Re Arula Investment Company Ltd [2010] FJHC 115; HBF285.2005 (9 April 2010)

IN THE HIGH COURT OF FIJI
AT LAUTOKA
CIVIL JURISDICTION

WINDING-UP ACTION NO. HBF 285 OF 2005

Re: ARULA INVESTMENT COMPANY LIMITED
DEFENDANT

Before: Master Anare Tuilevuka

Counsels: Mr. Faiz Khan for Sherani & Co. (Petitioner)
Mr. Shalen Krishna for H.A Shah (Respondent)

Date of Hearing: 26th March 2010

Date of Ruling: (Oral Ruling Delivered on 31st March 2010).
Written Ruling circulated on 09th April 2010.

RULING

BACKGROUND

1. This is an opposed Winding-Up petition. The facts are not in dispute. On the 29th of July 2008 in the High Court of Fiji at Lautoka, a Consent Judgement in favour of Credit Corporation (Fiji) Limited ("CCL") - the Petitioning Creditor - was entered against the Debtor Company, Arula Investment Company Limited ("AICL") in the sum of $150,000 in HBC014 of 2002.

2. The judgment sum has remained outstanding to this date. That judgement sum is the debt alleged in the Winding Up proceedings now before me.

3. On the 19th of March 2009, CCL served on AICL at its registered office a three – week Notice dated 16th of March 2009 calling on AICL to pay up the judgement debt together with interest therein at the rate of 4% per annum from the date of judgement until full payment.

4. When AICL failed to comply with the Notice, CCL then presented (on 28th September 2009) the Winding Up Petition that is now before me. This was followed by the Affidavit Verifying Petition filed on 06th October 2009. Thereafter, various Notices of Intention to Appear and Support Petition were filed by the following alleged Creditors:

	Supporting Creditor	Debt Alleged
(i)	Merchant Finance & Investment Company	$ 3,907.76
(ii)	Shell Bridge Service Station	$75,122.30
(iii)	TPAF	$ 8,640.76

5. The Memorandum of Due Compliance filed on 05th November 2009 had annexed to it evidence that the Petition was duly advertised once in the Fiji Times on 9th October 2009 and once in the Gazette also on Friday 9th October 2009.

6. The Affidavit in Opposition of Chandish Arun Prasad was filed on 22nd December 2009. His Affidavit does not deny the judgment debt. Prasad deposes though that AICL only consented to judgment on the understanding that CCL would give it time to the end of June 2010 to pay it off. When the consent judgment was entered in July 2008, AICL had been negotiating with various foreign investors to enter into a joint venture enterprise with it on its logging and sawmilling business. According to Prasad, the reason why AICL consented to judgment was because it felt that the pendency of HBC014 of 2002 (on which consent judgement was entered) might hinder its negotiations. He says that AICL understood that CCL would not take any further proceedings to enforce the consent judgement until negotiations were closed. Since then, according to Prasad, AICL has taken its negotiations with foreign investors to an advanced stage. He annexes various letter and e-mail correspondences which seem to confirm some on-going negotiations.

7. Prasad deposes also that AICL’s business has been valued by some New Zealand Professional Valuers at USD$15.1 million and that its assets far exceed the debt in question. Hence, AICL is able to pay its debts. According to Prasad, the only reason why AICL has not settled the debt is because of its on-going negotiations.

8. The Affidavit in Reply of Neelam Kavita Sharma deposes that the Consent Judgement was stayed for 6 months from 29h July 2008 to 29th January 2009. She denies that CCL ever gave an undertaking to AICL to stay execution up to the end of June 2010. According to her, the six-month stay on execution was granted to give time to AICL to sell its business and its assets and then settle the judgment debt from proceeds thereof. She highlights that it is now eighteen months since the consent judgment was entered and no attempt has been made to settle the debt. She says the Company is not operating and is clearly insolvent.

ANALYSIS

9. A company may be wound-up if it is unable to pay its debt (section 220 (e)) and the circumstances are such that it is just and equitable to wind-up the company. In this case, the consent judgement and the resulting judgement debt is not in dispute.

10. I accept the evidence of Neelam Kavita Sharma that CCL did at no time agree to extend the time for settlement of the judgment debt to 30th June 2010. The Court records show that consent to stay execution was only granted for six months only. That means that the judgment debt was due and payable on 29th January 2009. The Winding Up Petition in this case was not presented until 28th September 2009. Between the 29th of January 2009 and 28th September 2009, AICL had made no attempt to settle its debt.

11. AICL’s insolvency and inability to pay its debt is clearly shown by the fact that 18 months after the consent judgment was entered, and more than 12 months after the judgment sum had become due and payable, it was still seeking an extension and had even boldly caused an affidavit to be sworn that CCL had agreed to it. As I have stated above – I do not accept that as the truth.

12. Mr. Krishna who appeared on instructions, argued that it would not be just and equitable to wind up AICL at this stage when it is (allegedly) on the verge of a breakthrough in its negotiations with some foreign investors about its sale and purchase or about some proposed joint venture and in particular – when its assets far exceed its liability.

13. On the above point, I accept Mr. Khan’s submission that the evidence in the Affidavit is not sufficient to show a definite commitment by any particular foreign investor on going into a joint venture with CCL on its local operations.

Furthermore, the eighteen months that has lapsed since the consent judgment was entered is in my view more than enough time suffered by CCL in being denied its entitlement to the fruits of its litigation in HBC014 of 2002.

14. In any event, the cases of Re National Funds Assurance Co. (1876), 24 W.R. 1066; 10 Digest 1080 and Re European Life Assurance Society (1869), L. R. [1869] UKLawRpEq 195; 9 Eq. 122; 10 Digest 819, 5335[1] are authority that a company ( other than a life assurance company) may be wound up on the ground of inability to pay its debt when it is commercially insolvent, namely, unable to pay its debts as they become due, although its assets when realized, including uncalled capital, exceed its liabilities.

15. The evidence in this case is strongly that AICL is commercially insolvent and unable to pay its judgment debt.

ORDERS

16. AICL is to be wound up under the provisions of the Companies Act (Cap 247). AICL’s is ordered to pay CCL’s costs which I summarily assess at $1,000 -00 (one thousand dollars).

Anare Tuilevuka
MASTER

09th April 2010.

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^[1] See reference to these cases in Halsbury’s Laws of England , 1949 Edition, Volume 5 at page 607.