2014 (3) TMI 923 - HC - Companies Law

Winding up petition - failure to pay debts - respondent contended that, this petition is not maintainable as the Gati has put the decree into execution, and since the decree has not yet been returned unsatisfied, the petition must be dismissed in limine. - Held that - A petitioning-creditor with a decree need not put it into execution before bringing a winding up petition. - He can proceed either under Section 434(1)(b) or, having served a notice, move against the debtor-company under Section 434(1)(a). Whether claim is time barred - Held that - The petition is based entirely on the decretal debt, not the underlying cause of action. Limitation would be governed not by Article 137 but by Article 136, and that provides a period of 12 years from the date when the decree is enforceable. - It is also settled that winding up is an equitable mode of execution. There is no manner of doubt that Atcom is commercially insolvent. Not only must it be deemed to be unable to pay its debts on account of its failure to comply with the demand in the statutory notice, but its reply contains vital admissions of financial inability, commercial insolvency, its lack of income and that it is doing no business. Gati has a valid decree in its favour. Petition admitted - The Official Liquidator is appointed Provisional Liquidator of the respondent company. - Decided in favor of petitioner.

Summary

Issues:
1. Winding up petition under Sections 433 and 434 of the Companies Act, 1956 due to non-payment of decretal debt.
2. Validity of the petition despite the decree not being executed.
3. Time-barred nature of the claim based on the date of the decree.
4. Commercial insolvency of the respondent company.

Analysis:
1. The petitioner, Gati Limited, sought winding up of the respondent-company, Atcom Technologies Limited, due to non-payment of a decretal debt. The contract between the parties required Atcom to pay Gati within 15 days of bill submission, with an interest provision. Gati filed a suit for recovery, which was decreed ex-parte in its favor.

2. Atcom's attempt to set aside the ex-parte decree was dismissed after a significant delay. Gati then sent a statutory notice demanding payment, to which Atcom responded with claims of financial difficulties. The respondent argued that the petition was not maintainable as the decree had not been executed, but legal precedents supported Gati's right to file a winding up petition without prior execution of the decree.

3. The respondent contended that the claim was time-barred, citing a misinterpretation of a judgment regarding the limitation period. However, the court clarified that the petition was based on the decretal debt, not the underlying cause of action, thus governed by a different limitation period. The court found the petition to be within the time limit based on the dismissal date of Atcom's application.

4. The court acknowledged Atcom's commercial insolvency based on its failure to pay the debt, financial admissions, and lack of business activity. With a valid decree in Gati's favor and Atcom's failed attempt to set it aside, the court deemed Atcom's defenses as speculative and intended to delay the proceedings. Consequently, the court admitted the Company Petition, appointed a Provisional Liquidator, and restrained Atcom from disposing of its assets without court permission.

This detailed analysis of the judgment highlights the legal proceedings, arguments presented, and the court's decision on each issue involved in the case.