2005 (7) TMI 380 - HC - Companies Law

Summary

Issues Involved:
1. Winding up petitions under Companies Act, 1956.
2. Alleged debt and inability to pay.
3. Deadlock in the company's functioning.
4. Joint Venture Agreement (JVA) obligations.
5. Mismanagement and unauthorized agreements.
6. Bona fide dispute and arbitration clause.
7. Just and equitable grounds for winding up.

Detailed Analysis:

1. Winding up petitions under Companies Act, 1956:
The petitions seek the winding up of M/s. Manor Hotel Pvt. Ltd. under sections 433(e) and (f), and section 434 read with section 439 of the Companies Act, 1956. The first petition is filed by International Caterers Pvt. Ltd. (ICPL) alleging the company owes Rs. 2,43,69,510 plus interest. The second petition is filed by Mr. Manmohan Singh, a shareholder and director, citing a deadlock in the company's functioning.

2. Alleged debt and inability to pay:
ICPL claims consultancy fees of Rs. 5.4 lakhs per month, escalating annually by 5%, were agreed upon in the JVA. Payments were irregular, and the company owes Rs. 3,39,41,236. Despite notices and meetings, the company failed to settle these dues, indicating financial inability.

3. Deadlock in the company's functioning:
Mr. Manmohan Singh alleges a deadlock due to non-payment of consultancy fees and unauthorized agreements with Guardian International Pvt. Ltd. This deadlock is exacerbated by mutual distrust and lack of cooperation between the shareholders, leading to the termination of the JVA and filing for winding up.

4. Joint Venture Agreement (JVA) obligations:
The JVA outlined roles and responsibilities, including TCG's duty to provide funds and ICPL's consultancy services. The company was to ensure ICPL's fee payment, even if it required TCG to provide interest-free loans. TCG was to be paid only if the company made profits. The JVA's breach, particularly non-payment to ICPL, is central to the disputes.

5. Mismanagement and unauthorized agreements:
The company entered into an agreement with Guardian without Mr. Manmohan Singh's consent, violating the JVA. This unauthorized act led to further disputes and allegations of fabricated board meetings to validate the agreement.

6. Bona fide dispute and arbitration clause:
The company argues that disputes should be resolved through arbitration as per the JVA. However, the court finds the company's defense of non-payment to ICPL as not bona fide, citing letters and auditor reports acknowledging dues. The court emphasizes that winding up petitions are maintainable despite arbitration clauses if the defense is not genuine.

7. Just and equitable grounds for winding up:
The court finds that the company's substratum has failed, evidenced by the deadlock, unauthorized agreements, and financial incapacity. The company's inability to manage its affairs and the loss of mutual trust between shareholders justify winding up on just and equitable grounds.

Conclusion:
The court admits the winding up petitions, appoints a provisional liquidator, and allows Guardian to manage the hotel under supervision. The decision underscores the failure of the JVA, financial incapacity, and deadlock as grounds for winding up the company.