2013 (4) TMI 31 - HC - Companies Law

Court allows rectification of procedural defects, orders repayment of debt, disputes respondent's financial stability.

Baader Beteiligungs GMBH Versus Parsoli Motor Works (P.) Ltd.

Baader Beteiligungs GMBH Versus Parsoli Motor Works (P.) Ltd. - TMI Issues Involved:1. Maintainability of the petition.2. Compliance with procedural requirements under the Companies Act and Company Court Rules.3. Bona fide nature of the dispute regarding the debt.4. Respondent's financial ability and willingness to repay the debt.5. Justification for winding up the respondent company.Issue-wise Detailed Analysis:1. Maintainability of the Petition:The respondent raised objections on the maintainability of the petition, arguing that the petition was filed without complying with the requirements prescribed under the Company Court Rules, 1956. They contended that there was no proper authorization or resolution passed by the petitioner company to institute the petition, and the accompanying affidavit did not comply with Rule 21 read with Form-3. The court examined these objections and noted that defects in the affidavit and verification are curable and not fatal. The petitioner was granted 30 days to cure the defects, including placing the resolution on record and providing a duly stamped power of attorney.2. Compliance with Procedural Requirements:The respondent argued that the affidavit attached to the petition was not made by a person competent to do so, as required by Rule 21 of the Company (Court) Rules, 1959. The court noted that the affidavit was made by a constituted attorney of the petitioner, which is permissible under the proviso of Rule 21. The petitioner subsequently filed a Judge's Summons seeking permission for the duly authorized attorney to affirm the petition. The court allowed this request, subject to the petitioner curing the defects within the stipulated time.3. Bona Fide Nature of the Dispute:The court examined whether the dispute raised by the respondent was bona fide, substantial, and genuine, or merely a facade to avoid its obligation. The court found that the respondent's defense was not bona fide but an afterthought, speculative, and illusory. The court noted that the petitioner had invested Rs. 5.97 crores as share application money, which the respondent failed to refund despite the rejection of the application by the Foreign Investment Promotion Board (FIPB) and instructions from the Reserve Bank of India (RBI) to do so. The respondent's refusal to repay the amount was not supported by any genuine or substantial ground.4. Respondent's Financial Ability and Willingness to Repay:The respondent claimed that it was a going concern with a good financial position and that the petition should be rejected on this ground. The court noted that the respondent's conduct indicated a willful neglect to discharge its financial obligations, despite having the capacity to pay. The court emphasized that even a financially sound company cannot avoid its obligations and that the solvency of the respondent was not a standalone defense to reject the petition.5. Justification for Winding Up:The court found that the eventuality contemplated under Section 433(e) and (f) of the Companies Act, 1956 existed in the present case. The respondent's failure to repay the debt within the statutory time limit and despite RBI's instructions indicated its inability to pay its debts. The court directed the respondent to deposit the amount of Rs. 5,96,57,383/- within four weeks in the Registry by Demand Draft issued by a Nationalized Bank. The court also allowed the petitioner time to cure the defects in the petition. The petition was scheduled for further hearing on 20.07.2012.Conclusion:The court concluded that the petition was maintainable, provided the petitioner cured the procedural defects within the stipulated time. The dispute raised by the respondent was not bona fide, and the respondent's financial position did not justify its refusal to repay the debt. The court directed the respondent to deposit the amount in question and scheduled the petition for further hearing.