2012 (6) TMI 673 - HC - Companies Law

Winding up petition - Failure to make repayment of the loan - the petitioner bank had granted loan to the respondent to meet with the need of working capital against collateral security by way of postdated cheque issued as well as personal guarantee of the Directors dishonor of cheque when placed for clearance respondent raised dispute in in response to the petitioner s statutory notice demanding the repayment - Held that - Having availed the loan facility and after having agreed to repay the loan amount and then after having asked for extension of time to repay the loan amount and then having again asked for further extension, the respondent company not only failed to keep its promise and fulfill its assurance and the respondent company not only went back on its written assurance in the loan agreement as well as the said two communication dated 18.5.2011 and 17.6.2011 - the dispute or defence of the respondent company is spurious, speculative, illusionary and an afterthought raised only with a view to resisting the petition and delaying the liability to make the payment of due and payable amount - respondents contention that the petitioner bank has not claimed definite and exact sum/amount which relevant to take into account the details mentioned in the statutory notice as para 1 of the statutory notice clearly mentions the amount - as the respondent s contention that the petition is filed without authority and the resolution is not acceptable as the Act, Rules or forms do not require any resolution to be passed for the purpose of initiating winding up proceedings, even where the petitioning-creditor is a Company with a Board of Directors - the legal consequence of a petition not being properly signed by the petitioner is a mere irregularity which can be cured at any time - accept and admit this petition - The petitioner is allowed time to place on record resolution of the petitioner bank to file the petition and authorizing Chief Manager to file the petition.

Issues Involved:
1. Petition for winding up of the respondent company under Sections 433 and 434 of the Companies Act, 1956.
2. Respondent company's failure to repay the loan and dishonour of the post-dated cheque.
3. Respondent's financial health and ability to repay the debt.
4. Allegations of malafide intentions and misuse of court processes by the petitioner.
5. Procedural defects in the petition and statutory notice.

Detailed Analysis:

1. Petition for Winding Up:
The petitioner bank filed a petition under Sections 433 and 434 of the Companies Act, 1956, seeking the winding up of the respondent company, M/s. Electrotherm (India) Ltd., for failing to repay a loan of Rs. 50 Crores. The petitioner requested the appointment of an official liquidator to take over the company's assets and conduct the winding-up process.

2. Failure to Repay Loan and Dishonour of Cheque:
The petitioner claimed that the respondent company failed to repay the loan despite several requests and reminders. The loan was secured by a post-dated cheque and personal guarantees from the directors. The cheque was dishonoured upon presentation due to "exceeds arrangements." The petitioner issued a statutory notice on 10.8.2011, which was met with an evasive reply from the respondent on 5.9.2011.

3. Respondent's Financial Health:
The petitioner argued that the respondent's failure to repay the loan and the dishonour of the cheque indicated the company's inability to discharge its debts. The respondent admitted to availing the loan but contended that the cheque was given as security and not for discharge of liability. The respondent also mentioned ongoing proceedings before the Debt Recovery Tribunal and claimed that the petition was an act of harassment. The respondent highlighted its financial position, including a large turnover and significant market share, arguing that temporary financial difficulties should not justify winding up.

4. Allegations of Malafide Intentions:
The respondent accused the petitioner of malafide intentions, claiming that the statutory notice did not specify a definite sum and that the petition was aimed at pressurizing the respondent. The petitioner countered that the respondent's sudden change in stance and failure to honour commitments indicated a lack of bona fides.

5. Procedural Defects:
The respondent contended that the petition was defective due to an improper verification affidavit, lack of a board resolution authorizing the petition, and absence of a power of attorney for the deponent. The court, however, noted that such defects were curable and did not warrant dismissal of the petition. The court referenced the decision in Welding Rods (P.) Ltd. v. Indo Borax & Chemicals Ltd. to support this view.

Conclusion:
The court concluded that the respondent's defence lacked bona fides and that the company had neglected to discharge its financial obligations. The petition was accepted and admitted, with the petitioner given time to cure procedural defects. The respondent was granted time to deposit the claim amount to demonstrate its bona fides and ability to pay. The determination of the final hearing date and advertisement of the petition's admission was deferred to a later date.

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