2011 (3) TMI 1457 - HC - Companies Law

Winding up - petitioner-company executed a Stock Purchase and Sale Agreement with M/s. Newco Prague s.r.o. ( Purchaser ) for sale of 100 per cent equity interest - respondent a company incorporated under the Indian Companies Act 1956 and registered with the Registrar of Companies Delhi executed a Guaranty Declaration dated 15-3-2007 whereunder it assumed the duty to pay to petitioner the unpaid instalments in accordance with the Agreement in the event of default by the Purchaser - However purchaser did not make payment and petitioner sent demand notice to guarantor i.e. respondent - Subsequently petitioner filed winding up petition against respondent Held that - liabilities of the surety is discharged because of the consideration given by the firm to the mills in the sense of the postponement of action by the firm against the mills. According to the petitioner the financial position of the mills is none too good and it will be impossible for them to proceed against the mills. There can be no doubt that the firm is entitled to ignore the principal debtor and seek payment from the surety and it is not open to the surety to ask the firm to first exhaust his remedy against the firm and then come to him. respondent owes a debt to the petitioner which it has defaulted in paying. Moreover the defence set up by respondent is a moonshine and a sham. petitioner s application allowed

Issues Involved:
1. Maintainability of the petition under sections 433(e) and 434 of the Companies Act, 1956.
2. Validity and enforceability of the Guaranty Declaration.
3. Authority of Mr. Ravi Chilukuri to execute the Guaranty Declaration.
4. Compliance with statutory requirements under FEMA and FERA.
5. Timing and validity of the statutory winding-up notice.
6. Existence of a debt owed by the respondent to the petitioner.

Detailed Analysis:

1. Maintainability of the Petition:
The respondent argued that the petition is not maintainable as no debt is owed to the petitioner until a decree is obtained on the basis of the Guaranty Declaration. The Court rejected this argument, citing the precedent set in *Ram Bahadur Thakur & Co. v. Sabu Jain Ltd.*, which establishes that a debt arises once the contingencies in the guarantee are met, making the petition maintainable.

2. Validity and Enforceability of the Guaranty Declaration:
The Guaranty Declaration was executed by the respondent to pay the petitioner in case of default by the Purchaser. The Court held that the Guaranty Declaration is a valid and enforceable contract under law, as it was not executed under coercion, undue influence, fraud, or misrepresentation.

3. Authority of Mr. Ravi Chilukuri:
The respondent contested the authority of Mr. Ravi Chilukuri to execute the Guaranty Declaration, arguing that he did not have the necessary power of attorney and was not a director or shareholder at the relevant time. The Court found that Mr. Chilukuri was authorized by a board resolution dated 2-3-2007 to sign documents on behalf of the respondent. Additionally, the principle of internal management prevents the respondent from disputing his authority.

4. Compliance with Statutory Requirements under FEMA and FERA:
The respondent argued that the Guaranty Declaration is null and void due to the lack of mandatory permissions under FEMA and FERA. The Court held that while the respondent could be prosecuted for any breaches of these statutes, it does not render the Guaranty Declaration unenforceable.

5. Timing and Validity of the Statutory Winding-Up Notice:
The respondent claimed that the winding-up notice dated 1-5-2009 was premature as the Purchaser had until 3-6-2009 to make the payment. The Court found that the petitioner had periodically sent letters and notices to the Purchaser and the respondent, and the winding-up notice was not premature.

6. Existence of a Debt Owed by the Respondent:
The Court found that a debt was owed by the respondent to the petitioner, as the respondent had assumed the duty to pay the unpaid instalments under the Guaranty Declaration. The Court cited the Supreme Court decision in *IBA Health (I) (P.) Ltd. v. INFO-DRIVE Systems SDN BHD*, which held that if a debt is undisputedly owing, it must be paid regardless of the company's solvency.

Conclusion:
The Court allowed the petitioner's application and appointed the Liquidator as the Provisional Liquidator of the respondent company. The respondent and its directors/officers were restrained from selling, parting with possession, or creating third-party rights in respect of its properties/assets until further orders. The respondent's application for dismissal of the petition was dismissed.

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