1. The above company petition is filed under Sections 433(1)(e) and 434 read with section 439 (1)(b) of the Companies Act, 1956 for a direction to wind up the first respondent company and to appoint the Official Liquidator as the Liquidator.

2. The Industrial Development Bank of India (IDBI) was impleaded as second respondent as per order dated 22.7.2010. Notice regarding admission was ordered in the company petition and the arguments of Mr.P.S.Raman, learned senior counsel appearing for the petitioner and Mr.R.Thiagarajan, learned senior counsel appearing for the first respondent company who raised objection about the maintainability of the company petition and Mr.K.Murthy learned counsel appearing for IDBI were heard.

3. The first respondent company is a limited company with authorized share capital of Rs.5 crores divided into 50 lakhs shares of Rs.10/-each and its main object is to carry on the business of manufacturing, bleaching, dyeing, printing and selling yarn, cotton and/or staple fibre, cloth and other fabrics made from raw cotton, jute, wool and other suitable materials and generally to carry on the business of cotton spinning and as weaving mill proprietors in all branches.

a) It is stated that originally one M/s.Sivakami Textiles Ltd. borrowed loans from various banks including the 2nd respondent bank to the tune of Rs.4,49,63,000/- and it was unable to repay the loan because of recession and the matter was referred to BIFR. At that time, the first respondent Company made a negotiation for taking over the said mill. It is stated that in the meantime, the said M/s.Sivakami Textiles Limited moved the AAIFR and the scheme was sanctioned by the appellate authority on 24.9.2001 and based on the scheme, the said M/s.Sivakami Textiles Limited was merged with the first respondent.

b) After merger, the appeal filed before the AAIFR by the first respondent was allowed by the first respondent which was allowed on 26.5.2000 by setting aside the order of winding up passed by the BIFR and the matter was remitted back to BIFR and the mill was taken over by the respondent with effect from 1.4.2001.

c) It is the case of the petitioner, which is a company incorporated under the Companies Act, carrying on the business in running textile mills that the first respondent contacted the petitioner and requested to run the textile mill by providing the required raw materials for conversion and stated that it would convert the raw cotton into yarn and deliver the same to the petitioner for consideration and the first respondent also requested to give an advance of Rs.75 lakhs for the said purpose and the agreement was entered into on 19.1.2006 based on which it is stated that the petitioner paid an amount of Rs.30 lakhs towards interest free conversion deposit and Rs.45 lakhs towards deposit repayable in 10 instalments together with interest at the rate of 12% p.a.

d) It is stated that on 19.1.2006 the first respondent executed a deed of hypothecation hypothecating four generator sets in favour of the petitioner as security for the sum of Rs.45 lakhs and therefore, the petitioner has a charge over the properties.

e) It is stated that against the first respondent company, one M/s.Dipalee Traders, Mumbai filed C.P.No.295 of 2003 for winding up, which is pending in this Court. It is the case of the petitioner that after doing conversion work for some time, the first respondent failed to continue the same due to electricity disconnection and requested the petitioner to advance further amount of Rs.32.32 lakhs towards electricity bills and the same was also paid by the petitioner under a supplementary agreement dated 17.4.2007 under which the first respondent agreed to repay the said amount at the rate of Rs.5 lakhs per month on 25th of every month.

f) The petitioner also gave a further amount of Rs.68,79,261/-at the request of the first respondent for the purpose of electricity payment and other liabilities and a simple mortgag