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2012 (11) TMI 827 - HC - Companies LawWhether a secured creditor of a registered company enjoys equal rights as an unsecured of a company to have its winding-up petition - Held that:- A secured creditor of a company has the legislative mandate to present a winding-up petition on the several grounds recognised in Section 433 including on the basis of the company’s inability to pay its debts. The issue here is whether a secured creditor, which founds its petition only on Section 434(1)(a) to raise the presumption of the company’s inability to pay its debts, would be able to establish the legal fiction without demonstrating the inefficacy or inadequacy of its security that the expression “neglected to pay the sum, or to secure or compound for it to the reasonable satisfaction of the creditor” in the relevant provision envisages. The rules in insolvency were to apply to companies which had been wound up in the event the value of the assets of the company was insufficient to meet the claims of its creditors, but such rule applied only to cases of winding-up on the ground of insolvency. It is beyond question that most rules of insolvency apply in the assessment of the entitlement of the creditors of a company in liquidation. But that is of no relevance in the present case. The company has not been wound up; indeed, we are two steps removed from such a situation since the present assessment is as to whether this petition made by a secured creditor, relying exclusively on Section 434(1)(a) for the court to presume the inability of the company to pay its debts, should be admitted for being advertised in the absence of the petitioning creditor having asserted or established the inefficacy or the inadequacy of the securities that it enjoys. The rules in insolvency were to apply to companies which had been wound up in the event the value of the assets of the company was insufficient to meet the claims of its creditors, but such rule applied only to cases of winding-up on the ground of insolvency. It is beyond question that most rules of insolvency apply in the assessment of the entitlement of the creditors of a company in liquidation. But that is of no relevance in the present case. The company has not been wound up, indeed, we are two steps removed from such a situation since the present assessment is as to whether this petition made by a secured creditor, relying exclusively on Section 434(1)(a) of the Act for the court to presume the inability of the company to pay its debts, should be admitted for being advertised in the absence of the petitioning creditor having asserted or established the inefficacy or the inadequacy of the securities that it enjoys. The inevitable conclusion from the discussion herein that a secured creditor of a company which has not established the inefficacy or the inadequacy of the security held by it may maintain a petition for winding up the company but such petition, if founded solely on the legal fiction under Section 434(1)(a) of the Act, will not qualify either to be admitted or for any order of winding-up to be passed thereon. Since the petitioning creditor here has neither averred nor otherwise established that the security that it enjoys is inefficacious or inadequate to meet its claim against the company, the petition cannot be admitted. Petition is permanently stayed with liberty to the petitioner to launch fresh winding-up proceedings upon exhausting its remedies against the securities that it enjoys. As a consequence an application under Section 450 of the Companies Act, is dismissed. The interim order subsisting on such application is vacated with immediate effect and the official liquidator is discharged as the provisional liquidator of the company. There will no order as to costs in either case.
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