2012 (4) TMI 569 - HC - Companies Law

Summary

Issues Involved:
1. Authority to File Petition
2. Existence of Debt and Default
3. Compliance with Procedural Rules
4. Alternative Remedy
5. Commercial Insolvency
6. Interpretation of Section 434(1) Clauses

Summary:

1. Authority to File Petition:
The respondent argued that Sri R. Seshan, the power of attorney holder of the petitioner company, was not entitled to represent and file the company petition due to non-compliance with Rules 32 of the Civil Rules of Practice and Rule 21 of the Companies (Court) Rules, 1959. The petitioner contended that the power of attorney was validly executed by the Managing Director, who was authorized by the Board of Directors. The court found that the Managing Director was empowered to appoint an agent, and leave was sought under Rule 21, thus satisfying the procedural requirements.

2. Existence of Debt and Default:
The petitioner claimed that the respondent owed Rs. 30,62,583/- for services rendered, which was not paid despite statutory notice. The respondent did not deny the debt but argued for reconciliation of accounts. The court noted that the petitioner provided invoices and statements, and the respondent failed to provide any substantial evidence against the debt. The court held that the respondent neglected to pay the debt without reasonable cause, fulfilling the requirements of Section 434(1)(a).

3. Compliance with Procedural Rules:
The respondent claimed non-compliance with Rule 95 of the Companies (Court) Rules, 1959. The court found that the petition included all necessary particulars, such as the debt amount, consideration, and notice of demand, thus complying with Rule 95 and Form 46 requirements.

4. Alternative Remedy:
The respondent argued that the petitioner had an alternative remedy of filing a civil suit. The court clarified that Section 443(2) of the Companies Act, which limits the court's discretion when an alternative remedy is available, applies only to petitions under Section 433(f) and not to those under Section 433(e). Therefore, the existence of an alternative remedy did not bar the winding-up petition.

5. Commercial Insolvency:
The respondent contended that it was a profit-making company and not commercially insolvent. The court referred to the Supreme Court's ruling in IBA Health (India) Private Limited, stating that commercial solvency is not a standalone ground to refuse a winding-up petition if the debt is undisputed. Since the respondent did not bonafide dispute the debt, the plea of commercial solvency was irrelevant.

6. Interpretation of Section 434(1) Clauses:
The respondent argued that all clauses (a) to (c) of Section 434(1) must be satisfied cumulatively. The court held that these clauses are in the alternative, dealing with different situations. Compliance with any one clause is sufficient to deem the company unable to pay its debts.

Conclusion:
The court admitted the company petition for winding up under Section 433(e) of the Companies Act, 1956, as the respondent neglected to pay the debt without reasonable cause. The petition was ordered to be advertised in two daily newspapers, with further proceedings scheduled for proof of publication.