Case Title: ATAMJIT SINGH & ORS. Vs. SPORTS FIT WORLD PVT. LTD.
Case No.: CO.PET. 48/2016
Dated on: May 07, 2024
Quorum: HON’BLE MR. JUSTICE DHARMESH SHARMA
Facts of the Case:
The case involves a petition filed by Atamjit Singh & others against Sports Fit World Pvt. Ltd. under Sections 433(e) and (f) of the Companies Act, 1956, seeking winding up of the respondent company due to non-payment of outstanding rent amounting to Rs. 1,99,70,730/- for the period from June 2013 to November 2015. The petitioner leased commercial property to the respondent with a monthly rental of Rs. 9,25,000/-, but the respondent repeatedly defaulted on payments, leading to legal notices and court proceedings. Despite the petitioner’s efforts, no liquidator was appointed, prompting the court to transfer the case to the National Company Law Tribunal (NCLT) as per the provisions of the Companies Act, 2013.
Issues framed by the Court:
- Whether there lies a default in fulfilling lease agreement obligations?
- Whether the failure of the respondent to reply to legal notice discharge its liabilities?
- Whether the proceedings should be transferred to the National Company Law Tribunal based on the stage of the winding-up proceedings?
Legal Provisions:
Section 433 (e) of the Companies Act, 1956: Deals with the power of the court to wind up a company.
Section 433 (f) of the Companies Act, 1956: It states that a company can be wound up if the company has acted against the interests of the sovereignty and integrity of India, security of the State, friendly relations with foreign States, public order, decency or morality.
Section 434 of the Companies Act, 1956: It pertains to the jurisdiction of the court for the winding up proceedings.
Section 439 of the Companies Act, 1956: Empowers the HC to make rules for regulating the proceedings under the Act.
Section 13 of the Punjab Rent Control Act: It provides for the tenant’s obligation to pay rent.
Section 485 (1) of the Companies Act, 1956: Deals with the power of the Central Government to make rules for carrying out the provisions of the Act.
Rule 26 of the Companies (Court) Rules, 1959: Pertains to the submission of documents and petitions in court proceedings under the Companies Act. It outlines the requirements and procedures for filing documents, petitions, or applications with the court.
Section 290 of the Companies Act, 2013: Pertains to the power of the Central Govt. to make rules regarding the winding up of companies.
Contentions of the Appellant:
The contentions of the appellants, Atamjit Singh & Ors., revolve around their petition seeking the winding-up of Sports Fit World Pvt. Ltd. due to non-payment of rent. The appellants assert that Sports Fit World Pvt. Ltd. has constantly defaulted on rent payments for the commercial property leased to them. Despite agreements and legal actions taken against the respondent, the outstanding rent remains unpaid. Further, they highlight that they served legal notices to the respondent regarding the outstanding rent and initiated legal proceedings under Section 138 of the Negotiable Instruments Act, 1881, and Section 13 of the Punjab Rent Control Act. However, the respondent failed to respond adequately, leading to the filing of the present petition.
The appellants argue that the respondent’s failure to pay its debts in the ordinary course of business justifies the filing of a winding-up petition under Sections 433(e) and (f) of the Companies Act, 1956, read with relevant provisions of the Act. They acknowledge the enactment of the Insolvency and Bankruptcy Code, 2016, and the Companies Act, 2013, during the proceedings. They contend that given the absence of appointed liquidators and the progression of legal frameworks, transferring the case to the National Company Law Tribunal (NCLT) is appropriate, as per Section 434 of the Companies Act, 2013.
Contentions of the Respondent:
A mere interpretation can be brought in order to determine the contentions of the respondent herein, which may include: Dispute over Rent Payment, Legal Defenses, Counterclaims, Procedural Objections and Request for Alternative Remedies.
Court’s Analysis and Judgement:
The court’s analysis and judgment focus on the petitioner’s request for winding up of the respondent company due to non-payment of rent. The court notes the sequential default by the respondent in rent payments, legal actions taken by the petitioner, and the absence of appointed liquidators in the case.
However, it cites certain relevant legal provisions, including Section 434 of the Companies Act, 2013, which allows for the transfer of winding-up proceedings from High Courts to the National Company Law Tribunal (NCLT). The court also references a Supreme Court decision indicating that cases at a nascent stage should be transferred to the NCLT. Therefore, the court decides to transfer the case to the NCLT, disposing of the current petition and directing the electronic record to be transmitted to the NCLT. The judgment emphasizes the NCLT’s authority to consider the matter further and pass appropriate orders.
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Judgement Reviewed By- Shramana Sengupta
