1971 (5) TMI 58 - HC - Companies Law

Company when deemed unable to pay its debts, Winding up - Power of tribunal to stay winding-up

Issues Involved:
1. Application for dismissal or stay of the winding-up petition.
2. Bona fide dispute regarding the debt.
3. Admissibility of evidence and limitation period.
4. Allegations of suppression of material facts and fraud.
5. Res judicata and principles analogous thereto.
6. Prima facie case for winding-up.

Detailed Analysis:

1. Application for dismissal or stay of the winding-up petition:
The application was made for either dismissing or permanently staying the winding-up petition (Company Petition No. 225 of 1970) and all related proceedings, including advertisements of the petition. This petition was filed by a secured creditor, Darjeeling Commercial Co. Ltd., against Pandam Tea Co. Ltd., claiming a debt of Rs. 3,99,936.09 inclusive of interest up to December 31, 1969. The creditor had previously lent Rs. 3,00,000 to the company, secured by a second charge on all the company's assets.

2. Bona fide dispute regarding the debt:
The company contended that there was a bona fide dispute regarding the debt mentioned in the winding-up petition. The company denied any loan transaction with the creditor and requested full particulars of the alleged loan, mortgage, and repayment. The creditor asserted that the liability was acknowledged in the company's balance sheets and other documents. The court found that the denial of the debt by the company was neither bona fide nor reasonable, as the debt was consistently shown in the company's balance sheets, which were duly signed by its directors.

3. Admissibility of evidence and limitation period:
The creditor did not produce a statement of account, and the company argued that the claim was barred by the law of limitation. The court noted that the creditor is a mortgagee and that the limitation period for presenting a winding-up petition is three years, not 12 years, as this proceeding is not to enforce the security of the mortgagee. The court referred to the case of Ramdin v. Kalka Prasad, which supported the three-year limitation period for personal remedies against a debtor under a mortgage.

4. Allegations of suppression of material facts and fraud:
The company obtained an interim injunction from the subordinate judge in Darjeeling, restraining the creditor from enforcing the statutory notice of demand. The court found that the allegations of fraud in the company's suit were vague and lacked particulars. The court also noted that the company had not taken any steps to rectify the records or challenge the transactions after the alleged fraudulent entries were made.

5. Res judicata and principles analogous thereto:
The creditor argued that the application for stay was barred by res judicata and principles analogous thereto, as the court had already ordered advertisements of the winding-up petition. The court rejected this argument, noting that the advertisements were stayed for three weeks to allow the company to apply for a stay. The court held that the application for stay was not barred by res judicata.

6. Prima facie case for winding-up:
The court had to determine whether a prima facie case for winding-up was made out by the creditor. The court found that the creditor had made a prima facie case for investigation in winding-up proceedings. The court referred to the case of In re Darjeeling Bank Ltd., which held that even if the statutory notice of demand was invalid, the creditor could still prove the company's inability to pay its debt. The court found that the denial of the debt by the company was not bona fide or reasonable and that the pendency of the suit in Darjeeling did not preclude the passing of a winding-up order.

Conclusion:
The application for stay or dismissal of the winding-up petition was dismissed with costs. The court found that the creditor had made a prima facie case for winding-up and that the denial of the debt by the company was not bona fide or reasonable. The court also held that the application for stay was not barred by res judicata or principles analogous thereto.

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