TMI Blog2010 (1) TMI 568X X X X Extracts X X X X X X X X Extracts X X X X ..... :- 7-1-2010 - MEHINDER SINGH SULLAR AND ASHUTOSH MOHUNTA, JJ. Arun Nehra and Saurav Chaudhary for the Appellant. M.L. Sarin and Hemant Sarin for the Respondent. ORDER Mehinder Singh Sullar, J. - Impugning the judgment dated 3-11-1995 passed by Learned Company Judge, the Infrastructure Leasing Financial Services Limited-appellant (for brevity "the appellant-Company") has directed the present appeal, invoking the provisions of section 483 of the Companies Act, 1956 (hereinafter to be referred as "the Act"). 2. The matrix of the facts, culminating in the commencement, relevant for disposal of the present appeal and emanating from the record, is that originally, the appellant-Company filed a petition for seeking winding up M/s. S.A. Builders Company-respondent (for short "the respondent-Company") under sections 433 and 434, read with section 439 of the Act. The case set up by the appellant was that the respondent as a promoter of M/s. Indian Acrylics Limited (for brevity "IAL") approached it for obtaining finance for setting up of IAL. A tripartite agreement dated 1-8-1989 was entered into between the appellant-company, IAL and R.K. Garg and responden ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... res to the promoters of IAL and in the event of the shares being not accepted by the said promoters, the appellant was free to sell the same to any other person. In the event of sale if the appellant got a lower price than the agreed amount, then the promoters were to make good deficiency in accordance with the terms of the agreement. The agreement did not contain a clause, under which, the promoters had no option but to buy-back the shares. According to the respondent, in fact the appellant neither offered the shares to the promoters within the stipulated period nor it is alleged that the appellant sold the same to any other person and the present winding up petition was filed without complying with the terms of the agreement, which is liable to be dismissed as such being wholly misconceived. It was also claimed by the respondent that the dispute arising under the agreement is referable to the arbitration and since the petition has been filed without taking recourse to the arbitration clause, so it is liable to be dismissed. 6. On merits, the case set up by the respondent-company was that there was no express undertaking that the Company was to buy-back the said shares. The sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... per clause ( e ), the company can be wound up if it is unable to pay its debts as defined under section 434. The procedure for winding up a company is provided under section 439 of Chapter II of the Act. The co-joint reading of these provisions of the said sections of the Act would reveal that the followings are the essential ingredients, which are conditions precedent and required to be proved for winding up the company, ( i ) not only that there must be an ascertainable and definite amount of debt which respondent-company failed to pay, ( ii ) but the respondent-company must be proved to be unable to pay the same i.e., incapacity to pay the amount, and ( iii ) an order under clause ( e ) is discretionary. 13. Such thus being the position of law and facts on the record, now the short and significant question, arises for determination in this appeal, is whether the respondent-company is liable to be wound up or not under the present set of circumstances. 14. At the very outset, in this regard, learned counsel for the appellant-company contended with some amount of vehemence that it stands proved on record that although as per agreement (Annexure P1), the respondent-compa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ould not come to the rescue of the appellant-company, as regards the present controversy is concerned. Because, the appellant-company has not proved the ascertainable and determined specific amount of debt and it also did not substantiate that the respondent-company is unable to pay the debt as well which are conditions precedent for winding up a company. 18. Possibly, no one can dispute that it is well recognized principle of law that the relief under clause ( e ) of section 433 of the Act is discretionary and winding up petition is not legitimate means of seeking to enforce the payment of the debt which is bona fidely disputed by the Company. If there is no neglect to make the payment of definite and quantified debt, then, the deeming provision does not come into play. 19. Sequelly, the provisions of section 433 of the Act are discretionary and can only be invoked if the respondent-company is unable to pay the ascertainable amount due. The court should grant the relief of winding up only if it is satisfied that existence of the Company will cost immense prejudice to all concerned. As the order of winding up would amount to death penalty of juristic person/legal entity, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d, this C.M. has been filed in which it has been pointed out that the disputed 10 lakh equity shares of Indian Acrylics Limited had already been sold by the appellant and, therefore, the appeal had been rendered infructuous. It has also been pointed out that the winding up petition had been filed against S.A.Builders, which had subsequently merged with M/s. Steel Strips Alloys Limited, having its Registered Office at village Rampur Mazri, Near Daula Kuan, District Sirmour (HP). Subsequently, the name of the merged company was changed to M/s. SAB Industries Limited, having Registered Office at the same place. It is, therefore, sought to be contended that this Court has no jurisdiction over the matter now. Mr. Arun Nehra, learned counsel for the non-applicant/appellant does not dispute the factual position. However, he contests the legal effect thereof as alleged in the application. Since, these facts have an important bearing on the outcome of the main appeal, it would be in the fitness of things that the main appeal be listed for re-hearing. Ordered accordingly." 22. Therefore, in this manner, the appeal was again listed for re-hearing. In compliance with the order of this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or the last three years are as under: ( Rs. in crores ) Particulars FY 2005-06 FY 2006-07 FY 2007-08 Total Assets 168.6 185.85 173.94 Profit Before Tax 1.74 2.79 1.22 Dividend/Bonus 0.76 3.8 to Shareholder These allegations have not been controverted by the appellant-Company. It means, it stands established on record that M/s. S.A.B.Industries is a going concern and has adequate financial capacity." 26. There is another aspect of the matter, which can be view from a different angle. Article 10 of the agreement posits that "any dispute or question under agreement shall be referred to the arbitration of three arbitrators. The company and the promoter shall appoint one arbitrator. The intending subscriber shall appoint another arbitrator and the two arbitrators so appointed shall appoint the Umpire and the cost of arbitra-tion shall be borne equally by the parties and only courts in Bombay shall have the jurisdiction to entertain any dispute arising under the agreement." Therefore, a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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