2016 (4) TMI 46 - HC - Companies Law

Winding up petition - Held that - As regards admission of the debts by the appellant-company payable to the respondent-company, the learned company judge has placed reliance on the agreement between the two companies dated February 24, 2012, whereby the appellant-company has acknowledged an outstanding of US 56,16,024.12 plus accrued interest after January 31, 2012. Admittedly the said amount has not been paid within the time provided in the said agreement or even thereafter. Thus, being prima facie satisfied that the appellant-company was unable to pay its debts, company petition has been admitted. In such facts, admission of the petition cannot be faulted. As under the Foreign Exchange Management (Establishment in India of Branch or Office or other Place of Business) Regulations, 2000, there is a prohibition under regulation 3 for establishing branch office in India by a foreign company without prior approval of the Reserve Bank of India. In view of the fact that we have already held above that the appellant has not been able to place any material on record to show that the respondent-company has any office (be it a site office or project office or warehouse or store house) within the territory of India, the provisions of the Regulations of 2000 would not be applicable. No good ground to interfere with the order of admission passed by learned company judge.

Summary

Issues:
1. Whether the respondent company, based in the United Kingdom, can file a winding-up petition against the appellant company in India under the Companies Act, 1956.
2. Whether the respondent company is conducting business activities in India, thereby necessitating compliance with specific provisions of the Companies Act.
3. Whether the debts acknowledged by the appellant company to the respondent company justify the admission of the winding-up petition.
4. Whether the Foreign Exchange Management Regulations apply to the respondent company's alleged business activities in India.

Analysis:
1. The respondent company, based in the United Kingdom, filed a winding-up petition against the appellant company in India under sections 433(e) and (f) read with sections 434 and 439(1)(b) of the Companies Act, 1956. The appellant contested the petition, claiming the dues were disputed and challenging the respondent's right to sue in India under section 599 of the Companies Act. The company judge admitted the petition for further proceedings.

2. The appellant argued that the respondent company is conducting business in India based on information from the respondent's website. However, the court found that providing technical services in India does not constitute having an establishment in India. The court distinguished a previous case where the company had a physical presence in India, concluding that the respondent's activities did not necessitate compliance with specific provisions of the Companies Act.

3. The admission of the debts owed by the appellant to the respondent was based on an agreement acknowledging outstanding amounts. As the debts were not paid as per the agreement, the court found prima facie evidence that the appellant was unable to pay its debts, justifying the admission of the petition.

4. The appellant also raised the issue of the Foreign Exchange Management Regulations, arguing that the respondent company would need approval to establish a branch office in India. However, since the court found no evidence of the respondent having a physical presence in India, the regulations were deemed inapplicable.

In conclusion, the court dismissed the appeal against the admission of the winding-up petition, finding no grounds for interference. No costs were awarded in the matter.