1987 (3) TMI 462 - HC - Companies Law

Summary

Issues Involved:
1. Whether the respondent-company is indebted to the petitioner.
2. Whether the petitioner is entitled to proceed with the winding-up petition for the recovery of interest claimed.
3. Whether the debt claimed by the petitioner is bona fide disputed.
4. Whether the respondent-company is insolvent or unable to pay its debt.

Summary:

1. Indebtedness of the Respondent-Company:
The petitioner claimed that the respondent-company owed Rs. 2,22,289.29 with interest at 18% per annum from June 1, 1984, for advertising and publicity services rendered. The respondent-company acknowledged the principal amount but disputed the interest claim, stating that no agreement on interest existed.

2. Entitlement to Proceed with Winding-Up Petition:
The petitioner argued that they were entitled to recover both the principal and interest amounts u/s 433(e) read with section 434 of the Companies Act, 1956. The respondent-company contended that the interest claim was neither agreed upon nor determined and that the petitioner should seek remedy through a regular civil court.

3. Bona Fide Dispute of Debt:
The court examined the bona fide nature of the dispute. It was noted that the claim for interest was not mentioned in earlier correspondence and was raised for the first time in the notice u/s 434. The court referred to legal precedents, including Halsbury's Laws of England and Palmer's Company Law, which state that a winding-up petition is not a legitimate means of enforcing a debt that is bona fide disputed.

4. Insolvency or Inability to Pay Debt:
The respondent-company had paid more than Rs. 2,22,000 during the proceedings, indicating its solvency. The court emphasized that the machinery of winding-up should not be used as a debt-collecting agency or to exert improper pressure on a company. The court cited various judgments, including Amalgamated Commercial Traders (P.) Ltd. v. A.C.K. Krishnaswami, to support its view that a bona fide disputed debt does not constitute neglect to pay u/s 434(1)(a).

Conclusion:
The court held that the interest amount claimed by the petitioner was not established as a debt, was bona fide disputed, and the respondent-company was not insolvent. Consequently, the winding-up petition was dismissed with costs.