2014 (5) TMI 1008 - HC - Companies Law

Winding up of company - Inability to pay debts - Gold ornaments made on order - But payment was not made fully - Held that - respondent has admitted the debt. It is also an admitted position that the respondent Company is not a going concern and the respondent Company has lost its financial sub-stratum and has become commercially insolvent and is unable to pay its debts. In light of such admitted position therefore, the petition deserves to be allowed. The respondent Company is hereby ordered to be wound up under Sections 433 and 434 of the Companies Act. The Provisional Liquidator appointed by this Court vide order dated 30.4.2012 and 13.11.2013 passed in Misc. Civil Application No. 182 of 2013 is hereby appointed as Official Liquidator. The Official Liquidator shall take possession of all movable and immovable assets of the respondent Company and shall file its report within a period of three months - Decided in favour of appellant.

Summary

Issues:
Petition for winding up under Sections 433 and 434 of the Companies Act, 1956 based on non-payment for gold ornaments supplied.

Analysis:
The petitioner entered a business transaction with the respondent to prepare gold ornaments at a specified rate per gram. The petitioner delivered the gold as per the agreement but the respondent failed to return the ornaments or pay the equivalent amount. Despite assurances, the respondent did not fulfill its obligations, leading to a situation where the respondent admitted its inability to repay or refund the gold. The respondent's financial instability and commercial insolvency were acknowledged by both parties. The petitioner sought winding up of the respondent company under Sections 433 and 434 of the Companies Act.

The respondent, through its advocate, admitted that the company was not a going concern, further supporting the petitioner's claim of commercial insolvency. Both parties did not raise any additional contentions, and the respondent conceded to the debt owed. The court considered the admitted position that the respondent was unable to pay its debts and had lost its financial sub-stratum. Consequently, the court ordered the winding up of the respondent company under Sections 433 and 434 of the Companies Act. The Provisional Liquidator previously appointed was designated as the Official Liquidator, tasked with taking possession of all assets and submitting a report within three months. The petition was allowed with no costs imposed on either party.