2014 (6) TMI 712 - HC - Companies Law

Winding up of company - Inability to pay debts - Held that - The respondent did not chose to reply to the notice and it is only in this proceedings, after service of notice manually, having entered appearance, had filed statement of objections, while admitting the transactions, though raising objections as to the varying dates in respect of which such liability may be due. The respondent has also stated that the tax authorities had seized the various documents pertaining to the transaction and that the respondents were not in a position to address the claim completely. It is in this manner that the respondent halfheartedly seeks to deny the liability - In any event, there was no compliance with the demand made under Section 434 of the Companies Act, 1956 and the attitude of the respondent to shy away from this court, would indicate on the face of it that the respondent is unable to pay its debts. Therefore the petition is allowed. The respondent is ordered to be wound up - Decided in favour of appellants.

Summary

Issues:
- Non-payment of dues by the respondent leading to a petition for winding up.

Analysis:
The judgment pertains to a case where the petitioner, engaged in displaying advertisements, entered into agreements with the respondent company for advertising services. The respondent failed to make payments as per the agreements, resulting in arrears amounting to significant sums. Despite the respondent's admission of the transactions, they raised objections regarding the dates and claimed inability to address the liabilities fully due to seizure of documents by tax authorities. The court noted the respondent's non-compliance with the demand under Section 434 of the Companies Act, 1956, and their reluctance to engage with the proceedings, indicating an inability to meet their debts.

The court, based on the findings, allowed the petition and ordered the winding up of the respondent company. The Official Liquidator was appointed as the liquidator, with the petitioner directed to bear initial expenses for the same. Additionally, the petitioner was instructed to publish advertisements of the winding-up order in specified newspapers and file a copy of the order with the Registrar of Companies within 30 days. The judgment underscores the legal consequences of non-payment of dues and the statutory provisions allowing for winding up in cases of insolvency or inability to meet financial obligations.