Tata Capital Financial Services Ltd vs. Clutch Auto Ltd

PETITION NO: 542/2012

DECIDED ON: 12-12-2013

CASE IN BRIEF: Section 433 & 434 Companies Act, 1956 – admitted debt – no improvements in settlement talks – whether the petition could be advertised – Held, Yes. Whether provisional liquidator to be appointed – Held, No.

FACTS:The broad facts are that the petitioner financed the respondent company which was supplying automobile clutches to various automobile manufacturers including TATA Motors. The finance was provided essentially for the purpose of working capital requirements of the respondent company. The total credit facility extended by the petitioner was Rs. 3.30 crores to be secured by a lien on the stocks, shares, property and book debts belonging to the respondent company. Despite of several reminders, the respondent could not pay back the amount, compelling the petitioner to serve a “loan recall notice” in September, 2012. Thereafter, the statutory notice under section 434(1)(a) of the Act was served on the respondent, calling upon the respondent to return the amounts with interest at the agreed rates within 21days, failing which winding up proceedings were threatened to be taken.

There is no dispute that the notice was served on the respondent company at its registered office on 3.10.2012. There was no reply to the statutory notice and hence the present winding up petition was sought.

DECISION : Petitioned filed by the respondent company was admitted.


The petition filed by the respondent company was admitted by the court on the following grounds:

  1. Initially there were talks for settlement between the parties but then they failed and on 02.09.2013 the court passed an order admitting the company petition but deferred further proceedings such as publication of citation in the newspapers and appointment of provisional liquidator for a period of 8 weeks to enable revival of the talks or settlement proposals, at the initiative of the respondent company. It was observed by the court in the said order that in case nothing happens at the end of the 8 weeks period, the law will take its own course.

  2. The position remained more or less the same as it remained in September, 2013 when the order for admission was passed by the court.

  3. In addition to this, there were problems and impediments which continued to delay the process of revival and the shifting of a plant to Bhiwadi and in settling the dues of the labourers at Faridabad. No details or documents relating to the same were placed before the court to show that the labourers are being paid in terms of the settlement agreement entered into with them and there was no material brought on record to show the progress in the shifting of the plant to Bhiwadi. In these circumstances, the reliance placed on the techno-economic viability report prepared in December 2012 and the developments which took place prior to August, 2013 do not take the case of the respondent any further.

  4. More significantly, the respondent company did not take the initiative to have talks or make settlement proposals to the petitioner despite the order dated 02.09.2013 making a clear reference to the same and making it the main ground for deferring the proceedings for a period of 8 weeks.

  5. The amount payable to the petitioner was outstanding for quite some time. No initiative appears to have been taken by the respondent company even after the passing of the order by the Court on 02.09.2013.

  6. Therefore the court directed the publication of the citation in the Delhi Gazette, Times of India (English) and Navbharat Times (Hindi) that the winding up petition against the respondent company has been admitted and making it clear in the advertisement that a provisional liquidator is yet to be appointed.


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