2018 (5) TMI 1856 - HC - Companies Law

Winding up petition - Whether Company has neglected to pay the same to the petitioner or has not secured the same due to the petitioner - HELD THAT - It is apparent that the amount, which the petitioner had advanced as loan as Director of the Company, has been repaid from time to time which is also admitted from the averments made by the petitioner in his Company Petition. It is accepted by the petitioner that he received an amount of ₹ 55,00,000/- and 10,00,000/- on 09/07/2007 and 10/07/2007 respectively in addition to a cheque of an amount of ₹ 20,709/- on 26/03/2008. The respondent-Company has also offered to pay the dues of the petitioner by securing flats constructed by it. However, as noted, the petitioner has refused to take the said flats. Thus, it cannot be said that the respondent- Company would be deemed to be unable to pay its debts within meaning of Section 434 of the Act of 1956. No case is made out to initiate proceedings for winding up of the respondent-Company in terms of Section 433(e) of the Act of 1956. The petitioner would, however, be free to recover the amount as he claims by taking up other remedies available to him under the Civil Procedure Code or any other provisions of law.

Issues Involved:
1. Validity of the petition under Section 439 of the Companies Act, 1956.
2. Financial obligations and repayment claims of the petitioner.
3. Allegations of mismanagement and wrongful financial practices.
4. Applicability of Section 433(e) and (f) of the Companies Act, 1956 for winding up the company.
5. Evaluation of the company's ability to pay its debts under Section 434 of the Companies Act, 1956.

Issue-wise Detailed Analysis:

1. Validity of the petition under Section 439 of the Companies Act, 1956:
The petitioner filed a Company Petition under Section 439 of the Companies Act, 1956, seeking the winding up of M/s Prestige City Developers Private Limited. The petition was based on the grounds that the company was unable to pay its debts, as outlined in Section 433(e) of the Act of 1956.

2. Financial obligations and repayment claims of the petitioner:
The petitioner claimed to have provided unsecured loans to the company from 2005-06, repayable on demand with interest. The petitioner detailed the amounts advanced and interest accrued, claiming a total of ?1,86,53,747/- as of 01/07/2016, with an interest rate of 21% per annum. The respondent company acknowledged the loans but disputed the interest rate and amount claimed. They highlighted that the financial obligations were tied to the company's cash flow and business performance.

3. Allegations of mismanagement and wrongful financial practices:
The respondent company refuted the petitioner's claims, stating that the petitioner was attempting to destabilize the company. They pointed out that the petitioner’s brother had also filed a separate application alleging mismanagement. The respondent emphasized that the company had adhered to generally accepted accounting principles and statutory requirements. They also disputed the petitioner's unilateral and arbitrary claims of liabilities and interest rates.

4. Applicability of Section 433(e) and (f) of the Companies Act, 1956 for winding up the company:
The court examined whether the company should be wound up under Section 433(e) for being unable to pay its debts or under Section 433(f) for being just and equitable. The court noted that the company was engaged in the business of constructing and selling flats, and the petitioner, an unsecured creditor, had refused the company's offer to repay the loans through flats or other means.

5. Evaluation of the company's ability to pay its debts under Section 434 of the Companies Act, 1956:
The court analyzed whether the company was deemed unable to pay its debts under Section 434. It considered the criteria, including the company's indebtedness, the petitioner's demand for repayment, and the company's response. The court found that the company had made efforts to repay the petitioner, including offering flats, which the petitioner refused. Thus, it could not be concluded that the company was unable to pay its debts.

Conclusion:
The court concluded that no case was made out for winding up the company under Section 433(e) of the Act of 1956. The petitioner was advised to seek other legal remedies to recover the claimed amount. Consequently, the Company Petition was dismissed, and the interim order restraining the company from alienating its immovable property was vacated. No costs were awarded.

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