2023 (2) TMI 995 - HC - Companies Law

Seeking winding up of the appellant company - Section 433(e) and 433(f) of the Companies Act, 1956 - HELD THAT - It is well settled that proceedings for winding up of the company are not recovery proceedings. A company is liable to be wound up under Section 433(e) of the Companies Act, 1956 if it is unable to pay the debt. In terms of Section 434 of the Companies Act, if a company fails to pay an admitted debt after receipt of the notice under the said Section, it would be deemed to be unable to pay the debt. We are unable to accept that in the given facts, the appellant has failed to repay an admitted debt. Admittedly, only a sum of ₹30,00,000/- was received by the appellant and the respondent had paid the remaining amount as claimed by it to PCI Middle East FZE. The learned Company Court had also noted that PCI Middle East FZE was a subsidiary of the appellant. Although, PCI Middle East FZE may be a subsidiary of the appellant, it is a separate entity. Undeniably, in cases where the defence against the claim of debt is found to be moonshine or a sham, the petition for winding up would be maintainable on account of inability to pay the debt. However, the facts of the case must clearly establish that there is no plausible defence available to the debtor company. The defence so raised has been solely for the purposes of avoiding repayment of admitted debt and in most cases, to camouflage the inability to do so. Appeal allowed.

Summary

Issues:
- Interpretation of Sections 433(e) and 433(f) of the Companies Act, 1956
- Dispute over payment for aircraft purchase
- Validity of the appellant's defense against debt repayment
- Examination of the appellant's ability to pay debts
- Justness and equity in winding up the appellant company

Interpretation of Sections 433(e) and 433(f) of the Companies Act, 1956:
The judgment revolves around a petition filed under Sections 433(e) and 433(f) of the Companies Act, 1956, seeking the winding up of the appellant company due to alleged debt non-payment and just and equitable grounds. The court analyzed the legal provisions and their application in the context of the case.

Dispute over payment for aircraft purchase:
The respondent claimed that the appellant failed to deliver an aircraft as agreed and did not refund the paid amount, leading to a petition for winding up. The appellant disputed the debt claim, asserting a bona fide dispute regarding the refundable amount. The court examined the communications between the parties and the payment terms to determine the validity of the debt claim.

Validity of the appellant's defense against debt repayment:
The appellant argued that there was a genuine dispute over the refundable amount and deposited a sum with the court to contest the inability to pay debts allegation. The court scrutinized the communications, agreements, and actions of the parties to assess the legitimacy of the appellant's defense against debt repayment.

Examination of the appellant's ability to pay debts:
The court delved into the details of the payment transactions, communications, and the appellant's financial capacity to ascertain whether the appellant was genuinely unable to pay the debt claimed by the respondent. The court emphasized the distinction between an admitted debt and a disputed amount in the context of winding up proceedings.

Justness and equity in winding up the appellant company:
Considering the totality of the circumstances, the court concluded that the respondent's claim did not constitute an admitted debt payable by the appellant. The court also found that the appellant's defense was not a sham and that the appellant had since deposited the disputed amount, indicating the ability to pay debts. Consequently, the court allowed the appeal, set aside the winding-up order, and directed the handling of the deposited amount.

This detailed analysis of the judgment showcases the court's thorough examination of the legal provisions, factual disputes, and equitable considerations involved in the case, leading to the final decision to allow the appeal and set aside the winding-up order.