1999 (2) TMI 734 - HC - Companies Law

Summary

Issues Involved:

1. Whether the petitioners have a valid claim for winding up the company under sections 433 and 434 of the Companies Act, 1956.
2. Whether the statutory notice served by the petitioners was based on a valid cause of action.
3. Whether the petitioners suppressed material facts.
4. Whether the unstamped promissory notes and receipts affect the maintainability of the petition.
5. Whether the amounts were secured by valid leave and licence agreements.
6. Whether the transaction is prohibited under the Bombay Money-Lenders' Act, 1946.
7. Whether the debt is legally recoverable and the petition maintainable.

Issue-wise Analysis:

1. Validity of the Petition for Winding Up:
The court considered whether the petitioners have made out a case under section 434(1)(a), read with section 433(e) of the Companies Act, 1956. The petitioners produced documentary evidence showing that they had advanced various amounts to the company, which were secured by various securities. Even excluding the improperly stamped promissory notes and receipts, other documents such as cheques and acknowledgments evidenced the payment by the petitioners to the company. The court found that the petitioners established that the company is indebted to them, thus justifying the petition for winding up.

2. Cause of Action for Statutory Notice:
The court examined the contention that no cause of action existed when the statutory notice was served. The petitioners had pleaded that inter-corporate deposits were made and renewed, with the company securing these by separate documents. The court found that on the date of the statutory notice, the company was due and owing money to the petitioners, rejecting the contention that no cause of action existed.

3. Suppression of Material Facts:
The court addressed the contention that the petitioners suppressed material facts. It found that the petitioners had set out various details in their petition and that the omission of some transactions did not constitute suppression of material facts. The court emphasized that under section 434(1)(a), the petitioners only needed to establish that the company was indebted to them in an amount over Rs. 500, which they had done.

4. Unstamped Promissory Notes and Receipts:
The court accepted the contention that unstamped promissory notes and receipts could not be tendered in evidence. However, it noted that the petition was not based solely on these documents, as they were merely collateral securities. The petitioners independently demonstrated that the amounts were advanced and secured by the company, leading to the rejection of this contention.

5. Validity of Leave and Licence Agreements:
The court examined whether the amounts were secured by valid leave and licence agreements. It found that these agreements were intended as collateral security for the loan's repayment. However, the agreements were never acted upon, and no landlord permission was obtained, rendering them ineffective as security. The court rejected the contention that the debts were transferred to the persons named in the agreements.

6. Prohibition under the Bombay Money-Lenders' Act:
The court considered whether the transaction was a loan prohibited under the Bombay Money-Lenders' Act. It determined that the transaction was excluded from the definition of a loan under section 2(9)(a) and/or 2(9)(f) of the Act, as it was a deposit in a company or an advance on a negotiable instrument. The court found no evidence of regular money-lending by the petitioners, concluding that the transaction was not hit by the Act's provisions.

7. Legal Recoverability of Debt and Petition Maintainability:
The court addressed the argument that the debt was not legally recoverable, which would affect the petition's maintainability. It acknowledged that a petition for winding up would lie only if the debt was legally recoverable. However, since the transaction was excluded from the definition of a loan under the Bombay Money-Lenders' Act, the petition could not be dismissed on this ground. The court ordered the company to pay or deposit the amount within eight weeks, failing which the petition would stand admitted.

Conclusion:
The court allowed the petition, directing the company to pay or deposit the specified amount within the stipulated time, with the petition to stand admitted upon failure to comply.