2001 (7) TMI 1213 - HC - Companies Law

Court Allows Appeal for Issuance of Insolvency Notice under Section 9(1)

The court allowed the appeal, holding that the appellant was entitled to issue an insolvency notice under Section 9(1) of the Presidency Towns Insolvency ... Winding up - Enforcement of orders of Courts, Powers of Court on hearing petition Issues Involved:1. Whether the consent order contains an order directing the respondent to pay a sum to the appellant.2. Applicability of Section 145 of the Code of Civil Procedure to a consent order passed by a company court.3. Whether Section 634 of the Companies Act, 1956, confers the status of a decree on an order passed by the company court.4. Jurisdiction of the company court to pass an order directing the company to make payment to a petitioning creditor.5. Whether the consent order can be enforced as a decree under Section 145 of the Code of Civil Procedure.6. Whether the consent order amounts to a fraudulent preference under Sections 531 and 536(2) of the Companies Act.7. Whether a company court has the power to direct payment of money to a petitioning creditor in a winding-up petition.Detailed Analysis:1. Whether the consent order contains an order directing the respondent to pay a sum to the appellant:The court examined the consent order and found that Clause 3 of the order directed the respondent-company to pay the specified amount to the appellant. Clause 10 of the consent order guaranteed the payment of all amounts due and the performance of the consent terms by the respondent-company. The court concluded that the respondent was personally ordered to ensure the performance of Clause 3, which included the payment of the specified amount.2. Applicability of Section 145 of the Code of Civil Procedure to a consent order passed by a company court:The court held that the respondent, having given a guarantee for the performance of a decree, falls within the purview of Section 145 of the Code of Civil Procedure. The consent order, having the force of a decree, is executable under Section 145, making it a decree or order for payment of money within the meaning of Section 9(1) of the Presidency Towns Insolvency Act.3. Whether Section 634 of the Companies Act, 1956, confers the status of a decree on an order passed by the company court:The court referred to the Privy Council's decision in Lyallpur Bank Ltd. v. Ramji Das, which held that an order made under the Companies Act could be enforced as a decree. The court also cited other judgments supporting the view that an order passed by a company court has the force of a decree and is enforceable as such.4. Jurisdiction of the company court to pass an order directing the company to make payment to a petitioning creditor:The court rejected the respondent's argument that the company court lacks jurisdiction to pass such an order. It held that the company court has the inherent power to make any order necessary for the ends of justice, including directing the company to make payment of an admitted liability. The court cited several judgments supporting the view that a company court has the power to pass orders for payment of money.5. Whether the consent order can be enforced as a decree under Section 145 of the Code of Civil Procedure:The court held that the consent order, having the force of a decree, is enforceable under Section 145 of the Code of Civil Procedure. The court emphasized that the consent order directed the respondent to ensure the performance of the terms, including the payment of the specified amount, making it executable as a decree.6. Whether the consent order amounts to a fraudulent preference under Sections 531 and 536(2) of the Companies Act:The court rejected the respondent's contention that the consent order amounts to a fraudulent preference. It held that Section 536(2) allows the court to order the disposition of the company's property, making the consent order valid and enforceable. The court also held that Section 531, which deals with fraudulent preferences, does not apply to the consent order as it was made after the commencement of the winding-up petition.7. Whether a company court has the power to direct payment of money to a petitioning creditor in a winding-up petition:The court held that the company court has the power to direct payment of money to a petitioning creditor, especially when the debt is admitted by the company. The court emphasized that winding-up proceedings are a proper remedy for enforcing payment of a just debt and a mode of execution. The court concluded that the company court, in this case, was justified in directing the respondent to ensure the payment of the admitted liability.Conclusion:The court allowed the appeal, holding that the appellant was entitled to issue an insolvency notice under Section 9(1) of the Presidency Towns Insolvency Act. The court directed the issuance of the insolvency notice to the respondent, thereby enforcing the consent order as a decree.