2007 (1) TMI 618 - HC - Companies Law

Summary

Issues involved: Admission of winding up petition, company's inability to pay debts, dispute over equipment servicing, discretion in passing winding up order, secured creditor's right to seek winding up.

Admission of winding up petition: The court admitted the petition for winding up of the company after being satisfied that the company was unable to pay its debts, and the petitioner's claim was indisputable. The company was given an opportunity to pay off the debt in monthly installments, but no payment was made, leading to the decision to wind up the company.

Dispute over equipment servicing: The company claimed that it faced financial difficulties due to heavy capital expenditures and market conditions, which affected its ability to pay for the equipment. The company also argued that the petitioner did not service the equipment as agreed, further hindering its operations and revenue generation. Despite these claims, the court found that the agreement did not obligate the petitioner to ensure servicing and that the company had missed payment deadlines.

Discretion in passing winding up order: The court highlighted the exercise of discretion in passing a winding up order, even if the debt is indisputable and the company is insolvent. Various factors, such as other creditors' opposition, workers' interests, and commercial viability, can influence the decision to refuse a winding up order despite the company's financial difficulties.

Secured creditor's right to seek winding up: The court clarified that secured creditors have the right to seek winding up of a company, relinquishing their security interest to claim a proportionate share of the company's assets in liquidation. The court dismissed the argument that being a secured creditor should prevent the petitioner from seeking winding up, as secured creditors have equal rights in such proceedings.

Final decision: The court ordered the winding up of the company in accordance with the Companies Act, 1956, directing the official liquidator to take possession of assets and control transactions. The application for a provisional liquidator was disposed of, and a stay of operation was granted pending a deposit of a specified amount with the official liquidator.