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TMI Blog2009 (4) TMI 436X X X X Extracts X X X X X X X X Extracts X X X X ..... igh Court in the case of Advent Corpn. (P.) Ltd., In re [1969] 39 Comp. Cas. 463 , wherein it is held that (headnote) : "If a company fails to comply with a notice under section 434(1)( a) for payment of a debt, the court has no discretion to refuse to make a winding up order. Section 434(1)(a) does not merely lay down a presumption which can be rebutted but uses the word 'shall' and enacts a deeming provision which comes into play once the company neglects to pay the sum demanded. The creditor is then entitled to a winding up order ex debito justitiae. In such a case the commercial insolvency of the company need not be established. The fact that the creditor has the alternative means of filing a suit to recover the debt is irrelevant." 4. Mr. Pahwa has further relied upon the decision of the Bombay High Court in the matter of Seksaria Cotton Mills Ltd., In re [1969] 39 Comp. Cas. 475, wherein it is held that : "If a company fails to comply with a statutory notice under section 434(1)(a) and the court comes to the conclusion that there is no bona fide dispute in regard to the petitioner's debt, the creditor is entitled to a winding-up order ex debito justitiae. The fact that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efore, not discharging its statutory functions only with a view to conceal the particulars of its fund position. He has, therefore, submitted that even on this ground, the petition deserves to be admitted and advertised. In support of this submission, he relied on the decision of this court in the case of UTI Bank Ltd. v. Shree Rama Multitech Ltd. [2005] 126 Comp. Cas. 15. 7. It is the case of the petitioner before the court that the respondent-company approached the petitioner for the purpose of business promotion and advertising of its products, namely, sarees, dress materials, etc., through the mode of press publications and electronic media, i.e., television, sometime in the month of April, 2000. The petitioner maintained a running account for the respondent whereunder the petitioner raised invoices/challans and the amounts received were being adjusted in the running account. The amounts due and payable in a given accounting year after adjustments of the amounts were being maintained. The arrangement came to be discontinued with effect from 1-4-2005, after cheques given by the respondent-company came to be dishonoured upon presentation. The petitioner has taken out proceedings ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n-reply and it was contended on behalf of the respondent-company that the company petition filed by the petitioner is not maintainable in view of the fact that the respondent-company is a going concern and is duly engaged in business activities and has not lost its substratum. The respondent-company has been discharging its liabilities towards various creditors, employees, statutory dues, electricity dues, etc., including payment to the petitioner earlier and also during the years 2005-06, 2006-07 and 2007-08 and especially when the alleged outstanding dues are seriously objected and disputed by the respondent. It is further contended that the alleged outstanding dues claimed by the petitioner have become time-barred and hence, the same cannot be enforced against the respondent-company. The said outstanding dues are in fact, not outstanding and as a matter of fact, nothing is outstanding against the respondent-company. It is further contended that the respondent-company is a working concern with about 60 employees and they are paid regularly. The current assets of the respondent-company are sufficient to meet with the total liability and, therefore, the company is not required to b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tioner issued by Shri Dhiren R. Dave, Company Secretary confirming that the last balance-sheet filed with the office of Registrar of Companies is for the period ending 31-3-2002. The respondent-company has not timely filed balance-sheets only with a view to conceal the fact that the respondent-company has lost its substratum and is commercially insolvent. As per the information gathered by the petitioner, the respondent-company owed huge amounts to large number of creditors which includes the petitioner-company as also dues of the workers, statutory dues, electricity dues, etc., and because of this, the respondent-company has not filed the balance-sheet with the office of the Registrar of Companies. It is further contended that the respondent-company has raised absolutely false and frivolous defense in the affidavit-in-reply. The same is required to be ignored and the petition be admitted and advertised. 10. On behalf of the respondent-company, an affidavit-in-rejoinder is filed on 4-12-2008, wherein it has been reiterated on behalf of the respondent-company that the whole claim of the petitioner is false and not supported by any substantial evidence and that the case of the petit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... led in the year 2007, they could not have been placed on record and, therefore, such documents are not having any evidentiary value. It is further contended in this affidavit that the petitioner has not produced even ledger accounts till this date which would reflect the liability of the respondent towards the alleged outstanding dues. It is further reiterated that the respondent-company has already made full payment to the petitioner-company for the advertisements given through it during the years 2000 to 2004 and also for the transactions during 2005 to 2008. The respondent-company has paid Rs. 82,621 towards P. F. account on 21-2-2008 and also paid the electricity bill of November, 2008, which would indicate that the respondent-company is a going-concern. 13. Over and above the factual submissions made on behalf of the respondent-company, certain authorities were also cited by Ms. Brahmbhatt, learned advocate appearing for the respondent-company. They are as under : (i)In Pradeshiya Industrial & Investment Corpn. of Uttar Pradesh v. North India Petro Chemicals Ltd. [1994] 79 Comp. Cas. 835 (SC); it is held that debt must be a determined or definite sum, not a disputed or a dou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an order of winding up or not. The court must in each case exercise its discretion in deciding whether in the circumstances of the case, it would be in the interest of justice to wind up the company. This is also manifest from section 443 of the Act which leaves it in the discretion of the court to make any one of the order envisaged therein. Section 443 also envisages relevant consideration in which winding-up order may not be considered just and equitable. 14. Considering the above decisions of this court as well as the Hon'ble Supreme Court, it was strongly urged that there is no substance or merits in the present petition and hence, the same deserves to be dismissed with cost. 15. Having heard learned advocates appearing for the respective parties and after having gone through the various submissions made and the issues raised before the court, and after having given serious thoughts to the authorities cited before the court, the court is of the view that the petition deserves to be admitted and the order of advertisement is required to be passed. While arriving at this conclusion, the Court has taken into consideration the two binding decisions of this Court in the case of C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions, supplier of goods or services and trade creditors are also the main backbones of any industry or business organisation and at their peril or disadvantage, the unscrupulous management of the companies must not be allowed to defend winding up petition under the guise of workers' interests or contending that the company is a going-concern. 17. While considering the present petition for winding up of the respon-dent-company, the state of affairs of the respondent-company which ultimately led to the financial crunch which is of a permanent nature by now, cannot be lost sight of. This is also one of the additional reasons which weighs with the court to admit the present petition filed against the respondent-company and pass an order of advertisement. 18. Having regard to the facts and circumstances of the case and looking to the totality of the reasons, the present petition is hereby admitted and the petitioner is hereby directed to issue public advertisement for admission and final hearing of the present company petition in the English Newspaper The New Indian Express and in Gujarati Newspaper Divya Bhaskar having circulation in Surat fixing the date of final hearing on 4-5-2009 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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