1992 (4) TMI 214 - HC - Companies Law

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

Summary

Issues:
1. Winding up petition based on debt recovery.
2. Dispute over debt amount and time limitation.
3. Admissibility of balance-sheet as evidence.
4. Bona fide defense against winding up petition.
5. Use of winding up petition as pressure tactic.
6. Judicial interpretation of debt acknowledgment.

Analysis:
1. The petitioner sought winding up of the respondent-company due to unpaid debt amounting to Rs. 1,42,675.05, alleging inability to pay.
2. The respondent denied liability, citing time limitation as the debt was last paid in 1984, and the petition was filed in 1988, arguing the debt was time-barred.
3. The petitioner claimed the debt was acknowledged in balance-sheets, while the respondent disputed any such acknowledgment and highlighted discrepancies in accounts.
4. The court emphasized that winding up petitions should not be used for debt recovery and must serve the interest of all creditors, assessing the bona fide nature of the defense against winding up.
5. It was noted that the petitioner's case appeared to pressure the respondent for debt payment rather than genuine winding up necessity, leading to the dismissal of the petition as an abuse of court process.
6. The court concluded that the debt acknowledgment was not sufficiently proven, and the defense of time limitation was bona fide, preventing the order for winding up.

Conclusion:
The court dismissed the winding up petition, highlighting the need for genuine winding up motives, not debt recovery tactics. It emphasized the importance of proving debt acknowledgment and the bona fide nature of defense against winding up. The petitioner was advised to pursue civil suit remedies while respecting the limitations and defenses available to the respondent.