2015 (10) TMI 411 - HC - Companies Law

Approval of Winding Up Petition for non-satisfaction of the award Petitioner holds that the Respondent failed to satisfy the award and the objections so raised by them are untenable and the claim needs a fresh arbitration proceeding to be filed Petitioner contends that Respondents were unable to clear the liability and after finalisation of the award Petitioner has the right to secure its payment by all means available under law and the Respondent cannot assail the award after its finalisation Respondent, on the contrary, contends that it has a claim against the Petitioner thus denied its demand Respondent also contended that the provisions of Section 433(3) and 434(1) can be invoked only if the debtor is unable to pay its debt and not if the refusal is on account of denial of liability Respondent further holds that to enforce the award, petitioner could only file the execution petition and not the winding up petition thus petition for winding up is not maintainable. Held That - Winding up petition is a perfectly proper remedy as it is the mode of execution given by Court to a creditor against a company unable to pay its debts Any creditor has a right to approach the Court pointing out that its admitted debt is not paid on which the Court then considers company needs to wind up or not - There is no warrant to deprive a creditor with a decree of foreign Court and the same can also file a winding up petition it is clear that Respondent is unable to clear its debts and has neglected to satisfy the demand without any sustainable reasons thus petition is admitted with further directions given Decided in favour of the Petitioner.

Summary

Issues Involved:
1. Maintainability of the winding-up petition.
2. Respondent's claim against the petitioner.
3. Enforcement of the foreign award.
4. Bona fide dispute regarding liability.
5. Commercial solvency of the respondent company.

Detailed Analysis:

1. Maintainability of the Winding-Up Petition:
The court first addressed the issue of whether the winding-up petition was maintainable. The respondent argued that the petitioner should have filed an execution petition to enforce the award, not a winding-up petition. The petitioner contended that it was within their rights to choose the course of action. The court referenced multiple judgments, including AIR 1966 SC 1707 (Harinagar Sugar Mills Limited Vs. M.W.Pradhan), which held that a winding-up petition is a proper remedy for enforcing payment of a just debt and is a form of equitable execution. The court concluded that a decree holder remains a creditor and can file a winding-up petition, thus affirming the maintainability of the petition.

2. Respondent's Claim Against the Petitioner:
The respondent claimed a counter liability against the petitioner based on another contract, arguing that this justified their refusal to pay the awarded amount. The court scrutinized the respondent's documents and found the claim to be unrelated to the award and not pursued through arbitration or legal proceedings. The court referenced the judgment in 2010 (10) SCC 553 (IBA Health (India) P Limited Vs. Info Drive Systems SDN.BHD), which emphasized that a winding-up petition should not be used to force payment of a bona fide disputed debt. The court concluded that the respondent's claim was not bona fide and was merely an attempt to evade payment.

3. Enforcement of the Foreign Award:
The petitioner had secured a foreign award against the respondent, which was deemed enforceable by the court in O.P.No.56/2014. The respondent's appeal against this order was not numbered and lacked a stay, leading the court to consider the award final and enforceable. As per Section 49 of the Arbitration and Conciliation Act, the foreign award is deemed a decree of the court, allowing the petitioner to seek winding-up. The court rejected the respondent's contention that only an execution petition was permissible.

4. Bona Fide Dispute Regarding Liability:
The court examined whether the respondent's dispute was bona fide and substantial. The respondent's claim, based on email communications from 2008, was found to be unrelated to the award. The court noted that no legal proceedings were initiated by the respondent to substantiate their claim. Citing the judgment in 2014 183 CC 395 (Bom) (Intesa Sanpaolo SPA Vs. Videocon Industries Limited), the court emphasized that a creditor remains a creditor even after obtaining a decree, and the existence of a decree does not negate the creditor's right to file a winding-up petition. The court concluded that the respondent's dispute was not bona fide and the petitioner was entitled to the winding-up relief.

5. Commercial Solvency of the Respondent Company:
The respondent argued that their commercial solvency should prevent the winding-up petition. The court referenced the judgment in IBA Health (India) P Limited Vs. Info Drive Systems SDN.BHD, which stated that commercial solvency cannot be a standalone ground to refuse a winding-up petition if the debt is undisputed. The court held that the respondent's solvency did not negate their obligation to pay the awarded amount.

Conclusion:
The court ordered the admission of the winding-up petition, directed notices to be issued, and appointed the Official Liquidator to take charge of the respondent company's assets. The court also directed the ex-directors of the respondent company to file their statement of affairs and required the petitioner to deposit initial expenses with the Official Liquidator. The case was scheduled for further hearing on 01.07.2015.