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TMI Blog2009 (4) TMI 447X X X X Extracts X X X X X X X X Extracts X X X X ..... a statutory notice had been issued and although the liability was an admitted one, the amount had not been paid. Treating the company as one which is unable to pay its debts, the petition for winding up was filed. Some more details are necessary for a case that has been instituted in the year 1998 and which is arriving for its adjudication at this length of time. II. Liability of the company wholly admitted 2. The petition filed under section 439, read with section 433(C), (E) and (F) and section 434, read with section 439(1) read with the relevant Company Rules had been originally instituted by the petitioner describing itself as a company. Later, on objections on behalf of the respondent, an amendment had been made describing the petitioner as a proprietorship having its office in Los Angeles and represented through a constituted attorney and agent Sh. S.K. Verma. The basis of the claim was for value of goods supplied to the respondent-company and at the time of filing of the petition, the petitioner had complained that the respondent-company was indebted to a sum of US $ 91,702.72 with interest. The petitioner had also spelt out the details of the invoices for the goods ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n us by the uneven market situation. We agreed for release of payments on fortnightly basis presuming that our payments will come fast after festival days which is becoming impossible for us. All our customers are postponing the due dates of payments". V. Payment of a portion of admitted liability on interim directions of Court - a cause for whimper of protest 5. After the petition was filed and after several hearings from the year 1998, nothing else changed for the petitioner except that by an order dated 26-5-2006, this Court was pleased to direct the respondent-company to pay Rs. 5 lakhs to the petitioner without prejudice to the rights and contentions of the respondents. This order was challenged in appeal by the company before a Division Bench but the Division Bench refused to interfere with the order upon which ultimately the respondent-company made the payment of Rs. 5 lakhs. This payment, which was made on 22-1-2007 was not allowed to go unchallenged and the respondent-company filed C.A. No. 95 of 2007 seeking for a direction to the petitioner to put the money back, since according to the respondent-company, the petitioner represents the general body of creditors an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g to learned senior counsel for the respondent-company, the power granted to the petitioner "to file and fight the cases on behalf of the Sound Fibre in Indian Courts" does not mean a right to authority to file a petition for winding up. While considering this subject, it is also necessary to point out that if there was yet another power of attorney that was filed during the course of the proceedings along with C.A. No. 111 of 2001, where another document Annexure A has been filed, which contains the following expressions : "To all persons, be it known, that I, Roger Paul Berg, of Sound Fibre as Grantor, do hereby make and grant a limited and specific power of attorney to Mr. S.K. Verma of Sneh International and appoint and constitute said individual as my attorney in fact. My named attorney in fact shall have full power and authority to undertake, commit and perform only the following acts on my behalf to the same extent as if I had done so personally; all with full power of substitution and revocation in the presence: (describe specific authority). Mr. S.K. Verma of Sneh International, 502-503, Shahpuri Tirath Singh Towers, C-58, C-Block, Community Centre, New Delhi, India ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t merely to the principal but also to any third party, who deals with such power of attorney. A company petition for winding up is invariably an extreme step and an authority granted merely to a person to institute a suit ought not to be understood as authorizing a person to even file a petition for winding up. Even the decision of this Court in D.H.M. Framji s case ( supra ) in laying down the strict rule of construction was merely expounding the fundamental principle that an agent shall not bind the principal for activities more than what he was authorized to do. These decisions, in my view, however, do not lend support to the extreme position canvassed by learned senior counsel for the respondents. On the other hand, the power of attorney granted sets out a larger boundary for the agent to traverse, when it describes not merely to a specific act of institution of suits for recovery of money as done in the Bombay High Court case cited above but sets out, "to file and fight the cases on behalf of Sound Fibre in Indian Courts". This expression is wide enough to describe every form of legal fight that could include even a petition for winding up of the company. Even otherwise, I d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rovisions of sections 433, 434 and 439 could not be used to arm-twist the company into succumbing to a disputed liability. Defences that may be possible for a respondent-company where that the financial condition of the company is solvent shall be definitely circumstances when the Court shall not order winding up or if the liability is denied, disputed or there is a semblance of defence in an action that could be initiated for recovery of money. (iii) Seemingly healthy balance sheet, not the test 14. However, to say that the mere fact that an audited statement shows some profits as having been posted would be a complete answer in all cases to stave off a petition for winding up would be at complete variance to the clear legislative intent and the language employed under the relevant provisions of the Companies Act. Every company that posts profits in its account statement cannot be taken up at its face value, if the recent incidents of massive corporate frauds afflicting the Indian Corporate World is any lesson to us. It has not just happened in India. What was SATYAM in India was CENTRO in Australia or ENRON in US. The bankruptcy of a company could be concealed by a clever ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... there is a likelihood of a valid defence or when the liability is disputed, the appropriate remedy would be only a civil suit and not a petition for winding up. These principles cannot be extended to an open and shut case of liability such as what obtains in this case where by several communications, the respondent has admitted that the money is due and that it was unable to pay the money to the petitioner. For the same reason, the several decisions referred to by the learned senior counsel for the petitioner that where a prima facie existence of a debt was proved, a petition for winding up could be filed are not replicated here. VII. Conclusion 16. In the circumstances, I am of the clear view that the company is unable to pay its debts and the affairs of the company cannot be carried on. The company is required to be wound up and ordered accordingly. 17. The notice of the order of winding up shall be filed with the Registrar of Companies and also communicated to the Official Liquidator attached to this Court. The advertisement of factum of winding up shall also be made within 14 days from the making of the order in " The Tribune (Chandigarh-Delhi Edition)" and in " ..... X X X X Extracts X X X X X X X X Extracts X X X X
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