2017 (6) TMI 302 - HC - Companies Law

Winding up petition - respondent is unable to pay its debts - Held that - In the facts of this case, the agreement entered into between the parties including the corporate guarantees submitted by the respondent clearly indicates that in the event of foreign customers of the respondent would have refused to make payment to the petitioner, the respondent was liable to pay to the petitioner for such transaction. The respondent had agreed to pay to the petitioner upon those foreign parties paying directly to the respondent subsequently and has also issued cheques which were dishonoured with remark stop payment. In view therof, there was a clear debt which was agreed to be paid by the respondent to the petitioner which the respondent failed and neglected to pay and was unable to pay to the petitioner. Winding up petition accepted.

Issues Involved:
1. Winding up of the respondent company under Sections 433 and 434 of the Companies Act, 1956.
2. Non-payment of export bills by foreign buyers and the respondent's liability.
3. Invocation of corporate and personal guarantees by the petitioner.
4. Adjustment of outstanding dues against cut and polished diamond transactions.
5. Respondent's claim of substantial defenses and pending arbitration proceedings.
6. Petitioner's claim for interim relief and appointment of a provisional liquidator.

Issue-wise Detailed Analysis:

1. Winding up of the respondent company under Sections 433 and 434 of the Companies Act, 1956:
The petitioner filed two petitions seeking the winding up of the respondent company on the grounds of its inability to pay debts. The court noted that the respondent had failed to honor its financial obligations under the agreement dated 15th December 2006, which included the non-payment of export bills by foreign buyers and the failure to pay amounts due under corporate and personal guarantees. The court concluded that the respondent was heavily indebted and unable to pay its debts, justifying the winding-up petitions.

2. Non-payment of export bills by foreign buyers and the respondent's liability:
The petitioner, nominated by the Government of India for import and export of gold and other precious metals, entered into an agreement with the respondent for exporting gold jewelry. The respondent obtained various export orders, but the foreign buyers did not honor the bills/invoices. The petitioner provided post-shipment finance, which was not repaid by the respondent. The court found that the respondent was responsible for the realization of export proceeds and had failed to fulfill this obligation.

3. Invocation of corporate and personal guarantees by the petitioner:
The respondent had issued a corporate guarantee and personal guarantees to ensure due payment from the foreign buyers. When the foreign buyers defaulted, the petitioner invoked these guarantees. The respondent, however, did not make any payment despite repeated reminders and statutory notices. The court noted that the guarantees were binding and the respondent's failure to honor them further supported the petitioner's claim.

4. Adjustment of outstanding dues against cut and polished diamond transactions:
The respondent requested the petitioner to adjust overdue payments of gold jewelry against invoices of cut and polished diamonds. The petitioner and Exim Bank gave their consent, but the respondent did not remit the received payments to the Exim Bank. The court observed that the respondent had received double payments but fraudulently failed to settle the outstanding dues, indicating dishonest conduct.

5. Respondent's claim of substantial defenses and pending arbitration proceedings:
The respondent argued that the disputes should be resolved through arbitration, as an arbitral tribunal had been constituted. The respondent also claimed substantial defenses, including a tripartite agreement and the assertion that cut and polished diamond documents were without recourse. The court rejected these defenses as frivolous and dishonest, noting that the respondent had not challenged the cancellation of the tripartite agreement and had failed to provide evidence supporting its claims.

6. Petitioner's claim for interim relief and appointment of a provisional liquidator:
The petitioner sought interim relief, including the appointment of a provisional liquidator. The court found that the respondent's liabilities were substantial and that the respondent was unable to pay its debts. Consequently, the court admitted the winding-up petitions, ordered the advertisement of the petitions, and appointed the official liquidator as a provisional liquidator with interim relief.

Conclusion:
The court concluded that the respondent was unable to pay its debts and had raised dishonest and frivolous defenses. The winding-up petitions were admitted, and the official liquidator was appointed as a provisional liquidator. The court also granted interim relief to the petitioner, including the advertisement of the petitions and the appointment of the official liquidator. The respondent's request for a stay of the advertisement and appointment of the liquidator was granted for a period of four weeks.

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