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2009 Supreme(Mad) 1998
High Court of Judicature at Madras
THE HONOURABLE MR. JUSTICE P. JYOTHIMANI
M/s. Besant Raj International Ltd., rep. by its Managing Director, Dr. A. Besant
C. Raj
Versus
M/s. Vishwabharathi Textiles Ltd., Tirupur
C.P.No.115 of 2002
Decided on: 01-07-2009
For the Petitioner:Rugan & Arya, Advocates.
For the Respondent:M.S. Krishnan, Senior Counsel, S. Kadarkarai, Advocate.
A winding up petition cannot be used as a method for making recovery of any amount due, which is otherwise enforceable as per the due process of law.
Headnote:
Companies Act - Winding Up Petition - Sections 433(e), 434 and 439 - Summary
Fact of the Case:
The petitioner, a management consultancy company, filed a winding up petition against the respondent company for non-payment of professional fees for arranging a loan. The respondent disputed the debt, claiming there was no concluded contract and no obligation to pay until the loan was availed.
Finding of the Court:
The court found that the respondent's liability was disputed and not legally enforceable. It held that the inability to pay debts under Section 433(e) of the Companies Act was not established, and the petition was dismissed.
Issues: Dispute over the existence of a legally enforceable debt, obligation to pay professional fees, and the use of winding up petition as a method for debt recovery.
Ratio Decidendi: A winding up petition cannot be used to enforce payment of a disputed debt. The court will not wind up a company if the debt is bona fide disputed and the defense is substantial.
Final Decision: The petition was dismissed as the court found that the respondent's liability was disputed and not legally enforceable under Section 433(e) of the Companies Act.
This petition is filed under Sections 433(e), 434 and 439 of the Companies Act (for brevity, "the Act") for a direction to wind up the respondent Company.
2. This Court, by an order dated 18. 2002, having satisfied of the prima facie case had directed issue of notice to the Registrar of Companies, affixture of notice at the premises of the registered office of the respondent Company and also permitted advertisement in English daily "News Today" and the Tamil daily "Makkal Kural". However, by a subsequent order dated 29. 2003, this Court, having found from the records of the Registrar, Board for Industrial and Financial Reconstruction (BIFR), New Delhi that in respect of the respondent Company under liquidation a case was pending before the BIFR in Case No.283/2002, closed the company petition in view of Section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985, with liberty to file application as and when finality is arrived in the case before BIFR.
.3. It appears that, subsequently, the respondent Company under liquidation has been discharged by BIFR by an order dated 5. 2006, and in C.A.No.1410 of 2008, this Court, by order dated 24. 2008, has directed revival of C.P.No.115 of 2002 at the stage where it was left and notice was directed to be served on the respondent returnable in six weeks time. In spite of the notice having been served on 26. 2008, there was no representation and consequently, this Court, by an order dated 27. 2008, has passed an order reviving the Company Petition, admitting the same and ordering notice to Registrar of Companies and affixture of notice at the premises of the registered office of the respondent company, apart from publication in Tamil daily "Daily Thanthi" and English daily "Hindu Business Line". In the said order, the Official Liquidator, High Court was appointed as Provisional Liquidator of the respondent Company, directing the Ex-Directors to file statement of affairs before the Official Liquidator within twenty-one days.
4. On an application filed by the respondent in C.A.No.2253 and 2254 of 2008 in C.A.No.1410 of 2008 in C.P.No.115 of 2002, for the purpose of condoning the delay in filing an application and also to set aside the order dated 27. 2008, this Court, by order dated 19. 2008, allowed the applications by setting aside the order dated 27. 2008 and posted the company petition for arguments. Thereafter, the matter got adjourned on various occasions, including on one occasion for reporting settlement.
5. The Company Petition has been filed by the petitioner which is a management consultancy company providing services to Indian Companies. One such service provided by the petitioner is syndication of funds for Indian Companies from both Indian and foreign sources. The respondent company, having authorised share capital of Rs.75 Lakhs, divided into 5000 equity shares of Rs.500/-each, issued subscribed and fully paid up 10,767 equity shares of Rs.500/-each. The main object of the respondent Company is to carry on the business of spinning and weaving cotton textiles and to construct, establish, purchase or otherwise acquire spinning mills, waste cotton spinning mills, weaving mills, etc.
6. The respondent company has approached the petitioner for procuring loan to the extent of 8 Million US Dollars to improve its business. There was a contract entered on 2. 2000 under which the respondent has paid Rs.2 Lakhs to the petitioner as initial payment. It is stated that, as per the contract, the said amount of Rs.2 Lakhs is non refundable and is to be treated as advance fees for preparation of detailed business plans for short term and long term funds. The contract provides for payment of 2% of the total loan arranged as professional fees for the services of the petitioner.
.7. It is the case of the petitioner that, as per the contract, the petitioner acted as a financial intermediar and by contacting various sources they arranged ECB Borrowings for 8 Mil
