1995 (11) TMI 307 - HC - Companies Law

Issues Involved:
1. Petition for winding up under sections 433, 434, and 439 of the Companies Act, 1956.
2. Alleged failure of the company to pay the petitioner the agreed amount for shares.
3. Preliminary objections raised by the company regarding the existence of debt and compliance with the agreement.
4. Dispute resolution through arbitration as per the agreement.
5. Determination of whether the company is commercially insolvent and unable to pay its debts.
6. Evaluation of the company's defense and whether the debt is bona fide disputed.

Detailed Analysis:

1. Petition for Winding Up:
The petitioner, Infrastructure Leasing & Financial Services Ltd., filed a petition under sections 433, 434, and 439 of the Companies Act, 1956, seeking the winding up of S.A. Builders. The petitioner claimed that the company failed to pay Rs. 1,68,52,000 for ten lakh shares of Indian Acrylics Ltd. (IAL) as agreed upon in a tripartite agreement.

2. Alleged Failure to Pay:
The petitioner alleged that the company neglected to make the payment despite reminders and a statutory notice of winding up. The petitioner argued that the company was unable to pay its admitted debts and thus liable to be wound up under the Act.

3. Preliminary Objections by the Company:
The company raised several preliminary objections:
- No debt was due from the company to the petitioner.
- The petitioner did not comply with the terms of the agreement, particularly the buy-back clause.
- The petition was filed without selling the shares to any other person as per the agreement.
- Non-joinder of necessary parties and existence of an arbitration clause in the agreement.

4. Dispute Resolution through Arbitration:
The company contended that disputes arising under the agreement were referable to arbitration, and the petitioner had not taken recourse to the arbitration clause. The agreement stipulated that any question arising under it would be referred to three arbitrators, one appointed by each party and an umpire appointed by the two arbitrators.

5. Commercial Insolvency and Ability to Pay Debts:
The company denied being commercially insolvent, stating it earned a profit of more than five crores in 1994. The company argued that the petition was a pressure tactic to force it to buy the shares.

6. Evaluation of the Company's Defense:
The court considered whether the company's defense was in good faith, substantial, and likely to succeed in law. The court found that:
- The petitioner did not offer the shares for sale within the stipulated time to one of the promoters, R.K. Garg.
- No definite amount or interest payable was settled during the 90-day period.
- The petitioner did not sell the shares in the open market and claim the loss, as allowed by the agreement.
- The petitioner's claim could not be considered an admitted debt without following the agreement's terms.

Conclusion:
The court concluded that the company had raised a substantial defense, and the amount claimed by the petitioner could not be considered an admitted debt. The court noted that the company was a going concern and able to pay its admitted debts. Consequently, the court refused to entertain the winding-up petition and relegated the parties to the remedy of a civil suit, given that the petitioner still held the shares in question. The company petition was disposed of accordingly.

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