2018 (6) TMI 1264 - HC - Companies Law

Winding up of the company - bonafide defence to the claim of the petitioner - Held that - Supreme Court, in the case of Madhusudan Gordhandas and Co.-vs.-Madhu Wollen Industries Pvt. Ltd. 1971 (10) TMI 49 - SUPREME COURT OF INDIA , held that the Court can refuse a petition for winding up of the company when the claim of the petitioner is bona fide disputed by the company. In other words, in the first place when the defence of the company is in good faith and one of substance, secondly, the defence is likely to succeed in point of law and thirdly, the company adduces prima facie proof of the facts on which the defence depends, the Court should refuse to admit the winding up application against the company. Considering the facts of the present case as find that the company has not been able to make out any bona fide defence to the claim of the petitioner, nor has it adduced any prima facie proof of the facts on which its defences depend. For all the foregoing reasons, this winding up application is admitted for ₹ 12,12,815/-. However, since the rate of interest claimed by the petitioner at the rate of 21%, per annum appears to be exorbitantly high and, as such, the same is reduced to 9%, per annum. Hence, hold that petitioning creditor is entitled to the sum of ₹ 12,12,815/-, together with interest at the rate of 9%, p.a. The winding up application shall be advertised once in the English newspaper, the Statesman and once in the Bengali newspaper, Bartaman by May 22, 2018. Publication in the Official Gazette is dispensed with

Summary

Issues Involved:
1. Petition for winding up of the company under Sections 433(e), 434, and 439 of the Companies Act, 1956.
2. Dispute over the loan agreement dated May 23, 2014.
3. Change in management and its impact on liability.
4. Allegations of forgery and fabrication of documents.
5. Requirement of a money lender's license under the Bengal Money Lenders' Act, 1940.

Issue-Wise Detailed Analysis:

1. Petition for Winding Up:
The petitioner sought the winding up of the company under Sections 433(e), 434, and 439 of the Companies Act, 1956, due to the company's failure to repay a loan of ?10 lakhs with interest as per the agreement dated May 23, 2014. The company contested the application, alleging that the loan agreement was forged and fabricated.

2. Dispute Over Loan Agreement:
The petitioner claimed that the loan of ?10 lakhs was advanced to the company, repayable by November 30, 2014, with 21% interest per annum, compounded quarterly. The company acknowledged the receipt of ?10 lakhs but disputed the loan agreement, alleging it was created fraudulently by the previous management (Kanoi Group) in collusion with the petitioner.

3. Change in Management:
The company underwent a change in management in April 2015, where the Kanoi Group transferred their shares to the Desai Group. The company argued that any liability before the cut-off date of December 14, 2014, was the responsibility of the Kanoi Group, and the Desai Group did not assume this liability. The petitioner contended that the company, as a juristic entity, remained liable regardless of the management change.

4. Allegations of Forgery and Fabrication:
The company alleged that the loan agreement and related documents were forged by the Kanoi Group and the petitioner. It claimed no board resolution authorized the loan, and the amount transferred was a fictitious liability. However, the company did not initiate any legal proceedings to cancel the agreement, weakening its defense.

5. Requirement of Money Lender's License:
The company argued that the petitioner did not hold a money lender's license under the Bengal Money Lenders' Act, 1940, and thus the application should be stayed. The petitioner countered that Section 13 of the Act of 1940 applies to suits for recovery of money lent, not to winding up applications under the Companies Act, 1956.

Judgment Summary:

The court found that the company had received ?10 lakhs from the petitioner through its bank account, and the receipt of this amount was undisputed. The company's defense that the loan was a fictitious liability created by the previous management lacked substance. The court presumed that the necessary board resolution was passed, authorizing the loan agreement. The company's failure to initiate legal proceedings to cancel the agreement further weakened its defense.

The court held that Section 13 of the Bengal Money Lenders' Act, 1940, does not apply to winding up applications under the Companies Act, 1956. The company's defense did not constitute a bona fide dispute, and it failed to provide prima facie proof of its claims.

The court admitted the winding up application for ?12,12,815/-, reducing the interest rate from 21% to 9% per annum. The application was ordered to be advertised in specified newspapers, with the next hearing scheduled for June 14, 2018. Urgent certified copies of the judgment were to be made available to the parties upon compliance with requisite formalities.