RE DRAGON SPIRITS LTD (formerly known as Golden Dragon Vodka Limited)

HCCW 214/2019

[2019] HKCFI 2449

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMPANIES WINDING‑UP PROCEEDINGS NO 214 OF 2019

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D E C I S I O N

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1.  I have before me a winding-up petition issued by Mr Sunil Tuli (“Mr Tuli”) against the Company. Mr Tuli relies, in order to prove insolvency, on an unsatisfied District Court judgment for US$119,739 plus interest and costs. The judgment was entered on 21 May 2019 and on the 11 June 2019, the Petitioner’s solicitors served a statutory demand on the Company. The Company has not opposed the Petition. However, a number of contributories have opposed a winding-up.

2.  On the 9 September 2019 three creditors and contributories of the Company issued a summons seeking a stay of the winding-up petition pending final determination of HCMP 1380 of 2019 and a future application to set aside the judgment.

3.  The miscellaneous proceedings were issued on the 2 September 2019 and seek rectification of the register of the Company’s members.  This, I have been told is necessary because a judgment entered in favour of a number of the shareholders on the 4 February 2019 dealing with the shareholding of the Company and directing a number of transfers has not been satisfied.  The thinking behind the originating summons apparently being that it is necessary to rectify the register before the board can be reconstituted and the Company put in a positon to apply to set aside the default judgment.  It seems to me that this is probably mistaken.  I was told that the three Plaintiffs in the miscellaneous proceedings currently are registered as holding 21.267% of the Company’s issued share capital and it would appear on the face of the matter that it would have been possible for them to requisition an extraordinary general meeting at which the board could be reconstituted.

4.  The opposing contributories have filed an affirmation from Mr Hiro Bharwani (“Mr Bharwani”) which sets out the grounds upon which they believe the default judgment should be set aside.  They are detailed in paragraph 24.

5.  It seems to me that they do not constitute matters which are capable of constituting a bona fide defence on substantial grounds.        What is said is that the loan agreement pursuant to which the debt relied upon by the Petitioner arose, occurred in suspicious circumstances. Various matters are referred to in the paragraph but it does not seem to me that any of them suggest, and I did not understand Mr Ismail on behalf of the opposing contributories to suggest otherwise, that the loan agreement, which was signed by the Company’s sole director was not properly authorised.  It would, therefore, be necessary in order to set aside that the default judgment to demonstrate that to the knowledge of the Petitioner, the loan agreement was not entered into bona fide and was part of some scheme to misappropriate money from the Company by its then sole director.  The kind of matters to which Mr Bharwani points as suggesting that the transaction is suspicious is the fact that the loan agreement provides that the advance was to be made not to the Company, but to another company called DMC Wealth Solution Limited (“DMC”) and that the advance was so made, but not recorded in the Company’s accounts.  However, the loan agreement which Mr Bharwani has exhibited makes it clear that the advance was to be made to DMC and I cannot see anything in paragraph 24 which is inconsistent with the Petitioner having advanced the money in good faith.  It does not seem to me that the evidence is capable of justifying the Court inferring, and there is no direct evidence, that the Petitioner knew that the money was not going to be used for the benefit of the Company.

6.  In the circumstances it seems to me that there is no justification in delaying dealing substantively with the Petition and I will, therefore, make the normal winding-up order.