Winding-up on admitted debts and SARFAESI priority upheld against company court leave requirement

A company was found liable to be wound up on the basis of admitted unpaid debts, because the statutory condition under section 433(e) of the Companies Act, 1956 was satisfied when the respondent-company acknowledged amounts due and failed to prove payment. The Court also held that secured creditors enforcing security under SARFAESI were not required to obtain leave of the Company Court, and their objection could not defeat the winding-up proceedings, because the special recovery regime under section 13 of SARFAESI prevailed over the general restriction in section 537 of the Companies Act, 1956. The winding-up petitions were therefore allowed and the objection was overruled.

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Issues: (i) whether the respondent-company was liable to be wound up for inability to pay admitted debts; (ii) whether secured creditors invoking the SARFAESI Act were required to obtain leave of the Company Court and whether their objection could defeat the winding-up proceedings.

Issue (i): whether the respondent-company was liable to be wound up for inability to pay admitted debts.

Analysis: The petition rested on section 433(e) of the Companies Act, 1956. The respondent-company admitted that some amount was due to the petitioners and did not establish payment of those debts. On admitted default, the statutory condition for winding up was satisfied.

Conclusion: The issue was decided against the respondent-company and in favour of the petitioners.

Issue (ii): whether secured creditors invoking the SARFAESI Act were required to obtain leave of the Company Court and whether their objection could defeat the winding-up proceedings.

Analysis: The objection was examined in the light of section 537 of the Companies Act, 1956 and section 13 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002. The Court relied on the principle that, in the field of enforcement of secured debts, the special statute governing recovery by secured creditors prevails over the general winding-up restriction, and that the secured creditors need not seek leave of the Company Court for enforcement under SARFAESI.

Conclusion: The objection was rejected and the issue was decided in favour of the petitioners.

Final Conclusion: The winding-up petitions succeeded, and the respondent-company was ordered to be wound up while the secured creditors' objection was overruled.

Ratio Decidendi: Where a company admits debts and fails to pay them, winding up under section 433(e) is warranted, and enforcement by secured creditors under SARFAESI is not blocked by section 537 of the Companies Act, 1956.

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