2013 (4) TMI 650 - HC - Companies Law

Winding up petition Maheshwari/appellant could not repay the dues to their creditors/Tata resulting in litigations at the instance of creditors - Whether the secured creditors could file the petition for winding up and if so, what would be the role of the company Court in the matter of admission of the winding up proceeding? Held that - Winding up is a discretionary remedy. Section 443 of the Act empower the Court to pass appropriate order that would be just in the facts and circumstances of the case as there exist no dispute to the ascertained/ claim of the creditor. The company also could not make any positive effort on that score. However, the Court should use its discretion judiciously. After following considering the case of Kotak Mahindra Bank Limited and Eastern Spining Mills & Industries Limited 2012 (11) TMI 82 We are inclined to give one more opportunity to Maheshwari to repay the dues of Tata. As Maheshwari would pay the dues of Tata as quantified and adjudicated by His Lordship by the order and judgement impugned by monthly installment of Rs.10 lakhs per month for one year commencing from April 10, 2013 and thereafter on the 10th day of the succeeding month. For the next financial year Maheshwari would pay Rs.12.5 lakhs per month on the date fixed as above. In the third financial year Maheshwari would pay Rs.15 lakhs per month until the entire dues are cleared off but if, any dues are still outstanding, that would be paid in four equal monthly installments payable on the date fixed as above. The payment of interest at the contractual rate would be at the yearly rest and be paid on the reducing claim. Frozen amount as on the date of the foregoing order would be taken as a principal sum and would be cleared off first and the subsequent interest component would be paid thereafter. So long the installments are paid off the winding up petition would remain permanently stayed. In default of payment of anyone installment this order would stand recalled and the parties would be at liberty to proceed before the learned company Judge.

Issues Involved:
1. Whether the secured creditors could file the petition for winding up.
2. The role of the company Court in the matter of admission of the winding up proceeding.
3. The maintainability of the winding up petition in light of parallel proceedings and remedies pursued by the creditor.
4. The assessment of the company's solvency and net worth.
5. The discretion of the Court in granting winding up orders.

Issue-wise Detailed Analysis:

1. Whether the secured creditors could file the petition for winding up:
The learned single Judge held that the right of the secured creditor to present a winding up petition was unfettered by the fact that the creditor would enjoy security that would be inadequate to meet the claim. The Court observed that a secured creditor is also a creditor within the meaning of Section 439(1)(b) of the Companies Act 1956, thus entitled to maintain a winding up petition.

2. The role of the company Court in the matter of admission of the winding up proceeding:
The Court emphasized that before making an order of admission of the winding up proceeding, it must assess whether the company is solvent and its net worth is positive. The learned Judge discussed the precedents and the law on the subject, particularly Section 434(1)(a) of the Companies Act 1956, and concluded that the petition should be admitted, giving it a representative character to allow all interested parties to support or oppose the winding up.

3. The maintainability of the winding up petition in light of parallel proceedings and remedies pursued by the creditor:
Maheshwari argued that Tata Capital, having pursued their remedy before the arbitration Court at Bombay and obtained protection, should not be allowed to pursue the winding up petition. However, the Court noted that the pendency of a civil suit on the self-same cause of action does not ipso facto make a winding up petition not maintainable. The Court referred to the decision in Central Bank of India vs. Sukhani Mining and Engineering Industries Pvt. Ltd., which held that winding up proceedings could not be stayed merely because the creditor has filed a suit against the company.

4. The assessment of the company's solvency and net worth:
The learned Judge held that the company's balance sheet was unimpressive, and the sickness of an Industrial Company under the Sick Industrial Companies (Special Provisions) Act 1985 was a worse financial position than commercial insolvency. The Court found that Maheshwari was unable to pay its debts, as evidenced by dishonoured cheques and the company's failure to reply to the statutory notice, thus establishing the presumption of inability to pay.

5. The discretion of the Court in granting winding up orders:
The Court highlighted that winding up is a discretionary remedy and even if a claim is admitted, the order of admission is not a matter of course. The Court must use its discretion judiciously, considering the scope of revival of the company. The Court decided to give Maheshwari an opportunity to repay the dues of Tata by installments, thus staying the winding up petition as long as the installments were paid.

Conclusion:
The appeal was disposed of with the following orders:
- Maheshwari to pay Tata's dues in monthly installments over three years.
- The winding up petition to remain permanently stayed as long as installments are paid.
- Other creditors supporting the winding up petition are at liberty to proceed with their independent proceedings.
- The cost awarded by the learned Judge was set aside.

Separate Judgments:
Dr. Mrinal Kanti Chaudhuri, J. agreed with the judgment.

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