2010 (10) TMI 910 - HC - Companies Law

Winding up petition - Held that - If a company is unable to produce or maintain its records it is a fit ground to order its winding up on just and equitable grounds. Further, the above conduct of the company shows they are somewhat lacking in commercial morality, which is another reason to order winding up on just and equitable grounds as discussed at page 3693 of the 16th edition, 2006 reprint of Ramaiya on Guide to the Companies Act. In any event, ₹ 2,04,360 is a very reasonable claim for occupation of the premises in question. This sum is prima facie payable by the company to the petitioning creditor.In the facts and circumstances above, I would admit the winding up application on just and equitable grounds and also on the ground that the company is prima facie unable to pay the sum of ₹ 2,04,360. However, I note that the balance claim of the petitioning creditor, has to be established in a suit. Therefore, this winding up application is admitted. The application should be advertised once in any English newspaper having circulation of over 50,000 copies in West Bengal and any Bengali newspaper of like circulation. Such advertisement should be made within four weeks from date. Publication in the Official Gazette is dispensed with. List this application five weeks hence.

Issues:
1. Application for winding up filed by the petitioner.
2. Effect of the Sick Industrial Companies (Special Provisions) Act, 1985 on the winding up application.
3. Claim by the petitioner for payment, accommodation, services, and supplies.
4. Response of the company denying the claim and lack of records to justify it.
5. Just and equitable grounds for winding up the company.
6. Admittance of winding up application on just and equitable grounds.
7. Setting terms and conditions for the company in a prospective suit.

Issue 1: Application for Winding Up
The winding up application was filed by the petitioner, a company named Jardine Henderson Ltd., against Howrah Mills Company Limited seeking payment for services, accommodation, and supplies provided up to March 31, 1987. The respondent company denied the claim, citing lack of records and disputing the amounts owed.

Issue 2: Effect of the Sick Industrial Companies (Special Provisions) Act, 1985
The winding up application was initially stayed due to proceedings before the Board for Industrial and Financial Reconstruction as per the SICA. The company came out of the protection under the Act in 2008, and the period of limitation for the claim stopped running from the start of the enquiry in 1987.

Issue 3: Claim by the Petitioner
The petitioner claimed Rs. 37,43,291 with interest, but the company disputed the amount and denied receiving bills or agreeing to the claimed services. A substantial part of the debt was found to be barred by limitation, leaving a balance claim of Rs. 28,63,805.

Issue 4: Response of the Company
The company's response to the winding up notice was evasive, denying the claim and questioning the validity of the bills and agreements referenced by the petitioner. The company alleged a lack of records to justify the claim and raised concerns about the petitioner's management involvement.

Issue 5: Just and Equitable Grounds for Winding Up
The court considered whether it was just and equitable to wind up the company based on the lack of records to support the claim, the petitioner's management involvement, and the company's refusal to pay despite admitting to availing services and accommodation.

Issue 6: Admittance of Winding Up Application
The court admitted the winding up application on just and equitable grounds, noting the company's inability to pay a prima facie sum of Rs. 2,04,360 for occupation of premises. The court directed the application to be advertised and set terms for the company in a prospective suit.

Issue 7: Setting Terms and Conditions
The court set conditions for the company, requiring payment of the specified sum and a bank guarantee to avoid further proceedings in the winding up application. The court provided a timeline for the company to comply and outlined consequences based on the company's actions regarding the suit filing and bank guarantee.

This detailed analysis covers the various issues involved in the legal judgment, including the application for winding up, the impact of relevant laws, the disputed claim, responses from both parties, just and equitable grounds for winding up, and the terms and conditions set by the court for the company.

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