2009 (10) TMI 528 - HC - Companies Law

Winding up petition - Held that - Applying the principle that after commencement of the arbitration proceedings, no company petition for winding up can be admitted and having regard to the financial status of the respondent-company, it is of the view that the company petition filed by the petitioner-company to wind up the respondent-company is not maintainable and the same is liable to be dismissed and accordingly dismissed.

Issues:
1. Winding up petition filed against respondent-company under Companies Act, 1956.
2. Claim for outstanding debt by petitioner against default company.
3. Transfer of assets and liabilities to respondent-company.
4. Dispute over payment of outstanding debt.
5. Financial status and objections raised by respondent-company.
6. Service of statutory notice and jurisdictional concerns.
7. Consideration of winding up petition during pendency of appeal.
8. Applicability of legal principles in winding up proceedings.

Detailed Analysis:
1. The petitioner sought to wind up the respondent-company under the Companies Act, 1956, due to outstanding debt owed by a default company. The petitioner claimed a sum of Rs. 36,19,239.38, including interest, from the default company for a failed business deal involving the installation of steel furnaces. The default company contested the suit, resulting in a decree against it, prompting the winding up petition against it.

2. Following the default company's inability to pay its debts, the petitioner filed a winding up petition, which was later closed with liberty to revive after proceedings before the BIFR. The respondent-company subsequently took over the default company's assets and liabilities. The petitioner claimed Rs. 51,62,873 from the respondent, who contested the petition citing pending appeal against the decree and financial stability.

3. The respondent-company's counter affidavit highlighted its financial stability, market leadership, and debt-free status since 2004-05. It objected to the defective service of the statutory notice and the lack of finality in the decree against the default company. The respondent argued that the appeal against the decree was pending, and the debt liability was yet to be determined.

4. The court acknowledged the pending appeal against the decree and the financial strength of the respondent-company. It emphasized that the alleged debt was subject to the appeal's outcome and could not be a basis for winding up until conclusively determined. The court cited legal precedents emphasizing the continuation of original proceedings through appeals and the inadmissibility of winding up petitions during arbitration proceedings.

5. Considering the legal principles and the financial status of the respondent-company, the court concluded that the winding up petition was not maintainable. The court dismissed the petition, noting the lack of grounds for interference and ordered the dismissal of the connected application as well.

6. In conclusion, the court's judgment focused on the lack of finality in the debt dispute, the pending appeal, and the financial stability of the respondent-company as key factors in determining the inadmissibility of the winding up petition. The court's decision aligned with established legal principles and precedents governing winding up proceedings in similar circumstances.

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