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TMI Blog1994 (2) TMI 267X X X X Extracts X X X X X X X X Extracts X X X X ..... NKATACHALLIAH, JJ. JUDGMENT: MOHAN, J.- Leave granted. 2.The brief facts leading to this appeal are as follows. The first respondent, North India Petrochemicals Limited (hereinafter referred to as 'NIPL') filed a winding-up petition (Company Petition No. 1 of 1993) before the High Court of Allahabad, Lucknow Bench, Lucknow under Sections 433, 434 and 439 of the Companies Act, 1956 (hereinafter referred to as 'the Act'). 3.On July 1, 1988 a Shareholders' Agreement or Promoters Agreement was entered into. That superseded earlier agreements which recorded that the grant of a Letter of Intent for the manufacture of 15,000 tonnes per annum of Phthalic Anhydride in favour of the appellant-Corporation. However, the said Letter of Intent was to be used, utilized and implemented in collaboration with M/s Dalmia Dairy Industries Limited (Respondent 2 herein). The collaboration agreement or the promoters agreement contemplated that a new company would be brought into existence called the Northern India Petrochemicals Limited. Clause 3 of the agreement provided that initial authorised capital would be Rs 5 lakhs which would be issued in equity shares of Rs 10 each while the su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pay the amount of Rs 72.50 lakhs. It was stated therein that the disputes raised by second respondent M/s Dalmia Industries Limited had already been referred to arbitration and as such is pending adjudication. Hence, NIPL was not entitled to take any action. 11.In the winding-up petition it is alleged that the sum of Rs 72.50 lakhs is a debt payable by the appellant to the first respondent. The debt arose on the basis of the promoters agreement between the appellant and the second respondent for promoting the first respondent-company referred to above. 12.It is further alleged that the appellant is liable to pay towards certain expenses for exploratory work. Those expenses will be adjusted and treated as subscription to the share capital. The appellant has agreed to subscribe by way of equity participation in the share capital. That amount ought to be paid. There is a breach of promoters agreement for the failure to pay these amounts, namely, the dues on account of share capital and the expenses for exploratory work. It was alleged that the said sum of Rs72.50 lakhs was due. Therefore, the first respondent claimed to be a creditor. 13.It may be noted, as stated above, that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uire the respondents to face the winding-up proceedings. Therefore, an appeal would lie under Section 483 of the Act. 18.As to the admissibility of the winding-up petition, the Division Bench is of the view that promoters agreement had in fact been entered into. The company is the beneficiary of the agreement. As a beneficiary it could claim that amount. From the material on record it is seen that no specific plea had been taken to show the circumstances under which the amount had not been paid by the appellant. Accordingly, the appeal came to be dismissed. 19. Hence, the present special leave petition. 20. It is urged by the learned Solicitor General that the learned Single Judge had gone wrong while holding that the admissibility of winding-up petition would depend upon arguable issues. Equally, the Division Bench failed to note that the debt is bona fide disputed. Further it failed to note that the question of liability is still pending adjudication before the arbitrator. No winding-up petition can be admitted unless the court comes to the conclusion that the defence put up is moonshine. In support of these submissions reliance is placed on Madhusudan Gordhandas v. Madhu W ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d has claimed this money. Hence, there is a substantial dispute in as much as the second respondent claims the said payment of Rs 72.50 lakhs on the ground that they should be reimbursed. 24.The appellant is a financial corporation which is fully owned by the State of Uttar Pradesh. It cannot be denied that it is a profit-making organisation and is not incurring losses. It is paying dividends on annual profits. Therefore, there is no relationship of debtor and creditor. 25.The defence of the appellant in relation to non-payment is a bona fide defence. Whatever it may be, the liability of the appellant is yet to be determined. It is in this factual background we will deal with legal aspect of the matter. Section 433 of the Act says: (d) "A company may be wound-up by the Court,(a) to (e) if the company is unable to pay its debts; (f) From the above it follows: (1) There must be a debt; and (2) the company must be unable to pay the same. An order under clause (e) is discretionary. 26.A debt under this section must be a determined or a definite sum of money payable immediately or at a future date. 27.What then is inability when the section says "unable to pay its d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion to the making of the windi Dg-Up order by the creditors the court will consider their wishes and may decline to make the winding-up order. Under Section 557 of the Companies Act, 1956, in all matters relating to the winding-up of the company the court may ascertain the wishes of the creditors. The wishes of the shareholders are also considered, though, perhaps, the court may attach greater weight to the views of the creditors. The law on this point is stated in Palmer's Company Law, 21st Edn., page 742, as follows: 'This right to a winding-up order is, however, qualified by another rule, viz., that the court will regard the wishes of the majority in value of the creditors, and if, for some good reason, they object to a winding-up order, the court in its discretion may refuse the order.' The wishes of the creditors will however be tested by the court on the grounds as to whether the case of the persons opposing the windingup is reasonable; secondly, whether there are matters which should be inquired into and investigated if a winding-up order is made. It is also well-settled that a winding- up order will not be made on a creditor's petitionif it would not benefit him or th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e dispute as to the debt. (5) The defence raised is a substantial one and not mere moon shine.We find it difficult to appreciate the reasoning of the learned Single Judge when he holds that there are arguable issues and, therefore, the winding-up petition has to be admitted. On this aspect the courts below failed to note that the admission of the winding-up petition is fraught with serious consequence as far as the appellant is concerned. 31.We are informed that the financial position of the appellant is sound. It is the largest financial corporation of the State of Uttar Pradesh. It has rendered financial assistance of Rs 1024.83 crores till March 1992 to more than 100 industrial units and has also promoted joint sector projects. It is profit-making financial corporation and is paying dividend as seen from the balance sheet for the year 1991-92, (filed along with special leave petition). The assets of the appellant-corporation are Rs 5,26,35,36,568. The reserves are Rs 17,60,15,222. The profits earned by the appellant before payment of tax is Rs 7.40 crores and after meeting its financial liabilities, Rs 2.78 crores. 32.Thus, we find no justification whatever for admitting t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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