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TMI Blog2012 (8) TMI 110X X X X Extracts X X X X X X X X Extracts X X X X ..... ght on record established that the respondent-company became indebted to the petitioner-company to a tune of Rs. 81,86,349 as on the date of filing of the petition and, despite service of statutory notice, it did not liquidate the liability. This court further held that the petitioner-company had made out a prima facie case for admission of the company petition, and in these circumstances directed, that the company petition be admitted. 2. Thereafter the respondent-company has filed these two applications (C.A. Nos. 1537 and 1538 of 2011). C.A. No. 1537 of 2011 is filed to set aside/recall the order of admission in C.P. No. 209 of 2010 dated April 11, 2011. C.A. No. 1538 of 2011 is filed by the respondent-company to reject the petition in C.P. No. 209 of 2010, and direct the parties to resolve the dispute through the arbitrator to be appointed by this court. 3. In the affidavit filed in support of C.A. No. 1537 of 2011, it is stated that the respondent-company is running a 24 hours news channel known as I-news ; they had approached the petitioner for providing internet services to them ; an agreement dated October 1, 2009, was entered into between the parties ; in the month of Oc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for this court's perusal. These are (1) the certificate issued by the director and CEO of the petitioner-company dated August 24, 2011, stating that the respondent-company was due a sum of Rs. 33,35,865 and they had no further claim in any form or in any manner over and above the said amount ; (2) a comparative statement of the annual returns of the company to show that the respondent-company is commercially solvent ; and (3) letter dated January 18, 2011, allegedly addressed by the director of the petitioner-company to the management of the respondent-company on January 18, 2011, wherein the petitioner is said to have stated that Rs. 33,35,865 was due as on June 30, 2010 ; the petitioner had earlier sent a legal notice followed by a winding up petition; they had held a couple of discussions with the senior vice-president of the respondent ; although assurances were given that payment would be made, nothing had happened so far ; and they looked forward to receive a cheque for Rs. 33,35,865 by January 24, 2011. 6. It may not be appropriate for this court to examine the documents passed across the bar as the petitioner-company is in no position to rebut the contents of these docume ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anagement cannot be a ground to refuse admission of a winding up petition, where the respondent-company is deemed to be unable to pay its debts. 8. Even if the amount claimed in the statutory notice is higher than the admitted amount, as long as the admitted amount exceeds the minimum amount stipulated under section 434(1)(a) of the Companies Act, and despite service of a statutory notice, the respondent-company fails to pay the lesser amount, it must be deemed that the respondent-company is unable to pay its debts in view of the legal fiction under section 434(1)(a) of the Companies Act. In Vijay Industries v. NATL Technologies Ltd. [2009] 89 SCL 205, the Supreme Court held that what was necessary for invoking section 434 of the Companies Act was that, despite service of notice by the creditor, the company which was indebted in a sum exceeding the amount specified therein, had failed and/or neglected to repay the same within three weeks thereafter or to secure or compound for it to the reasonable satisfaction of the creditor ; section 433 of the Companies Act did not state that the debt must be precisely a definite sum ; and if, on the date of filing of the petition, dues in resp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he respondent-company chose not to appear. Even during the hearing of the present applications, the applicant-company (the respondent in the company petition) does not deny its liability to pay Rs. 33,35,865 to the petitioner. All that they contend is that the company is solvent, and there is a remedy of arbitration provided under the contract. Both these contentions do not merit acceptance. In view of the legal fiction under section 434(1)(a) and on compliance of the conditions stipulated therein, if the company does not pay the amount due it must then be deemed to be unable to pay its debts. The question whether the company is or is not commercially solvent is of little consequence, as the legal fiction under section 434(1)(a) requires this court to deem that the company is unable to pay its debts. An examination of the company's solvency may be a useful aid in determining whether the refusal to pay the debt is a result of a bona fide dispute as to the liability or whether it reflects an inability to pay. Of course, if there is no dispute as to the company's liability, it is difficult to hold that the company would be able to pay the debt merely by proving that it is able to pay ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n for winding up is not for money. The petition filed under the Companies Act would be of the effect that the company has become commercially insolvent and, therefore, should be wound up. The power to order winding up of a company is contained under the Companies Act and is conferred on the court. An arbitrator, notwithstanding any agreement between the parties, would have no jurisdiction to order winding up of a company, as such a power is conferred on, and is vested with, the court under the Companies Act - Haryana Telecom Ltd. (supra) and Prime Century City Developments (P.) Ltd. v. Ansal Buildwell Ltd. [2003] 113 Comp. Cas. 68/42 SCL 256 (Delhi). Even if an arbitration clause subsists between the parties, the High Court would have unfettered powers to entertain winding up petitions (Madhya Pradesh Iron & Steel Co. v. G.B. Springs (P.) Ltd. [2003] 117 Comp. Cas. 327/42 SCL 785 (Delhi)). In terms of the arbitration agreement, the arbitrator can always find out and adjudicate as to whether or not a company is functional and, if it was not functional, he could always find out the nature and status of its assets and can also issue directions and pass orders regarding dues and liabil ..... X X X X Extracts X X X X X X X X Extracts X X X X
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