1989 (6) TMI 266 - HC - Companies Law

Summary

Issues Involved:
1. Legitimacy of the winding-up petition.
2. Bona fide dispute of debt.
3. Interpretation of agreements and undertakings.
4. Triable issues and jurisdiction of the company court.
5. Alleged mala fide intention behind the winding-up petition.

Detailed Analysis:

1. Legitimacy of the Winding-Up Petition:
The appeal challenges the judgment ordering the winding up of the appellant company. The PSIDC had moved a petition for winding up under sections 433, 434, and 439 of the Companies Act, 1956, on the ground of the company's admitted liability of Rs. 40 lakhs. However, the appellant company contested this claim, arguing that it was not a legitimate means of seeking to enforce payment of a disputed debt.

2. Bona Fide Dispute of Debt:
The appellant company argued that there was no admitted liability, citing a counter-claim that PSIDC owed Rs. 52,53,960 to the company. The company maintained that the Rs. 40 lakhs loan was adjusted against the project overrun costs and demanded reimbursement of the remaining balance from PSIDC. The court referenced Supreme Court rulings in *Amalgamated Commercial Traders Pvt. Ltd. v. Krishnaswami* and *Madhusudhan Gordhandas and Co. v. Madhu Woollen Industries Pvt. Ltd.*, which established that a winding-up petition is not appropriate if the debt is bona fide disputed and the defense is substantial.

3. Interpretation of Agreements and Undertakings:
The agreements and undertakings between PSIDC, CCL, and the Industrial Finance Corporation of India (IFCI) were central to the dispute. Clause 13 of the agreement dated June 6, 1977, and undertakings given in May 1980 by PSIDC and CCL to IFCI, which became integral parts of the agreement, were crucial. The court noted that the learned company judge had not adequately considered these documents, which supported the appellant's defense that the PSIDC was liable for a portion of the project overrun costs.

4. Triable Issues and Jurisdiction of the Company Court:
The court emphasized that the issues raised were triable and should be addressed in a civil court rather than in the summary jurisdiction of the company court. It was noted that the company had set up a bona fide case by producing prima facie evidence of its defense, and the company court was not competent to resolve such disputed questions of fact.

5. Alleged Mala Fide Intention Behind the Winding-Up Petition:
The court found that the PSIDC's act of filing the winding-up petition was potentially mala fide, aimed at pressurizing the company to settle the disputed claim. The court cited the decision in *Ambala Bus Syndicate Pvt. Ltd. v. Bala Financiers Pvt. Ltd.*, which held that a winding-up petition should be dismissed if the debt is bona fide disputed, and the proper remedy for the creditor is a civil action.

Conclusion:
The court concluded that the company judge erred in ordering the winding up of the company without considering the relevant agreements and undertakings. The appellant company had established a bona fide defense, and the issues raised were triable in a civil court. The winding-up petition was deemed inappropriate and was set aside, allowing the appeal with no order as to costs.