2017 (5) TMI 375 - HC - Companies Law

Winding up petition - Held that - There is substance in the case of the petitioner company that even otherwise both the consultancy agreement of 24-7-2010 and the following bill dated 20-8-2010 between the petitioner company and CGEPL are got up documents, and set up in a desperate attempt to derail the winding up petition. This inter alia not least for the reason that the respondent company has not controverted the allegation specifically made that its Memorandum of Association does not include as the main or even ancillary and incidental objects, business relating to Solar Energy. Nor does the respondent company has any expertise in the field of Solar Energy having exclusively engaged in the business of dairy since its inception in 1997. Further the consultancy agreement dated 24-7- 2010 was signed on behalf of CGEPL by Ajay Pareek, brother of Alok Pareek and Akshay Kumar Bhargava, co-promoter and director with Alok Pareek, on behalf of the respondent company. No explanation has also been forthcoming from the respondent company as to why the bill dated 20-8-2010 bears No.1/2010 for a company doing business since 1997 and why despite consultancy being a service chargeable to Service tax, service tax was not deducted and paid to the government. Also extremely odd and suspicious is that the bill No.1/2010 dated 20-8-2010 for alleged consultancy service by the respondent company to CGEPL was signed by Ajay Pareek, brother of Alok Pareek and marked attention to his brother Alok Pareek as director of CGEPL-also director in the respondent company. In the facts and evidence on record a case of a debt of ₹ 20 lac remaining unpaid to the petitioner company despite a winding up notice to the respondent company has been made out. The defence of the respondent company to the winding up petition is malafide, convoluted, mutually destructive and palpably false, what of being bonafide and based on substantial grounds making out a triable issue. No iota of public interest against the winding up has even been urged and cannot be found.

Issues Involved:
1. Inability to repay the loan amount.
2. Defence of non-existence of debt.
3. Prematurity of the winding-up petition.
4. Commercial insolvency of the respondent company.
5. Bonafide dispute regarding the debt.
6. Legal standing of the consultancy agreement and associated documents.
7. Public interest considerations in winding up.

Issue-wise Detailed Analysis:

1. Inability to Repay the Loan Amount:
The petitioner company sought the winding up of the respondent company due to its inability to repay an admitted loan amount of ?20 lacs along with interest at 36% per annum despite a statutory notice under Section 434(1)(a) of the Companies Act, 1956. The respondent company did not dispute the receipt of the loan amount transferred via RTGS to its bank account.

2. Defence of Non-Existence of Debt:
The respondent company argued that the alleged debt was non-existent, claiming that the ?20 lacs was paid towards the liability of Clean Green Energy Private Limited (CGEPL) under a consultancy contract related to a Solar Power Project. Alternatively, they claimed the amount was a financial assistance requested by Alok Pareek, Director of the respondent company, to be repaid by 31-12-2010. However, the petitioner company contended that the loan was based on an oral contract for one month with an interest rate of 36% p.a., and the email dated 18-8-2010 did not constitute a binding proposal.

3. Prematurity of the Winding-Up Petition:
The respondent company claimed the winding-up notice issued on 17-11-2010 was premature, arguing the loan was repayable by 31-12-2010. However, the court found no merit in this claim, as the email cited did not specify the loan amount or interest rate and did not constitute a legal proposal. Therefore, the notice was not premature.

4. Commercial Insolvency of the Respondent Company:
The petitioner company argued that the respondent company was commercially insolvent, evidenced by its default in payments to secured creditors, as highlighted in a notice published in a newspaper regarding a recovery case by IDBI Bank. This supported the petitioner's claim that the respondent company was unable to pay its debts.

5. Bonafide Dispute Regarding the Debt:
The court emphasized that a winding-up petition should not be used as an instrument for recovering a disputed debt unless the dispute is substantial, genuine, and bonafide. The court found the respondent company's defence to be false, mutually destructive, and without merit, thus not constituting a bonafide dispute.

6. Legal Standing of the Consultancy Agreement and Associated Documents:
The petitioner company argued that the consultancy agreement dated 24-7-2010 and the associated bill dated 20-8-2010 were fabricated. The court noted that the respondent company's Memorandum of Association did not authorize business in solar consultancy, and its balance sheets did not reflect any such business. The court found the documents suspicious and indicative of a desperate attempt to derail the winding-up petition.

7. Public Interest Considerations in Winding Up:
The court held that a company unable to discharge its due debts should not be allowed to operate, as it would be detrimental to commercial morality and public interest. No substantial public interest argument against the winding-up was presented by the respondent company.

Conclusion:
The court concluded that the petitioner company had made out a clear case for winding up the respondent company. The defences raised by the respondent company were found to be false and without substantial grounds. Consequently, the court ordered the winding up of the respondent company, appointing the Official Liquidator attached to the court as the Liquidator. The petitioner was directed to publish the winding-up order in two newspapers and the official gazette, with all costs to be borne by the petitioner company.

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