2017 (12) TMI 1725 - HC - Companies Law

Winding up of respondent company - inability to pay its debts and declared commercially insolvent - main argument of respondent was that meetings of Joint Lender's Forum had taken place in which there were many lenders who were not in favour of winding up, whereas there were many other lenders who were in favour of winding up - HELD THAT - After the petition was admitted, no new affidavit of reply has been filed opposing the winding up of the company. Today also there is nobody present for respondent company. Petitioner has also filed an affidavit of one Digambar Khadye affirmed on 2nd August, 2017 to which are annexed copies of newspaper cuttings advertising admission of petition and also a copy of the gazette notification advertising admission of petition. At the time of admission, service of petition under Rule 28 of the Companies (Court) Rules, 1959 has been waived. While admitting the petition in paragraph 56, it is quite obvious that the company is unable to pay its debts, is commercially insolvent and deserves to be wound up. Therefore, the petition is allowed.

Issues Involved:
1. Winding up of the respondent company due to inability to pay debts and commercial insolvency.
2. Admission of liability by the respondent.
3. Involvement and decisions of the Joint Lender's Forum (JLF).
4. Proposals for revival and infusion of funds.
5. Legal arguments and precedents cited by both parties.
6. Appointment of an Official Liquidator.

Issue-wise Detailed Analysis:

1. Winding up of the respondent company due to inability to pay debts and commercial insolvency:
The petitioners sought the winding up of the respondent company on the grounds of its inability to pay its debts and commercial insolvency. The respondent had borrowed significant amounts from the petitioners but failed to repay, leading to the classification of the loans as non-performing assets. The court noted that the respondent’s liabilities exceeded its assets, and there was no viable plan for revival, making it clear that the company was commercially insolvent.

2. Admission of liability by the respondent:
The respondent admitted its liability towards the petitioner and other creditors. The court observed that the respondent had acknowledged its debts in various meetings and documents, including balance confirmation statements. Despite these admissions, the respondent failed to repay the outstanding amounts, reinforcing the petitioners' case for winding up.

3. Involvement and decisions of the Joint Lender's Forum (JLF):
The JLF, comprising various lenders, held multiple meetings to discuss the respondent's financial situation. The court reviewed the minutes of these meetings, which indicated that the respondent was heavily indebted and unable to secure additional funds for revival. The JLF members, including the petitioners, had differing opinions on the winding up, but the majority were not in favor of infusing further funds into the respondent.

4. Proposals for revival and infusion of funds:
The respondent and some intervenors proposed various revival plans, including an expression of interest from Asmara Resources Private Limited to infuse ?600 crores. However, these proposals were either rejected by the JLF members or withdrawn by the investors due to unmet conditions. The court found no credible or feasible plan for the revival of the respondent, further justifying the winding up.

5. Legal arguments and precedents cited by both parties:
The respondent argued that the court should consider the wishes of the majority of creditors and shareholders before passing a winding-up order. They cited several judgments, including those from the Madras High Court and the Supreme Court, to support their case. However, the court distinguished these cases based on the facts and circumstances of the present case, particularly the respondent's inability to revive and the substantial admitted liabilities.

6. Appointment of an Official Liquidator:
Given the respondent's insolvency and lack of a viable revival plan, the court decided to appoint an Official Liquidator to take charge of the respondent's affairs, assets, and business. This decision aimed to protect the interests of all creditors and prevent the further dissipation of the respondent's assets.

Conclusion:
The court concluded that the respondent company was unable to pay its debts and was commercially insolvent. The petitioners' case for winding up was upheld, and an Official Liquidator was appointed to oversee the process. The court emphasized the need to protect the creditors' interests and prevent the further erosion of the respondent's assets. The petitions were allowed, and the respondent company was ordered to be wound up under the supervision of the Official Liquidator.

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