Winding up petition admitted where debt default was shown and SARFAESI possession alone did not bar proceedings.
A prima facie case for admission and advertisement of the winding up petition was established where the company's liability was supported by arbitral awards, non-compliance with payment directions, a statutory demand notice, and an admitted inability to discharge debts; the petition was therefore admitted for advertisement. The SARFAESI bar under section 15(3)(c) did not apply because it operates only when management of the borrower company is taken over, not when the secured creditor merely takes possession of secured assets. As the notices showed possession only, without takeover of management by appointment of directors or an administrator, the winding up proceedings were not precluded.
Issues: (i) Whether the respondent company's financial condition and defaults disclosed a prima facie case for admission and advertisement of the winding up petition; (ii) Whether action taken by the secured creditor under the SARFAESI Act, limited to possession of assets, barred the winding up petition under section 15(3)(c) of that Act.
Issue (i): Whether the respondent company's financial condition and defaults disclosed a prima facie case for admission and advertisement of the winding up petition.
Analysis: The respondent's liability to the petitioner was supported by arbitral awards, non-compliance with payment directions, service of a statutory demand notice, and the admitted inability to discharge debts. The material placed before the Court showed persistent financial distress and repeated defaults, which were sufficient at the threshold stage for admission of the petition and for ordering advertisement under the Companies (Court) Rules, 1959.
Conclusion: The issue was answered in favour of the petitioner.
Issue (ii): Whether action taken by the secured creditor under the SARFAESI Act, limited to possession of assets, barred the winding up petition under section 15(3)(c) of that Act.
Analysis: Section 15(3)(c) of the SARFAESI Act was held to operate only when the management of the borrower's business is taken over, not when only possession of secured assets is taken. The statutory scheme distinguishes possession under section 13(4)(a) from takeover of management under section 13(4)(b) and section 15(1), and the notices relied on by the respondent showed only possession of assets, not takeover of management by appointment of directors or an administrator. On that basis, the bar under section 15(3)(c) was not attracted.
Conclusion: The issue was answered against the respondent company.
Final Conclusion: The winding up petition was admitted and directed to be advertised, as the petitioner established a prima facie case of inability to pay debts and the SARFAESI did not preclude the proceedings.
Ratio Decidendi: The bar against winding up under section 15(3)(c) of the SARFAESI Act applies only where the management of the borrower company has been taken over, and not where the secured creditor has merely taken possession of secured assets.
TaxTMI 
AI Drafter ✕
TaxTMI 
