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TMI Blog2012 (6) TMI 853X X X X Extracts X X X X X X X X Extracts X X X X ..... been represented before the appellate court. The appellate order recorded specifically that there was no illegality or irregularity in the order appealed against and found the appeal to be devoid of merit. The order of admission was affirmed. (2.) THE company has used an affidavit at the post -advertisement stage and supplementary affidavits have also been filed. The company seeks to rely on further documents that have been disclosed by it which would reveal, according to the company, that it has a complete defence to the claim. In the alternative and without prejudice to the company's submission that it has a more than plausible defence to the claim, it is suggested that the company may be permitted to furnish security of the entire sum as due today in terms of the order of admission and the claim of the petitioner relegated to a suit. It is in such circumstances that the primary question that arises is as to whether a company can seek to re -agitate the merits of the claim and contest the same at the post -admission stage of a creditor's winding -up petition. The ancillary issue that is raised is whether the company can offer to furnish security at the post -adver ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the preadmission stage, as per the practice followed in this court, only the petitioning -creditor and the company are heard on the merits of the claim and a decision taken whether the petition should be advertised or not. Such order is appealable. (5.) THERE is good reason for such a procedure to be adopted by this court as noticed in the Bharat Vegetable judgment and in the SRC Steel and Dhariwal Steel cases. Upon a creditor's winding -up petition being advertised, there is considerable prejudice suffered by the concerned company since a doubt is cast as to the creditworthiness of such commercial entity. Experience also shows that other creditors not immediately pressing for payment would rush to seek the instant release of the monies due upon the advertisement of a winding -up petition relating to the concerned company. It is in such circumstances that the process has been split up, so to say, in this court where, at the initial stage, the matter is confined to the merits of the claim and only if the petitioning -creditor makes out a case of an indisputable debt remaining outstanding that the matter progresses any further. If the debt is bona fide disputed in the sens ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pronouncement reported at : (1966) 1 Comp LJ 300 (Cal) : 70 CWN 516 (John Herbert v. Pranay Kumar Dutta) that a prima facie view is taken by the Company Judge at the time of admission of a creditor's winding -up petition and held that such 'prima facie view at the time of the admission must mean a prima facie view as to whether the company should be wound up under section 443'. The division bench in the Khaitan Paper case went on to add, - - It cannot be said, having regard to the practice of this court, that the court forms a prima facie view as to the ground on which the winding up petition is admitted. Thus if a petitioning creditor files a winding up petition on the ground that the company is unable to pay its debt and the company opposes the application by filing an affidavit seeking to establish before the court that the debt was a disputed one and the court comes to a conclusion that the company's dispute is not a bona fide one, it must be held that the finding as to the existence of the debt by the court is a final one. However, it does not follow from this, having regard to sections 433 and 443, that the company must be wound up. (8.) THE division ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the Company Court at the final stage of hearing of the winding up, just as an interlocutory decision in a suit is not binding at the time of passing of the final decree - - 60. The general view and also our view that the formation of the opinion of the Single Judge at the admission stage that the debt of the company is indisputable, and the binding and final nature of that opinion, does not really come in conflict with these dicta of the division bench. The reason is this: at the stage of admission the parties present before the court are the company and the petitioning creditor. The decision of the court that the debt of the company is final and binding binds them, and all other Courts in the same manner as a summary decree does. This is putting the matter on a very high pedestal, but it is, both logically and as matter of law already placed on that high pedestal. 61. But at the stage of the hearing of the winding up petition, the company has already, to a certain extent split up into the creditors and the contributors who come and make representations on their own behalf and by themselves, even apart from the submission which might be made by the company. The partie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... though it must be admitted that Khaitan Paper did not take into account the circumstances referred to at paragraphs 59 to 61 of the SRC Steel report since the question that the division bench answered in Khaitan Paper was narrower than the discussion on the entire scheme of the creditors' winding -up proceedings in SRC Steel. On the strength of the dicta in Pandam Tea, Bangasri Ice and John Herbert, some observations have been made in judgments of this court to the effect that the prima facie view taken at the time of admitting a winding -up petition is more final and less tentative than what a prima facie view would ordinarily connote. Most notably, such observations find place in the Single Bench judgments reported at (2007) 2 WBLR (Cal) 129 (In re Raghunath Exports Ltd.) and (2007) 2 Cal LT 417 (In re: JMD Medicare Ltd.). The observations to such effect in such Single Bench judgments have to be understood in the context of the elaborate discussion on such aspect at paragraphs 59 to 61 of the SRC Steel report and cannot be read to imply that the finding, at the time of admission, of the debt being due from the company to the petitioner is not final as between the principa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... asonableness of the company's excuse to not make the payment that is assessed at the pre -admission stage in this court. The company does not have to demonstrate a water -tight defence; just like a defendant in a summary suit does not have to conclusively demolish the claim to earn leave to defend the suit. The company has only to make out an arguable case to rebut the presumption of its inability to pay its debt. But upon the presumption arising and the company failing to rebut the presumption, the company is liable to be wound up. Even in such case the court is not bound to send the company into liquidation. The court still retains the discretion to not wind up the company and the post -advertisement assessment is based as much on the wishes of the others connected with the company as it is on the prospects of the company and divers other factors. In the practice followed in this court, a creditor is entitled ex debito justitiae to have his petition admitted if the debt is indisputable; but the unpaid debt is only one of the factors that the court takes into consideration at the post -advertisement stage to assess whether it ought to ring the knell heralding the civil death o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In such circumstances, there is little meaning in a company offering thereafter for the claim to be secured, for the issue as to the company's liability to the petitioner can no longer be reopened or reassessed in any other forum as it has attained finality as between the company and the petitioner. (15.) THERE is no other significant ground which has been urged by the company for the court's discretion to be exercised in its favour despite the apparent inability of the company to pay its debt. The company has, however, not been permitted to refer to the documents sought to be relied on in support of the company's assertion that the petitioner is not entitled to the money claimed since such question has already been finally decided at the admission stage.' (16.) ACCORDINGLY, the company, Baljit Securities Ltd., is directed to be wound up in accordance with the provisions of the Companies Act, 1956. The official liquidator shall forthwith take possession and control of all books, records, assets, documents and transactions of the company now in liquidation. The petitioner will cause a gist of this order to be published in the same newspapers where the petiti ..... X X X X Extracts X X X X X X X X Extracts X X X X
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