2018 (9) TMI 1219 - HC - Companies Law

Winding up petition - petitioner entered into a Distributorship Agreement with respondent company concluding with an outstanding debt - Held that - At this stage, only note that learned counsel for the respondent has pointed out that the communication dated 6.10.2014 was written on the instructions of the petitioner. Reliance is placed on communication dated 28.8.2014 written by the petitioner to the respondent. Even if what has been pleaded is correct it does not take away the fact that on the instructions from the petitioner the respondent has admitted the dues. It is also an admitted fact that despite these communications no worthwhile payment has been made to the petitioner. In opinion thereof the defence raised is not bonafide. There are no reasons given as to why the debt is not payable. Admit the present petition. The Official Liquidator attached to this Court is appointed as the Provisional Liquidator. He is directed to take over all the assets, books of accounts and records of the respondent-company forthwith. The citations be published accirdingly.

Summary

Issues involved:
Winding up petition under Companies Act, 1956 based on default in payment, validity of debt assignment without consent, arbitration agreement impact on winding up proceedings, limitation period for filing winding up petition.

Analysis:
1. The petitioner filed a winding up petition under sections 433(e), 434(1)(a), and 439 of the Companies Act, 1956, seeking to wind up the respondent company due to defaults in payment. The petitioner entered into a Distributorship Agreement with the respondent company, supplied goods, and raised commercial invoices. The respondent admitted liability through communications, but later disputed it. The debt was assigned to another petitioner due to defaults, and a statutory notice was sent under section 434. The respondent raised objections based on the Distributorship Agreement and an arbitration clause, along with questioning the limitation period.

2. The Distributorship Agreement clause 9 stated that parties cannot assign or deal with rights without consent. However, the debt assignment occurred due to respondent's default, and the petitioner seeking dues is a party to the proceedings. The respondent's objection based on the Agreement was deemed without merit. Additionally, the arbitration clause was found irrelevant for winding up proceedings as per settled law, citing the Booz Allen and Hamilton Inc. Vs. SBI Home Finance Ltd. case, which highlighted non-arbitrable disputes like insolvency and winding-up matters.

3. Regarding the limitation issue, communications from the respondent acknowledging the debt in 2014 were crucial. The acknowledgment of debt within the limitation period supported the filing of the winding up petition in 2016. Despite the respondent's claim that communications were on the petitioner's instructions, the acknowledgments stood valid. The defense raised by the respondent was deemed not bona fide, as per the IBA Health (I) Pvt. Ltd. vs. Info-Drive Systems Sdn.Bhd. case, emphasizing the need for genuine disputes in winding up petitions.

4. Consequently, the court admitted the winding up petition, appointing the Official Liquidator as the Provisional Liquidator. Directions were given to take over assets, publish citations, and seal premises. The petitioner was required to deposit a sum for publication costs, and the Official Liquidator was empowered to value assets and seek police assistance if necessary. The next hearing was scheduled for a later date to proceed with the winding up process effectively.