1989 (5) TMI 275 - HC - Companies Law

Summary

Issues:
1. Interpretation of settlement agreement in a winding-up petition.
2. Disputed debt in a winding-up petition.
3. Proof required to substantiate a disputed debt.
4. Entitlement to interest on outstanding debt.

Interpretation of Settlement Agreement:
The petitioner filed a winding-up petition against the respondent for non-payment of a debt. Initially, a settlement was reached between the parties, leading to the dismissal of the petition. However, the respondent made partial payments post-settlement, leading to a dispute over the remaining amount. The court noted that the settlement agreement did not fully discharge the debt, and the petitioner was allowed to file a fresh petition if the compromise failed.

Disputed Debt in Winding-up Petition:
The respondent disputed the amount claimed by the petitioner, arguing that a significant portion had already been paid as per the settlement agreement. Additionally, the respondent claimed that the petitioner had supplied defective material, which was accepted as scrap, and that the petitioner owed money to a sister concern of the respondent. The court emphasized that a winding-up petition cannot be used to enforce a debt that is genuinely disputed.

Proof Required for Disputed Debt:
In cases of disputed debt, the court outlined three key principles: the defense must be in good faith and substantial, likely to succeed in law, and supported by prima facie evidence. The court found that the respondent failed to provide sufficient evidence to substantiate its defense. The respondent's failure to produce essential documents like the balance sheet and ledger extract weakened its defense, leading the court to conclude that the debt was not bona fide disputed.

Entitlement to Interest on Outstanding Debt:
The petitioner claimed interest on the outstanding amount at 18% per annum, starting from a specific date. However, the court, considering the circumstances, awarded interest at a rate of 12% per annum from the same date until realization. The respondent was directed to pay the principal amount along with the awarded interest by a specified date, failing which the winding-up petition would be advertised in designated publications.

The case was scheduled for further directions on a specific date, allowing for potential follow-up actions based on the court's decision regarding the outstanding debt and interest.