2011 (2) TMI 1266 - HC - Companies Law

Winding up deemed inability of the appellant-company to pay its debts - it is an assignee of the State Bank of India who had granted various loans to the appellant - appellant was in arrears of more than Rs. 2.66 crores - State Bank of India filed application for recovery before the Debts Recovery Tribunal on 5-2-2001 which was still pending - Held that - company petition was maintainable as issue therein was not of recovery but of inability of company to pay its debts and its liability for being wound up. there is no bar to proceedings for winding up being initiated merely on account of pendency of proceedings before DRT and therefore order of Single Judge was to be upheld

Summary

Issues involved:
Admissibility of company petition under section 433/434 of the Companies Act, 1956 based on the deemed inability of the appellant-company to pay its debts.

Detailed Analysis:

1. Admissibility of Company Petition: The respondent, as the assignee of State Bank of India, filed a company petition under section 433/434 of the Companies Act, 1956, claiming that the appellant was unable to pay its debts. The appellant argued that since recovery proceedings were pending before the Debts Recovery Tribunal, the company court's jurisdiction could not be invoked. However, the learned company judge found the company petition maintainable, emphasizing that the issue was not about recovery but the company's inability to pay its debts and potential liability for winding up.

2. Validity of Assignment Deed: The appellant contended that the respondent had no contractual relationship with them as the assignment deed was not valid under the Transfer of Property Act, 1882, and the Registration Act, 1908. The appellant argued that the debt sought to be recovered was time-barred and that the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (RDB Act) was a Special Act. Citing relevant judgments, the appellant sought to establish that the assignment deed was invalid and the debt recovery was impermissible.

3. Interpretation of Legal Provisions: The respondent opposed the appellant's arguments, asserting that the RDB Act did not prohibit winding-up petitions. They argued that the assignment deed was legal under the Banking Regulation Act, 1949, and the company petition did not concern time-barred debt. The respondent relied on judicial precedents to support their position, emphasizing that proceedings under the Companies Act were not barred by the RDB Act.

4. Court's Decision: After considering the submissions, the court upheld the learned company judge's decision, stating that the pendency of proceedings before the Debts Recovery Tribunal did not preclude winding-up proceedings. The court distinguished relevant judgments cited by both parties, emphasizing that the debt amount was ascertainable and not time-barred. The court noted the appellant's refusal to pay even the principal debt promptly, leading to the dismissal of the appeal. The court clarified that the appellant could propose a reasonable payment plan to the company judge for consideration.

5. Final Verdict: The court dismissed the appeal, highlighting the appellant's unreasonable stance on debt repayment. The court maintained that the impugned order would stand unless the appellant presented a reasonable proposal for debt repayment to the learned company judge for further evaluation in accordance with the law.