1987 (7) TMI 536 - HC - Companies Law

Circumstances in which a company may be wound up, Winding up Company when deemed unable to pay its debts

Summary

Issues:
- Petition under section 433 of the Companies Act, 1956 for non-payment of dues by respondent-company.
- Dispute over the bailment agreement and unpaid sum of Rs. 24,000.
- Creditor seeking winding up order due to non-payment by debtor.

Analysis:
The petitioner in this case claimed that the respondent-company owed him Rs. 24,000 under a bailment agreement for the use of electrical fittings and taps. The petitioner alleged that despite initial payments, the respondent defaulted on subsequent payments, leading to the outstanding amount. The respondent, however, contended that the agreement was induced by the petitioner's father, with assurances of furnishing the house, which were not fulfilled. The court emphasized that while a creditor can seek assistance under section 433 for unpaid dues, if the debt is genuinely disputed, the court may refuse a winding up order, directing parties to resolve the matter in a civil court. The court cited the case of Madhusudan Gordhandas and Co. v. Madhu Woollen Industries P. Ltd. to support this principle.

The court scrutinized the evidence presented, noting discrepancies in the petitioner's claims. The petitioner's oral testimony regarding the bailment agreement and fixtures was deemed unconvincing, especially concerning the source of funds for the fittings. The petitioner's mother also testified, introducing new claims about the funds' origins, which were not previously mentioned. The court highlighted the lack of concrete evidence or agreements supporting the petitioner's entitlement to rental income from the fittings, raising doubts about the credibility of the claims made.

The respondent's managing director provided a different narrative, asserting that the rent was for furniture supplied by the landlord, which the petitioner's family failed to provide. The court acknowledged the bona fide nature of the defense raised by the respondent, indicating a likelihood of success in a civil court. Following the precedent set by the Supreme Court, the court rejected the winding up petition, advising the petitioner to pursue the matter in a civil court for a detailed adjudication. The respondent was awarded costs and advocate's fees, concluding the judgment.