2018 (9) TMI 1930 - HC - Insolvency and Bankruptcy

Winding up petition - case of petitioner is that the company is unable to pay its debts to petitioner and is commercially insolvent - HELD THAT - Upon receipt of the authenticated copy from petitioner's advocate, the Official Liquidator shall forthwith cause notice to all concerned directors calling upon them to file their respective statement of affairs strictly in consonance with the provision of law. All directors of respondent company, now in liquidation, are hereby directed to file their respective statements of affairs as required under Section 454 of the Companies Act, 1956, failing which, the Official Liquidator shall proceed further and lodge criminal complaint against the erring directors, without seeking prior sanction of this Court for initiation of criminal prosecution. Registry to return the amount of ₹ 10,000/ deposited by petitioner subject to any deductions if any.

Summary

Issues:
Petition for winding up based on commercial insolvency and inability to pay debts.

Detailed Analysis:
1. The petition was filed for winding up the respondent company based on the grounds of commercial insolvency and inability to pay debts. The petitioner, an unpaid vendor, supplied goods to the company, and despite various attempts for payment, the company failed to settle the outstanding amount. The company's defense of inferior quality of goods supplied was deemed as an afterthought to avoid payment.

2. The company had issued post-dated cheques for partial payment, but one of the cheques was dishonored due to insufficient funds. The company claimed that the cheques were security cheques, and they suffered monetary losses due to the quality of goods supplied. However, the court found the company's defenses to be unsubstantiated and concluded that the company's actions indicated an inability to pay debts.

3. Despite attempts to settle the outstanding amount, including a recorded agreement to clear the dues within a specified timeframe, the company failed to fulfill its obligations. The court noted that the company's approach to the matter, including approaching the Board for Industrial and Financial Reconstruction (BIFR), indicated financial distress and an intention to restructure its debts rather than pay them.

4. The court, after considering the submissions and lack of response from the company, allowed the petition for winding up. The official liquidator was appointed to take charge of the company's assets and affairs, with directions to notify all concerned directors to file their statements of affairs as required by law. The court also ordered the return of a deposited amount to the petitioner and disposed of the petition accordingly.