2012 (4) TMI 302 - HC - Companies Law

Debt to Firm upheld, Company's recall bid denied, funds for arbitration, winding up petition closed

The Court held that the debt of Rs. 24,75,128/- was a crystallized debt owed by the Company to the Firm. The Company's application to recall the admission ... Petition filed by Director of Partnership Firm - the Company amended its MOA - the Company has only two Promoters/Directors - one Director who is also a Partner of the Firm requested the Firm to advance monetary aid in financial crises – firm advanced the sum for six years through account payee cheques – Firm issued a statutory notice of demand - The Firm produced a copy of the Balance Sheet of the Company for the year 2009-10 filed before the ROC reflecting the dues payable to the Firm - Petition filed by the Firm under the aforesaid provisions for winding up. - The Company contends that the Firm has been dissolved much earlier to the filing of the petition and it has no locus standi to maintain a petition for winding up –the company contented that it has never admitted the alleged debt and has denied the debt in its reply notice to the petitioner - Held that: - There is no explanation by the Company as to why it did not adopt the mode of serving the notice by registered post or through a lawyer - The production of the copy of the notice and the certificate of posting, after about four months of the order date would make it clear that the claim of the Company is mala fide and unbelieveable -it is to be held that the dues payable to the Firm is a crystallized form of debt and there is no impediment for this Court to pass appropriate orders for payment of this debt to the Firm - The amount of Rs. 24,75,128/- deposited in this Court be transferred to m the arbitration proceedings pending between the parties Issues Involved:1. Existence of Crystallized Debt: Whether the sum of Rs. 24,75,128/- is a crystallized debt owed by the Company to the Firm.2. Recall of Admission Order: Whether Company Application 294/2011 filed by the Company to recall the order dated 24-02-2011 deserves to be allowed.3. Withdrawal of Deposited Amount: Whether the Firm should be permitted to withdraw the amount of Rs. 24,75,128/- deposited by the Company before the Court.Detailed Analysis:1. Existence of Crystallized Debt:The Firm, M/s. Agni Aviation Consultants, claimed that the Company owed it Rs. 24,75,128/-, a fact allegedly reflected in the Company's balance sheet for the year ending 2009-10. The Company disputed this, arguing that there were numerous transactions between the two entities over seven years and that the debt was not crystallized. However, the Court noted that the Company admitted the debt in its balance sheet and failed to provide specific evidence of other transactions that would offset this debt. The Company's belated production of a reply notice and postal certificate raised doubts about their genuineness. The Court concluded that the debt was indeed crystallized, noting, 'Therefore, it is to be held that the dues of Rs. 24,75,128/- payable to the Firm is a crystallized form of debt.'2. Recall of Admission Order:The Company sought to recall the order admitting the winding-up petition, arguing that the Firm had been dissolved and that Wg. Cdr. K.T. Sebastian (Retd.) lacked authority to represent it. The Court found that the Company did not provide a satisfactory explanation for failing to produce relevant documents earlier and that the documents produced later were not credible. The Court held, 'the order admitting the petition cannot be recalled,' thus dismissing Company Application 294/2011.3. Withdrawal of Deposited Amount:The Firm sought permission to withdraw the Rs. 24,75,128/- deposited by the Company in Court. The Court noted that while the Firm's counsel suggested transferring the amount to arbitration proceedings, the application did not provide specifics about these proceedings. The Court ordered, 'The amount of Rs. 24,75,128/- deposited in this Court be transferred to the arbitration proceedings pending between the parties,' provided the Firm furnishes the particulars within a week.Conclusion:The Court concluded that the debt of Rs. 24,75,128/- was a crystallized debt owed by the Company to the Firm. The Company's application to recall the admission order was dismissed, and the Firm was permitted to have the deposited amount transferred to ongoing arbitration proceedings. The petition for winding up was ordered to be closed.