2014 (4) TMI 1317 - HC - Companies Law

Winding up of respondent company due to inability to pay its debts - Sections 433(e) 434(1)(c) and 439(1)(b) of the Companies Act 1956 - time barred debt - HELD THAT - The plea of debt being time barred appears to be not tenable in law. The language of resolution and the minutes of the meeting and debt mentioned clearly indicate that the debt cannot be said to be time barred as the resolutions and the time of filing of the petition would clearly indicate that debt in question cannot be said to be time barred. The question of invoice and the purchase order being dependent upon the change circumstances or actions as sought to be made out is also not tenable in eye of law as none of the documents which were perused were indicative of raising any nexus or a point of nexus between the parties who were participating in the project (so to say) but the averments made in paragraph No.5 and the e-mails exchanged indicate that they have knowledge of the final outcome but that in itself cannot be given a status of a binding condition so as to bring in new obligations or absolving the parties of its existing obligation for paying the outstanding. The Court is therefore of the view that the petitioner Company has made out a case of outstanding and respondent Company has liability to make good the outstanding i.e. US 371, 019.00. Let there be some more time available to the respondent Company for discharging its liabilities to the petitioner Company and therefore while admitting the matter the Court is inclined to grant time to the respondent Company to make good its liability to the petitioner Company on or before 16.06.2014 failing which the further order of advertisement will be passed. The matter may come up on 18.06.2014.

Summary

Issues Involved:
1. Whether the respondent company is liable to be wound up under the Companies Act, 1956 due to its inability to pay its debts.
2. Whether the debt claimed by the petitioner is time-barred under the Limitation Act.
3. Whether the respondent company's defenses are bona fide and substantial enough to avoid winding up.

Detailed Analysis:

1. Liability for Winding Up:
The petitioner sought the winding up of the respondent company under Sections 433(e), 434(1)(c), and 439(1)(b) of the Companies Act, 1956. The petitioner argued that the respondent company, M/s. ORG Informatics Limited, failed to pay an outstanding debt of US$ 371,019.00, despite repeated requests and statutory notices. The petitioner claimed that the respondent company had admitted its debt through Board Resolutions and had not complied with the statutory notice served on 11th January 2012. The court noted that the petitioner had made a prima facie case for the respondent company's inability to pay its debts, as evidenced by the Board Resolutions and the lack of payment despite promises.

2. Time-Barred Debt:
The respondent company contended that the debt was time-barred, invoking Section 18 of the Limitation Act. The petitioner countered this by arguing that the acknowledgment of debt through Board Resolutions extended the limitation period. The court examined the provisions of Section 18 of the Limitation Act, which allows for a fresh period of limitation upon acknowledgment of liability in writing. The court concluded that the debt was not time-barred, as the Board Resolutions constituted a valid acknowledgment of the debt, thereby extending the limitation period.

3. Bona Fide Defense:
The respondent company argued that there was a bona fide dispute regarding the debt, as the entire transaction was part of a larger project (BBMP) involving multiple parties. The respondent claimed that the petitioner was aware of the interlinked nature of the project and that the payments were contingent upon receiving funds from another company, M/s. Spanco Singapore Pte. Limited. The court, however, found that the respondent's defenses were not substantial enough to prevent the winding up. The court noted that the documents and communications did not establish any new obligations or conditions absolving the respondent company from its existing obligations.

Conclusion:
The court concluded that the petitioner had established a case for the respondent company's inability to pay its debts. The court admitted the petition for winding up but granted the respondent company additional time to discharge its liabilities to the petitioner by 16th June 2014. If the respondent company failed to make the payment by the stipulated date, the court indicated that further orders, including advertisement of the winding-up petition, would be issued. The matter was scheduled to be revisited on 18th June 2014.