2010 (10) TMI 1169 - HC - Companies Law

Summary

Issues Involved:
1. Assignment of Debt
2. Indebtedness of the Company
3. Factoring Facility and Security
4. Non-payment and Legal Proceedings
5. Financial Condition and Insolvency
6. Failure to File Affidavit and Accounts
7. Admission of Petition and Order

Summary:

1. Assignment of Debt:
The Petitioners, a Securitisation and Reconstruction Company registered u/s 3 of the SARFAESI Act, 2002, sought the winding up of Paper Prints (India) Private Limited ("the Company"). DBS Bank Limited assigned the debts due from the Company to the Petitioners via a Deed of Assignment dated 9th December 2009, entitling the Petitioners to receive the debts and file the petition.

2. Indebtedness of the Company:
The Company was indebted to the Petitioners for Rs. 2,46,05,783.27 as of 31st January 2009, with further interest at 14% per annum from 1st February 2009 till payment/realisation.

3. Factoring Facility and Security:
DBS granted a Factoring/Overdraft facility of Rs. 2,50,00,000 to the Company in July 2007, which was accepted and secured by a demand promissory note, a letter of continuity, a factoring agreement, postdated cheques, and personal guarantees from the promoters.

4. Non-payment and Legal Proceedings:
Despite efficient banking services from DBS, the Company failed to regularise its overdue account. DBS issued notices and eventually filed an Original Application before the Debt Recovery Tribunal for recovery of the amount. The Petitioners were substituted in place of DBS after the assignment.

5. Financial Condition and Insolvency:
The Petitioners argued that the Company was in severe financial crisis, facing continuous losses, and unable to pay its debts, indicating commercial insolvency. The Company was allegedly delaying proceedings at the Debt Recovery Tribunal to avoid a decree.

6. Failure to File Affidavit and Accounts:
The Company failed to file an Affidavit in reply for over four months. During court proceedings, the Company's representative could not confirm whether yearly accounts were filed with the Registrar of Companies since 2007. The Company's claim that only Rs. 20,00,000 was due was unsupported by evidence.

7. Admission of Petition and Order:
The Court found the Company unable to pay its debts and admitted the Company Petition, making it returnable on 25th November 2010. The Petitioners were ordered to advertise the Petition in specified newspapers and the Maharashtra Government Gazette, with a deposit of Rs. 10,000 towards publication charges.

Order:
(i) The Company Petition is admitted and made returnable on 25th November 2010.
(ii) The Petition shall be advertised in two local newspapers and the Maharashtra Government Gazette, with a deposit of Rs. 10,000 towards publication charges within two weeks, failing which the Petition shall stand dismissed for non-prosecution.

[ S.J. KATHAWALLA, J. ]