TMI Blog2019 (1) TMI 1317X X X X Extracts X X X X X X X X Extracts X X X X ..... spondent-company. 2 . Briefly stated, the case of the petitioner is that the petitioner and the respondent-company were separately incorporated under the provisions of Companies Act, 1956 (Act). The nominal and authorized share capital of respondent-company as per master data available on the website of Ministry of Affairs is ₹ 5 crores divided into 50 lacs equity shares of ₹ 10 each. The relevant document is filed as Annexure P/1. The petitioner has also filed the memorandum of association of respondent-company as Ex.P/2. It is urged that in August, 2011, the petitioner-company was approached by respondent-company with a request to provide financial assistance and commercial support in operating Soyabin Processing Plant situated at Indore Road, Khandwa. 3. The respondent-company was requested to provide financial and commercial support to enable it to repay the loan of I.T.C. Limited and run the plant at maximum capacity in order to earn revenue. An agreement dated 09-09-2011 was entered into between the parties whereby the petitioner-company provided financial facility of ₹ 50 lacs (Fifty lacs) to the respondent-company as loan for maintaining the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ure P/5. 6. The respondent-company further demanded additional financial assets of ₹ 81 lacs to meet its day to day expenses and to overcome from deteriorating financial condition. The petitionercompany extended the additional financial facility of ₹ 81 lacs and consequently a certificate of registration of modification of charge dated 03-11-2015 for a total financial facility of ₹ 3 crores 90 lacs (Annexure P/6) was issued by ROC. Further more through an addendum (Annexure P/7) to the agreement dated 21-10-2015, the parties agreed to shorten the date of repayment from 30-09-2016 to 31-03-2016. 7. It is urged by the petitioner that before expiry of due date of repayment, the petitioner-company wrote a letter dated 11-02-2016 (Ex.P/8) to respondent-company reminding it to make the repayment of entire loan before last date aforesaid. The respondent company did not make any payment. 8. The stand of the petitioner-company is that on 31-03-2016 (Ex.P/9), the petitioner-company requested the respondent to confirm the balance outstanding of financial assets. In turn, respondent-company acknowledged and confirmed the credit balance of ₹ 3 crores ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny. Indeed, the respondentcompany has admitted at Page 10 of the reply dated 06-05-2017 that it has endeavored to repay the loan. The same is the stand in Para 5 (Page 4) of the reply to the application for appointment of Provisional Liquidator dated 27-07-2017. 11. Shri Atre, learned counsel for the petitioner submits that where the debt is undisputed, the defence about ability to repay the debt is liable to be ignored. Even if exact amount of debt is disputed, the Court must make a winding up order without enquiring about quantification of debt. Reliance is placed on (1971) 3 SCC 632 (M/s. Madhusudan Gordhandas Co. vs. Madhu Woolen Industries Pvt. Ltd.) . Once debt is undisputedly owing and it has not been paid, the failure attracts the presumption of inability to pay. In support of this contention, reliance is placed on (2010) 10 SCC 553 (IBA Health (India) Pvt. Ltd. vs. Info-Drive Systems SDN. BHD.) . Lastly, it is contended that Section 434 of the Act raises a legal fiction as to when company would be deemed to be unable to pay its debts. To buttress this contention, (2009) 3 SCC 527 (Vijay Industries vs. Natl. Technologies Ltd.) is relied upon. 12 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Income Tax Department meaning thereby 50% profit shown from the Ledger Account of the petitioner-company, which the respondent-company was liable to receive has been repaid towards loan. Shri Faridi relied upon Clause 5.12 and argued that in case of loss in any year, no deduction shall be made towards recovery of advance loan by the petitioner and the share of loss of respondent shall be deemed to be loan and the same shall be recovered as loan from the profit of next years. Since the unit was required to be run by both the parties as per the agreement and when unit itself has not been endeavored to be continued with concentrated force by the petitioner-company, then it cannot be said by the petitioner-company that the respondent-company is an inactive and dormant one. Similarly, when profit of respondent-company has been adjusted with loan then it cannot be said that the respondent-company is unable to pay its debts as per Section 433(e) of the Companies Act. It is noteworthy that in Para 8 and 11 of the reply, it is pleaded that the respondent has already repaid some amount towards loan. However, the amount of such repayment has not been disclosed by the respondent i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... parties. The Civil Court can examine whether rights and obligations were performed and breached. The Company Court is not the appropriate forum to undertake the exercise of factual enquiry. The respondent-company relied on another judgment of this Court in the case of Alpha Packaging Ltd. vs. Som Distelleries Ltd. wherein it was held that to raise a presumption of company s inability to pay its debts, it is not enough merely to show that the company has omitted to pay the debt despite service of statutory notice, it must be further shown that the company omitted to pay without reasonable excuses and conditions of insolvency in the commercial sense exists. In support of aforesaid contention, Shri Faridi also relied up on the judgment of this Court in the case of Illume Tech Solutions And Services vs. Netlink Software Group Pvt. Ltd. and another judgment in the case of Sobhagya Appliances vs. Gagan Marketing (P) Ltd. . 17. Learned counsel for the petitioner filed synopsis and supplied a compilation of judgments of Supreme Court which are mentioned hereinabove whereas learned counsel for the respondent-company filed a compilation of aforesaid judgments. 18. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bligatory for every company creating a charge to register the particulars of charge signed by the company with relevant documents in a prescribed form. As per this statutory requirement and obligation, the respondent-company itself furnished the necessary information to the ROC, which is evident from those forms filed by the petitioner alongwith petition. It is noteworthy that whenever charge was modified because of adding of loan amount and new conditions were entered into between the parties the respondent-company furnished such information in the prescribed form to the statutory authority and in turn, Certificate of Registration for modification of charge were issued. For example, the following information in Form 8 was provided by the petitioner:- 15. Short particulars of the property or asset(s) charged (including complete address and location of the property) (i) Equitable Mortgage of Diverted Land ad measuring 6.21 Acres with all superstructures plant machinery situated thereon at Khasra No.25.1,26/1,27/1,25/2, 25/3,26/3 and 26/4 Pahani No.77 Khandwa Another Similar declaration can be seen which reads as under:- 15. Short particulars of the property or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 25. The judgment of Apex Court in the case of Madhusudan (supra) was considered in the case of Vijay Industries (supra). It was made clear that:- (i) Where the debt is undisputed, the court will not act upon a defence that the company has the ability to pay the debt but did not choose to pay that particular debt. (ii) Where, however, there is no dispute that the company passed the creditor a debt entitled him to a winding-up order but the exact amount of the debt is disputed, the court will make a winding-up order without requiring the creditor to quantify the debt precisely. (iii) The principles on which the court acts are first that the defence of the company is in good faith and one of substance, secondly, the defence is likely to succeed in point of law and, thirdly, the company adduced prima facie proof of the facts on which the defence depends. As per the principles aforesaid, it is clear that in a case of this nature, where debt is not disputed, the Court shall pass a winding-up order. Even if exact amount of debt is disputed, a winding-up order needs to be passed. Where there exists no dispute that the respondent-company has passed the credi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t in view of statutory certificates issued by Ministry of Corporate Affairs. The judgments of Illume and Sobhagya Appliances (supra) are based on different factual matrix. In those cases, the existence of debt was in dispute. Thus, those judgments cannot be pressed into service. 28. In the light of aforesaid analysis, in my view, the petitioner could make out a case for winding-up. This petition was already admitted on 20-02-2017 and preliminary objection taken by the respondent-company based on an arbitration clause in the agreement was turned down in the light of judgment of Delhi High Court reported in 2003 (113) Company Cases 68 (Prime Century City Developments Pvt. Ltd. vs. Ansal Buildwell Ltd.) . Thus, I deem it proper to accept the prayer for winding-up of respondent-company. 29. I, therefore, order that the respondent-company be wound up. A copy of the winding-up order shall be drawn by the Registrar as per company rules and shall be forwarded to the official liquidator and also to the Registrar of Companies as required under s. 444 of the Act. The official liquidator shall forthwith take into his custody all the property and effects, books and paper ..... X X X X Extracts X X X X X X X X Extracts X X X X
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