Case Note & Summary
The Court Receiver, High Court, Mumbai filed a company petition under Sections 433 and 434 of the Companies Act, 1956 for winding up of Vatsa Interiors P.Ltd. (formerly Benzer Interiors P.Ltd.) for recovery of royalty charges amounting to Rs.97,54,768/-. The respondent company was appointed as an agent of the Court Receiver in Suit No.258 of 1996 on condition of paying royalty at Rs.3,00,000/- per month for use of premises at Malabar Hill, Mumbai. The company fell into arrears from 1997. A statutory notice dated 16.04.2002 was issued but the amount remained unpaid. The company admitted the debt but sought time to pay. The court noted that the company had not paid the arrears despite the petition being filed in 2004. The court held that the company is unable to pay its debts and is liable to be wound up. However, considering the company's request, the court granted a final opportunity to pay the principal amount in installments: Rs.25,00,000/- by 31.03.2005, Rs.25,00,000/- by 30.04.2005, and the balance by 31.05.2005. If the company fails to pay, the petition shall be advertised and proceed for winding up. The court also directed that if the company pays the entire amount, the petition shall stand dismissed.
Headnote
A) Company Law - Winding Up - Inability to Pay Debts - Sections 433(e), 434 Companies Act, 1956 - The Court Receiver, as creditor, filed a winding up petition against the respondent company for non-payment of royalty arrears of Rs.97,54,768/- despite statutory notice under Sections 433 and 434. The company admitted the debt but sought time to pay. The court held that the company is unable to pay its debts and is liable to be wound up, but granted a final opportunity to pay the principal amount in installments to avoid winding up. (Paras 1-5)
Issue of Consideration
Whether the respondent company is liable to be wound up under Section 433(e) of the Companies Act, 1956 for inability to pay its debts, being arrears of royalty charges amounting to Rs.97,54,768/-.
Final Decision
The court allowed the petition but granted a final opportunity to the respondent company to pay the principal amount of Rs.97,54,768/- in three installments: Rs.25,00,000/- by 31.03.2005, Rs.25,00,000/- by 30.04.2005, and the balance by 31.05.2005. If the company fails to pay any installment, the petition shall be advertised and proceed for winding up. If the entire amount is paid, the petition shall stand dismissed.
Law Points
- Winding up under Sections 433 and 434 of the Companies Act
- 1956
- Debt recovery
- Statutory notice
- Admission of debt
- Inability to pay debts
