2016 (5) TMI 824 - HC - Companies Law

Court admits winding-up petition for admitted debt despite financial stability claims.

The court admitted the winding-up petition, ruling that the respondent company acknowledged its debt within the limitation period through an email and a ... Winding up petition - Held that:- This court finds a justification on the part of the company petitioner to knock the door of the company court seeking for winding up of the company. When that is the one of the legal course available to the company petitioner, this court cannot shut its door to the company petitioner, on technical reasons. In my considered view, while rendering substantial justice, neither the technicalities nor, to certain extent, untenable factual objections, can block the way of this court in doing so. In this case, the Division Bench has already rejected those objections. It is well settled that when substantial justice and technicalities are pitted against each other, only the substantial justice should prevail over all other technicalities. See Laxmibai vs Bhagwantbuva [2013 (1) TMI 858 - SUPREME COURT] Therefore, there is every justifiable reason to admit the company petition. Accordingly, the company petition is admitted. (i) Issue Notice on the Court Notice Board. (ii) Issue Notice to the respondent. (iii) Issue Notice to the Registrar of Companies, Madras. (iv) Affixure of notice at the premises of the Registered Office of the respondent company. (v) The petitioner is directed to publish the company petition in one issue of Tamil daily 'Malai Murasu' in one issue of English Daily 'Indian Express' and in the Tamil Nadu Government Gazette fixing the date of hearing on 10.6.2016. (vi) The petitioner is directed to publish the company petition giving at least fourteen days clear advance notice. (vii) The Official Liquidator, High Court, Madras as Provisional Liquidator is directed to take charge of the assets of the respondent company. The Ex-Directors of the respondent company is directed to file their statement of affairs before the Official Liquidator within a period of 21 days. The company shall deposit a sum of ₹ 20,000/- towards initial expenses before the Official Liquidator in this matter. Issues Involved:1. Whether the respondent company acknowledged its debt within the limitation period.2. Whether the promissory note and the email constitute an admission of liability.3. Whether the winding-up petition is maintainable.4. Whether the respondent company's financial status affects the petition.Detailed Analysis:1. Acknowledgment of Debt within Limitation Period:The petitioner claimed that the respondent acknowledged its debt through an email dated 01.04.2008, which was within the limitation period. The Division Bench confirmed this acknowledgment, stating that the email admitted the liability and was sent before the expiry of the limitation period. Consequently, the limitation period restarted from the date of the email, making the petition filed on 24.11.2008 within the limitation period.2. Promissory Note and Email as Admission of Liability:The petitioner argued that the respondent executed a promissory note on 31.03.2005, promising to pay US$ 140,000, and acknowledged this debt in the email dated 01.04.2008. The Division Bench found these documents to be valid acknowledgments of debt. The respondent's attempt to dispute the execution of the promissory note was rejected, as the Division Bench had already established its validity and the email's acknowledgment.3. Maintainability of the Winding-Up Petition:The respondent contended that the petitioner should pursue a civil suit instead of a winding-up petition. However, the court held that the petition was maintainable as the respondent failed to pay an admitted debt. The court emphasized that the winding-up petition is not merely a debt collection tool but a legitimate course of action when a company fails to pay its admitted liabilities.4. Respondent Company's Financial Status:The respondent argued that it was financially sound and employed over 800 technical staff, suggesting that the petition should not be entertained. The court, however, noted that the company's financial status does not absolve it from paying admitted debts. The court cited precedents indicating that the ability to pay does not negate the obligation to settle undisputed debts.Conclusion:The court admitted the winding-up petition, finding that the respondent company had an admitted liability of US$ 140,000, which it failed to pay despite sufficient opportunities. The court directed the Official Liquidator to take charge of the respondent company's assets and ordered the publication of the petition in specified newspapers and the Tamil Nadu Government Gazette. The case was scheduled for further hearing on 10.06.2016.