Chetan Khera v Palladian Capital Limited & Anor

This is a creditor's winding up proceeding in which the petitioner, a former director and 50% shareholder in each company, presented petitions based on unpaid director's loan accounts. The court applied the established principles for contested winding up petitions, including the need for a genuine and serious cross-claim to defeat a petition and the requirement for evidential support for any alleged assignment of debt. The judge found that there was no reliable evidence that the petitioner had assigned his loan to the other director and that the asserted derivative claim (sections 260–264 Companies Act 2006) and other set-off arguments were belated, inadequately evidenced and unlikely to exceed the petition debts. The companies were insolvent and deadlocked; the judge concluded an independent liquidator should be appointed and therefore made winding up orders against both Palladian Capital Limited and Palladian (Penfold) Limited.

Background and parties:

• The petitioner, Mr Chetan Khera, presented winding up petitions against Palladian Capital Limited and Palladian (Penfold) Limited based on asserted debts in his director's loan accounts (£612,162.19 against Capital and £237,070.80 against Penfold).
• Both companies were run with Mr Dara Khera; the companies were insolvent or effectively so, and Penfold was deadlocked between the two 50% shareholders/directors.

Nature of the application:

• The petitions sought compulsory winding up of each company. Respondents opposed: Capital argued the debt had been assigned to Dara; opposition to the Penfold petition relied on an asserted derivative claim by the company against the petitioner for breach of duty (alleged sales of flats at undervalue) and other set-off arguments.

Issues framed:

• Whether there was a genuine and serious dispute about the debts relied on, sufficient to defeat the petitions.
• Whether the petitioner’s claimed debts had been validly assigned.
• Whether Penfold had a genuine and substantial derivative / cross-claim that exceeded the petition debt and should prevent a winding up order.
• Whether, even if a cross-claim existed, the court should nevertheless exercise its discretion to wind up because of insolvency, deadlock and other exceptional circumstances.

Court’s reasoning and findings:

• The court reiterated authorities that a company must show, with evidence, that a cross-claim is genuine and of substance and that mere or late assertions are inadequate.
• On Capital: the allegation of an oral assignment was vague, unsupported and inconsistent with contemporaneous negotiations that treated assignments as conditional parts of a broader settlement; the documentary record did not support a concluded assignment. The judge rejected the assignment defence and held the debt was due.
• On Penfold: the asserted derivative claim (sections 260–264 Companies Act 2006) alleging sales at undervalue was first pleaded only belatedly and was unsupported by contemporaneous documents or expert valuation evidence. Dara had not contemporaneously objected on valuation grounds and had in any event agreed the sales in principle; the court concluded the derivative claim was not shown to be genuine and substantive so as to exceed the petition debt. The insolvency and deadlock of Penfold, concealed enforcement steps by Two Work (default judgments and third party debt orders obtained without petitioner’s knowledge), and the advantages of an independent liquidator justified making the winding up order.

Outcome: The court ordered compulsory winding up of both companies.

The court made compulsory winding up orders against Palladian Capital Limited and Palladian (Penfold) Limited. The judge held there was no reliable evidence of an assignment of the petitioner’s loan to the other director and that the asserted derivative/cross-claim by Penfold was belated, insufficiently evidenced and not of substance to exceed the petition debt. Given insolvency and deadlock, an independent liquidation was appropriate.