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TMI Blog1995 (11) TMI 373X X X X Extracts X X X X X X X X Extracts X X X X ..... s company petition, had advanced large sums of money periodically as and by way of inter-corporate loans to the respondent-company commencing from 16-4-1984, the first such loan being a sum of Rs. 5 crores. An Agreement dated 22-12-1985, was entered into between the parties which provides, inter alia, for repayment of the loan in part or full to the petitioner within 30 days from the date of demand, 15 per cent of the loan to be repayable to the petitioner at 15 days notice, and the rate of interest to be at 15 per cent per annum compounded quarterly with additional 5 per cent being the penal interest if the amount remained outstanding for a period of 10 days after the due date. The petitioner-company appears to have advanced even larger sums of money to the respondents thereafter, over a period of about 7 years, the peak having been reached on 18-6-1990, on which date the amount advanced by the petitioner to the respondent stood at Rs. 65 crores. The respondent-company repaid in part, and in instalments, the amounts borrowed by it, however, leaving a balance of Rs. 5 crores as at the end of November, 1992. Between 1-8-1990 and November, 1992, a sum of Rs. 25 crores was repaid. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Government and in the event of the Government releasing the fund, the company would be in a position to pay some amount to the petitioner assuming that any amount is due to the petitioner herein". The assertion that no amount is repayable towards principal, after stating that the amount outstanding is Rs. 5 crores and the alleged excess payment towards interest is Rs. 78 lakhs, and the vague promise of some amount to be paid to the petitioner assuming that any amount is due to the petitioner is indicative of the recalcitrant attitude of the respondents. 7. While the chairman of the respondent-company has asserted that the company is wholly owned by the Government of India, the Chief Manager (Finance) of the respondent-company in his affidavit filed on 6-4-1995, has stated that "Government of India holds 50 per cent of the paid-up share capital of the petitioner". One is left to wonder as to which one of those two assertions is correct. The endeavour of the respondent has been to assert that because the Government of India has a major role in the affairs of the company, a petition for winding up of the company even if it be at the instance of an admitted creditor to whom t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thcoming for such extraordinary delay in finalising the accounts in the two affidavits filed by the company finance manager. 10. The failure on the part of the respondent to furnish any financial data concerning the company for the financial year 1993-94 and the period subsequent to 1-4-1994, in the circumstances must be regarded as deliberate. The respondent has failed to furnish such information apparently because its financial position has worsened. This conduct of the respondent again raises considerable doubts regarding the credibility of the claim made by the respondent, regarding its solvency and its true net worth. The respondent-company appears to have adopted a very casual approach to the winding-up petition instituted against it by the petitioners, merely because the respondent-company s share in substantial numbers are held by the Government of India. This approach on the part of the respondent deserves to be deprecated. 11. Mr. Dalip Singh, the learned counsel for the respondent, urged that the petition should not be admitted, as in his submission, the only course open to the petitioner is to institute a money suit against the company for recovering its dues. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e that the company is commercially insolvent. There can be no excuse for not repaying an admitted overdue liability except sheer inability to make the payment. 13. Section 433( e ) of the Act provides that any company may be wound up, inter alia , on the ground that the company is unable to pay its debts . Section 434 sets out the circumstances in which the company is deemed to be unable to pay its debts. Section 434 reads thus : " Company when deemed unable to pay its debts. (1) A company shall be deemed to be unable to pay its debts ( a )if a creditor, by assignment or otherwise, to whom the company is indebted in a sum exceeding five hundred rupees then due, has served on the company, by causing it to be delivered at its registered office, by registered post or otherwise, a demand under his hand requiring the company to pay the sum so due and the company has for three weeks thereafter neglected to pay the sum, or to secure or compound for it to the reasonable satisfaction of the creditor; ( b )if execution or other process issued on a decree or order of any Court in favour of a creditor of the company is returned unsatisfied in whole or in part; or ( c )if it is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that their claim is against a company, petition for winding up the company to enforce their claim, even when the liability of the company for meeting such claim is bona fide disputed. In the oft-quoted words of Buckley: "It is well-settled that winding up petition is not a legitimate means of seeking to enforce payment of the debt which is bona fide disputed by the company. A petition presented ostensibly for a winding up order but really to exercise pressure will be dismissed, and under circumstances may be stigmatised as scandalous abuse of the process of the Court". This statement of Buckley was approved by the Supreme Court in the case of Amalgamated Commercial Traders (P.) Ltd. v. A.C.K. Krishnaswami [1965] 35 Comp. Cas. 456 and has been quoted with approval in several subsequent decisions rendered by the Apex Court. Such approval was reiterated in the recent case of the Pradeshiya Industrial Investment Corpn. of Uttar Pradesh v. North India Petro Chemicals Ltd. [1994] 79 Comp. Cas. 835 (SC). 17. In Palmer s Company Law, twenty-fourth edition, in Chapter 88, winding up by the Court, at 85-86 the law on this aspect is stated thus : "...where there is bon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e dispute as regards the debt or the right of the petitioner to maintain this petition. Though the respondent, after admitting the outstanding of Rs. 5 crores, has claimed that a sum of Rs. 74 lakhs had been paid as excess interest, even assuming that such excess payment has been made towards interest, even then a sum of Rs. 4 crores and twenty-six lakhs is admittedly due. The respondent has contended that the rate of interest is 15 per cent and not at 21 per cent whichever rate is adopted, a sum exceeding Rs. 1 crore has accrued, as interest admitted on the outstanding sum during the pendency of this petition. The company has failed to pay or secure or compound the debt even after the statutory notice. Even though this petition has been pending for over two years, the company has failed to pay any part of the petitioner s dues. It has only made vague promises which have also remained unfulfilled. The company is, thus, not only deemed to be unable to pay its debts, but that such inability is also a fact which has been demonstrated by the company s continued failure to pay the debt even during the pendency of this petition. 20. As to whether or not the other creditors of the co ..... X X X X Extracts X X X X X X X X Extracts X X X X
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