1976 (1) TMI 115 - HC - Companies Law

Summary

Issues Involved:
1. Petition for winding up of the company due to inability to pay debt.
2. Adjournments and delays in the proceedings.
3. Application for adjournment by the company.
4. Examination of consent precipes and negotiations for settlement.
5. Refusal of adjournment and admission of the winding-up petition.

Detailed Analysis:

1. Petition for Winding Up of the Company Due to Inability to Pay Debt:
The Central Bank of India filed a petition for the winding up of Mckenzies Ltd. on the grounds of the company's inability to pay a debt amounting to Rs. 2,65,540.74 with interest at 12% per annum. The debt arose from the bank's provision of letters of credit and secured guarantees for the import of the company's goods. The bank delivered relevant documents to the company against trust receipts and debited the company's account accordingly. A statutory notice was issued on 28th December 1970 under section 434(1)(a) of the Companies Act, demanding payment, which was not complied with, leading to the petition for winding up.

2. Adjournments and Delays in the Proceedings:
The petition was accepted on 16th April 1971 and was initially returnable on 18th June 1971. However, numerous adjournments were sought and granted by mutual consent of both parties, ranging from two weeks to eight weeks. The reasons cited for adjournments included the need for the company to file an affidavit-in-reply and ongoing negotiations for settlement. This pattern continued from 16th July 1971 to 13th January 1976, resulting in a significant delay in the prosecution of the petition.

3. Application for Adjournment by the Company:
At the hearing on the present date, the company applied for another adjournment, citing ongoing negotiations for settlement and the absence of the managing director, who was out of Bombay. The company also mentioned having paid Rs. 45,000 to the bank and provided security worth Rs. 60,000. Despite the bank's non-opposition, the court refused the adjournment due to the prolonged history of delays and the lack of any substantial progress in the negotiations.

4. Examination of Consent Precipes and Negotiations for Settlement:
The court examined the numerous consent precipes filed by both parties, which consistently cited the need for time to finalize "without prejudice" consent terms. Despite repeated requests, no substantial evidence or documents were provided to support the existence of any finalized consent terms. The court noted that both parties had used these consent precipes to obtain adjournments without any real progress in negotiations, indicating a lack of diligence and sincerity.

5. Refusal of Adjournment and Admission of the Winding-Up Petition:
The court found no substance in the grounds for adjournment presented by the company. The managing director's absence and the company's offer to pay the dues within nine months were deemed insufficient reasons for further delay. The court emphasized the importance of expeditiously disposing of winding-up petitions to avoid harm due to long unconditional adjournments. Citing previous judgments, the court highlighted the undesirable practice of indefinite postponements in such cases. Consequently, the application for adjournment was refused, and the winding-up petition was admitted.

Conclusion:
The court refused the company's application for adjournment due to the prolonged and unjustified delays in the proceedings. The winding-up petition was admitted, highlighting the necessity of timely resolution in such matters to prevent adverse consequences. The judgment underscores the need for vigilance and diligence by both parties, especially in cases involving significant financial liabilities.