2004 (8) TMI 395 - HC - Companies Law

Appeal Dismissed: Winding-Up Petition Upheld for Rs. 5 Lakhs

The Division Bench upheld the admission of the winding-up petition against the company for a sum of Rs. 5 lakhs, with interest. The company's appeal ... Winding-up petition - inability to pay debts - Bona fide attempt to serve statutory notice - Admission of winding-up petition on merits despite non-service of notice - Liberty to pay in instalments and consequence of default - Dismissal of review application as time-barredWinding-up petition - inability to pay debts - Bona fide attempt to serve statutory notice - Admission of winding-up petition on merits despite non-service of notice - Admission of the winding-up petition on the ground that the company is unable to pay its debt despite contention regarding non-service of statutory notice. - HELD THAT: - The Court found the factual admission that the company received the sum advanced and that interest was paid intermittently, supported by account confirmation and TDS certificates, and no documentary foundation was placed by the company to demonstrate a bona fide and triable dispute. Although the Division Bench had observed that statutory notice had not been served in law, the trial court proceeded to examine the merits and concluded that failure to pay the admitted sum and cessation of interest payments established that the company was unable to pay its debt. In these circumstances, at the admission stage the petitioning creditor was entitled to have the winding-up petition admitted. The petition was accordingly admitted for the claimed sum with interest from the specified date, and conditional liberty was granted to the company to pay by instalments; default would permit publication and further steps as directed. [Paras 5, 6, 7, 8]Winding-up petition admitted for the claimed sum with interest; company granted liberty to pay in 12 monthly instalments and publication rights on default.Dismissal of review application as time-barred - Maintainability of the review application filed by the company against the Division Bench order. - HELD THAT: - The Court observed that the review application was not filed promptly after the Division Bench's judgment and that steps were not taken to have the review heard before the remitted matter was concluded. The explanation for the delay of about 150 days beyond the prescribed period was found inadequate. In view of these facts the review application was held to be not entertainable at that stage and was dismissed. [Paras 3]Review application dismissed as barred and not entertainable.Final Conclusion: The High Court admitted the winding-up petition on merits, concluding the company is unable to pay the admitted debt and granting liberty to pay by instalments with consequences on default; the company's review application against the earlier Division Bench order was dismissed as timebarred. Issues:1. Service of statutory notice for winding-up petition2. Admittance of winding-up petition by lower court3. Appeal against lower court's judgment4. Review application before Division BenchIssue 1: Service of statutory notice for winding-up petitionThe petitioner filed a winding-up petition against the company, alleging non-payment of a sum of Rs. 5 lakhs lent and advanced. The company confirmed the balance and paid interest, but the statutory notice of demand was returned with 'Not known' endorsement. The lower court held that there was a bona fide attempt to serve the notice, and it was duly served. The company claimed no valid service of notice, leading to a dispute.Issue 2: Admittance of winding-up petition by lower courtThe lower court admitted the winding-up petition, directing advertisement and payment of the admitted sum. The company appealed, and the Appellate Court set aside the judgment, ordering a fresh hearing. The company's review application was dismissed, and the matter was heard afresh, establishing the company's inability to pay the debt.Issue 3: Appeal against lower court's judgmentThe Appellate Court set aside the lower court's decision, emphasizing the need to consider the case for winding up even without the statutory notice. The company's contentions regarding a civil dispute with another party and lack of a valid license were considered insufficient to resist the winding-up petition.Issue 4: Review application before Division BenchThe company filed a review application before the Division Bench, which was kept pending for a significant period. The review application was ultimately dismissed due to delay and lack of convincing explanation for the delay in filing. The Division Bench found the review application not entertainable at that stage, considering the timing and reasons for the delay.In conclusion, the winding-up petition was admitted for the sum of Rs. 5 lakhs, with interest rates specified. The company was given the option to pay in monthly installments, with consequences for default outlined. The review application against the Appellate Court's judgment was dismissed due to delay and lack of merit.