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Issues: Company's failure to implement sanctioned scheme under Companies Act, 1956 leading to winding up petition.
In this judgment delivered by Aggarwal, J., the court addressed a judge's summons under section 392(2) of the Companies Act, 1956, seeking the winding up of a company due to its failure to implement a scheme sanctioned by a previous order. The scheme required the company to pay its unsecured creditors in full within a specified timeframe. The court highlighted key aspects of the scheme, including the deposit of a certain sum for distribution among creditors, continuation of export business, and submission of share certificates and guarantees by the directors. The applicant, an unsecured creditor, initiated the winding up petition after the company failed to comply with the scheme's terms despite reminders and inquiries. The court analyzed section 392 of the Companies Act, which empowers the court to enforce compromises and arrangements. Sub-section (2) allows the court to order the winding up of a company if it deems that a sanctioned scheme cannot be satisfactorily accomplished. The court emphasized that it must ensure the schemes it sanctions are implemented effectively for the benefit of all parties involved. The court has the authority to modify schemes if difficulties arise to achieve the intended purpose for the company and its stakeholders. After reviewing the affidavit presented by the applicant's counsel, the court found that the sanctioned scheme could not be executed satisfactorily. The company did not contest the allegations, and its counsel indicated a change in circumstances, stating that the export business was no longer viable. The court noted that the company's directors misled creditors by falsely portraying the continuation of the export business, which was no longer operational. The court concluded that the scheme's main purpose had been undermined, as critical obligations, such as depositing share certificates and providing guarantees, were not fulfilled. The lack of sincerity in implementing the scheme and the company's failure to offer a valid explanation led the court to order the winding up of the company. In the final decision, the court made the summons absolute in favor of the applicant, ordering the winding up of the company as per the prayer terms. The court reserved the decision on costs to be borne by the company for a later date. Additionally, a creditor of the company supported the winding up petition, citing the lifting of the stay on legal proceedings against the company following the court's order for winding up, allowing creditors to pursue their claims without hindrance.
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