HC - Companies Law

Winding up - Circumstances in which a company may be wound up - Held that - There is absolutely no difficulty to conclude that the first respondent has acknowledged its liability and despite the receipt of statutory notice, the first respondent is unable to repay the amounts to the petitioner and therefore the objection raised by the first respondent against the maintainability of the company petition is not sustainable and accordingly, the company petition is ordered to be admitted. Let notice of publication of the petition be effected by the petitioner in two dailies, viz., Business Line (English edition) and Daily Thanthi (Tamil edition) and also in the Government Gazette in accordance with the Companies (Court) Rules, 1959. The official liquidator attached to this court is appointed as the provisional liquidator of the company with a direction to take over all the assets and records of the company wheresoever located and to proceed in the matter in accordance with law. The official liquidator shall file its report within two months of taking over possession of the assets and records of the company.

Issues Involved:
1. Maintainability of the company petition due to non-service of statutory notice to the registered office.
2. The financial inability of the first respondent-company to repay its debts.
3. The impact of filing a civil suit on the winding-up proceedings.

Issue-wise Detailed Analysis:

1. Maintainability of the Company Petition:
The first respondent contested the maintainability of the company petition on the grounds that the statutory notice was not sent to its registered office. The petitioner sent the notice to two addresses, but not to the registered office at Thenur, Samayanallur Post, Madurai. Despite this, the first respondent acknowledged receipt of the notice and issued a reply. The court referred to several judgments, including *Indian Oil Corporation Ltd. v. NEPC India Ltd.* and *Rajearajeswari Packaging Products v. Dev Fasteners Ltd.*, which held that the non-sending of notice to the registered office is not fatal if the company received and acted upon the notice. The court concluded that the statutory notice was sufficiently served, and the petition was maintainable.

2. Financial Inability to Repay Debts:
The petitioner argued that the first respondent was unable to pay its debts, as evidenced by various financial transactions and acknowledgments. The first respondent received multiple advances from the petitioner, totaling Rs. 1.92 crores, and acknowledged these in its balance sheet and through various agreements and confirmations. The court examined the balance sheet, agreements, and confirmation letters, which clearly showed the first respondent's indebtedness to the petitioner. The court found that the first respondent acknowledged its liabilities and was unable to repay the amounts despite receiving the statutory notice.

3. Impact of Filing a Civil Suit:
The first respondent argued that the petitioner's filing of a civil suit for recovery barred the winding-up proceedings. The court held that filing a civil suit does not preclude a winding-up petition, as the two proceedings serve different purposes. The civil suit is to vindicate private rights, while the winding-up petition addresses the company's capacity to repay its debts, considering the interests of creditors and contributors. The court referred to the judgment in *Varinder Sahni v. MGRM Net Ltd.* to support this view. The court concluded that the civil suit did not bar the winding-up proceedings.

Conclusion:
The court admitted the company petition for winding up the first respondent-company, finding that the statutory notice was sufficiently served, the first respondent was unable to repay its debts, and the filing of a civil suit did not bar the winding-up proceedings. The court directed the petitioner to publish the notice of the petition in specified newspapers and appointed the official liquidator to take over the assets and records of the company. The matter was listed for further directions on 29-11-2010.

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