2013 (6) TMI 63 - HC - Companies Law

Voluntary winding up - huge loss - no steps taken by any of the creditors for recovery of their dues - Even though the counsel for the appellant Company has offered to give up the counter claim against Prasar Bharti and further offered that the ex-management will continue to contest the claim of Prasar Bharti against the appellant Company and not burden the Official Liquidator with the same but in the entirety of the facts aforesaid we are suspicious of the motives of the appellant Company in seeking its winding up when there does not appear to be an apparent reason therefor. The possibility of the appellant Company seeking winding up for other oblique reasons which are not visible to this Court and of the management of the appellant Company seeking the winding up to remove a blemish from their own record and which may be coming in the way of their other ventures, cannot be ruled out. Application for voluntary winding up rejected.

Summary

Issues involved:
- Appeal against the order for voluntary winding up of the company under Section 433 of the Companies Act, 1956.
- Discretionary nature of winding up by the Court guided by solvency, ability to pay debts, and interest of creditors.
- Concealment of information in arbitration proceedings and counter claim filed.
- Possibility of revival of the company based on the success of the counter claim.
- Financial status of the company with unsecured loans and inventories.
- Steps taken by creditors for recovery of dues.
- Suspicions regarding the motives behind seeking voluntary winding up.
- Validity of the Company Judge's decision to refuse winding up.

Detailed Analysis:

1. The appellant company filed a petition for voluntary winding up under Section 433(a) r/w Section 439 of the Companies Act, 1956, citing losses, disputes with Prasar Bharti, and no business conducted since 1999. The directors and shareholders approved the winding up in meetings held in 2006.

2. The Company Judge dismissed the petition, emphasizing that winding up is a discretionary act of the Court based on solvency, debt repayment ability, and creditor interests. Prasar Bharti opposed the petition, alleging it was to avoid their claims in arbitration. The Judge noted the appellant's concealment of a counter claim in arbitration and the possibility of company revival based on the success of the counter claim.

3. The appellant offered to continue contesting arbitration proceedings and give up the counter claim if permitted to wind up. Financial details revealed unsecured loans and inventories, with no action taken by creditors for recovery.

4. Despite the appellant's offers, the Court expressed suspicions about the motives behind seeking winding up, suggesting hidden reasons or attempts to clear the management's record. The Court declined to interfere with the Company Judge's decision, supported by Prasar Bharti opposing the winding up claim.

5. The appeal was dismissed, with no costs awarded, based on the Court's assessment of the situation and the Company Judge's valid reasons for refusing to wind up the company. The judgment highlighted the discretionary nature of winding up and the need for compelling reasons to justify such a decision.