2018 (9) TMI 1084 - HC - Companies Law

Winding up petition - whether the company should be wound up or not? - Held that - In view of the submission made by the company that it is not in a position to liquidate the debts of the creditors as of now and considering the fact that there has been decrease in tangible assets of the company between 31st March, 2016 and 31st March, 2017 and the change in position between 21st June, 2017 and 22nd August, 2018 as prima facie noticed it is necessary to preserve the assets of the said company for the benefit of its creditors till further orders are passed. A prima facie case that the company has transferred its assets after filing of the winding up application is established. The balance of convenience and inconvenience is in favour of the creditors of the said company. The company is therefore restrained by an order of injunction from dealing with, disposing of, alienating, encumbering or creating any third party interest in respect of its assets until further orders. Considering the need to preserve the assets of the company for the ultimate benefit of the creditors the Official Liquidator is appointed as the Provisional Liquidator who will make an inventory and prepare a list to that effect and thereafter be in symbolic possession of the assets of the company. The inventory list to be prepared by the Provisional Liquidator be submitted on the next date of hearing. The creditors are directed to serve a copy of this order immediately to the Provisional Liquidator.

Summary

Issues:
1. Admittance of winding up petition
2. Consideration of company's financial position
3. Discrepancies in company's asset lists
4. Requirement of supplementary affidavit
5. Preservation of company's assets
6. Appointment of Provisional Liquidator

Admittance of Winding Up Petition:
The High Court admitted the winding up petition (C.P. No. 1 of 2016) by an order dated 1st December, 2017. Subsequently, advertisements were issued due to the failure to pay the admitted sum, leading to the appearance of four supporting creditors post-advertisement. Two supporting creditors, Reliance Commercial Finance Limited and Reliance Home Finance Limited, filed an application under Section 450 of the Companies Act, 1956. The main consideration post-advertisement was whether the company should be wound up or not.

Consideration of Company's Financial Position:
The Court, after hearing the parties and reviewing the company's affidavits, found it unclear regarding the company's present financial position and whether it should be wound up or kept in existence. An order dated 10th August, 2018, directed the company to provide details of its properties and interests in other projects. Discrepancies were noted between the company's asset lists before 21st June, 2017, and as of 22nd August, 2018, necessitating further explanations from the company.

Discrepancies in Company's Asset Lists and Requirement of Supplementary Affidavit:
The company was directed to file a supplementary affidavit explaining the dates of flat sales in mentioned projects, amounts received from sales, and details of conveyance/agreements with Cliff Trexin Pvt. Ltd. The company was also instructed to provide details of the decrease in tangible assets between 31st March, 2016, and 31st March, 2017, as per its balance-sheet. The supplementary affidavit deadline was set for 25th September, 2018.

Preservation of Company's Assets:
Considering the company's inability to liquidate debts, decrease in tangible assets, and prima facie evidence of asset transfer post-application, the Court restrained the company from dealing with or disposing of its assets until further orders. An injunction was imposed to protect the assets for the benefit of creditors.

Appointment of Provisional Liquidator:
Reliance Commercial Finance Limited and Reliance Home Finance Limited requested the appointment of a Provisional Liquidator over the company's assets. To safeguard creditor interests, the Official Liquidator was appointed as the Provisional Liquidator. The Provisional Liquidator was tasked with preparing an inventory of the company's assets and submitting the list on the next hearing date.

In conclusion, the Court's detailed analysis and orders aimed to address the complexities surrounding the company's financial position, discrepancies in asset lists, and the need to protect creditor interests through the appointment of a Provisional Liquidator. The case was scheduled for further proceedings on 28th September, 2018.