In an appeal filed before it, the Bombay High Court has opined that a Company Court need not necessarily dismiss a Winding Up petition at the Admission Stage even if it has been filed by a Secured Creditor. The Appellant Company was challenging the admission of a Company Petition by the Company Judge wherein the Respondent had sought for winding up of the Appellant Company.

In the matter of Stoneman Royale Limited Versus Asset reconstruction Company (India) Limited, the Appellant argued that as per the financial statements, it was evident that there were sufficient means to make the payment of a sum of Rs. 5.34 Crores to the Respondent as balance against a One Time Settlement of Rs. 25.25 Crores. The Appellant referred to the judgment of the Single Judge of the Calcutta High Court in Eastern Spinning Mills and Industries Limited ­ 2012 SCC OnLine Cal 11500 wherein ‘the Company Judge ought not to have admitted petition for winding up of a company where the company was in a position to secure the claim or the demand made by a petitioning creditor.’

Refuting the basis of arguments by the Appellant, the Respondent relied on the judgments of the Division Bench of the Bombay High Court in SICOM Ltd. Vs. Entertainment World Developers Pvt. Ltd. ­ [2016] 197 CompCas 195 (Bom) and Bharat Overseas Bank Ltd. Vs. Shree Arcee Steels P.Ltd.­ [1985] 58 Comp Cas 174 stating that the issue whether the security is really sufficient or not can only be gone into at the stage of final hearing of the petition for winding up and not at the stage of admission.

After hearing the arguments placed before it, the Bench of Justice A.S Oka and Justice M.S Sonak preferred the reasoning in the judgment of Bharat Overseas Bank Ltd as against that in Eastern Spinning Mills and Industries Limited on the sole premise that the Court was only concerned

‘with the issue of admission of the petition seeking winding up of the appellant and not with the issue as to whether such a petition should be finally allowed and the appellant be ordered to be wind up.’

Upholding the reasoning given in Bharat Overseas Bank Ltd, the Court dismissed the appeal as there was no good ground for interference with the order of the Company Judge admitting the winding up petition of the Respondent.

 

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Judgment: Stonemann Royale Limited Versus ARCIL