2016 (9) TMI 1428 - HC - Companies Law

Winding up petition - Held that - In terms of Section 434(1) of the Companies Act, 1956 since the respondent has neglected to pay the said amount, therefore, it is deemed to be unable to pay the debt . The statutory notice under Section 434 of the Act sent by the petitioner was refused by the respondent, therefore, it would be deemed to be served. Hence, a case is made out for admitting the present winding up petition. Hence the company petition is admitted.

Summary

Issues:
1. Petition seeking winding up of respondent-Company under Sections 433 and 434 of the Companies Act, 1956.
2. Dispute over a sum of ?1 Crore advanced as a short-term loan by the petitioner to the respondent.
3. Allegations of dishonored post-dated cheques and misrepresentation of loan as Share Application Money by the respondent.
4. Respondent's defense claiming the amount was for share allotment and lack of Board resolution for the loan.
5. Examination of balance sheets, liabilities, and assets to determine the financial state of the respondent.
6. Refusal to accept statutory notice for debt repayment by the respondent.
7. Legal implications under Section 434(1) of the Companies Act regarding debt repayment and refusal of statutory notice.

Analysis:
The petitioner filed a winding-up petition against the respondent-Company under Sections 433 and 434 of the Companies Act, 1956, citing non-repayment of a ?1 Crore short-term loan advanced in 2008. The petitioner alleged that post-dated cheques issued as security were dishonored by the respondent, who misrepresented the loan as Share Application Money without any share allotment application. The respondent contended that the amount was for share allotment, but failed to provide evidence supporting this claim. The Court noted discrepancies in the respondent's balance sheet, including reflecting the loan as Share Application Money, indicating financial instability.

The respondent's defense lacked merit as the petitioner's payment was undisputed, and the respondent failed to return the amount despite demands, confirming it as an unsecured loan. The Court found the respondent unable to pay the debt under Section 434(1) due to financial distress, highlighted by dishonored cheques, high liabilities, and minimal assets. The refusal to accept the statutory notice further strengthened the petitioner's case for winding up. The petitioner's compliance with legal requirements and the respondent's failure to substantiate its defense led to the admission of the winding-up petition.

The Court ordered the winding up of the respondent-Company, appointing the Official Liquidator as the Liquidator to oversee the process. The Official Liquidator was directed to take necessary steps for further proceedings, emphasizing the seriousness of the financial situation. If the respondent was found to be a running concern, symbolic possession of assets was permitted, with subsequent orders to be sought from the Court. The judgment concluded by ensuring procedural compliance for the final winding-up order, aligning with the provisions of the Companies Act and Company Court Rules.