Case Note & Summary
The appeal was filed by Horizon Flora India Limited against an order of the learned single Judge dated 16 July 2010 in Company Petition No. 189 of 2008, by which the company was ordered to be wound up. The appellant contended that the winding up petition filed by Asset Reconstruction Company (India) Ltd. (ARCIL), as an assignee of debt from Dena Bank, was not maintainable because ARCIL is a sole trustee and the assignment under the SARFAESI Act was invalid. Additionally, the appellant argued that since proceedings were pending before the Debts Recovery Tribunal (DRT), the winding up petition could not proceed. The respondent, represented by senior counsel Mr. Madon, submitted that the company was totally insolvent, relying on a Chartered Accountant's report, and that the company should be wound up under the Companies Act. On the issue of ARCIL's capacity, the respondent cited a Division Bench judgment in Alpha and Omega Diagnostics India Ltd. vs. Asset Reconstruction Company (I) Ltd., which held that an assignee bank or financial institution can proceed under the Securitization Act and the RDB Act, and that the term 'debt' under Section 2(g) of the RDB Act must be interpreted broadly. The court, per P.B. Majmudar J., dismissed the appeal, upholding the winding up order. The court found that the assignment was valid and that ARCIL, even as a sole trustee, could maintain the petition. The company's insolvency was established by the Chartered Accountant's report, justifying winding up under the Companies Act.
Headnote
A) Company Law - Winding Up - Maintainability of Petition by Assignee - Companies Act, 1956, Sections 433, 434 - The court considered whether a winding up petition filed by Asset Reconstruction Company (India) Ltd. (ARCIL), as an assignee of debt from Dena Bank, is maintainable. The appellant argued that ARCIL, being a sole trustee, cannot maintain the petition and that pending DRT proceedings bar winding up. The court, relying on a Division Bench decision in Alpha and Omega Diagnostics India Ltd. vs. Asset Reconstruction Company (I) Ltd., held that the assignment is valid and ARCIL can proceed under the Securitization Act and RDB Act. The appeal was dismissed. (Paras 2-3)
B) Company Law - Insolvency - Winding Up on Ground of Insolvency - Companies Act, 1956, Section 433(e) - The respondent relied on a Chartered Accountant's report to show the company's total insolvency. The court accepted this as a ground for winding up under the Companies Act. (Para 3)
Issue of Consideration
Whether a winding up petition filed by an assignee of debt (ARCIL) is maintainable, and whether the assignment is valid under the SARFAESI Act.
Final Decision
Appeal dismissed. The order of the learned single Judge dated 16 July 2010 winding up the company is upheld.
Law Points
- Winding up petition maintainable by assignee of debt
- Assignment under SARFAESI Act valid
- ARCIL as sole trustee can proceed under RDB Act and SARFAESI Act
- Company insolvent based on Chartered Accountant report
Case Details
2010 LawText (BOM) (10) 63
Appeal (L) No. 559 of 2010 in Company Petition No. 189 of 2008
P.B. Majmudar, Anoop V. Mohta
Mr. Yogesh Mehta (instructed by Mr. Sachin S. Punde) for appellant; Mr. D.D. Madon, Senior Advocate (with Mr. Vinod Kothari and Mr. Sahil Saiyed, instructed by M/s. Apex Law Partners) for respondent
Horizon Flora India Limited
Assets Reconstruction Co. India Ltd.
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Nature of Litigation
Appeal against winding up order of a company
Remedy Sought
Appellant sought to set aside the winding up order passed by the learned single Judge
Filing Reason
Appellant challenged maintainability of winding up petition filed by ARCIL as assignee of debt and validity of assignment
Previous Decisions
Learned single Judge ordered winding up of the company on 16 July 2010 in Company Petition No. 189 of 2008
Issues
Whether a winding up petition filed by an assignee of debt (ARCIL) is maintainable under the Companies Act, 1956?
Whether the assignment of debt in favour of ARCIL is valid under the SARFAESI Act?
Whether pending proceedings before DRT bar the winding up petition?
Submissions/Arguments
Appellant: ARCIL as sole trustee cannot maintain winding up petition; assignment invalid; pending DRT proceedings bar winding up.
Respondent: Company is insolvent as per Chartered Accountant report; Division Bench in Alpha and Omega Diagnostics held that assignee can proceed under SARFAESI and RDB Acts.
Ratio Decidendi
An assignee of debt, including a securitisation or reconstruction company acting as sole trustee, is entitled to maintain a winding up petition under the Companies Act, 1956. The assignment is valid under the SARFAESI Act, and the term 'debt' under Section 2(g) of the RDB Act is to be interpreted broadly. Pending DRT proceedings do not bar winding up if the company is insolvent.
Judgment Excerpts
The learned counsel for the appellant vehemently submitted that since the original petitioner, Asset Reconstruction Company (India) Ltd. (ARCIL) is an assignee of the debt, Company Petition at the instance of ARCIL for winding up is not maintainable.
Mr. Madon, learned senior counsel appearing for the respondent, on the other hand, submitted that the company is totally insolvent for which he has relied upon the report of the Chartered Accountant.
a Division Bench of this Court in Writ Petition No. 1268 of 2010 (Alpha and Omega Diagnostics India Ltd. vs. Asset Reconstruction Company (I) Ltd. and others) dated 9th August, 2010 has decided the said point...
Procedural History
Company Petition No. 189 of 2008 was filed by ARCIL seeking winding up of Horizon Flora India Limited. The learned single Judge allowed the petition and ordered winding up on 16 July 2010. The company filed Appeal (L) No. 559 of 2010 against that order. The Division Bench heard the appeal and dismissed it on 27 October 2010.
Acts & Sections
- Companies Act, 1956: Sections 433, 434
- Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act): Section 2(zd)
- Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (RDB Act): Section 2(g)
