2014 (9) TMI 1291 - HC - Companies Law

Company ordered to wind up under sections 433, 434, 439 for inability to pay debts and lack of defense

Gujarat HC ordered winding up of respondent company under sections 433, 434 and 439 of Companies Act, 1956 on grounds of inability to pay debts. Court ... Winding up for inability to pay debts - Loss of substratum - Concurrent SICA/BIFR proceedings and effect on winding up - Appointment of Official Liquidator and powers/dutiesWinding up for inability to pay debts - Loss of substratum - The respondent company is liable to be wound up on the ground of inability to pay its debts and having lost its substratum. - HELD THAT: - The Court found, on facts and on the summary record of proceedings before the B.I.F.R., that the respondent company had no means or capacity to pay the debt claimed by the petitioner and had no bona fide defence to the claim. The material before the Court showed repeated failures to produce a viable rehabilitation scheme, unsuccessful attempts to settle dues with secured creditors, and a B.I.F.R. process which culminated in directions for issuance of show-cause notice for winding up and a conditional confirmation of winding up if no acceptable proposal was reported by the operating agency. On this basis the Court concluded that the company was unable to pay its debt and had lost its substratum, and therefore the statutory test for winding up under the Companies Act was satisfied. [Paras 6]Petition allowed; respondent company ordered to be wound up.Concurrent SICA/BIFR proceedings and effect on winding up - Pending proceedings under SICA/B.I.F.R. did not preclude the High Court from directing winding up in the circumstances of this case. - HELD THAT: - Though the respondent pointed to earlier B.I.F.R. proceedings and a declared sick industrial company status, the B.I.F.R. record produced in court showed that efforts at revival had failed, that the B.I.F.R. had directed issuance of show-cause notice for winding up and had made winding up conditional upon no improved proposal being reported by a specified date. The Court treated the B.I.F.R. record as demonstrating absence of viable revival and accordingly proceeded to wind up the company rather than keeping the petition pending merely on account of the earlier SICA proceedings. [Paras 5, 6]The existence of SICA/B.I.F.R. proceedings did not bar the High Court from ordering winding up in the present facts.Appointment of Official Liquidator and powers/duties - Appointment of Official Liquidator and directions for possession, inventory and report were made consequential to the winding up order. - HELD THAT: - Consequent to allowing the petition, the Court appointed the Official Liquidator attached to the Court as liquidator of the respondent company and directed him to take possession of all movable and immovable assets, custody of accounts, books and records, prepare inventory and panchnama, engage an official valuer if required, and file an appropriate report before the Court within three months. [Paras 7]Official Liquidator appointed and directed to take possession, prepare inventory and report.Final Conclusion: The petition was allowed: M/s. Skylead Chemicals Ltd. was ordered to be wound up for inability to pay its debts and loss of substratum; the Official Liquidator was appointed with directions to take possession of assets, records and to submit an inventory report; no costs were awarded. Issues:Company petition for winding up under sections 433, 434, and 439 of the Companies Act, 1956 due to unpaid debt.Analysis:The petitioner, a chemical company, filed a Company Petition seeking winding up of the respondent company, Skylead Chemicals Ltd., for failure to pay its debt amounting to Rs. 25,12,633/-. Despite statutory notices and reminders, the respondent failed to pay the dues. The respondent also did not respond to the court notice served via registered post. The petitioner contended that the respondent had lost its substratum and was unable to pay its debts, justifying winding up under the Companies Act.The respondent company had developed financial problems and was declared a sick industrial company by the Board for Industrial and Financial Reconstruction (B.I.F.R.). Various proceedings were initiated, including the appointment of the Industrial Development Bank of India (I.D.B.I.) as an operating agency to prepare a revival scheme. However, no viable rehabilitation scheme was submitted, leading to directions for winding up consideration. Efforts for revival, including a proposal from ARVEE Laboratories, did not yield positive results. The B.I.F.R. ultimately ordered the winding-up notice to be kept in abeyance pending further developments.The High Court, after considering the facts and proceedings before the B.I.F.R., concluded that the respondent company lacked the means to pay its debt and had no viable defense. The court found that the respondent had lost its substratum and was unable to pay its dues, justifying the winding up. Consequently, the court ordered the winding up of Skylead Chemicals Ltd. under sections 433, 434, and 439 of the Companies Act, 1956. The Official Liquidator was appointed to take possession of all assets, accounts, and records of the company, and to submit a report within three months. No costs were awarded in the matter.