2010 (1) TMI 565 - HC - Companies Law

Winding up of the respondent Company seeked - Held that - In this view of the matter in terms of the provision contained in sections 433(e) and 434 of the Act and the law laid down by the Supreme Court in the case of Madhusudan Gordhandas & Co. 1971 (10) TMI 49 - SUPREME COURT OF INDIA which squarely apply to the present case which is essentially under section 433(e) of the Companies Act, it is not a fit case to refuse to make an order of winding up in exercise of powers under section 443(2) of the Act which is applicable where the petition is presented on the ground that it is just and equitable that the company should be wound up. On the other hand it is a fit case to order winding up of the respondent Company. Accordingly, I order winding up of respondent company in accordance with the provisions of the Act read with Companies (Court) Rules, 1959

Summary

Issues:
- Petition seeking winding up of respondent company under section 433(e) of the Companies Act, 1956.
- Disputed amount due from respondent company in multiple Company Petitions.
- Commercial insolvency of respondent company and inability to pay debts.
- Arguments regarding the alternative remedy of approaching Civil Court for debt recovery.
- Intervention application by employees' organization.
- Legal principles and judgments related to winding up petitions.

Analysis:

The judgment involves a petition seeking the winding up of a respondent company under section 433(e) of the Companies Act, 1956. The petitioner claimed that the respondent company owed a substantial sum, including principal amounts, tax deductions, and interest. The respondent denied the allegations but admitted the debt, proposing phased repayment. An intervention application by an employees' organization highlighted the potential impact on employees if the company is wound up.

The petitioner argued that despite the admission of debt, no payments were made, indicating insolvency. The respondent contended that the petitioner could seek debt recovery through the Civil Court instead of winding up. Legal arguments referenced judgments emphasizing that winding up is a discretionary remedy, not an automatic right, and should be a last resort. The court reviewed precedents and principles regarding winding up petitions and the requirement for undisputed debts or substantial defenses.

The court found that the respondent company did not dispute its liability to pay the debts but failed to show a substantial defense or dispute. Despite intentions to repay in phases, no payments were made, indicating an inability to pay debts. The court concluded that the respondent company was unable to pay its debts, justifying the winding up order. The intervention concerns were noted, but the winding up order was deemed necessary, with the Official Liquidator appointed as the liquidator of the company.

In conclusion, the court ordered the winding up of the respondent company based on the provisions of the Companies Act and relevant legal precedents. The judgment highlighted the importance of proving an inability to pay debts in winding up petitions and the discretionary nature of such remedies. The appointment of the Official Liquidator marked the next step in the winding up process, with further orders scheduled for the next hearing date.