2016 (2) TMI 386 - HC - Companies Law

Winding up petition - Held that - It is prima facie evident that the respondent company has neglected to pay its due debt to the petitioner Bank despite its obligation and notice, and therefore per se is deemed to be insolvent. The petition is accordingly, admitted. The citation of the winding up petition being admitted be published by the petitioner in two news papers i.e. The Times of India (English) and Dainik Bhaskar (Hindi) Jaipur Edition in terms of Rule 24 of the Companies (Courts) Rules, 1959. The Citation be also published in Official Gazette.

Summary

Issues Involved:
Petition under Section 439(1)(b) read with 433(e) of the Companies Act, 1956 for winding up of the respondent company due to non-repayment of loan, statutory notice under Section 434(1)(a) of the Act of 1956 returned, respondent's objections based on prior recovery proceedings under the Recovery of Debts due to Bank and Financial Institutions Act, 1993, defense of misuse of legal process by the petitioner Bank, legal principles regarding winding up petitions despite prior recovery actions, determination of insolvency based on non-payment of debt despite statutory notice.

Detailed Analysis:

1. The petitioner, a bank, filed a petition under Section 439(1)(b) read with 433(e) of the Companies Act, 1956 against the respondent company for the recovery of an outstanding loan amount. The respondent company failed to maintain financial discipline, missed loan repayments, and post-dated cheques were dishonored, leading to a debt of Rs. 32,12,485.21 as of 23-6-2012. Despite repeated requests and a statutory notice, the respondent failed to repay the debt, indicating commercial insolvency.

2. The respondent raised objections citing prior recovery proceedings under the Recovery of Debts due to Bank and Financial Institutions Act, 1993 and the property auctioned under the SARFAESI Act. The respondent argued that the winding up petition was a misuse of legal process as the bank had already taken steps for recovery. However, the defense did not dispute the debt owed to the bank, but rather focused on the bank's prior actions, alleging suppression of facts.

3. The court considered the legal precedents, including judgments in cases like Viral Filaments Ltd. Vs. Indusind Bank Ltd. and The Bank of Nova Scotia Vs. RPG Transmission Limited, emphasizing that the mere filing of a recovery application does not bar a winding up petition if conditions under the Companies Act, 1956 are met. The court highlighted that insolvency proceedings are in the public interest to prevent companies from operating under limited liability when unable to pay debts, emphasizing commercial morality.

4. Referring to the principles laid down by the Hon'ble Supreme Court in Vijay Industries Vs. NATL Technologies Limited, the court determined that the respondent company had neglected to pay its debt despite statutory notice, indicating insolvency. The court admitted the winding up petition, ordering its publication in newspapers and the Official Gazette, with costs borne by the petitioner bank. The Official Liquidator was also directed to receive a copy of the order.

This detailed analysis covers the issues involved in the legal judgment, providing a comprehensive overview of the court's decision and the reasoning behind it.