2018 (8) TMI 506 - HC - Companies Law

Winding up petition - Non payment of dues - Held that - In the present case, the petitioner had issued a notice to the Company demanding the dues, which has been duly served on the Company and despite that, the Company has neglected to pay the sum or to secure or compound it, within the meaning of Section 434 of the Act. As further appears from the independent Auditors Report dated 04.09.2017 that the Company is a loss making Company and that there is erosion of the capital of the Company and there is mismatch of the assets and liabilities of the Company, in as much as, the liability exceeds the assets. It is submitted that it is otherwise not in public interest that the Company continues its operations. Having regard to the fact that the Company, inspite of the notice, has neglected to pay the outstanding dues or to secure or compound for it to the reasonable satisfaction of the petitioner, within the meaning of Section 434 (1) (a) of the Act, the Company would be deemed to be unable to pay its debts . In that view of the matter, the Company is liable to be wound up under Section 433 (e) of the Act.

Summary

Issues:
Petition for winding up under Section 439(1)(b) of the Companies Act, 1956 based on unpaid dues and inability of the company to pay its debts.

Analysis:
The petitioner was employed by the company as a General Manager but faced a pay cut and subsequently resigned due to better prospects. Allegations include non-payment of salary from January 2013 till the resignation date and other benefits totaling ?3,93,259.33. Despite issuing notices demanding dues, the company failed to pay, leading to the winding-up petition (Para 2-4).

The company did not appear before the court despite the petition being admitted, indicating non-cooperation. The petitioner's counsel argued that the company's inability to pay debts justifies winding up, citing Section 433(e) and Section 434 of the Act, which outlines conditions for deeming a company unable to pay its debts (Para 5-8).

An Auditor's Report confirmed the company's loss-making status, capital erosion, and asset-liability mismatch, suggesting the company's financial instability. The court found the company deemed unable to pay its debts under Section 434(1)(a) due to non-payment despite notices, justifying winding up under Section 433(e) (Para 9-10).

Canara Bank intervened in the case, further highlighting the company's financial troubles. The court allowed the petition, appointing the official liquidator to take charge of the company's assets, conduct winding-up proceedings, and distribute assets as per the law (Para 11-12).

The petitioner was directed to follow Rule 113 of the Company (Court) Rules, 1959 for public notice publication, and the court instructed the Registrar to inform relevant authorities about the winding-up order promptly (Para 13).