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2021 (12) TMI 348 - HC - Companies LawSeeking winding up of the respondent - inability to pay the debts under Section 433 (e) and (f) read with Sections 434 and 439 of the Companies Act, 1956 - HELD THAT - Once a notice is issued under Section 434 of the Companies Act, a deeming fiction is created regarding the inability to pay the debt, therefore it becomes the obligation on the part of the respondent/debtor Company to show that the debt itself is illegal or that there is no debt at all, if it has to escape the consequence of issuance of a winding up notice. On the facts available in the case on hand one could see that the deeming fiction created by Section 434 of the Companies Act, has occurred, therefore, the existence of the debt has been proved. Therefore, it becomes incumbent upon the Court to consider the defences that are projected by the respondent Company as an answer to the claim for winding up. Even ignoring the agreements and the bills of exchange, the certificates of acceptance that had been issued by the respondent would show that there is a categorical admission of liability. Each of the bills of exchange is supported by a certificate of acceptance. The respondent has not denied the execution of the certificates of acceptance - A Division Bench of this Court in MICHAEL HART VERSUS NINESTARS INFORMATION TECHNOLOGIES LTD. REPRESENTED BY ITS MANAGING DIRECTOR, GOPAL KRISHNAN 2013 (4) TMI 875 - MADRAS HIGH COURT , has examined the scope of Section 433 of the Companies Act and held that the Company Court while examining the issuance of notice or admission of a Company Petition need not pronounce upon the validity or enforceability of the debt. Admittedly, the respondent Company had not chosen to terminate the contract. It had continued to avail the services. Therefore, it cannot now turn around and say, there is a violation of the provisions of the Aircraft Act or the C.A.R. Rules made there under and therefore the liability ceased - the respondent Company has miserably failed to satisfy the three pronged test suggested by the Hon ble Supreme Court in MADHUSUDAN GORDHANDAS AND CO. VERSUS MADHU WOOLLEN INDUSTRIES (P.) LTD. 1971 (10) TMI 49 - SUPREME COURT and hence had rendered itself liable to be wound up for its inability to pay its debts under Section 433 (e) of the Companies Act 1956. This Company Petition should be allowed and the respondent Company directed to be wound up.
Issues Involved:
1. Legally enforceable debt 2. Creditor-debtor relationship 3. Assignment validity 4. Bona fide dispute regarding debt 5. Stamping of documents 6. Public policy and regulatory compliance Issue-wise Detailed Analysis: 1. Legally Enforceable Debt: The petitioner, a Swiss stock corporation, sought the winding up of the respondent, a private sector airline, under Section 433(e) and (f) read with Sections 434 and 439 of the Companies Act, 1956, for the alleged inability to pay debts. The respondent had availed services from SR Technics, Switzerland, for aircraft maintenance, repair, and overhauling. Invoices were raised by SR Technics, and the respondent issued seven bills of exchange, acknowledging the debts through certificates of acceptance. The petitioner, Credit Suisse AG, entered into a financing agreement with SR Technics, assigning all present and future rights to receive payments under the agreement to the petitioner. 2. Creditor-Debtor Relationship: The respondent contended that the petitioner is not a creditor and there was no contractual relationship of a debtor and creditor. The respondent also argued that the agreements between the respondent and SR Technics did not authorize assignment to the petitioner. The court, however, noted that the certificates of acceptance executed by the respondent implied acknowledgment of the debt. 3. Assignment Validity: The petitioner argued that the assignment of rights from SR Technics to Credit Suisse AG was valid and that the petitioner was entitled to receive payments under the seven invoices. The respondent challenged the validity of the assignment, claiming that the endorsements on the bills of exchange were not in the required form and lacked the necessary stamp, making them unenforceable. 4. Bona Fide Dispute Regarding Debt: The respondent claimed a bona fide dispute regarding the entitlement of SR Technics under the invoices. The court emphasized that if the debt is bona fide disputed and the defense is substantial, the court will not wind up the company. The court examined whether the defense was in good faith, substantial, likely to succeed on a point of law, and whether the company provided prima facie proof of the facts on which the defense depended. 5. Stamping of Documents: The respondent argued that the documents relied upon by the petitioner, including the assignment deeds, bills of exchange, and certificates of acceptance, were not properly stamped as per the Indian Stamp Act, making them unenforceable. The court noted that the question of stamping would not arise at the stage of issuing a notice of winding up or admission of a winding up petition and could be examined by the Official Liquidator after an order of winding up. 6. Public Policy and Regulatory Compliance: The respondent contended that SR Technics did not have a valid license from the Director General of Civil Aviation (DGCA) for aircraft maintenance services, making the enforcement of the claim against public policy. The court found that the respondent was aware of SR Technics' lack of DGCA approval but continued to avail their services without terminating the agreement as provided under Clause 14.3 of the agreement. The court concluded that the respondent could not evade liability by raising technical objections after benefiting from the services. Conclusion: The court held that the respondent failed to satisfy the three-pronged test for a bona fide defense as suggested by the Supreme Court in Mathusudan Gordhandas & Co. v. Madhu Woollen Industries (P) Ltd. The court directed the winding up of the respondent company under Section 433(e) of the Companies Act, 1956, and instructed the Official Liquidator to take over the assets of the respondent company. The petition was allowed, and the connected miscellaneous petitions were closed with no costs.
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