2009 (10) TMI 535 - HC - Companies Law

Winding up - Held that - In the instant case in view of the civil disputes between the parties and particularly when the petitioner is not satisfied with the decree passed in his favour and has even preferred an appeal before this Court and in the face of there being a security for the outstanding dues of the petitioner given by the respondent thus the case falls under an exception and no discretion can be exercised in favour of the petitioner under section 433(e) of the Act. Though the just and equitable clauses can be pressed into service for winding up of a company where substratum of the company has gone or where the company is formed for the purpose of fraud or where full investigation is necessary or where there is a complete deadlock in the management of the company on account of internal strife none of the above situations exist in the instant case and neither has the petitioner made out a case on this ground. On the other hand what is of significance is that the respondent is a company in the realm of public sector coming under the Ministry of Heavy Industries Government of India supported by the Central Government and having a huge work force and was one of the top public sector companies once upon a time. Though presently the company is in a difficult financial situation would not mean that it is just and equitable to wind up the said company. Petition dismissed.

Issues Involved:
1. Maintainability of the company petition.
2. Requirement of issuing notice to the Central Government before winding up a Government company.
3. Bona fide dispute regarding the debt.
4. Just and equitable grounds for winding up.

Detailed Analysis:

1. Maintainability of the company petition:
The petitioner filed a company petition under sections 433(e) and (f) read with section 439 of the Companies Act seeking the winding up of the respondent company, HMT Watches Limited. The respondent contended that the petition was not maintainable due to the pendency of an original suit filed by the petitioner for recovery of the same amount. The court referred to various precedents, including Hegde & Golay Ltd. v. State Bank of India, which established that the pendency of a suit does not bar the maintainability of a winding-up petition. The court concluded that the petition for winding up is maintainable despite the pendency of a civil suit.

2. Requirement of issuing notice to the Central Government before winding up a Government company:
The respondent argued that as a wholly-owned subsidiary of HMT Limited, a Government company, the Central Government should be notified before any winding-up order is made. The court rejected this contention, stating that while the respondent company is a Government company under section 617 of the Companies Act, there is no provision excluding it from winding-up proceedings under the Act. The court cited the case of Maruti Udyog Ltd. v. Hindustan Photo Film Mfg. Co. Ltd., where a Government company was ordered to be wound up. Thus, the court held that it is not necessary to issue notice to the Central Government before passing a winding-up order.

3. Bona fide dispute regarding the debt:
The petitioner claimed an outstanding amount of Rs. 89,85,249, which the respondent partly admitted but disputed the remaining amount. The court noted that the respondent company had admitted liability to an extent of Rs. 61,23,608 but disputed the balance. The court emphasized that a winding-up petition should not be used as a means to enforce payment of a disputed debt. The existence of a bona fide dispute regarding the debt was supported by the fact that the trial court had only partly decreed the petitioner's claim in the civil suit. The court concluded that the dispute regarding the debt was bona fide, and therefore, the petition for winding up could not be sustained.

4. Just and equitable grounds for winding up:
The petitioner argued that the respondent company should be wound up on just and equitable grounds due to its inability to pay debts and chronic financial difficulties. The court observed that the respondent company is a subsidiary of a public sector undertaking with a significant workforce and potential for revival. The court referred to the principles laid down in various cases, including Tata Iron & Steel Co. Ltd. v. Micro Forge (India) Ltd., which stated that winding-up should not be ordered if the debt is bona fide disputed. The court found that the respondent company had submitted a revival plan to the Central Government and had the potential to recover with governmental support. Therefore, the court held that it was not just and equitable to wind up the respondent company.

Conclusion:
The court dismissed the company petition, holding that the petition was maintainable but not justified on the merits due to the bona fide dispute regarding the debt and the potential for the respondent company's revival. The court emphasized that winding-up should not be used as a means to enforce payment of a disputed debt and that the respondent company's situation did not warrant winding up on just and equitable grounds.

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