2014 (2) TMI 1356 - HC - Companies Law

Unable to pay the due amount - Section 434(1)(a) of Companies Act, 1956 - HELD THAT - The proposal submitted by the respondent for restructuring of its liabilities to banks would not in any way restrict the petitioner to maintain the present petition which the petitioner is entitled to ex debito justitiae. The second submission made by the respondent that there is an inter se agreement between various banks also does not offer any credible defence to the respondent - The present petition is, therefore, admitted Appointment of a Provisional Liquidator - HELD THAT - The Directors of the company shall file a Statement of Affairs within 21 days and also disclose the correct addresses of the company as well as the addresses of the Directors. It is clarified that the Directors of the company shall continue to operate the bank accounts, however, a weekly statement as to the receipts and payments shall be furnished to the Official Liquidator. Application disposed off.

Summary

Issues:
1. Petition under Section 433(e) of the Companies Act, 1956 for unpaid financial facilities.
2. Dispute over restructuring proposal under CDR mechanism.
3. Application for appointment of Provisional Liquidator and management of company assets.

Issue 1: The petition was filed under Section 433(e) of the Companies Act, 1956, alleging non-payment of financial facilities by the respondent despite a notice served. The respondent acknowledged the amounts due but argued for a restructuring proposal under the CDR mechanism pending with a consortium of banks. The court found the respondent unable to discharge its debts, admitting the winding-up petition. The court held that the restructuring proposal did not bar the petitioner from maintaining the petition, leading to the admission of the petition and directing advertisement for hearing.

Issue 2: The respondent's proposal for restructuring its liabilities did not prevent the admission of the winding-up petition. The court rejected the defense based on an inter se agreement between various banks, emphasizing the petitioner's entitlement to maintain the petition. The court directed the petitioner to issue advertisements for the winding-up hearing despite the restructuring proposal under consideration by other secured creditors.

Issue 3: An application was made for the appointment of a Provisional Liquidator due to the respondent's temporary inability to repay debts. The court allowed the respondent to continue efforts to discharge creditors but ordered the Official Liquidator to take charge of movable stock to prevent misappropriation. Details of warehouses storing stock were provided, and the respondent was directed to disclose inventory details and realizable value. The directors were instructed to file a Statement of Affairs and provide correct addresses, with continued operation of bank accounts under Official Liquidator's oversight. The respondent was given liberty to pursue proposals with banks and settle with creditors, with the application disposed of accordingly.