1985 (6) TMI 167 - HC - Companies Law

Summary

Issues Involved:
1. Maintainability of the petition for winding up.
2. Alleged claim of the respondent being barred by limitation.
3. Bona fide dispute of the respondent's alleged claim.
4. Deemed insolvency u/s 434 of the Companies Act, 1956.
5. Existence of a valid counter-claim by the appellant.

Summary:

1. Maintainability of the Petition for Winding Up:
The appellant initially argued that the respondent, not being a registered firm, could not maintain the petition for winding up. However, this point was not pressed in the appeal.

2. Alleged Claim of the Respondent Being Barred by Limitation:
The appellant also initially contended that the respondent's claim was barred by limitation. This point was also not pressed in the appeal.

3. Bona Fide Dispute of the Respondent's Alleged Claim:
The appellant argued that the respondent's claim was disputed bona fide. The appellant contended that the cheques issued were not to be presented for encashment until the respondent's dues were settled. The appellant also claimed a counter-claim of Rs. 4,52,250 for losses due to the respondent's sudden cessation of orders without notice, which was a breach of the agreement.

4. Deemed Insolvency u/s 434 of the Companies Act, 1956:
The appellant argued that there could not be any question of deemed insolvency u/s 434 of the Companies Act, 1956, as the entire claim of the respondent had been secured. The appellant relied on various case laws, including the Supreme Court decision in Amalgamated Commercial Traders P. Ltd. v. A. C. K. Krishnaswami, which held that a winding-up petition is not a legitimate means of seeking to enforce payment of a debt bona fide disputed by the company.

5. Existence of a Valid Counter-Claim by the Appellant:
The appellant argued that it had a valid counter-claim in excess of the respondent's claim. The appellant contended that the respondent's sudden cessation of orders resulted in significant losses and damages. The court noted that these disputes could not be resolved on affidavits but required thorough investigation in a regular action.

Conclusion:
The court concluded that the appellant's defence was not frivolous or mala fide and that the respective claims and cross-claims required thorough investigation in a regular action. The court held that the petitioning-creditor's debt was bona fide disputed and there was a prima facie case for the appellant's counter-claim. Consequently, the court set aside the judgment and order dated August 3, 1982, admitting the winding-up petition and directed that the sums deposited be held as security pending further proceedings. The appeal was allowed with no order as to costs.