Inter-corporate deposit not barred by money-lending law; legally recoverable debt sustained winding-up petition

An inter-corporate deposit was held not to fall within the Bombay Money-Lenders Act, 1946 because the record did not show a regular, continuous, or systematic money-lending business, and the transaction came within statutory exclusions for deposits and bona fide business advances. The debt was therefore not unenforceable on that ground. On the winding-up issue, the Court found that the petitioners had shown substantial advances supported by documentary material, and objections based on group relationship, alleged suppression, unstamped collateral documents, and leave-and-licence arrangements did not defeat liability. A legally recoverable debt having been established, the petition for winding up on the ground of inability to pay was maintainable.

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Issues: (i) whether the inter-corporate deposit transaction was hit by the Bombay Money-Lenders Act, 1946 and the debt was therefore not legally recoverable; (ii) whether the petitioners had established a just and recoverable debt for winding up under sections 433(e) and 434(1)(a) of the Companies Act, 1956.

Issue (i): Whether the inter-corporate deposit transaction was hit by the Bombay Money-Lenders Act, 1946 and the debt was therefore not legally recoverable.

Analysis: The transaction was examined in the light of the statutory definitions of loan, advance, and money-lending, including the exclusions for deposits in a company, advances on negotiable instruments, and advances made bona fide in the regular course of business. The Court held that the material did not show any regularity, continuity, or system of money-lending activity and that the transaction fell within the statutory exclusions. It was therefore not treated as a prohibited money-lending transaction.

Conclusion: The transaction was not hit by the Bombay Money-Lenders Act, 1946 and the debt was not rendered unenforceable on that ground.

Issue (ii): Whether the petitioners had established a just and recoverable debt for winding up under sections 433(e) and 434(1)(a) of the Companies Act, 1956.

Analysis: The Court found that the petitioners had advanced substantial amounts to the company, that the debt had been renewed and supported by documentary material, and that the objections based on inter se group transactions, alleged suppression, unstamped collateral documents, and the leave and licence arrangements did not displace the company's liability to the petitioners. Since the debt was held to be legally recoverable, the statutory foundation for a winding-up petition on the basis of inability to pay was satisfied.

Conclusion: The petitioners established a just and legally recoverable debt and the winding-up petition was maintainable.

Final Conclusion: The company was directed to pay or deposit the quantified amount within the stipulated time, failing which the winding-up petition would stand admitted; the petition was ultimately allowed.

Ratio Decidendi: A winding-up petition based on inability to pay lies only where the underlying debt is legally recoverable, and an inter-corporate deposit supported by negotiable instruments and not shown to constitute a regular money-lending business is not barred by the Bombay Money-Lenders Act, 1946.

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